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Hospitals Seek to Overturn New Payment Policy Jeopardizing Community Care

December 06, 2018

In a lawsuit filed this week, hospitals and hospital advocates—including the American Hospital Association and Association of American Medical Colleges (AAMC)—argued that the Centers for Medicare & Medicaid Services (CMS) is acting outside the law by imposing a harmful new payment policy that reduces reimbursement and jeopardizes the ability of hospitals to meet the needs of their patients in community-based settings.

CMS recently finalized a new payment regulation that expands the application of so-called “site-neutral” payments, cutting the payments that hospitals receive for outpatient clinic visits. Of particular concern, a recent study exploring the characteristics of Medicare patients receiving care in hospital outpatient departments validates that the new payment policy could threaten access to care for the most vulnerable patients and communities. Medicare patients who receive care in a hospital outpatient department are more likely to be poorer and have more severe chronic conditions than Medicare patients treated in an independent physician office.

The lawsuit makes the case that Congress specifically had crafted a 2015 law that protected existing hospital outpatient departments from payment cuts, based on an appreciation for the differences between hospital departments and other sites of care like physician offices. The new policy imposed by CMS exceeds the agency’s statutory authority and contravenes Congressional intent.

HAP and the hospital community have urged federal policymakers to ensure that the payment rates reflect an appreciation for the cost of supporting hospital-level care in community settings, arguing that the fundamental underpinnings of site-neutral payment policies are erroneous.

Hospital outpatient departments treat sicker, more medically complex patients for whom the hospital is the most appropriate setting. Compared to patients seen in an independent physician office, hospital outpatient patients are more likely to be:

  • From lower-income areas
  • Under 65 (individuals with disabilities, end-stage renal disease, and amyotrophic lateral sclerosis)
  • Burdened with more severe chronic conditions
  • Previously hospitalized
  • Eligible for both Medicare and Medicaid
  • Previously cared for in an emergency department, thereby having higher Medicare spending prior to receiving ambulatory care

Additionally, hospital outpatient departments warrant appropriate reimbursement because they operate at a higher level of care—providing 24/7 emergency standby capacity and specialized services such as trauma, psychiatric, obstetrics, and pediatric emergency care. They also are governed by more comprehensive licensing, accreditation, and regulatory requirements.

The payment cuts impacting clinic visits in community-based hospital outpatient departments are being phased in during two years starting January 1, 2019. For 2019, the policy will amount to a $380 million cut to Medicare payments.

Please contact Laura Stevens Kent, HAP’s vice president, federal advocacy, with any questions regarding advocacy efforts to push back on site-neutral policies. Questions pertaining to the lawsuit may be directed to Jolene Calla, HAP’s vice president, health care finance and insurance.

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