All Cost of Care Is Not Equal

The hospital field and the Centers for Medicare and Medicaid Services (CMS) do not see eye-to-eye when it comes to fair reimbursement for basic clinic visits, known in medical terminology as evaluation and management services, when these specific services are provided by a hospital-owned outpatient department located off the hospital’s main campus.  These off-campus clinics are key sources of primary care and other physician services throughout Long Island and the Hudson Valley, as well as the state and the nation.  What makes them unique is that patients served by these clinics are generally of lower income and present with more medically-complex conditions, leading to a higher cost of care than would be experienced by a private physician practice in a local community.

Yet, CMS instituted in a 2018 rule that payment to all outpatient hospital clinics should be reduced by 60 percent to match the rate paid to private physician practices.  This ignores the disparity in cost of care in favor of what is familiarly known as “site neutral” payment.  It also ignores the more stringent regulations and oversight hospitals face as opposed to physician offices, and likewise, the costs associated with compliance.

The issue stems back to 2015 when Congress included specific language in the Bipartisan Budget Act of 2015 to exempt from the “site neutral” cut those hospital-owned clinics that were in operation before November 2, 2015.  The 2018 rule essentially ignores Congress’ intent of the statute, and it is on these grounds that the hospital industry takes issue.  In December of 2018, the American Hospital Association filed suit against CMS stating that the rule is executive overreach and contradicts Congress’ original intent.  The suit also challenged Medicare’s own budget neutrality law that requires any reductions in reimbursement to be offset by reinvestment elsewhere in the program.

A federal judge agreed with the hospital industry’s argument and in mid-September ruled that CMS overreached its authority to implement site neutral cuts for basic clinic visits to all hospital-owned outpatient departments.  The U.S. District judge further tasked CMS to develop remedies and required all parties to the lawsuit to submit a joint status report by October 1, 2019. CMS asked a federal judge to reconsider the September 17, 2019 decision, but that was rejected by a federal judge on October 21, 2019. The judge also denied CMS’ request for a stay to consider whether to appeal the order. CMS is likely to appeal the court’s most recent decision.

Lost in all of this legal wrangling is the patient – more specifically, the patient of lower economic means who suffers from a variety of medical conditions and benefits from the comprehensive services a hospital-based outpatient clinic offers.  Hospitals are there to service these patients regardless of their ability to pay.

Fortunately, an overwhelming number of House and Senate members oppose these site neutral cuts because they realize that such steep reimbursement reductions affect hospitals’ overall financial viability.  In that respect, all patients, all constituents in a community are adversely affected.



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