Becker's Hospital Review

13 CFO / FINANCE HHS' site-neutral pay cuts are legal, appeals court rules By Ayla Ellison A panel of appellate judges on July 17 overturned a lower court ruling and held that HHS' site-neutral payment policy that cuts Medicare payments for hos- pital outpatient visits can go forward. Under the 2019 Medicare Outpatient Pro- spective Payment System final rule, CMS made payments for clinic visits site-neutral by reducing the payment rate for evalua- tion and management services provided at off-campus provider-based departments by 60 percent. In an attempt to overturn the rule, the Amer- ican Hospital Association, the Association of American Medical Colleges and dozens of hospitals across the nation sued HHS. ey argued CMS exceeded its authority when it finalized the payment cut in the OPPS rule. ey further claimed the site-neutral pay- ment policy violates the Medicare statute's mandate of budget neutrality. HHS argued that under the Bipartisan Budget Act of 2015 it has authority to develop a meth- od for controlling unnecessary increases in outpatient department services. Since "meth- od" is not defined in the statute, the govern- ment argued its approach satisfies generic definitions of the term. U.S. District Judge Rosemary Collyer rejected that argument and set aside the regulation implementing the rate reduction in September 2019. HHS filed an appeal in the case, and the appellate court reversed the lower court's decision July 17. e question at issue on appeal was whether HHS can reduce the OPPS reimbursement for a specific service, and implement the cut in a non-budget-neutral manner, as a meth- od for controlling unnecessary increases in the volume of the service. "Reducing the payment rate for a particular OPPS service readily qualifies … as a 'meth- od for controlling unnecessary increases in the volume' of that service," a panel of judges for the U.S. Court of Appeals for the District of Columbia wrote in the decision. "e low- er the reimbursement rate for a service, the less the incentive to provide it, all else being equal. Reducing the reimbursement rate thus is naturally suited to addressing unnecessary increases in the overall volume of a service provided by hospitals." e court held that HHS' reduction in reim- bursement for evaluation and management services provided by off-campus provid- er-based departments falls within its author- ity to develop a method to control unneces- sary increases in outpatient service volume. "Because we conclude that the regulation rests on a reasonable interpretation of HHS's statutory authority to adopt volume-control methods, we now reverse," the panel of ap- pellate judges wrote in the decision. n 619-bed California hospital to join Cedars-Sinai By Ayla Ellison H untington Hospital in Pasadena, Calif., said in July it has entered into a definitive agreement to join Los Angeles-based Cedars-Sinai Health System, roughly four months after the organizations signed a letter of intent to explore an affiliation. The agreement calls for investments in 619-bed Hunting- ton Hospital's information technology, ambulatory ser- vices and physician development. Under the agreement, Huntington Hospital would be governed by a local board and its philanthropy and volunteer support would be lo- cally controlled, the organizations said. "On behalf of everyone at Huntington Hospital, we are all very pleased to have reached this important milestone," Jaynie Studenmund, chair of the Huntington Hospital board of directors, said in a news release. "We pledge to work cooperatively with all the relevant parties and believe that this proposed affiliation is in the best inter- est of all of our stakeholders and the greater San Gabriel Valley community." The definitive agreement was submitted for regulatory re- view and approval in July. The process is expected to take several months. n Florida hospital to close Aug. 31 By Ayla Ellison S hands Lake Shore Regional Medical Center in Lake City, Fla., announced in early August it will end all services at the hospital and its physician clinics on Aug. 31. The hospital, owned by the Lake Shore Hospital Authority, cited a decline in patient volume as a reason for the closure. The declining volume and financial challenges have resulted in losses that are unsustainable, the hospital said. The announcement came after Franklin, Tenn.-based Commu- nity Health Systems, which operates the hospital, entered into a settlement and termination agreement with the Lake Shore Hospital Authority for the planned closure of Shands Lake Shore on June 30, according to a filing with the Securities and Exchange Commision. After Shands Lake Shore closes, CHS will operate 12 hospitals in Florida. The hospital authority is seeking statements of interest from potential operators and has received five proposals from potential management companies, according to TV station WCJB. The Lake Shore Hospital Authority board of trustees will meet to discuss the five proposals. n

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