Vernaglia Comments on AHA v Azar Decision

18 September 2019 MedPage Today News

Partner Larry Vernaglia was quoted in the MedPage Today article, “Mixed Reactions After Site-Neutral Payments Struck Down,” about the recent federal court decision in American Hospital Association v. Azar in which a federal judge invalidated a regulation from the Centers for Medicare & Medicaid Services instituting site-neutral payments for physician services. The case focused on a 2018 CMS rule where it exercised its authority to use a method to control unnecessary increases in the volume of covered hospital outpatient department services by applying a Physician Fee Schedule-equivalent payment rate for the clinic visit service when provided at an off-campus provider-based department that is paid under the Outpatient Prospective Payment System.

Vernaglia wasn’t surprised by the decision. “I believe that the regulatory ‘site neutrality’ change for 2019 clearly went beyond Congress ‘ line in the sand drawn in Section 603 of the Bipartisan Budget Act of 2015 in which Congress specifically protected off-campus outpatient hospital departments billing Medicare prior to Nov. 2, 2015,” he said. “So when CMS applied the same payment reduction to those departments Congress meant to hold harmless, I expected that this would offend a court.”

He added that the concept wasn’t the basis for the court’s decision. “Rather, the judge ruled more broadly, focusing on the core powers of CMS to make reimbursement changes under the OPPs. Changes needed to be across the board…and budget neutral…CMS, the court ruled, did neither, and therefore, its 2019 payment reduction was beyond their power. I think the Court’s ruling is far better for the hospital industry than if it had narrowly ruled on the Section 603 statutory versus 2019 regulatory changes because it will apply more widely.”

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