United States Government’s Response to AHA, AAMC and Hospitals Motion to Enforce Court’s Judgment

November 25, 2019

Defendant’s Opposition to Plaintiffs’ Motion to Enforce Judgment

Introduction

As part of its yearly process to establish Medicare rates under the Outpatient Prospective Payment System (OPPS), the U.S. Department of Health and Human Services (HHS) recently published a new rule setting those rates for the 2020 calendar year. Because the new rule effectively reduces payment rates in the same manner as the 2019 rule that Plaintiffs challenged in this case, Plaintiffs ask the Court to enforce the Court’s prior judgment, which addressed the 2019 OPPS rule, but now with respect to 2020 rule. The Court should deny Plaintiffs’ request.

Defendant, of course, recognizes that this Court already concluded that HHS’s method to control unnecessary increases in volume in the 2019 OPPS Rule was ultra vires. And, while the government may appeal the Court’s decision, Defendant further recognizes that, if Plaintiffs in this case were to bring a proper challenge to the Subsection (t)(2)(F) method implemented in the 2020 OPPS Rule, the Court may well find it to be ultra vires for the same reasons. As such, Defendant would willing to work with Plaintiffs to expedite any new case challenging the 2020 rule if Plaintiffs were to bring one after the 2020 rule goes into effect and Plaintiffs properly present a claim to the agency. However, Plaintiffs’ request that the Court enforce its judgment in this case (regarding the 2019 OPPS Rule) as to a different rule (the 2020 OPPS Rule) that has not yet gone into effect (and that Plaintiffs have not even challenged) is fatally flawed. As described below, Plaintiffs’ motion ignores the nonwaivable presentment requirement embodied in the Medicare statute, and it misinterprets the proper scope of the Court’s September 17, 2019 order. Defendant respectfully asks that the Court deny Plaintiffs’ motion.

Background

Each year, through notice-and-comment rulemaking, HHS establishes the rates that Medicare will pay hospitals for the upcoming year under the OPPS. In the rule that established rates for 2019, HHS developed and implemented a volume-control method pursuant to its authority under Subsection (t)(2)(F) to control unnecessary increases in the volume of certain clinic visit services. See 83 Fed. Reg. 58,818, 59,014 (Nov. 21, 2018) (2019 OPPS Rule); see also 42 C.F.R. § 1395l(t)(2)(F). Although HHS indicated that it intended to phase in its method for controlling unnecessary increases in the volume of clinic visit services over two years, id. at 59,914, the 2019 OPPS Rule set rates only for payments made in the 2019 calendar year, id. at 58,818 (“This final rule . . . revises the Medicare hospital outpatient prospective payment system . . . for CY 2019 to implement changes arising from our continuing experience with these systems.”).

Plaintiffs brought this action to assert that HHS’s use of its Subsection (t)(2)(F) authority in the 2019 OPPS Rule was ultra vires. Plaintiffs initially filed suit on December 4, 2018, see ECF No. 1. However, Plaintiffs filed an Amended Complaint on January 29, 2019—after the 2019 OPPS Rule had gone into effect—in order to add allegations that the Plaintiff-Hospitals “presented claims to their Medicare Administrative Contractors (MACs)” after the 2019 OPPS Rule went into effect on January 1, 2019. See Am. Compl. ¶ 15. The parties cross moved for summary judgment, and the Court granted Plaintiffs’ motion on September 17, 2019. ECF No. 31. The Court agreed with Plaintiffs that HHS’s method for controlling unnecessary increases in costs was ultra vires and vacated the challenged portion of the 2019 OPPS Rule. ECF No. 32; see also ECF No. 39 (denying HHS’s motion to modify the Court’s September 17, 2019 order and entering final judgment).

On August 9, 2019, before the Court ruled on the parties’ cross motions for summary judgment, HHS issued a notice of proposed rulemaking as part of its annual rate-setting process to establish OPPS rates for the 2020 calendar year. See 84 Fed. Reg. 39,398. After considering comments on the proposed rule, HHS made the final version of the 2020 rule covering the 2020 calendar year available on its website on November 1, 2019, see CY 2020 Medicare Hospital Outpatient Prospective Payment System and Ambulatory Surgical Center Payment System Final Rule (CMS-1717-FC) (Nov. 1, 2019), https://www.federalregister.gov/documents/2019/11/12/2019-24138/medicareprogram-changes-to-hospital-outpatient-prospective-payment-andambulatory-surgical-center (2020 OPPS Rule). The 2020 OPPS Rule was published in the Federal Register on November 12, 2019. See 84 Fed. Reg. 61,142.

In the preamble to the 2020 OPPS Rule, HHS acknowledged that this Court vacated its volume control method for the 2019 calendar year and explained that HHS is “working to ensure affected 2019 claims for clinic visits are paid consistent with the court’s order.” Id. at 61,368. As HHS further explained, however, HHS continues to

believe that Section 1833(t)(2)(F) of the Act grants the Secretary the authority to develop a method for controlling unnecessary increases in the volume of covered OPD services, including a method that controls unnecessary volume increases by removing a payment differential that is driving a site-of-service decision, and, as a result, is unnecessarily increasing service volume.

Id. at 61367-68. Because HHS still has the right to appeal the Court’s judgment, and because the Court vacated only the 2019 OPPS Rule, HHS determined that it would be appropriate to implement the second phase of its volume control methodology in the 2020 OPPS Rule, which would apply only to the 2020 calendar year. Id. at 61,368.

On November 11, 2019, Plaintiffs moved to enforce the Court’s September 17, 2019 order, which Plaintiffs contend prevents HHS from exercising its Subsection (t)(2)(F) authority in the 2020 OPPS Rule. See ECF No. 43 (Judgment Mem.).

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