Site Neutral 2020 Complaint

Jan. 13, 2020


Plaintiffs the American Hospital Association, Association of American Medical Colleges, Mercy Health Muskegon, Clallam County Public Hospital District No. 2, d/b/a Olympic Medical Center, and York Hospital bring this Complaint against Defendant Alex M. Azar II, in his official capacity as Secretary of Health and Human Services (HHS), and allege as follows:

Preliminary Statement

1. This is an action to challenge certain aspects of a final rule issued by the Centers for Medicare & Medicaid Services (CMS), an agency within HHS, for Medicare hospital outpatient services in calendar year (CY) 2020. See Centers for Medicare & Medicaid Services, Medicare Program: Changes to Hospital Outpatient Prospective Payment and Ambulatory Surgical Center Payment Systems and Quality Reporting Programs, Dep’t of Health and Human Servs., 84 Fed. Reg. 61,142 (Nov. 12, 2019) (2020 Final Rule).

2. The 2020 Final Rule, in relevant part, continues in effect (and indeed, increases) certain payment cuts made in CY 2019 that this Court already declared unlawful and vacated in a September 17, 2019 decision. See Order, American Hospital Ass’n v. Azar, No. 18-2841, ECF No. 32 (RMC) (Sept. 17, 2019) (granting summary judgment against CMS and vacating “the Secretary’s Method to Control for Unnecessary Increases in the Volume of Outpatient Services” in the 2019 Final Rule). Following the Court’s decision, CMS moved to modify the Court’s order and/or to stay its effect. After “careful consideration of the parties’ briefs,” the Court denied that motion and determined that “vacatur was appropriate and that a stay was not.” See Orders, Am. Hosp. Ass’n v. Azar, No. 18-2841, ECF No. 39 (RMC) (Oct. 21, 2019), and ECF No. 50 (RMC) (Dec. 16, 2019).

3. Nonetheless, CMS pressed ahead with the same unlawful payment cuts for CY 2020. Like the 2019 Final Rule, the 2020 Final Rule implements reductions to Medicare payment rates for certain clinic visit services provided at specified off-campus hospital providerbased departments (off-campus PBDs). Off-campus PBDs are practice locations of a hospital that are not located in immediate proximity to the main building of their affiliated hospital, but are nonetheless so closely integrated with and controlled by the main hospital as to be considered a part of the hospital.

4. The 2020 Final Rule is ultra vires for the same reasons as the 2019 Final Rule. Congress has established a clear structure for CMS to make annual changes to payments for covered hospital outpatient services under Medicare. 42 U.S.C. § 1395l(t)(9)(A). Changes to payment that target only specific items or services must be budget neutral. 42 U.S.C. § 1395l(t)(9)(B). And yet the 2020 Final Rule purports to do precisely what Congress has expressly prohibited: reduce total payments for covered hospital outpatient services for CY 2020 by hundreds of millions of dollars by targeting a select group of services for non-budget-neutral payment adjustments. CMS cannot exercise its limited authority in a manner so flagrantly inconsistent with the Medicare statute. That is textbook ultra vires action—as this Court has already held.

5. The 2020 Final Rule is unlawful for other reasons as well. In the Medicare statute, Congress has laid out a clear distinction between “excepted” off-campus PBDs, which meet specified grandfathering requirements, and “non-excepted” off-campus PBDs, which do not. The statute makes clear that services provided at excepted and non-excepted off-campus PBDs should be paid pursuant to different payment systems. 42 U.S.C. § 1395l(t)(21)(C). And yet the 2020 Final Rule effectively abolishes any distinction between excepted and non-excepted entities by subjecting them both to the same payment system and rate. That violates the clear intent of Congress and therefore is ultra vires.

6. CMS may not contravene clear congressional mandates merely because the agency wishes to make cuts to Medicare spending. And the agency’s conduct in issuing the 2020 Final Rule is all the more stark because this Court has already rejected CMS’s identical attempt to replace Congress’s unequivocal directives with the agency’s own policy preferences. The 2020 Final Rule is no less an impermissible flex of regulatory authority than the 2019 Final Rule, and should meet the same fate.

To read the entire complaint, download the PDF below.