The University of Virginia has joined 37 other hospitals in suing over a new federal rule that cuts some Medicare rates for outpatient hospital sites to match rates at doctor’s offices.
The plaintiffs, which include the University of Kansas Hospital Authority, Vanderbilt University Medical Center and other hospitals in several states, challenge the new rule as an executive overreach that will cost hospitals $380 million in 2019 and $760 million in 2020. The lawsuit was filed in U.S. District Court for the District of Columbia on Jan. 18.
The Department of Health and Human Service’s rule, which took effect Jan. 1, is known as a site-neutral payment policy. It means that Medicare now pays the same rates for medical services regardless of whether they are provided in a physician’s office or in a department located off a hospital’s main campus. In general, services at hospital outpatient departments — such as radiology, ultrasound and urgent care — are more expensive to provide than in physicians’ offices because hospitals have stricter regulatory requirements, according to the complaint.
Hospital outpatient departments can now expect to receive a 30 percent reduction in Medicare payments for those services, according to the complaint. That will strain the UVa Medical Center’s resources, the hospital told Azar before the rule took effect.
“The proposed payment reductions will hurt our ability to continue to provide the full range of quality safety-net services that we currently offer,” Pamela Sutton-Wallace, the hospital’s CEO, wrote in a public comment to the department in September.
Even before the rate reduction, according to the complaint, the hospitals “were under significant financial strain from steadily increasing costs in the healthcare marketplace and reimbursement cuts from the government and private insurers alike.”
In public comments, several of the plaintiffs stated that outpatient offices aren’t just redundant satellites of the hospital or replications of local physician’s offices, but they in fact provide easier access for many low-income patients and offer necessary services not typically offered by doctor’s offices. UVa also noted that the new rule would be particularly devastating to academic medical centers, which typically see more complex cases.
Off-campus hospital outpatient departments are often the main avenue of care for low-income patients. Sutton-Wallace wrote that low-income and vulnerable patients depend on the Medical Center because they “face difficulty being seen in physician offices” at all.
“This is not a sustainable financial model for public institutions like UVa Medical Center who serve all citizens regardless of their ability to pay for care,” Sutton-Wallace wrote.