• Federal Court Upholds CMS's Extension of Outpatient "Blended Payment Rate"
  • April 29, 2009 | Author: Krista M. Barnes
  • Law Firm: Baker & Hostetler LLP - Houston Office
  • On March 26, 2009, the D.C. District Court dealt a setback to hospitals that were seeking to reverse a historical payment policy of the Centers for Medicare & Medicaid Services (CMS) arising out of the agency’s late implementation of the outpatient prospective payment system (OPPS). The litigation involved the Medicare payment rate for outpatient services for the fiscal years after January 1, 1999, until the establishment of the OPPS in April of 2001. Prior to January 1, 1999, Congress had required that outpatient services be paid based on a “blend” of the hospital’s reasonable costs and the rate paid to ambulatory surgery centers for such services. When Congress required CMS to implement the OPPS in the Balanced Budget Act of 1997, however, it terminated the statutory “blended payment rate” provision effective for services furnished after January 1, 1999.

    Controversy arose when the January 1, 1999, end to the statutory blended payment rate came and CMS had not yet established the OPPS. CMS addressed the controversy by simply extending the blended payment methodology until the OPPS was established, despite the fact that there was no Congressional authority to do so. A number of hospitals challenged CMS’s authority to continue such blended payments, arguing that the appropriate payment during the “vacuum” between January 1, 1999, and the implementation of OPPS was the historical reasonable cost methodology. The D.C. District Court found that the statutory scheme created ambiguity with respect to the nature of payment for outpatient services once the blended payment rate methodology expired. In light of this ambiguity, the court granted a high degree of deference to the agency’s interpretation so long as it was reasonable. The court determined “not only that [CMS’s decision to extend the blended payment methodology] was a reasonable decision, but that it was the decision that best effectuated Congress’s intent.”

    The decision deals a blow to the number of challenges by hospitals that currently are before the Provider Reimbursement Review Board seeking similar relief to the plaintiff hospitals. The plaintiff hospitals have 60 days from the decision to file a notice of appeal with the D.C. Circuit. Hospitals with similar challenges should continue to monitor the progress of this case.