The Trump administration on Friday pushed three federal appeals judges to resurrect its site-neutral payment policy for office visits, saying the panel should defer to HHS' expertise.
HHS determined that too many office visits were occurring in hospital outpatient departments, which was increasing taxpayer spending under Medicare's outpatient prospective payment system. Congress gave the agency the power to reduce that service volume, Department of Justice attorney Alisa Klein told the U.S. Court of Appeals for the District of Columbia Circuit.
Since Congress defined methods broadly under the Medicare statute, the justices should defer to the agency's interpretation of the law since Congress didn't speak to the precise issue at hand, Klein argued.
"Congress may not have anticipated what was not a problem until years (after it changed the law), which is that for these particular services . . . you had a perverse incentive introduced by a Medicare payment differential," Klein said during Friday's oral arguments, which were held telephonically due to the COVID-19 pandemic.
The payment difference between evaluation and management services performed in outpatient clinics and physician practices led hospitals to buy up neighboring practices, which cost taxpayers money because Medicare paid more for the same services, she said.
It's the same argument that didn't hold water with U.S. District Judge Rosemary Collyer last fall when she sided with hospitals, ruling that Congress didn't give HHS the ability to change reimbursement rates to lower utilization and that the law required payment changes to be budget-neutral. The three-judge panel on Friday did not show any sign of which side it would take.
"Could a method include simply not paying for a service?" Judge Patricia Millett said. "What if the (HHS) secretary just, at some point, said here's a procedure that I just don't think should be performed in outpatient clinics at all?"
That would mean that any amount of that procedure would be too high and effectively bar it from being performed inside an outpatient setting under Medicare, Millett said.
Judge Sri Srinivasan acknowledged that some of the law's language was a "feather in (the government's) quiver," but he wondered whether other parts of the statute contradicted HHS' interpretation of the law since they detail how the agency should calculate payments.
Catherine Stetson, an attorney for Hogan Lovells representing hospitals, argued that HHS has two ways to make payment adjustments. It can make targeted, budget-neutral payment changes or adjust the conversion factor to increase or decrease all payments under the outpatient prospective payment system. The agency cannot make targeted payment adjustments that aren't budget-neutral, according to Stetson.
"I think the reason that Ms. Klein was resisting calling this an adjustment (is because there's) a very specific list, as Chief Justice Srinivasan said, of fee schedule adjustments," Stetson said.
The court needs to decide whether payment changes are one of the methods outlined by Congress in the statute to determine whether it's reviewable, said Judge Merrick Garland.
"There's no dispute that there's a bar on judicial review of methods," Millett said. "If this is a method, there's no review of how well or sloppily or reasonably they adopted the method."
But Garland suggested that the law could allow for targeted adjustments that aren't budget-neutral if service volume increases after HHS adjusts payments using the methods outlined by Stetson.
If the court finds that payment adjustments are a method, as defined by Congress, it would be a big win for the Trump administration and advocates for site-neutral payments because the court wouldn't be able to review the changes. Hospitals are hoping they find the opposite.