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HHS Site-Neutral Pay Rule to Remain in Effect

The U.S. Supreme Court recently declined to hear an appeal challenging the Department of Health and Human Services’ (HHS) site-neutral payment policy, allowing the regulation to move forward. Hospitals originally sued to prevent the rule from taking effect, but were ultimately unsuccessful when the U.S. Court of Appeals for the District of Columbia ruled against them in favor of the rule’s legality.

The site-neutral pay rule, specifically Section 603 of the Bipartisan Budget Act of 2015, brings significant changes to Medicare hospital payment policy. The rule extends the concept of site-neutral payment policy by requiring that newly created off-campus hospital outpatient departments no longer be paid under the Outpatient Prospective Payment System (OPPS). Rather, such departments will be paid under an alternative, less remunerative payment system – the Medicare Physician Fee Schedule (MPFS). The goal of the rule is to reduce a perceived disparity in Medicare payments where hospital-affiliated clinics get paid more than physician offices for the same services.

Specifically, the rule amends Section 1833(t) of the Social Security Act, which governs Medicare payments for hospital outpatient department services, by adding a new clause that prospectively excludes from the definition of covered services most items and services furnished by an “off-campus outpatient department of a provider,” which the statute defines as a department of a provider that is not located on the provider’s campus or within a 250-yard radius from a remote location of a hospital. While CMS guidance on the rule is still unfolding, it has provided some insight into its interpretation of the 250-yard measurement. CMS explains that a hospital may measure 250 yards from “any point of the physical facility that serves as the site of services of the remote location to any point in the PBD.”

Central to the implementation of the rule is the concept of “excepted sites,” or sites to which the new rule does not apply. In general, the site-neutral pay rule does not apply to hospital outpatient departments that were established, or that began new lines of services, prior to 2015. On the other hand, departments that have been established, expanded, moved to a new location, changed ownership, or began new lines of services after 2015 may be subject to the rule. CMS has imposed rules that generally restrict these activities, but exceptions that continue to allow payment under the OPPS, rather than requiring a shift to the MPFS, may apply. Hospitals and other healthcare providers may wish to keep these considerations in mind when establishing new outpatient departments, relocating or expanding current facilities, expanding service lines, or transferring ownership.

For over 35 years, Wachler & Associates has represented healthcare providers and suppliers nationwide in a variety of health law matters, and our attorneys can assist providers and suppliers in understanding the impacts of the HHS’ site-neutral payment policy. If you or your healthcare entity has any questions pertaining to healthcare compliance, please contact an experienced healthcare attorney  at 248-544-0888 or

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