CMS unlawfully imposed 0.2% payment cut to cover two-midnight rule, federal court rules
CMS has until October 1 to propose a timetable for reissuing the rule.
A federal judge has partly sided with providers in ordering the Centers for Medicare and Medicaid to provide further justification for the 0.2 percent payment reduction in provider compensation that will kick-in under the two-midnight rule, according to the September 21 ruling in U.S. District Court in Washington D.C.
Hospitals must be allowed additional opportunity to comment on the rule regarding inpatient stays, said Judge Randolph Moss.
The court ruling has the potential to delay the planned implementation of the 0.2 percent cut scheduled for the end of the year.
[Also: CMS delays two-midnight rule enforcement to January 2016]
CMS has until October 1 to propose a timetable for reissuing the rule. If the agency fails to comply, the payment cut could be set aside, Moss wrote.
The court will issue an appropriate order after the timetable is submitted, Moss said.
The American Hospital Association and numerous hospital organizations brought lawsuits against CMS to overturn the two-midnight rule. The lawsuits were consolidated as Shands Jacksonville Medical Center vs. Sylvia Burwell, secretary of the Department of Health and Human Services.
The plaintiffs argued that the Medicare Act does not authorize the HHS secretary to make an across-the-board 0.2 percent reduction in the payment of inpatient services. The court rejected this argument.
Moss also rejected CMS's argument that it met all legal requirements for rulemaking when it decided to cut hospitals' inpatient payments by 0.2 percent.
[Also: CMS to soften two-midnight rule, allow for exceptions]
CMS violated the Administrative Procedure Act in not allowing hospitals the opportunity to comment on the agency's proposal, Moss said.
"Although the deficiencies in the rule are serious, the Court is not convinced that they are so grave that the Secretary should be precluded from taking corrective steps with respect to the 2014 inpatient prospective payment system," Moss wrote.
The U.S. Department of Health and Human Services proposed the 0.2 reimbursement cut for inpatient stays to offset increases in revenue from the two-midnight rule for hospital stays. CMS had estimated that implementing the two-midnight rule would shift about 40,000 patients from the outpatient to the inpatient setting, leading to an additional $220 million in payments to providers.
Twitter: @SusanMorseHFN
