Reply in Support of Plaintiffs’ Motion for Summary Judgment

Introduction

Plaintiffs’ opening brief explained the clear limits that Congress imposed on the ability of the Centers for Medicare & Medicaid Services (CMS) to change Medicare payment rates for hospital outpatient clinic visit services from year to year: The agency may make targeted cuts to the Medicare payment rates for specific items or services, but it must do so in a budget-neutral fashion. And CMS must respect the statutory exemption that Congress explicitly provided to protect certain grandfathered (“excepted”) off-campus provider-based departments (PBDs) from a statutory change that effectively reduced payment rates for non-excepted off-campus PBDs.

CMS’s Final Rule ignored both of these clear statutory mandates. By selectively cutting payment rates for certain off-campus PBD clinic visit services, CMS violated the Medicare statute’s clear prohibition on non-budget-neutral cuts to specific categories of services. And by setting the payment rate for excepted off-campus PBDs as though they were not excepted—purportedly to fix a problem created by Congress’s selected approach—CMS has engaged in a clear usurpation of legislative authority from Congress.

In response, the Government does not contest that the statutory provision authorizing the agency to make annual adjustments to hospital outpatient payment rates—Subsection (t)(9)—prohibits the agency from making non-budget-neutral payment cuts to selected services. Instead, CMS is left to argue that its authority derives from a separate statutory provision—Subsection (t)(2)(F)—that, when triggered, provides the agency with authority to make adjustments to an across-the-board “conversion factor.” But that conversion factor is not implicated here. And in trying to defend its decision to override the statutory separateness of excepted and non-excepted off-campus PBDs, the Government effectively admits that its goal was to address a policy concern that Congress has already addressed through a different legislative solution. That is ultra vires. This Court should right the agency’s clear wrong.

Not to be deterred, the Government suggests—but does not expressly argue—that this Court lacks jurisdiction to review the Final Rule. Not so. There is nothing in the Medicare statute that precludes this Court from holding the agency to account when it has clearly exceeded the bounds Congress imposed on its delegated authority. Indeed, this Court has recently affirmed as much in two closely analogous cases that the Government simply fails to acknowledge. Review of Plaintiffs’ ultra vires claim is available and appropriate now.