Hospitals peg Medicare payment fight on SCOTUS ruling

Axios – Monday, September 39, 2025
By Maya Goldman

Hospitals appear to be on a collision course with the Trump administration over its push to change the way Medicare pays them for certain outpatient procedures.

Why it matters: Health systems stand to lose billions of dollars if the administration expands “site-neutral” payment policies that pay the same rate for some services regardless if they’re delivered in hospital outpatient facilities or doctors’ offices. Medicare typically pays a higher rate for services delivered at hospitals.

But the administration’s options may be limited by last year’s Supreme Court ruling that curtailed the executive branch’s ability to interpret laws — at least according to the hospitals.

Hospitals will likely take the administration to court if it finalizes its site-neutral expansion.

The big picture: Site-neutral policies have been pitched for years as a way to rein in Medicare spending. Congress got close to enacting a limited policy last year, but legislative language was left out a year-end government funding deal.

State of play: Medicare administrators in July proposed decreasing what the program pays hospitals to administer drugs like chemotherapy at outpatient clinics they own, in order to discourage providers from driving up the cost of care.

Medicare anticipates the change would reduce hospital payments by $280 million next year and nearly $11 billion over the next decade.

It’s an extension of a policy the first Trump administration pursued and that hospitals fought in court before the administration prevailed on appeal.

Medicare officials wrote in their latest proposal this summer that the earlier legal battle affirmed their authority to extend site-neutral reimbursement to hospital outpatient drug administration services.

Yes, but: The American Hospital Association, in a comment letter to the Centers for Medicare and Medicaid Services this month, argued that the administration isn’t authorized to make the payment changes.

CMS’ site-neutral proposal “would fundamentally rewrite the law” on hospital payment, AHA added, in a nod to last year’s Supreme Court ruling that scrapped the so-called Chevron deference doctrine.

The comment letter sets the stage for AHA to sue the administration again, banking on the hope that judges won’t give Medicare administrators the same deference they did a couple years ago.

Beyond the legal arguments, health systems say CMS’ change ignores that hospital outpatient clinics provide more complex and comprehensive services than independent physician offices and are more likely to serve sicker patients.

The other side: Medicare’s plan has a lot of supporters outside the hospital industry, including from consumer advocates that clash with the Trump administration on other issues.

“This proposal is particularly important for those health care consumers that rely most heavily on physician administered drugs, such as chemotherapy patients,” Consumers First — a coalition of health advocacy groups led by Families USA — wrote this month.

“Enacting site neutral payments for drug administration would provide these patients much needed relief from high health care prices.”

Physicians like the site-neutral push — but not the way CMS wants to implement it.

The American Medical Association said that instead of counting the reduced hospital payments as savings, CMS should reinvest the money into Medicare, including physician payments.

Zoom out: Medicare, in a further push toward site-neutral payment, also proposed expanding the list of procedures that can be performed at ambulatory surgical centers and getting rid of a list of procedures that Medicare will pay for only when delivered in an inpatient setting.

But the administration separately proposed reducing practice expense payments for care provided by doctors who work in facility settings — including ambulatory surgical centers.

“It may seem that those incentives are not aligned, if you really want to push care towards lower-cost settings, and really achieve that goal of site neutrality,” said Jeff Davis, director at health care consulting firm McDermott+.

What we’re watching: CMS will issue a final decision on whether it’s moving forward with the site-neutral policies around Nov. 1.

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