AHA, AAMC sue Trump administration over site-neutral payment rule


Wooden gavel and gold legal scale that appear to have sunlight falling on them

Two of the nation’s largest healthcare groups are suing the Trump administration over a final rule to institute site-neutral payments for clinic visits, saying the policy would hurt patients.

Last month, the Centers for Medicare & Medicaid Services (CMS) finalized the 2019 Outpatient Prospective Payment System (OPPS) rule (PDF), which will gradually institute site-neutral payments in the Medicare program over the next two years. Agency officials said site-neutral payments for clinic visits will lower out-of-pocket costs for beneficiaries and save the program as much as $380 million in 2019.

In a complaint filed in the U.S. District Court for the District of Columbia, the American Hospital Association (AHA) and the Association of American Medical Colleges (AAMC) said the rule would lead to access problems as hospitals cut services, hurting vulnerable patients. The associations claimed the administration is overstepping its legal bounds  and were joined in the legal action by Olympic Medical Center in Port Angeles, Washington; Mercy Health in Muskegon, Michigan; and York Hospital in York, Maine.

“These cuts directly undercut the clear intent of Congress to protect hospital outpatient departments because of the real and crucial differences between them and other sites of care,” said Rick Pollack, president and CEO of the AHA, in a statement.

AHA said it was planning legal action shortly after the rule was finalized.

Physician groups, including the American Association of Family Physicians (AAFP) and the American College of Physicians (ACP) as well as groups like the Cancer Oncology Alliance, have supported site-neutral payments for some time. AAFP has said site-neutral payments can also help community clinics stay open at a time many have had to close due to vertical integration, consequently advancing patient choice and reducing costs.

But hospital groups oppose the rule, which also expands a CMS policy limiting how much drug companies can charge hospitals for their products in the 340B program.

“Patients who receive care in a hospital outpatient department are more likely to be poorer and have more severe chronic conditions than patients treated in an independent physician office,” Pollack said. “In addition, only hospitals provide 24/7 access to care for patients, regardless of their ability to pay, hospitals are held to far higher regulatory requirements, and hospital outpatient departments in inner cities and rural areas are often the only sites of care that provide the services they do.”

Most recently, AHA had sued CMS over the 340B program changes before HHS bumped up the implementation date last month for changes that would set price ceilings and add civil monetary penalties for manufacturers—two changes the AHA supported.


Federal cuts to hospitals to reach $218B in next decade, AHA report says


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A report commissioned by the American Hospital Association and the Federation of American Hospitals warns that a conglomeration of health measures could result in funding losses of up to $218.2 billion for hospitals by 2028.

The report looked at multiple measures—from sequestration to cuts in Medicare payments for bad debt, hospital coding and documentation adjustment and clarifications to the three-day payment window—to project the cumulative losses between 2010 and 2028.

The single most costly changes they found? Adjustments to Medicare Severity Diagnosis Related Groups documentation and coding, which is expected to add up to $79.3 billion in cuts over that time period.

Here’s a look at what else they took into account:Sequestration

Among the reductions taken into account under sequestration, the Budget Control Act of 2011 imposed across-the-board cuts in federal spending, including a 2% reduction in Medicare payments after April 1, 2013. Sequestration cuts have since been extended several times to stretch through fiscal 2027.
Estimated cost: $73.1 billion by 2028.

Changes to Medicaid Disproportionate Share Hospital payments

The group took multiple pieces of legislation into account, namely the Affordable Care Act, which required cuts to federal DSH payments beginning in 2014 to account for the decrease in uncompensated care anticipated under health insurance coverage expansion. It was delayed but will take effect in 2020 and extend through 2025.
Estimated cost: $25.9 billion between 2020 and 2025

Off-campus provider-based departments

The Bipartisan Budget Act of 2015 modified the CMS definition of provider-based off-campus hospital outpatient departments so only those off-campus PBDs that were billing under CMS’ outpatient prospective payment system prior to November 2015 could continue to bill under the OPPS starting in 2017. Off-campus PBDs would otherwise be eligible under reimbursements from other payment schedules.
Estimated cost:  $13.2 billion between 2017 and 2028

Post-acute care reductions

The Medicare Access and CHIP Reauthorization Act of 2015 capped Medicare reimbursements to post-acute care facilities by no more than 1% in fiscal 2018. Further, the Bipartisan Budget Act of 2018 continued restricting inflation-based payment increases for home health services starting in fiscal 2020.
Estimated cost: $6.1 billion between 2018 and 2028.

Hospice transfer policy

The Bipartisan Budget Act of 2018 extended the definition of post-acute care providers to include hospitals, which meant patients who are discharged from an IPPS hospital to a hospital will result in a reduced payment to the hospital starting in fiscal 2019.
Estimated cost: $5.5 billion

Bad debt

Under the Middle-Class Tax Relief and Job Creation Act of 2012, bad debt reimbursement was phased down to 65%.
Estimated cost: $5 billion between 2013 and 2028.

3-day window

This refers to the American Jobs and Closing Tax Loopholes Act of 2010, which was meant to prevent unbundling of related services within three days of an inpatient admission.
Estimated cost: $4.2 billion in 2010 and 2011.



Trump Administration Invites Health Care Industry to Help Rewrite Ban on Kickbacks

The Trump administration has labored zealously to cut federal regulations, but its latest move has still astonished some experts on health care: It has asked for recommendations to relax rules that prohibit kickbacks and other payments intended to influence care for people on Medicare or Medicaid.

The goal is to open pathways for doctors and hospitals to work together to improve care and save money. The challenge will be to accomplish that without also increasing the risk of fraud.

With its request for advice, the administration has touched off a lobbying frenzy. Health care providers of all types are urging officials to waive or roll back the requirements of federal fraud and abuse laws so they can join forces and coordinate care, sharing cost reductions and profits in ways that would not otherwise be allowed.

From hundreds of letters sent to the government by health care executives and lobbyists in the last few weeks, some themes emerge: Federal laws prevent insurers from rewarding Medicare patients who lose weight or take medicines as prescribed. And they create legal risks for any arrangement in which a hospital pays a bonus to doctors for cutting costs or achieving clinical goals.

The existing rules are aimed at preventing improper influence over choices of doctors, hospitals and prescription drugs for Medicare and Medicaid beneficiaries. The two programs cover more than 100 million Americans and account for more than one-third of all health spending, so even small changes in law enforcement priorities can have big implications.

Federal health officials are reviewing the proposals for what they call a “regulatory sprint to coordinated care” even as the Justice Department and other law enforcement agencies crack down on health care fraud, continually exposing schemes to bilk government health programs.

“The administration is inviting companies in the health care industry to write a ‘get out of jail free card’ for themselves, which they can use if they are investigated or prosecuted,” said James J. Pepper, a lawyer outside Philadelphia who has represented many whistle-blowers in the industry.

Federal laws make it a crime to offer or pay any “remuneration” in return for the referral of Medicare or Medicaid patients, and they limit doctors’ ability to refer patients to medical businesses in which the doctors have a financial interest, a practice known as self-referral.

These laws “impose undue burdens on physicians and serve as obstacles to coordinated care,” said Dr. James L. Madara, the chief executive of the American Medical Association. The laws, he said, were enacted decades ago “in a fee-for-service world that paid for services on a piecemeal basis.”

Melinda R. Hatton, senior vice president and general counsel of the American Hospital Association, said the laws stifle “many innocuous or beneficial arrangements” that could provide patients with better care at lower cost.

Hospitals often say they want to reward doctors who meet certain goals for improving the health of patients, reducing the length of hospital stays and preventing readmissions. But federal courts have held that the anti-kickback statute can be violated if even one purpose of the remuneration is to induce referrals or generate business for the hospital.

The premise of the kickback and self-referral laws is that health care providers should make medical decisions based on the needs of patients, not on the financial interests of doctors or other providers.

The Trump administration is calling its effort a “regulatory sprint to coordinated care.”CreditSarah Silbiger/The New York Times.

Health care providers can be fined if they offer financial incentives to Medicare or Medicaid patients to use their services or products. Drug companies have been found to violate the law when they give kickbacks to pharmacies in return for recommending their drugs to patients. Hospitals can also be fined if they make payments to a doctor “as an inducement to reduce or limit services” provided to a Medicare or Medicaid beneficiary.

Doctors, hospitals and drug companies are urging the Trump administration to provide broad legal protection — a “safe harbor” — for arrangements that promote coordinated, “value-based care.” In soliciting advice, the Trump administration said it wanted to hear about the possible need for “a new exception to the physician self-referral law” and “exceptions to the definition of remuneration.”

Almost every week the Justice Department files another case against health care providers. Many of the cases were brought to the government’s attention by people who say they saw the bad behavior while working in the industry.

“Good providers can work within the existing rules,” said Joel M. Androphy, a Houston lawyer who has handled many health care fraud cases. “The only people I ever hear complaining are people who got caught cheating or are trying to take advantage of the system. It would be disgraceful to change the rules to appease the violators.”

But the laws are complex, and the stakes are high. A health care provider who violates the anti-kickback or self-referral law may face business-crippling fines under the False Claims Act and can be excluded from Medicare and Medicaid, a penalty tantamount to a professional death sentence for some providers.

Federal law generally prevents insurers and health care providers from offering free or discounted goods and services to Medicare and Medicaid patients if the gifts are likely to influence a patient’s choice of a particular provider. Hospital executives say the law creates potential problems when they want to offer social services, free meals, transportation vouchers or housing assistance to patients in the community.

Likewise, drug companies say they want to provide financial assistance to Medicare patients who cannot afford their share of the bill for expensive medicines.

AstraZeneca, the drug company, said that older Americans with drug coverage under Part D of Medicare “often face prohibitively high cost-sharing amounts for their medicines,” but that drug manufacturers cannot help them pay these costs. For this reason, it said, the government should provide legal protection for arrangements that link the cost of a drug to its value for patients.

Even as health care providers complain about the broad reach of the anti-kickback statute, the Justice Department is aggressively pursuing violations.

A Texas hospital administrator was convicted in October for his role in submitting false claims to Medicare for the treatment of people with severe mental illness. Evidence at the trial showed that he and others had paid kickbacks to “patient recruiters” who sent Medicare patients to the hospital.

The owner of a Florida pharmacy pleaded guilty last month for his role in a scheme to pay kickbacks to Medicare beneficiaries in exchange for their promise to fill prescriptions at his pharmacy.

The Justice Department in April accused Insys Therapeutics of paying kickbacks to induce doctors to prescribe its powerful opioid painkiller for their patients. The company said in August that it had reached an agreement in principle to settle the case by paying the government $150 million.

The line between patient assistance and marketing tactics is sometimes vague.

This month, the inspector general of the Department of Health and Human Services refused to approve a proposal by a drug company to give hospitals free vials of an expensive drug to treat a disorder that causes seizures in young children. The inspector general said this arrangement could encourage doctors to continue prescribing the drug for patients outside the hospital, driving up costs for consumers, Medicare, Medicaid and commercial insurance.




HHS set to implement long-delayed 340B final rule in January


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Editor’s note: This story has been updated to include a response from 340B Health and the American Hospital Association.

HHS is planning an about-face on the long-delayed rule that would set price ceilings and monetary penalties in the 340B program, moving up its start date by several months. 

The Department of Health and Human Services issued a notice (PDF) saying that it intended to finally implement the rule on Jan. 1, cutting off seven months of time from a previously announced July 1 start date.

The rule—which would set price ceilings for drugs and punish pharmaceutical companies that knowingly overcharge 340B hospitals—has been delayed five times by the Trump administration, most recently in June. The final rule was first issued in January 2017. 

The Health Resources and Services Administration (HRSA) said the delays were necessary as it needed more time to implement the rule properly and wanted to fully explore possible alternatives or supplemental regulations.

The most recent delay was fueled in part because HHS has made addressing the rising cost of drugs a key priority, and officials were concerned that implementing the rule could impact actions taken under the “American Patients First” plan.

The start date was moved up to Jan. 1, HRSA said in the notice, because it “determined that the finalization of the 340B ceiling price and civil monetary penalty rule will not interfere with the department’s development of these comprehensive policies.” 

Four national healthcare organizations sued HHS in September over the delays to the final rule. The American Hospital Association (AHA), America’s Essential Hospitals (AEH), the Association of American Medical Colleges (AAMC) and 340B Health all signed on to the suit, which claims that the repeated delays violate the Administrative Procedure Act. 

Since the rule was first proposed in 2015, there has been ample time to notify stakeholders and tweak the plan, the groups argued.

“The department’s proffered rationales for their successive delays have shifted and been inconsistent,” according to the lawsuit. 

340B Health said in a statement emailed to FierceHealthcare that the group is “encouraged” to see HHS responding to the suit.

“These rules were ordered by Congress more than eight years ago based on clear, documented evidence of overcharging by drug companies of 340B hospitals, clinics, and health centers,” interim CEO Maureen Testoni said. “The time for delay is over and now it is time for action.”

AHA echoed the sentiment, saying it hopes HHS “sticks by the commitment” to roll out the rule.

“The rule also requires that HHS make pricing information available online to 340B hospitals and other providers,” General Counsel Melinda Hatton said in a statement. “We strongly encourage HHS to publish that website promptly, which is critical to enforcement of the 340B program, as soon as possible after January 1.”

HHS has also taken aim at the 340B program by significantly slashing its payment rate. In a rule that took effect at the beginning of fiscal year 2018, the Centers for Medicare & Medicaid Services cut the rate from up to 6% above the average sales price for a drug to 22.5% less than the average sales price.

All told, the change will cut $1.6 billion in drug discount payments. AHA, AEH and AAMC are also challenging that policy in court


Hospitals prepare for uncompensated care payment change



Hospitals will soon get paid for uncompensated care differently, and though supporters of the change say it will create a fairer measurement, hospitals are leery about how the move will affect their bottom lines.

Starting Oct. 1, CMS will begin a three-year phase-in for how it pays hospitals for uncompensated care. No longer will they get paid based solely on a Medicaid, dual-eligible and disabled patient headcount. Instead, hospitals will need to provide patient-level detail of the services performed, as well as total uncompensated care totals.

Rita Numerof, co-founder and president of Numerof & Associates, told Healthcare Dive that counting heads is easier for hospitals, but it’s not always accurate. That distortion can result in institutions having an “unfair advantage” in terms of payments under the Disproportionate Share Hospital program. Instead, CMS will now gauge the actual care experience.

Numerof said the move looks to target flaws in the current payment model and improve transparency and accountability. “I think that looking at the services that are provided rather than just looking at the number of people and making an assumption about what their utilization is is a lot more accurate,” she said.

Chuck Alsdurf, director of healthcare finance policy and operational initiatives at Healthcare Financial Management Association, told Healthcare Dive the change “levels the playing field” for hospitals. However, several issues and concerns remain.

Worksheet S-10 and uncompensated care

CMS recently released its hospital inpatient prospective payment system final rule for fiscal year 2019, which included a provision that will require hospitals to use Worksheet S-10 to provide patient-level compensated care information that can be used to make payments to disproportionate share hospitals.

That patient-level data includes forms in which hospitals must attest to a patient’s eligibility, such as whether the person meets the criteria through disability, dual eligibility or Medicaid.

At the same time, CMS will audit Worksheet S-10 data in the fall and says it will continue provider education efforts and look to improve Worksheet S-10 instructions.

CMS made the change to improve the accuracy in the way that DSH payments are made. “Historically, the approach has been a head-count approach, essentially taking a look and totaling up the number of Medicaid patients, dual patients and those that are disabled,” Numerof said.

The new method isn’t as easy as a headcount, but it improves accuracy and is closer to what a hospital is actually owed.

According to the agency, about half of hospitals that receive uncompensated care payments felt the need to modify their S-10 data. Alsdurf said that’s not a large enough number to assume the data is accurate or reliable. “HFMA members view this as half of the hospitals possibly submitted imprecise data based on vague instructions that impact their hospital payments. So, at the current time, we do not feel this model is clear or accurate enough to utilize for such a significant distribution of funds,” he said.

Critics charge that the change might hurt Medicaid expansion states and help hospitals in states that didn’t expand the program. Now, hospitals calculate Medicaid Patient Days and send that information along to CMS. However, supporters of the change say that non-expansion states with fewer Medicaid recipients now lose out on uncompensated care payments compared to expansion states.

In a letter to CMS about the change, Dallas-based Parkland Memorial Hospital CEO Frederick Cerise said his facility is one of the largest providers of uncompensated care in Texas, which has not expanded Medicaid.

He said Parkland supports the change and called using S-10 data a “more exact measure.” The system provided $2.37 billion in uncompensated care in FY 2015. More than three-fourths of the system’s payer mix is unfunded (nearly half) or Medicaid (almost one-third).

The American Hospital Association agrees that Worksheet S-10 has the potential to provide a more accurate measure of uncompensated care costs. However, Erika Rogan, senior associate director of policy at AHA, told Healthcare Dive in a statement the group has concerns about the “accuracy and consistency of the S-10.”

Meanwhile, America’s Essential Hospitals, which represents more than 325 member hospitals with much of the country’s uncompensated care, sent a 44-page letter to CMS in June listing a series of concerns and recommendations to resolve the issues.

“The high cost of providing complex care to struggling Americans leaves our hospitals with limited resources, driving them to find increasingly innovative strategies for high-quality care,” AEH CEO Bruce Siegel said. “But improving care coordination and quality while staying true to a mission of helping those in need can be a delicate balance. This balance is threatened by payment cuts to hospitals.”

What does the change mean for hospitals?

Uncompensated care costs in community hospitals are on the rise after years of decreases following the Affordable Care Act.

Uncompensated care is bad debt charges plus financial assistance charges. This includes caring for uninsured patients unable to pay their bills. Uncompensated care doesn’t include underpayments from Medicare or Medicaid.

The AHA earlier this year said 4,840 community hospitals provided a total of $38.3 billion in uncompensated care in 2016, up from $35.7 billion at 4,862 community hospitals in 2015. And uninsured numbers have increased in the years since 2016, so those numbers are likely higher now.

Hospitals are concerned about any change that might result in them losing out on uncompensated care funding. However, what the change will mean for hospitals depends on multiple factors, including patient mix, location and how much the facility already relies on uncompensated care payments.

The AHA had hoped CMS would put into place protections to shield hospitals hurt by the change. In its comments to CMS, the hospital group requested a stop-loss policy that would kick in if hospitals lost more than 10% of DSH payments in a year after using the S-10 worksheet. AHA estimated that nearly one-fifth of hospitals might face that problem in FY 2019. AEH also requested a stop-loss policy.

Ultimately, CMS didn’t put in that provision. Numerof said she understands the agency’s choice. Hospitals need to understand where the market is headed and build infrastructure and systems to meet those demands accordingly. She added that no other business would request stop-loss protection based on changes like the S-10.

Concerning community relations, Alsdurf doesn’t expect the change will have an impact. “Hospitals will continue to provide care to those who cannot afford it, so I don’t think this change will have any impact on the community, positive or negative,” he said.

How should hospitals prepare?

There are still questions about the S-10, but hospitals can’t wait for CMS to provide all answers and clarifications. The change is here and hospitals need to move forward with the information available to them.

This process means maximizing uncompensated care payments in the new system. One step is for hospitals to make sure their charity care and bad debt policies are updated and that those policies are followed, so they receive the level of payments they’re owed.

Alsdurf said hospitals are already collecting Medicaid days data. Now they’ll have to add another piece. He expects the change will be minor for reporting and data gathering practices.

“Until they receive feedback from CMS on their data, it’s hard to do much other than make sure they feel good about the data … I’d suggest they begin running reports from their billing systems and reconciling the data (if they haven’t already) to the S-10 worksheet for FY 2014 to present,” Alsdurf said.

He added that hospitals should also continue to review their data as CMS provides more explicit instructions about S-10 in the coming months.




Two major hospital groups suggested separately that CMS had overstepped its legal authority in proposals for next year.


The administration has touted site-neutral payment policies as a way to rationalize reimbursement.

Industry groups contend that site-specific costs should be considered when calculating rates.

The proposals intersect with administration efforts to reduce drug costs.

The deadline to comment on proposed changes to the Medicare outpatient prospective payment system (OPPS) and ambulatory surgical center (ASC) payment system for next year passed Monday evening.

Hospital groups did not pass up the opportunity to make their displeasure known, and they hinted that legal action to block the proposal could be warranted.

Among the more than 2,800 comments received, there were some unsurprisingly unhappy responses from the American Hospital Association (AHA), America’s Essential Hospitals (AEH), and others who had already expressed their general opposition the government’s plan when it was announced in July.

Both groups added detail to their feedback Monday and accused the Centers of Medicare & Medicaid Services (CMS) of pursuing changes beyond its legal authority.

“The AHA is deeply disappointed in certain proposals that CMS has chosen to set forth in this rule, which run afoul of the law and rely on the most cursory of analyses and policy rationales,” AHA Executive Vice President Thomas P. Nickels wrote. “Taken together, they would have a chilling effect on beneficiary access to care and new technologies, while also dramatically increasing regulatory burden.”

The AHA objects specifically to three items in the CMS proposal:

  1. A payment reduction for hospital outpatient clinic visits in certain off-campus provider-based departments (PBD). These visits would be reimbursed at the physician fee schedule rate, which equals 40% of the OPPS rate.
  2. A payment reduction for “services from expanded clinical families” in certain off-campus PBDs. This would also be set at 40% of the OPPS rate.
  3. A continuation of the policy that pays for 340B program separately payable drugs at 22.5% less than the average sales price and an expansion of that policy to certain PBDs.

The AEH comment, signed by organization President and CEO Bruce Siegel, MD, MPH, made similar points.

“We are deeply concerned about several provisions of the proposed rule that exceed the agency’s statutory authority and would have a disproportionately negative impact on essential hospitals—those that provide stability and choice for people who face barriers to care,” Siegel wrote.

CMS Administrator Seema Verma has touted the so-called “site-neutral” payment proposal as an effort to rationalize the way the federal government reimburses services, saying it doesn’t make sense for taxpayer-funded healthcare programs to pay different rates depending upon the site of service.

“It’s a great example of some of the bizarre things in the Medicare program that just don’t make sense and that are actually having a perverse incentive on the entire healthcare delivery system,” Verma said.

In a comment on behalf of about 4,000 hospitals and 165,000 other providers, Premier Senior Vice President of Public Affairs Blair Childs contended that there are key differences between PBDs and physician practices that should be taken into account in CMS reimbursement decisions.

“At a time when providers are adopting population health strategies that seek to limit inpatient care when it is safe and medically appropriate, we are concerned that CMS’ over-reach is counterproductive and will have negative consequences for beneficiaries,” Childs wrote. “In lieu of expansive site-neutral payment policies, CMS should focus on methods to encourage providers to adopt risk-based alternative payment models”

Less than 20% of the comments received by CMS had been released publicly as of Tuesday morning, but major industry groups released their comments publicly on their own, reflecting a variety of concerns beyond the site-neutral payment policy. The Pew Charitable Trusts, for example, focused on a request for information in the proposal pertaining to the Competitive Acquisition Program.



CMS ends risk-adjustment freeze, releasing $10.4B to insurers


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The Trump administration will release billions in risk-adjustment payments to insurers this fall, ending a relatively short-lived freeze that generated pushback from payers and providers alike.

“This rule will restore operation of the risk-adjustment program and mitigate some of the uncertainty caused by the New Mexico litigation,” CMS Administrator Seema Verma said in a statement. “Issuers that had expressed concerns about having to withdraw from markets or becoming insolvent should be assured by our actions today. Alleviating concerns in the market helps to protect consumer choices.”

The final rule (PDF), released by the Centers for Medicare & Medicaid Services (CMS) on Tuesday evening, maintains the same methodology for risk-adjustment transfers previously outlined by the agency, using statewide average premiums as part of the formula. CMS included an additional explanation in the rule on the formula.

For the 2018 and 2019 benefit years, CMS will adjust statewide average premiums by 14% to account for an estimated proportion of administrative costs that do not vary with claims. The agency will not apply an adjustment to the 2017 plan payments “to protect the settled expectations of insurers” that have already calculated pricing and offering decisions based on the 2017 formula.

“Absent this administrative action, HHS would be unable in the coming months to collect charges or make payments to issuers for the 2017 benefit year,” the rule states. “These amounts total billions of dollars, and failure to make the payments in a timely manner threatens to undermine the stability of the insurance markets.”

CMS suspended the $10.4 billion in risk-adjustment payments earlier this month, citing a New Mexico court decision in February that vacated the use of statewide average premiums to calculate risk-adjustment payments. The agency asked the district court judge to reconsider his ruling, but that decision isn’t expected until the end of August.

Most policy experts expected CMS to unfreeze the payments, and late last week the agency sent an interim rule to the Office of Management and Budget (OMB) for review.

Several insurers were quick to denounce the freeze. Physician and hospital groups like the American Hospital Association and the American Medical Association had also urged CMS to reinstate the payments in recent weeks.