Judge who ruled in OMC’s favor rejects government’s arguments

Editor’s note: This story has been corrected to reflect that Olympic Medical Center has halted expansion of primary care in Sequim. OMC is moving forward with expanding the cancer center and the project is expected to be completed in 2020.

WASHINGTON, D.C. — A federal judge who ruled in favor of Olympic Medical Center in its lawsuit against the federal government last month will not change her opinion and the case is now closed, pending appeal.

U.S. District Court Judge Rosemary M. Collyer issued a second opinion Oct. 21, rejecting the government’s argument that her order — which ended a rule that threatened to cost OMC more than $47 million over the next decade — left no mechanism for providing any Medicare reimbursements to hospitals with off-site clinics.

Collyer notes in her ruling that the government “respectfully disagrees” with her decision and that the government believes there is still a question about whether the agency made the right decision that could be resolved on appeal.

“This factor may weigh in the government’s favor when a decision within the agency’s discretion was potentially lawful but insufficiently explained,” Collyer wrote.

“But here the Court has determined that CMS put forth an impermissible interpretation of the statutory scheme; no amount of new data or reasoning on remand can save its interpretation.”

Olympic Medical Center became a named plaintiff in the American Hospital Association’s lawsuit against the federal government earlier this year, and successfully argued that the federal Centers for Medicare and Medicaid Services (CMS) did not have the authority to implement a “site neutrality” rule.

CMS implemented the “site neutrality” rule in November, a move that cut Medicare reimbursements by 30 percent this year and was set to cut 60 percent in future years at clinics that are more than 250 yards away from a hospital’s main campus.

As a result of the rule, OMC has halted growth of primary care in Sequim. Officials have said that even with the ruling in favor of the hospitals, the hospital will likely continue to budget conservatively as the litigation continues to play out. Collyer wrote that if the government wants to stay her order, it needs to ask a higher court.

The government has argued that if it is successful in appeal, it will be difficult to get back any over payments it was forced to make to hospitals. For that reason, the government asked Collyer to undo a key part of her ruling.

Collyer notes that if the government loses on appeal, that won’t be an issue.

“That may seem obvious, but the point is that CMS’s argument has nothing to do with the appropriateness of vacatur in this case, only its timing,” she wrote. Vacatur means vacated or set aside.

Collyer has not required the government to pay back nearly a year’s worth of underpayments, but ordered the government and hospitals to submit a status report to determine if additional briefing was required.

In that status report, the American Hospital Association, Association of American Medical Colleges and Kansas Hospital Authority plaintiffs wrote that they have “Not yet had any substantive discussions regarding the appropriate remedy” with government.

The hospitals wrote that the government believed that by asking the judge to reconsider her order, there was no need to discuss compensation. The government also argued that without the rule that slashed payments to hospitals, it now has no way to pay hospitals anything for visits at off-site clinics.

Collyer wrote that she did not cut the portion of the rule that allowed payments, only the portion that unlawfully cut payments, adding that the cut is easy to make because CMS “tacked the … rate reduction on at the end” of the rule.

“That the rate reduction … can be so easily severed from the Final Rule as a practical matter strongly suggests that severance is appropriate as a legal matter,” the judge wrote.


Reporter Jesse Major can be reached at 360-452-2345, ext. 56250, or at jmajor@peninsula dailynews.com.

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