PORT ANGELES — Olympic Medical Center — which recently slashed $1.7 million from its 2019 budget — is a named plaintiff in a lawsuit filed Tuesday against the U.S. Department of Health and Human Services over cuts to Medicare reimbursements at off-site clinics.

The lawsuit, filed by the American Hospital Association and Association of American Medical Colleges in U.S. District Court in Washington, D.C., Tuesday, was filed over an “ill-advised and unlawful payment reduction to the outpatient prospective payment system (OPPS) that threatens access to care and hospitals’ and health systems’ ability to continue to meet the needs of their patients, especially those with the most complex needs and those in vulnerable communities,” the AHA and AAMC said in a statement.

Last month, the federal Centers for Medicare and Medicaid Services announced it would move forward with 60 percent cuts to Medicare reimbursements at off-site clinics, despite the more than 1,700 letters and comments from Clallam County residents arguing against the measure. There were about 3,000 comments total.

“We’re pleased the American Hospital Association and the Association of American Medical Colleges filed this lawsuit and that OMC is a plaintiff because this policy does a tremendous harm to our health care system here in Clallam County,” OMC CEO Eric Lewis said.

“We think they exceeded their authority significantly and we’re working hard to reverse what I think is … the worst policy decision I’ve seen in my career.”

The final rule phases in the 60 percent cut to OMC in practice expense reimbursement for patient visits more than 250 yards from the Port Angeles hospital.

As a result, reimbursement to OMC will be cut by about $1.7 million in 2019 and another $1.7 million in 2020, officials said. The cost over 10 years is about $47 million. The cuts do not affect other North Olympic Peninsula hospitals.

Lewis said the goal is for OMC to maintain all of its services as the full impact of the cuts are felt in 2020, but to do that will require significant changes.

“It’s a complex planning process that’s not done, but we know we can’t stay the same,” Lewis said. “We’re looking at ways to get better and to maintain our services .. despite these cuts as we try to reverse them through the legislative process and the lawsuit.”

The lawsuit asks the court to declare the final rule exceeds CMS’ statutory authority and asks for preliminary and permanent injunctive relief preventing the government from enforcing the rule.

Olympic Medical Center is joined in the lawsuit with two other hospitals: Mercy Health in Muskegon,Mich.; and York Hospital in York, Maine.

“This Court should reject CMS’s attempts to replace Congress’s unequivocal directives with the agency’s own policy preferences,” the lawsuit reads. “CMS may not contravene clear congressional mandates merely because the agency wishes to make cuts to Medicare spending.

Of Olympic Medical Center’s patients, 83 percent rely on government-paid insurance with 58.63 percent of all patients relying on Medicare, the lawsuit said.

The hospital provides outpatient services at eight off-site clinics that Congress agreed should receive higher Medicare reimbursement rates, according to the lawsuit.

Clinic visit services at all off-site clinics across the country were previously paid at relatively higher payment rates to hospitals. Amid concerns that off-site clinics were competing with private practice clinics, Congress decided in 2015 to allow existing off-site clinics — including the eight in Clallam County — to continue to be paid at the higher rate. New clinics receive reimbursements at a lower rate.

“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.

“For example, 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.”

“Olympic Medical will suffer immediate and concrete harm form the outpatient service payment reductions set forth in the Final Rule,” the lawsuit says.

Last month Olympic Medical Center cut its 2019 budget by $1.7 million in anticipation of the reduced reimbursement. The hospital plans to save $500,000 by moving some services to OMC’s main campus.

The hospital also plans to slow hiring of new employees, which will save $343,000 next year.

Staff also are proposing to defer the Sequim Primary Care expansion, a $5 million capital project, and defer the Sequim Outpatient Surgery project, also a $5 million capital project.

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