The decision is a major loss for hospitals that are already facing revenue reductions due to the COVID-19 pandemic.
The court presented 2017 data showing the evaluation and management reimbursement rate for new patients was $184 in outpatient clinics, compared with $109 at a freestanding physician's office, and cited Medicare Payment Advisory Commission reports that found hospitals reacted to the payment differential by buying up freestanding physician practices.
CMS Administrator Seema Verma tweeted that the ruling is a win for American patients.
"A patient shouldn't have to pay more for an outpatient department visit than a visit to a doctor's office, & on avg can save $14/visit," Verma tweeted on Friday.
The American Hospital Association said is reviewing the decision to determine next steps.