ASC leaders and physicians remain frustrated with Medicare and private payers over disparities in reimbursements between their facilities and hospital outpatient departments.
One proposal to even out the payment playing field is site neutral payments, or site neutrality. Site-neutral payments means that patients pay the same price for the same services, regardless of where services are performed.
Some legislative efforts have been undertaken to reform site-neutral payment policies. The Bipartisan Budget Act of 2015 introduced site-neutral payment reforms that applied lower payment rates to off-campus HOPDs, with some exemptions. In 2019, CMS extended site neutrality to all off-campus HOPDs for clinic visits, including those previously exempt, and rural hospitals were exempted from those reforms in 2022.
The Peter G. Peterson Foundation advocates for further updates to site-neutral payment policies in an Aug. 26 blog post. Here are five major points raised:
1. There is little to no evidence that the quality of care is better in a hospital setting than in ASCs or physicians' office, and payments should reflect that. PPF notes that in many cases, physician group practices have been purchased by hospitals and relabeled as part of the HOPD, thereby receiving higher payments for the same services. This encourages the ongoing consolidation in healthcare that is being driven by corporations, payers and private equity groups. Physicians regularly cite a lack of leverage with payers and decreasing reimbursements as a main reason they are flocking to employed settings.
2. Data shows that even with comparable volume growth rates, average prices at HOPDs have grown by 27% as compared with 11% growth at ASCs and 2% of growth at physicians' offices. This demonstrates that under current policies, hospitals and large health systems are incentivized to keep their prices high and further fuel the buyout of smaller facilities, physician groups and ASCs.
3. These higher prices are passed onto patients and the federal government –– but site neutrality could fix that. Site neutrality would affect out-of-pocket costs and cost sharing for Medicare patients and those covered by private insurance. According to the American Action Forum, Part B beneficiaries in 2019 paid a $9 copayment for a standard clinic visit at a physician's office, but paid 2.5 times as much for the same services at a HOPD. Site neutrality could cut down on that disparity and its impact on patients' wallets.
4. Hospital groups argue that reimbursement rates are formulaically higher for HOPDs to account for differences in regulatory burden, complexity of services, equipment and patient mix. They contend that neutralizing payments for a wider range of services would negatively weigh on their balance sheets. One recent report from MedPAC found that hospitals' 2023 aggregate all-payer operating margin remained below pre-pandemic levels. The report found high variation in their margins, between negative 5% and 10%, which are dependent upon trends in patient volumes, higher labor and supply costs, and the end of the federal COVID-19 funds.
5. There are a few examples of proposed site-neutrality legislation with bipartisan support. Payments to hospitals currently account for nearly 40% of all Medicare payments –– the single largest component of Medicare spending. Current legislative proposals would reform Medicare payments to alleviate the burden on the federal budget and support Medicare's Hospital Insurance Trust Fund.
One site-neutral option would pay HOPDs at the lower rates paid to stand-alone physician offices for certain services, in addition to paying all hospital-owned physician offices located off-campus at that same rate. One analysis created for Blue Cross Blue Shield found that this proposal could save the government $231 billion from 2024 to 2033.
Another policy evaluated by the Committee for a Responsible Federal Budget would require the payment rates for some services performed at on-campus HOPDs to match the Medicare physician fee schedule that applies to physicians' offices. Payments for all services rendered at off-campus HOPDs, stand-alone emergency departments and clinics would be set at this rate. This proposal would also give CMS the ability to identify more services for application of the site-neutral payments. According to CRFB, this policy would bring down premiums and cost sharing for Medicare beneficiaries by $94 billion, reducing private cost-sharing premiums by up to $466 billion over 10 years.