More Outpatient Site-Neutral Payments to Cut Costs, Coalition Says

February 26, 2019 - Extending and establishing site-neutral payments for outpatient services is the key to lowering healthcare costs, a coalition of patient advocates, providers, payers, and employers recently told top policymakers.

“Site neutral payment reforms have long had bipartisan support from policymakers, healthcare economists, regulators and MedPAC,” the Alliance for Site Neutral Payment Reform wrote in a Feb. 20 letter. “In terms of savings, a recent projection from the Congressional Budget Office suggests site neutral payments for outpatient services have the potential to save $13.9 billion over ten years.”

“Therefore, we strongly encourage you and your colleagues in Congress to embrace commonsense changes to our healthcare delivery system that will directly lower out-of-pocket costs for patients, provide savings and stability for the Medicare program and promote transparency in the healthcare marketplace. To do so, we urge Congress to expand the application of site neutral payment policies to all clinically appropriate outpatient services.”

National industry groups in the Alliance include the American Academy of Family Physicians (AAFP), America’s Health Insurance Plans (AHIP), Blue Cross and Blue Shield Association, American College of Physicians (ACP), and Large Urology Group Practice Association (LUGPA).

CMS has used site-neutral payments to ensure appropriate utilization of services and to reduce excessive costs. The federal agency used the reimbursement strategy with long-term care and more recently, the agency extended site-neutral payments to more hospital-based outpatient care.

READ MORE: More Site-Neutral Payments to Impact Value-Based Care, Reps Says

In the 2019 Hospital Outpatient Prospective Payment System (OPPS) rule, CMS extended site-neutral payments to clinic visits furnished in hospital outpatient departments (HOPDs). The federal agency now reimburses all HOPDs at a Physician Fee Schedule-equivalent rate for certain outpatient services.

The site-neutral payment expansion for outpatient services came with much fanfare.

The American Hospital Association (AHA), Association of American Medical Colleges (AAMC), and three healthcare organizations sued HHS over implementation of the site-neutral payments, arguing CMS did not have the authority to apply the payment methodology to “grandfathered” HOPDs.  Thirty-eight hospitals also filed a lawsuit against HHS over the reimbursement policy for similar reasons.

When CMS first started using site-neutral payments for outpatient services, policymakers carved out exceptions for some facilities. Off-campus HOPDs that began operations on or after Nov. 2, 2015, were not subject to the first round of site-neutral payments because hospitals developed the HOPDs relying on higher reimbursement rates, Congress argued.

However, the Alliance for Site Neutral Payment Reform recently contended that extending site-neutral payments to more HOPDs will benefit the entire industry.

READ MORE: 200 Hospitals Face 5.5% Medicare Payment Cut Under Site-Neutral Rule

“Congress recognized the negative consequences these unsubstantiated payment disparities have on patients, taxpayers and businesses by directing CMS to institute site neutral payments for newly acquired and newly built off-campus provider-based HOPDs. However, these reforms represent only a small step in the right direction,” they wrote.

“The majority of existing provider-based off-campus facilities and those that were mid-build were ‘grandfathered’ and able to continue billing Medicare at the much higher rate for the same services. These exempted facilities still have a strong incentive to purchase physician practices and move them into existing HOPDs.”

Hospital acquisitions of physician practices are continuing at a rapid pace. New data from Avalere Health and the Physicians Advocacy Institute (PAI) showed hospitals purchased 8,000 practices in a recent two-year period ending in 2018, and that is on top of the 5,000 practices acquired in the previous year.

Stakeholders have argued that the Medicare reimbursement structure drove hospitals to acquire more practices because hospitals receive a higher rate for furnishing outpatient services under the OPPS compared to the Medicare Physician Fee Schedule.

But the higher rate also results in Medicare paying more for outpatient services, the Alliance added. They cited a 2017 Avalere and PAI analysis that found Medicare paid an additional $2.7 billion on services delivered in hospital-owned settings versus the physician office.

READ MORE: The Difference Between Medicare and Medicaid Reimbursement

The analysis also revealed that patients pay more when they go to an HOPD. Patients spent $411 million more in out-of-pocket costs when their providers worked for a hospital.

Failing to extend site-neutral payments to more HOPDs is to blame, the Alliance elaborated.

“The implementation of ‘partial’ site neutrality has also created confusion and ambiguity for patients,” they wrote. “A patient’s copayment amount can vary drastically depending on whether that service is provided at a ‘grandfathered’ HOPD or a newly built or acquired HOPD or a PPS-exempt cancer hospital facility or a freestanding physician office.”

“Medicare patients should have certainty and transparency around their care costs and not be forced to navigate an overly complex reimbursement system. Both patients and Medicare should be paying the same amount for the same service regardless of where it is performed.”

The fate of site-neutral payments for outpatient services is still up the air. But CMS seems to think the reimbursement methodology for reducing costs and boosting competition in the industry.

“Medicare pays for things differently based on the site of care, paying more or less for the same service, but different locations,” CMS Administrator Seema Verma said in July 2018. “Now sometimes it makes sense, as some facilities provide a higher level of service.

“But other times, it creates misaligned incentives – decisions about whether a patient receives a service in a hospital or in a doctor’s office is influenced by how Medicare pays.”