HOPD vs. Physician Office: A Case Study in the Payment Gap

This month, the Medicare Payment Advisory Commission released its annual report to Congress.

One of the primary recommendations the group made to Congress was site-neutral Medicare payments. The proposal is not new, and hospitals have fought its implementation in the past.

MedPAC said payments between hospital outpatient departments and other outpatient settings, such as physician offices and ambulatory surgery centers, need to be better aligned. HOPDs generally receive significantly higher payments than other outpatient settings for the same services. In 2013, Medicare paid HOPDs 78 percent more than ASCs for the same procedure. The pay gap gives hospitals an incentive to acquire physician practices and begin billing for the same services as HOPD procedures, according to MedPAC.

In its report, MedPAC outlined how large the pay gap can be between an HOPD and a physician office. According to 2014 rates, the payment for a level II echocardiogram without contrast in a physician office totals $228.02. That payment covers the physician's work, practice expenses and professional liability insurance. However, under the same 2014 rates, the payment for the same procedure in an HOPD totals $492.22.

Site-neutral payments, many have argued, would save Medicare more than $1 billion and would eliminate a policy that is "not sustainable." However, hospitals have said the higher payments are justified because they are needed to subsidize a hospital's less profitable, but necessary, service lines like emergency departments and trauma care.

More Articles on Hospitals and Medicare:
MedPAC Report Recommends Site-Neutral Medicare Payments, SGR Repeal
AHA to MedPAC: Consider Sequestration Effects for 2015 Medicare Payments
CMS Finalizes 1.7% Pay Bump to HOPDs, Packaged Rate for Clinic Visits

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