Report: Higher Payments to HOPDs "Not Sustainable"

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As hospitals continue to gobble up physician practices and integrate them within their networks, the higher payments doled out to hospital-owned facilities will strain the healthcare system further, according to an article from consulting firm Alvarez & Marsal.

Many hospitals and health systems have ramped up their physician practice acquisitions in order to employ more physicians and bring in higher sources of revenue through enhanced payments.

Currently, Medicare reimburses hospital outpatient departments 80 percent more than freestanding physician clinics for routine evaluation and management office visits. Similarly, Medicare pays HOPDs 74 percent more than ambulatory surgery centers for outpatient surgical services that don't require hospitalization or an overnight stay after surgery. Private payors also "follow Medicare's lead" in large price differentials between HOPD services and physician practices, according to the article.

The Medicare Payment Advisory Commission has recommended "site-neutral" payments on several occasions to close the wide payment gap between HOPDs and facilities that are independent of hospitals, which could reduce Medicare spending by up to $1 billion. However, the American Hospital Association has lobbied heavily against such recommendations, saying site-neutral payments hurt access to care for patients and are needed to subsidize a hospital's less profitable, but necessary, service lines like emergency departments and trauma care.

However, the Alvarez & Marsal article said the disparate reimbursement from Medicare and private payors to HOPDs "is not sustainable."

"MedPAC and employers are increasing their scrutiny of provider and site-specific pricing across primary and secondary service areas," according to the article. "The short-term pricing (and profitability) 'bonanza' secondary to differential reimbursement does not eliminate the need for cost reduction and quality initiatives, and potentially represents a longer-term opportunity for investment in care delivery innovation."

More Articles on Hospital Outpatient Departments:

MedPAC Suggests Equalizing Payments Between Hospitals, Ambulatory Clinics
17 Healthcare Niches — Observations for 2013
Report: Hospital Consolidation Will Cause Massive Inflation

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