Site-neutral payment policies are a hot topic every year across the healthcare industry and in Congress. Becker's has compiled the latest updates and policy changes leaders should know in 2024.
Background
1. In the simplest terms, a site-neutral payment policy means the payment for a healthcare service provided to a patient is the same regardless of the setting in which the service occurs. Hospitals argue that their higher prices stem from the larger overhead costs they incur compared to other providers, such as emergency services and 24-hour access, regulatory compliance, and supply and labor costs.
2. Medicare uses two different payment methods for outpatient procedures based on where the service occurs. Hospital-based procedures performed at hospital outpatient departments (HOPDs) are paid through the Hospital Outpatient Prospective Payment System (OPPS). Freestanding clinics such as physician offices and ASCs are paid through the Medicare Physician Fee Schedule. As such, hospital-based procedures receive higher payments from Medicare compared to ambulatory and office-based procedures. On average, Medicare rates for ASCs are 50% of what HOPDs receive for the same services, according to the Ambulatory Surgery Center Association. Site-neutral payments aim to close that gap.
3. Site-neutral payment policies hold the potential to reduce care costs for patients and for taxpayers through Medicare, but they would result in large payment cuts to hospitals and health systems. Private insurers typically follow the path of site-neutral payment policies made under the Medicare program.
4. Proposed site-neutral payment policies have not followed partisan lines in the past. One recent bill in the House, the Lower Costs, More Transparency Act, passed with 166 Republicans and 154 Democrats voting in favor. In December, the Congressional Budget Office estimated the failed legislation would have saved Medicare $3.7 billion over 10 years.
5. In 2015, the Bipartisan Budget Act enacted site-neutral payments under Medicare for new, off-campus hospital outpatient departments, restricting new HOPDs from charging more for the same services that cost less in other facilities. The legislation stipulated that HOPDs that billed under the Outpatient Prospective Payment System on or after Nov. 2, 2015 would be paid through the Medicare Physician Fee Schedule starting in 2017. Services provided in a dedicated emergency department are still paid through the OPPS.
6. In 2016, the 21st Century Cures Act provided exemptions for some HOPDs that were under or planned for construction when the Bipartisan Budget Act was passed.
7. CMS published its final 2017 OPPS payment rule on Nov. 1, 2016. The agency had originally proposed requiring HOPDs to offer the same services they did on Nov. 2, 2015, but did not include that requirement in the final rule. If an HOPD relocates, the final rule stipulates that the facility's exempted status can be terminated.
8. In 2019, CMS expanded the site-neutral policy to include clinic visits occurring at all off-campus HOPDs.
Where industry groups stand today
Generally, hospitals oppose site-neutral payment policies, while insurers are in favor. Hospitals argue that their services cost more to provide and they face more regulations than other providers. If site-neutral policies are implemented, hospitals cite risks like decreased access to care, especially in rural areas, and lower revenues leading to cost-cutting measures that could potentially affect care quality. Insurers argue that patients are overcharged for routine services at hospital-owned facilities, and that site-neutral policies promote higher care quality standards and more transparency in pricing.
Below are summaries of the positions taken by seven healthcare associations:
9. American Hospital Association: Against
Represents nearly 5,000 hospitals, health systems, networks and other providers
"Payment proposals that attempt to treat hospital outpatient departments the same as independent physician offices and other ambulatory sites of care ignore the very different level of care provided by hospitals and the needs of the patients and communities cared for in that setting. Hospitals need to have emergency stand-by capacity, are open 24/7 to all who seek care regardless of ability to pay, and have myriad regulatory requirements imposed on them — all adding to the overall cost of care."
"Instead of considering flawed policies that put patient access to care in jeopardy, Congress should focus on ways to make sure hospitals and health systems have the resources they need to continue providing 24/7 care to all patients in every community," AHA President and CEO Rick Pollack wrote in March.
10. Federation of American Hospitals: Against
Represents more than 1,000 tax-paying community hospitals and health systems
"Site-neutral may sound appealing, but it is not as benign as many perceive. Instead, this one-size-fits-all payment ignores the fundamental functional and cost structure differences between hospitals and physician offices – among other settings – and threatens the unique, mission-critical services that communities rely on hospitals to provide 24/7/365.
Ultimately, implementing a site neutral payment policy is nothing less than a devastating cut to hospital funding – which means patients and their access to care will be affected!"
11. Center for Medicare Advocacy: Against
A nonprofit, public interest law firm advocating for Medicare access and quality
"Site neutral payments would result in patients who need intensive inpatient rehabilitation being diverted inappropriately to less intensive settings based solely on their diagnosis, despite their clinical needs. This is clearly a mistake, and could endanger vulnerable beneficiaries."
12. American Medical Association: Supportive
Represents more than 190 state societies and medical specialty associations
"Many policy proposals over the years have recommended simplistic, across-the-board solutions to the site-of-service differential that reduce payments to all sites to rates paid in the least costly setting. However, shrinking payments to the lowest amount paid in any setting does not help physicians. The AMA does not believe it is possible to sustain a high-quality healthcare system if site neutrality is defined as shrinking all payments to the lowest amount paid in any setting. Additionally, the AMA urges CMS to pay physicians fairly for office based procedures and, where clinically appropriate, shift more procedures from the hospital to office setting, which is more cost-effective."
13. AHIP: Supportive
Represents 1,300 health insurance benefits and services organizations
"Advance site-neutral payments to defend consumers against having to pay more for the same services depending on the site of care."
14. Blue Cross Blue Shield Association: Supportive
Represents 34 independent Blue Cross and Blue Shield companies
"Hospitals have strong financial incentive to continue purchasing physician practices, giving these new entities the upper hand when negotiating payment rates with insurers, resulting in higher costs for patients. Congress must protect patients from these inappropriate billing practices by expanding site-neutral payment policies and cracking down on anti-competitive behavior among providers," David Merritt, BCBSA's senior vice president of policy and advocacy, wrote in 2023.
"Medicare's move to expand site-neutral payments would pave the way for private insurance plans to also implement these payment policies, ultimately increasing access to high-quality and affordable care."
15. Medicare Payment Advisory Commission: Supportive
An independent federal body that advises Congress on the Medicare program
"In general, the Commission maintains that Medicare should base payment rates on the resources needed to treat patients in the most efficient setting. If the same service can be safely and appropriately provided in different settings, a prudent purchaser should not pay more for that service in one setting than in another."
Recent policy updates
Site-neutral payment policies are proposed annually in Congress, though recent bills have failed to pass both chambers or site-neutral provisions are not included in the final legislation. The issue is a key legislative priority for industry groups like the American Hospital Association.
16. The House passed the Lower Costs, More Transparency Act in December, which included site-neutral provisions that would have required the same Medicare reimbursement rates for drugs and infusions administered at both off-campus HOPDs and physician offices and ASCs. In February, the Senate struck site-neutral policies from the legislation. In March, the Senate passed the Consolidated Appropriations Act of 2024 without any site-neutral provisions.
17. The PATIENT Act of 2023 was proposed legislation that would have required site-neutral payments for drug administration services, starting in 2025. The bill was not enacted.
18. The SITE Act of 2023 was proposed legislation that would have required site-neutral payments for HOPDs that were exempted for being under or planned for construction when the Bipartisan Budget Act of 2016 was passed, starting in 2025. The bill was not enacted.
19. The MPACT Act of 2023 was proposed legislation that would have required site-neutral payments for services related to cancer diagnosis and treatment at off-campus HOPDs, beginning in 2025. The bill was not enacted.
20. The Primary Care and Health Workforce Expansion Act of 2023 was proposed legislation that would have banned hospitals from charging facility fees for off-campus services, including primary care and telehealth services. The bill was not enacted.