25 things to know about site-neutral payments

The Medicare program currently pays significantly different rates for services provided in different settings, and site-neutral payments have been considered as one way of eliminating the payment gap. However, that option has proven to be a contentious issue.

Here are 25 things to know about site-neutral payments.

1. Under existing Medicare payment policies patients with similar clinical profiles may be treated in different settings at different costs to Medicare, according to the American Health Care Association.

2. According to the Medicare Payment Advisory Commission, Medicare paid hospital outpatient departments 78 percent more on average than ambulatory surgery centers for the same procedure in 2013.

3. The current payment system "fails to encourage collaboration and coordination across multiple sites of care and provides few incentives that reward efficient care delivery," according to the American Health Care Association.

4. Site-neutral payments have been put forth as one way of solving the payment disparity issue. However, hospital advocates have strongly opposed that recommendation.

President Obama supports site-neutral payments
5. President Barack Obama's 2016 budget calls for Medicare payments to be equal for costly common procedures regardless of whether service is provided in a hospital outpatient setting or a physician's office. The goal is to incentivize the most cost-effective ambulatory setting for healthcare procedures like colonoscopies, cardiac imaging and cancer care.

6. President Obama's initiative has received support from The Alliance for Site-Neutral Payment Reform, an advocacy group comprised of health insurers, primary care medical societies, nursing homes and patients.

7. In a letter to Congress in January, The Alliance for Site-Neutral Payment Reform said its goals were "to decrease Medicare and commercial spending, ensure patients receive the right care in the right setting, lower taxpayer and beneficiary costs and increase patient access."

MedPAC calls for site-neutral payments
8. The Medicare Payment Advisory Commission has consistently called for site-neutral Medicare payments. In its June 2013 report to Congress, MedPAC stated, "If Medicare pays a higher rate for a service in one setting over another, program spending increases and beneficiaries pay more in cost sharing without a corresponding increase in quality of care."

9. In January, MedPAC issued its final payment recommendations for inclusion in its annual report to Congress. The commission recommended site-neutral payments for certain post-acute services. That switch would save Medicare $1 billion to $5 billion over five years, according to MedPAC.

10. MedPAC contended site-neutral payments for skilled nursing facilities and inpatient rehabilitation facilities "would be unlikely to negatively impact beneficiaries," according to a Bloomberg report.

11. American Medical Rehabilitation Providers Association Chairman Bruce Gans had a different view than MedPAC. He told Bloomberg MedPAC's recommendation "fails to consider the long-term impact of diverting Medicare beneficiaries into less intensive rehabilitation settings despite their clinical needs."

12. In March, MedPAC once again called for site-neutral payments for select conditions treated in both skilled nursing facilities and inpatient rehabilitation facilities.

13. The commission has also previously recommended reducing the rate Medicare pays for basic office visits from the payment rate in the outpatient setting to the physician office rate.

Opposition to site-neutral payment proposals
14. The American Hospital Association and other providers have pushed back against site-neutral payment proposals. In support of their position, hospitals have relied on a 2014 study prepared for the AHA that showed hospital outpatient departments treat sicker and poorer cancer patients in need of more extensive care and resources than do physician offices.

15. The AHA study also found the cancer patients treated in outpatient departments have more severe chronic conditions and are about four times more likely to be uninsured or covered by Medicaid than are cancer patients treated in a physician's office.

16. The AHA study warned that, to the extent differences in cancer patients and the care they receive in hospital outpatient departments and physician offices "result in variations in the cost of care, site-neutral payments may have adverse effects on patient access to care," according to AHA News Now.

17. If site-neutral payments were implemented, hospital revenue could decrease by approximately $1.44 billion each year, according to MedPAC.

18. Site-neutral payments would be bad news for hospitals still operating under the fee-for-service model and would be "particularly tough on hospitals that have acquired physician practices and moved their ancillary services into the hospital setting — a big issue in cardiology," according to The Advisory Board Company.

19. The shift of services from physician offices to hospital outpatient departments has inflamed the controversy surrounding site-neutral payments, according to a 2014 Health Affairs issue brief. "Because of the higher payment rates for outpatient department services, this shift in site of service means that Medicare spending on these services is increasing even though there may be no difference in the care the patient receives," the issue brief states.

How to address a potential switch to site-neutral payments
20. "Medicare's adoption of some form of site-neutral payment is increasingly becoming a matter of when, not if," according to an April report from The Advisory Board Company.

21. To address site-neutral payments, some systems are taking select outpatient services and returning them to the practice setting.

22. The Advisory Board Company suggests hospitals "carefully downsize what's in-house now, in favor of a bigger ambulatory offering." This shift can be a positive one for hospitals and even has the potential to promote a better patient experience by eliminating many of the access problems under the current health system structure of hospital outpatient ancillary services.

23. It is possible for health systems to offset some of the revenue losses due to site-neutral payments. One way is to participate in shared savings or Medicare Advantage, as providers can be rewarded for the increased savings that are achieved by performing more services in the ambulatory setting, according to The Advisory Board Company.

24. However, the rewards from value-based programs won't completely offset the revenue losses that health systems will experience with site-neutral payments. This is especially true for health systems that are just "dipping their toe in the value-based payment world," according to The Advisory Board Company.

25. "No matter when or to what extent CMS implements site-neutral payments, it is going to be important to develop a strong ambulatory strategy that aligns the economics around value, outcomes, and patient access," according to The Advisory Board Company.

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