Hospitals battling -17.5% Medicare outpatient margin urge Congress against site-neutral pay

During a June 26 briefing with congressional leaders, the American Hospital Association pushed back against proposed site-neutral payments for outpatient procedures.

Proposals to reduce Medicare pay rates for hospital outpatient departments by aligning them with rates for ASCs and independent physician offices are "based on the false assumption that Medicare overpays hospitals for outpatient services, when in fact hospitals receive only 84 cents for every dollar they spend caring for Medicare patients, resulting in a staggering negative 17.5 percent Medicare outpatient margin," according to AHA leaders. 

The AHA opposed MedPAC's site-neutral payments and Medicare's recommendations, arguing that the plan would cut rural hospitals' average Medicare margin from -17.8 percent to -21 percent.

Coupled with the trend toward sicker patients, longer hospital stays and rising costs for labor, drugs, medical supplies and equipment, hospitals face an unsustainable financial environment that site-neutral payments would worsen, forcing many to close or reduce services, creating serious access to care issues for communities across the country. AHA leaders said. 

"Any cuts would significantly cripple our organization's ability to continue meeting the patients' needs in our community and region," said Carl Vaagenes, CEO of Alexandria, Minn.-based Alomere Health, adding that Medicare and Medicaid already pay the rural hospital 25 percent and 48 percent less, respectively, than its actual cost to deliver care. "This year our organization is off to our worst start in my tenure and we are on pace to have close to a $10 million loss in fiscal year 2023 if nothing changes."

The proposed site-neutral pay changes would be a drastic blow to rural hospitals, 11 of which have closed this year and 152 of which have closed since 2010. 

Beginning in 2026, site-neutral payments would be made for certain categories of services across ambulatory settings, including hospital outpatient departments — both on- and off-campus, The site-neutral payment rate that would apply to the services in each ambulatory payment classification would be based on the Medicare payment system for the ambulatory setting in which these services are most commonly furnished. 

According to the AHA, this proposal would result in a $11.6 billion cut to hospitals in the first year and $180.6 billion over 10 years.

Copyright © 2024 Becker's Healthcare. All Rights Reserved. Privacy Policy. Cookie Policy. Linking and Reprinting Policy.


Featured Whitepapers

Featured Webinars