Should we Redirect These Healthcare Dollars?

Opportunities in site neutral payment policy reform

Author

Dana Prommel Strauss
September 30, 2024

Site neutral payments are a well-known way we could reduce spending in Medicare, with trickle down effects for insurers and for healthcare consumers. Stakeholders in favor of site neutral payments even have their own coalition, the Alliance for Site Neutral Payment Reform.

Site neutral payment reform would reduce the incentive to provide care and procedures in the site that would reimburse at the highest level. When a service is reimbursed using site neutral methodology, reimbursement is the same regardless of site of care. But remember, only a portion of services are covered outside of the hospital outpatient department.

Differential payment rates based on site of service leads to unnecessary spending and has incentivized health system acquisition of physician practices. But except for some small policy changes, there has been little progress in site neutral payment policy.

Who is weighing in?

Here’s what the Medicare Payment Advisory Committee (MedPAC) said in June 2023:

And MedPAC’s June 2022 Report to Congress, they said this:

To evaluate whether an ambulatory service should continue to have different payment rates in the three settings or whether it would be appropriate to align the payment rates more closely across the three settings, we analyzed the ambulatory payment classifications (APCs) used in the outpatient prospective payment system (OPPS) to pay for services provided in HOPDs. Each APC includes a set of services that are similar in terms of clinical attributes and cost; all services in the same APC have the same OPPS payment rate. Of the OPPS’s 169 APCs for services, we identified 57 APCs for which it would be reasonable and appropriate to align the OPPS and ASC payment rates with those set in the physician fee schedule (PFS). We also identified 11 APCs for which it would be appropriate to align the OPPS payment rates with the ASC payment rates and continue to use the PFS payment rate when the service is provided in a freestanding office. In the 68 APCs for which it is reasonable to align payment rates across ambulatory settings, we found that patient severity has little effect on the costs incurred by HOPDs when furnishing the services, so adjustments to payments for patient severity do not appear to be necessary. For 101 APCs, such as emergency department (ED) visits, the HOPD is the most frequent setting, or the services cannot be provided in settings other than HOPDs. For these APCs, each setting should continue to have a different payment rate, with generally higher payments for HOPDs. As policymakers consider how to align payment rates

MedPAC Commissioners

There IS bipartisan interest in aligning Medicare payments across outpatient settings.

There have been small updates to the policy made through legislation and rulemaking. Kaiser Family Foundation (KFF) discusses in the below YouTube video.

Recent Articles about Site Neutral Payment Reform (It’s a Hot Topic!):

The Kaiser Family Foundation did an excellent issue brief on site neutral payments earlier this year.

In April of 2024, Kathleen Sebelius and Alex Azar united to write about the topic in Stat News, urging Congress to adopt site neutral payment reform.

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As two former secretaries of Health and Human Services, we are all too familiar with the struggle of finding narrow openings for bipartisanship. Despite our different approaches, we believe that addressing health care costs is a truly bipartisan issue. To be serious about creating access for people to the best possible care, that care must be affordable for patients and taxpayers. One issue that is particularly ripe for bipartisan compromise is site neutral payments

Kathleen Sebelius and Alex Azar in Stat News

As the former secretaries point out, healthcare reform has bipartisan support. Getting specific about reform areas can be more complicated. But as Sebelius and Azar point out, here’s an area where both parties should be able to agree on reform.

In May of 2024, Becker’s wrote “20 Things to Know About Site Neutral Payment Policies” amid the flurry of legislative activity in the 118th Congress.

Then on September 18, 2024, Health Affairs published a Forefront article: “The Promise and Pitfalls of Site Neutral Payments in Healthcare.”

Opposition

The American Hospital Association (AHA) has led the opposition to meaningful site neutral reform. Other prominent opposers are the Federation of American Hospitals, and the Center for Medicare Advocacy.

Hospitals say site neutral payment policies will reduce access to care, harm hospitals with their higher overhead, and more.

Site neutral payment policy supporters disagree with hospitals, disputing hospitals’ justifications for maintaining disparate payments across outpatient settings.

There are MANY more supporters than opposers, including:

Why Now?

Unless they raise taxes, Congress needs money to fund pressing healthcare reform priorities, which are known as “pay-fors.”

Here are a few examples of where Congress could choose to redirect funding they capture in enacting site neutral payments:

  • Increase funding for rural and safety net hospitals

  • Increased funding for primary care providers and others providing accountable care

  • Funding for supplemental benefits in Traditional Medicare

  • Permanent telehealth coverage without site origination restrictions in Traditional Medicare

  • Funding healthcare workforce growth

  • Improved and innovative reimbursement for home-based care

Keep in mind that site neutral payments will likely be passed incrementally over time (click this link to read more, and then click the “pdf” button to read the paper). The pdf itself from the Yale Tobin Center for Economic Policy is also linked here, for your convenience .

We are in a Presidential election year and a Congressional “lame duck” session is coming soon. There both potential opportunities to pass needed legislation that has been waiting for a vehicle. Then in January, we will have both a new President and the start of the119th Congress.

There’s a lot we need to address to improve our healthcare system, and health policy changes are needed to enable these many population health improvements at scale. Site neutral payment policies could go a long way in facilitating and funding healthcare transformation for years to come.

Bonus: Here’s a recent site-neutral payment podcast I enjoyed. Marc Ryan points out that site neutral payment also protect consumers, who are hit by high out-of pocket payment when the exact same services are provided by a HOPD vs. an ASC vs. a physician practice: