Hospitals push back against ‘site-neutral’ Medicare funding proposals

Health systems are pushing back against proposals to change reimbursement rates for hospital outpatient departments.

In recent years, some advocates have said Medicare could save billions by moving to “site-neutral” policies, which would mean hospital outpatient departments and physicians offices would be reimbursed at the same rate.

U.S. Rep. Cathy McMorris Rodgers, a Republican from Washington state, has expressed support for site-neutral policies.

Lawmakers discussed the topic at last week’s meeting of the House Energy and Commerce Subcommittee on Health. Some lawmakers argue that physicians’ offices are providing the same services as some hospital outpatient departments or hospital-owned clinics.

Hospitals are arguing against such policies, saying they would add to the financial difficulties many hospitals are struggling with after three years of the COVID-19 pandemic. Ashley Thompson, the American Hospital Association’s senior vice president of public policy analysis and development, testified at the hearing and argued against site-neutral proposals.

“There is nothing ‘neutral’ about site-neutral policies,” Thompson said at the hearing.

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Hospitals contend that reducing reimbursement rates to their outpatient facilities could hurt patient access to quality care. They argue that those outpatient clinics treat a higher percentage of patients from underserved communities and patients with more complex medical conditions.

In addition, hospitals cite greater licensing and regulatory requirements, as well as the need to maintain capacity in emergencies.

Still, there is support for pursuing site-neutral reimbursements. U.S. Rep. Cathy McMorris Rodgers, a Republican from Washington state, offered support for the idea at the House subcommittee hearing.

“Today, patients and Medicare pay more at hospitals than outpatient centers or physician offices for the same services,” McMorris Rodgers said at the hearing. “Several proposals would advance ‘site-neutral payments’ for certain services that can be routinely done safely in a doctor’s office, such as drug administration, diagnostic tests, imaging procedures, to name a few.

“For these services, Medicare and patients would pay the same amount, regardless of where they are performed,” she said.

A diverse group of advocacy groups is pressing Congress to advance site-neutral policies. The Alliance for Site Neutral Payment Reform, which includes America’s Health Insurance Plans, Blue Cross Blue Shield Association, the American Academy of Family Physicians, and the US Oncology Network, is calling on lawmakers to reduce Medicare payments to outpatient departments.

The Alliance argues that the current system encourages more consolidation in healthcare as hospitals acquire more physician practices, driving up costs for patients.

McMorris Rodgers said she understands hospitals are dealing with financial headwinds.

“Hospitals are integral parts of our communities, and we recognize the effects of high labor costs, inflation, and ever-increasing government regulation,” McMorris Rodgers said. “But the question before us is: Should we support hospitals through a complex and opaque network of cross-subsidies with unintended consequences, like consolidation, that increase costs for patients? Or do we separately work on a transparent, accountable way to support hospitals that need it?”

In a 2021 report, the Committee for a Responsible Budget concluded that Medicare would save $153 billion over 10 years by moving to site-neutral funding policies. The Brookings Institution has also said site-neutral policies would lower Medicare costs.

The Federation of American Hospitals argues that site-neutral policies endanger “mission critical” services that hospitals provide. The group said site-neutral policies “fail to distinguish between the types of patients that hospitals serve when compared to other providers, as well as the difference in the level of care.”

“While these one-size-fits-all policies may look good on paper, the reality is they put the most vulnerable patients’ access to care at risk,” the federation said.