Site-Neutral Payments: Same Reimbursement in All Locations

What

The Medicare Payment Advisory Commission (MedPAC) is urging Congress to align Medicare fee-for-service rates for several services regardless of where they are offered. On April 13, 2023, MedPAC met to discuss a recommendation for Congress to more closely align Medicare payment rates across physician offices, ambulatory surgical centers, and hospital outpatient departments for 66 specific payment classifications — but only when doing so doesn’t pose a risk to patient access. Congress seems open to considering the recommendation, but it is not required to do so.

When

In 2012, 2014, 2022, and now again in 2023, MedPAC made recommendations about which services can be safely provided in multiple settings so that the same reimbursement may be paid by Medicare. In April 2023, MedPAC unanimously voted to include this recommendation in its June Report to Congress. On April 26, 2023, the U.S. House Energy & Commerce Committee held a hearing to, in part, consider site-neutral payment reform that mirrors MedPAC’s recommendation.

Highlights

• When services are provided by hospital outpatient departments, they receive a higher reimbursement rate for the same service offered at a much lower rate than surgery centers or physician offices. If site-neutral payment reform were adopted, Medicare would pay lower rates for routine services regardless of where the patient is treated.
• MedPAC identified 66 ambulatory payment classifications that Congress could safely align payment rates — mostly imagery and lab tests. In recommending site-neutral payments, MedPAC is trying to save Medicare money (it said its site-neutral proposals would have saved Medicare $6.6 billion in 2019) and discourage hospitals from acquiring lower-cost providers.
• The American Hospital Association opposes the site-neutral payment proposal, saying that it would destabilize hospital revenue. In contrast to hospitals, surgery centers are traditionally supportive of site-neutral payments because it allows surgeons to choose the site that makes the most sense for patients; there is no financial incentive to choose one location over another.

Bottom Line

The pressure to contain costs in federal programs is proving too great to continue paying hospitals a higher rate for routine services that can be performed elsewhere. The momentum for this policy change is also a clear backlash against hospitals acquiring physician offices and converting them into hospital outpatient departments despite no change in the services offered or the providers offering them. Orthopaedic practices should prepare for possible revenue changes by 2026, as this policy change seems likely to be implemented and the type of services subject to site-neutral payments is likely to expand.

Sources

MedPAC. April 13-14, 2023 Public Meeting. Accessed April 24, 2023.

American Hospital Association. AHA Comments on March 2023 MedPAC Meeting Topics – Wage Index, Ambulatory Payments and Part D Drugs. Accessed April 24, 2023.