Dive Brief:
- The American Hospital Association is escalating messaging that site-neutral payments will worsen Medicare hospital outpatient margins as the battle over site-neutral legislation heats up in Washington.
- Along with releasing a new report, the hospital lobby also hosted a briefing on Capitol Hill Monday with hospital executives. They argued that proposals reducing payment rates for hospital outpatient departments would worsen hospitals’ already shaky financial outlook, while jeopardizing care for Medicare and Medicaid patients nationwide.
- The AHA’s stance is in stark contrast with the views of healthcare stakeholders including the CMS and industry watchdogs that support legislation currently being considered by Congress to standardize payments across sites.
Dive Insight:
Under current Medicare payment arrangements, hospital outpatient departments receive higher reimbursement than independent physician offices and ambulatory surgery centers for providing the same low-acuity care. Hospital-owned clinics can also charge additional facility fees to cover what they argue are additional overhead costs, resulting in higher co-pays for patients.
Recently, some lawmakers have reinvigorated efforts to enact site-neutral policies, arguing aligning fee-for-service payment rates across ambulatory settings would drive down patient costs while saving Medicare money. The move has broad support among healthcare stakeholders — but not hospitals, who would see government payments drop as a result.
“Lobbyists are pretty much the only opposition,” Loren Adler, associate director of the USC-Brookings Schaeffer Initiative for Health Policy, testified during a congressional panel in April.
In June, a bipartisan group of senators introduced the Site-based Invoicing and Transparency Enhancement Act that would standardize payments to hospital-owned outpatient sites and physician offices for the same services. Along with lowering out-of-pocket costs, advocates of the bill say it would save taxpayers up to $40 billion over a decade.
However, proposals to reduce hospital outpatient department payments are based on a false assumption that they are currently being overpaid by Medicare, the AHA argues in a report out this week.
Instead, hospitals receive 84 cents for every dollar they spend on Medicare patients, resulting in a negative 17.5% Medicare outpatient margin, according to the report.
The AHA argues that hospital outpatient departments warrant a higher level of Medicare payments, because they tend to see sicker patients and have to comply with more onerous regulations, including 24/7 standby capacity for emergencies.
The hospital lobby also released an infographic on Friday in advance of its Hill briefing showing that health insurers and private equity firms are responsible for the majority of physician acquisitions over the last five years.
Advocates of site-neutral policies say they could remove a financial incentive for hospitals to acquire outpatient offices, bolstering independent physician practices.
As a result, physician groups generally support payment parity regardless of location.
The SITE Act is not the first attempt to lower differences in reimbursement rates between hospital outpatient departments and other providers. In 2021, hospital reimbursements took a hit when the Supreme Court declined to overturn the HHS’s policy that lowered hospital outpatient facility payments for clinic visits.
