Site-neutral payment policies could save Medicare $471 billion

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Adopting site neutral payment policies for Medicare would yield savings for the program, for private insurance premiums and for enrollees' out-of-pocket costs, which would total about $471 billion over the next decade, according to a new analysis from the Blue Cross Blue Shield Association.

Medicare's savings would add up to about $202 billion from 2024-2023, while Medicare enrollees would save about $67 billion on Part D premiums, and another $67 billion on cost sharing. And premiums for private health insurance plans would total roughly $107 billion over that period, amounting to a 0.75% reduction in aggregate premiums.

That reduction in private insurance premiums, BCBSA found, would increase federal tax revenues by about $29 billion, bringing total federal savings from adopting these site-neutral payment policies to $231 billion. 

And enrollees in those private plans would save another $18 billion on their cost sharing because of the lower payment rates, bringing total out-of-pocket savings to $152 billion for enrollees across Medicare and private plans.

WHAT'S THE IMPACT

Medicare pays more for services provided in hospital outpatient departments than it does when the same services are provided in a doctor's office, or another setting outside the hospital. That disparity, said BCBSA, affects payment rates under private health insurance plans, since those plans typically use Medicare's system as a basis for paying hospitals and doctors – though generally at higher rates of payment.

BCBSA cited experts who have recommended that Medicare adopt site-neutral payment policies for services commonly delivered outside the hospital – at the lower payment rates applicable in non-hospital settings – with exemptions for rural hospitals.

Adopting this approach, the association said, would not only substantially cut Medicare spending, but would reduce costs and premiums for private health insurance plans due to the links between Medicare's rates and private payment rates.

More complex services may require treatment in a facility, but Medicare still pays substantially more if the facility is a hospital outpatient department rather than an ambulatory surgical center. In the case of colonoscopies, for example, Medicare's allowed amount for a hospital was 67% higher. In the case of MRI's, the total hospital payment was 62% higher.

For many services, there's little or no evidence that care quality is higher when provided in a hospital setting. In some cases, physician's offices were purchased by hospitals and relabeled as an off-campus component of the hospital's outpatient department. The resulting higher payments provide one incentive for that organizational change, said BCBSA.

THE LARGER TREND

BCBSA acknowledged that site-neutral policies have typically been opposed by much of the hospital industry, with many considering such policies a blow to their financial stability.

In 2020, an appeals court reversed a lower court decision and upheld the action of the Department of Health and Human Services to pay formerly grandfathered off-campus outpatient departments run by hospitals at the same, lower rate of physician clinics.

In November 2019, the Centers for Medicare and Medicaid Services decided to move forward with a two-year phase-in of site neutral payments despite a decision in the district court earlier that year siding with hospitals in their fight to keep the higher outpatient payments for off-campus facilities.

In the 2020 ruling, the U.S. Court of Appeals in the District of Columbia said HHS had the authority to reduce payments to the off-campus facilities to bring them in line with other outpatient payments.

Twitter: @JELagasse
Email the writer: Jeff.Lagasse@himssmedia.com