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Details matter (a lot) in site-neutral payments

Caitlin Owens
Jul 17, 2023

Illustration: Aïda Amer/Axios

Site-neutral payments have become a buzzy topic on the Hill, but that doesn't mean everyone who is talking about them is pitching the same thing.

Why it matters: If legislation is ever to become law, Congress will have to decide among competing versions of the policy that produce different amounts of savings — and would mean varying levels of financial hits to hospitals.

State of play: The Energy and Commerce Committee has already approved a relatively small version of site-neutral payments, but committee Chair Cathy McMorris Rodgers and ranking member Frank Pallone have signaled that they're not finished with the topic.

  • Everyone's waiting to see what Ways and Means is going to mark up, especially after members met about their health agenda last week.
  • Education and the Workforce also took related action last week when it marked up legislation requiring "accurate billing practices by hospitals" within ERISA.

The big picture: Site-neutral legislation could save the federal government hundreds of billions of dollars over a decade, or just a couple billion dollars, depending on how it's structured.

Between the lines: Loren Adler, associate director of the Brookings Schaeffer Initiative on Health Policy, said there are generally three buckets of proposals swirling around:

1) Require Medicare to pay the same amount for certain services provided at on-campus hospital outpatient departments and physician offices. "This is where most of the money is," Adler said.

2) Equalize Medicare payments for all or some services services provided at off-campus hospital outpatient departments and physician offices. Both 2015 legislation and a Trump administration rule have done a version of this, but Congress could make the lower payment rates apply everywhere or in more places.

3) Make hospitals bill separately for each off-campus outpatient department. "These proposals don’t involve changing any Medicare payments or any direct 'cuts,'" Adler said. The Ed and Workforce measure falls in this bucket, and E&C also approved a version.

Our thought bubble, from Axios' Peter Sullivan: Bucket No. 3 seems to be where Congress' focus is at the moment: on "honest billing" efforts rather than major changes to Medicare reimbursement itself.

By the numbers: Estimates have put site-neutral savings at around $150 billion over 10 years, not including spillover effects in the private market, making it a popular idea among budget hawks.

  • But the narrower the proposal, the less money it saves.
  • One of the measures already approved by E&C would equalize Medicare payments only for the administration of drug services in off-campus hospital departments. CBO estimated the bill would save $3.8 billion over a decade.

The other side: Any money saved by Medicare comes at the expense of hospitals, which are already warning of dire consequences.

  • “You’re talking about in an environment that’s more and more difficult — from a hospital standpoint and a patient care standpoint, we don’t see this as any time to be thinking about cutting payments," said Chip Kahn, CEO of the Federation of American Hospitals.
  • "But obviously, overall it’s better to have less than more in terms of reductions. And then you hope that this is not a precedent and a pathway to action later."

What they're saying: "We are encouraged that there’s a lot of discussion about it. I just am worried that they’re going to try to take as easy a way out as possible on it," said Josh Gordon, director of health policy at the Committee for a Responsible Federal Budget.

  • “The best version would be site-neutral payments across outpatient departments, off campus and on campus, and ambulatory surgical centers," he added.
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