Healthcare reformers have set their eyes on ensuring that the federal government pays the same price for procedures no matter where they happen. Called site neutrality, advocates see the price discrepancies as an inefficiency that needs fixing, while hospital advocates say reimbursement reductions would devastate the care they provide.
During this years Texas legislative session, East Texas representative Brian Harrison introduced HB 4352 to make sure “that Medicaid reimbursement rate for outpatient services provided by a hospital-owned outpatient facility is the same as the reimbursement rate for outpatient services provided by an independent, physician-owned practice if 1) the outpatient services are not dependent on technology associated with the facility and 2) evidence-based rationale does not support a different reimbursement rate for a specific outpatient service.”
The bill never made it out of the Health Care Reform Committee. Still, it is part of a national effort to reduce healthcare spending by ensuring that federal payers reimburse at the same rates for the same services, whether in a physician’s office, ambulatory surgery center, or hospital outpatient facility.
Houston-based Arnold Ventures LLC has been a key advocate for site neutrality and have partnered with the Committee for a Responsible Federal Budget, whose Health Savers Initiative released a report that found that site neutrality would reduce national health expenditures by $346 to $672 billion between 2021 and 2030. The report says that site neutrality would result in $217 and $279 billion in budget deficit reduction during that same period.
According to data compiled by TMA president and Dallas cardiologist Dr. Rick Snyder from Medicare claims data and his office, a heart muscle image single photon emission computed tomography (which locates areas of the heart muscle that have inadequate blood flow compared with sites that have normal flow) costs about $375 at his office. Medicare reimburses a hospital outpatient department more than $1,300 for the same procedure. An echocardiogram ( a test that uses ultrasound to create images of your heart) costs $210 in his office, while Medicare reimburses hospital outpatient departments $500 for the same procedure.
The American Hospital Association says site neutrality laws would reduce access to services. The higher prices are due to higher regulatory burdens, poorly funded patient mixes, and the complexity of the services provided at the hospital campus. But many hospital outpatient departments aren’t on hospital campuses because of physician group consolidation.
Still, hospitals are already in somewhat difficult financial straits after a tumultuous few years and the pandemic. In 2022, half of all Texas hospitals lost money. A report from consulting firm Kaufman Hall predicted that 53 percent of hospitals would have a negative operating margin this year, up from 34 percent pre-pandemic. Additionally, the AHA found that the federal government already underpays hospitals for outpatient services, which resulted in a negative 17.5 percent Medicare margin in 2021. “Site-neutral payment is a misguided policy that seeks to further align provider payments among care settings. However, these policies disregard a patient’s acuity, the complexity of care, and the regulatory requirements that exist among different settings,” the AHA says.
In a March address to the UT Southwestern community, President Daniel Podolsky said the medical center was operating at a net loss of 1 percent as of February, which translates to $27 million. He said that by the end of the year, he hopes the system will be in the black by 1.5 percent but that the system needs to turn a 3 percent profit to maintain campus updates and operations. The AHA claims that Medicare pays 84 cents for every dollar hospitals spend providing care to Medicare beneficiaries.
But site neutrality advocates want changes for when a hospital acquires a physician group and begins charging a hospital rate for a service that was a fraction of that cost in the same location before the consolidation. More and more physician practices are now part of hospital systems, as hospital acquisitions have more than doubled in the past decade. According to the Physicians Advocacy Institute, hospitals owned 15 percent of physician practices in 2013 and 21 percent in 2018.
According to the Congressional Budget Office, payment to hospital outpatient departments is set to grow faster than other segments of the healthcare industry. The CBO predicts a 100 percent increase in Medicare payments to hospital outpatient departments between 2020 and 2030. Medicare payments for inpatient services are expected to grow by about 42 percent, and payments to physicians are predicted to grow by 28 percent.
In 2015, Congress passed the Bipartisan Budget Act of 2015 that established site-neutral payments for services at new hospital outpatient departments, but a series of lawsuits have blocked other expansions. Site Neutrality has been the rare issue to attract bipartisan support, and has been a platform initiative for Presidents Barrack Obama, Donald Trump, and Joe Biden. The top Republican on the Senate Finance Committee has also expressed interest in expanding site neutrality, while others leaders want to carve out exceptions for safety net and rural hospitals.
Even as state-level reforms fall short, momentum is building at the federal level to significantly expand site-neutral policies, pitting policymakers and payers against the hospital lobby. Three of the top seven lobbying organizations are hospitals (American Hospital Association), a health insurance company (Blue Cross Blue Shield), and physicians (American Medical Association), so significant changes won’t come easy.
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