Understanding Medicare Site-Neutral Payments

Different Costs for the Same Tests

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Are you paying more than your fair share?. Alfred Gescheidt / Photographer's Choice RF / Getty Images

You should expect to pay the same amount for health care services regardless of where you have them performed. Surprisingly, Medicare has not held to these principles. The Centers for Medicare and Medicaid has been paying outpatient hospital departments more for the same tests and procedures that can be done in your doctor's office. That may be about to change.

What Are Site Neutral Payments?

When you need an evaluation, your doctor will order tests. If your doctor's practice is affiliated with a hospital, you may be referred to the hospital's outpatient department to get them done. In reality, this could be costing you more.

Your doctor's office may be able to offer the same tests that are also offered at an outpatient hospital outpatient department. For example, many cardiologists can perform echocardiograms and stress tests in their office. Some orthopedic surgeons may have x-rays on site to look for fractures. Ambulatory surgery centers may compete with hospitals for certain low-risk procedures.

As it currently stands, for the same clinical situations, Medicare pays more for services done in outpatient hospital departments than these other sites. This is the case even when it is not necessary to be in a hospital. Simply put, the quality of care is no different from one site to the next.

According to the Medicare Payment Advisory Commission (MedPAC), Medicare paid hospital outpatient departments nearly twice the amount for echocardiograms in 2013. In that same year, ambulatory surgery centers were paid roughly 78 percent less for the same low-risk procedures performed in a hospital setting.

How Site Neutral Payments Affect Medicare

MedPAC has proposed that payments for the same procedures in the same outpatient clinical scenarios be paid by Medicare at the same rates. These site-neutral payments will save both you and Medicare money.

The Office of Inspector General recently estimated that changing surgery rates to those paid to ambulatory surgery centers could save Medicare as much as $15 billion over five years. Site-neutral payments could decrease Medicare payments to hospitals by $1.44 billion each year, according to MedPAC.

How Site Neutral Payments Affect Hospitals

The American Hospital Association (AHA) has argued against site-neutral payments. They argue that outpatient hospital departments see a disproportionate number of people on Medicaid, people who are dual eligible (both Medicare and Medicaid), and people who are uninsured. With low-income patients less able to pay their share of the bill, a change to site neutral payments could lead to lower overall reimbursement rates for hospitals.

Medicare patients who use outpatient hospital departments also tend to have more chronic medical conditions. The increased risk for complications in these patients needs to be taken into account.

The AHA notes that due to these higher risk patients, outpatient hospital departments are more likely to have a nurse in addition to a physician involved in different testing scenarios. This adds to the overhead costs for these studies.

Hospitals stand to lose billions if site-neutral payments come into play. Loss of revenue could financially strain hospitals to make changes, possibly affect staffing and other accessibility issues.

How Site Neutral Payments Affect You

Site neutral payments will save you money when you get care in an outpatient hospital department. After all, you are paying for the same test and the same quality of care.

The caveat is that these policy changes could potentially come with changes to accessibility. Cuts to hospital revenue could make it harder to access certain tests.

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View Article Sources
  • American Hospital Association. Comparison of Care in Hospital Outpatient Departments and Physician Offices. http://www.aha.org/content/15/hopdcomparison.pdf. Published February 2015.
  • Medicare Payment Advisory Commission. Report to the Congress: Medicare Payment Policy. http://www.medpac.gov/documents/reports/mar2015_entirereport_revised.pdf?sfvrsn=0. Published March 2015.
  • Office of the Inspector General. Medicare and Beneficiaries Could Save Billions If CMS Reduces Hospital Outpatient Department Payment Rates for Ambulatory Surgical-Center Approved Procedures to Ambulatory Surgical Center Payment Rates. http://oig.hhs.gov/oas/reports/region5/51200020.pdf. Published April 2014.​