AAFP, Insurers Back Medicare Bid for 'Site-Neutral' Pay

Kerry Dooley Young

August 02, 2018

Medicare officials may get significant support from some physicians and insurers for their bid to end higher payments for identical and similar medical services provided in hospital-owned clinics than in independent practices.

The Centers for Medicare and Medicaid Services (CMS) said it intends to use the 2019 update of its hospital outpatient payment rule to move toward what it calls "site neutrality." At issue are cases where Medicare pays significantly more for services delivered by physicians whose practices are considered hospital outpatient departments (HOPDs) than it does to those in independent practices.

"Not only have Medicare beneficiaries been forced to pay more at HOPDs, but vertical integration has caused many community clinics to close their doors, ultimately undercutting patients' right to choose where they receive their care," said Michael Munger, MD, president of the American Academy of Family Physicians, in a July 31 statement issued by the Alliance for Site Neutral Reform.

The alliance also includes the American Academy of Orthopaedic Surgeons, the American College of Physicians, the Digestive Health Physicians Association, the Community Oncology Alliance, and the US Oncology Network. Also in the alliance are America's Health Insurance Plans and the Blue Cross and Blue Shield Association.

"Because healthcare costs have emerged as Americans' primary financial concern, and the cost of care has been steadily rising — especially for Medicare patients with cancer — it is absolutely essential that CMS close the regulatory loopholes that drive up the costs of care," said Randy Broun, MD, president of Oncology Hematology Care, in the alliance's statement.

In the draft outpatient payment rule released on July 25, CMS estimated that its proposal could have annual savings of about $760 million, or $610 million for Medicare, and $150 million in reduced copays for people covered by the program.

CMS said in a fact sheet that Medicare now pays about $116 for a clinic visit, with people enrolled in the federal health program facing a $23 copayment. CMS intends to level the payment for this service to an equivalent rate to the physician fee schedule, dropping the payment to about $46 and the copayment to $9.

In its release, the Alliance for Site Neutral Reform cited examples of procedures that it said are more costly for Medicare and its beneficiaries when provided at hospital-owned sites than in freestanding physician offices: chemotherapy, $281 vs $136; cardiac imaging, $2,078 vs $655; and colonoscopy, $1,383 vs $625.

Positive Impact?

Policy experts and many physicians have long argued that Medicare shouldn't pay more for similar or identical services simply because a physician is employed by a hospital. The higher reimbursement now provided for care delivered at hospital-affiliated practices has been cited as a driver of consolidation in medicine.

"The proposed site neutral payments will have a positive impact for solo and small group practices who are facing consolidation pressures," Munger told Medscape Medical News in an email exchange. "We have previously encouraged CMS to create incentives for outpatient clinic visits to be performed in the most cost-effective location, which is a primary care physician's office."

CMS is accepting comments on the rule through September 24. They can be offered online at the Regulations.gov site. CMS officials will read the submissions and in the final rule will address the points raised. Regulations.gov has posted a checklist to help members of the public offer federal agencies useful feedback on proposed rules.

The American Hospital Association (AHA) already has stated objections to the CMS plan. CMS "showed a lack of understanding about the reality in which hospitals and health systems operate daily to serve the needs of their communities," AHA Executive Vice President Tom Nickels said in the statement.

Section 603 of the Bipartisan Budget Act of 2015 protected existing hospital outpatient departments from an earlier leveling of payments. This fiscal deal exempted off-campus hospital departments that were running prior to November 2, 2015.

"In 2015, Congress clearly intended to provide current off-campus hospital clinics with the existing outpatient payment rate in recognition of the critical role they play in their communities," Nickels said.

Yet, lawmakers remain concerned about the effects of hospital consolidation on costs and patients. At a February hearing, Rep. Gregg Harper (R-MS) cited an analysis that found that the number of physicians employed by hospitals increased by 49% between 2012 and 2015. Medicare's more generous reimbursement to hospitals is only one contributor to this trend, he noted.

"Physicians are incentivized for many reasons to consolidate with hospitals, including more payment stability and less financial and regulatory burdens," Harper said at the hearing.

Still, there's a value beyond cost to helping keep independent practice attractive for physicians, said Robert W. Seligson, MBA, MA, chief executive officer of the North Carolina Medical Society and president of the Physicians Advocacy Institute. The institute emerged from the settlement terms from multidistrict litigation that focused on unfair payment practices by many of the nation's large for-profit health insurers.

Seligson said he doesn't doubt the quality of care provided by physicians employed by hospitals.

"I'm just saying that when doctors have their own practice and they are in control of it, they tend to be even better at what they are doing," he told Medscape Medical News.

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