AHA: Site-neutral Payments Ignore Hospitals' Adverse Patient Mix

Payers counter that removing exemptions for all site-neutral payments could save taxpayers $471 billion over 10 years.

Medicare patients who receive outpatient care at hospitals tend to be sicker and poorer than Medicare patients accessing independent physician offices and ambulatory surgical centers, according to a new report commissioned by the American Hospital Association.

The findings, compiled by KNG Health Consulting, "underscore the reasons why compensating hospitals and health systems under Medicare the same amount as IPOs and ASCs could put patient access to care at risk," AHA says in a media release.

The Balanced Budget Act of 2015 mandated Medicare site-neutral payments for care at newer off-campus hospital outpatient departments (HOPD), restricting them from charging Medicare more than charges at other care settings. However, HOPDs that were operational in 2015 were grandfathered in and allowed to charge the same higher rates as at hospitals.  

Hospitals have long argued that their adverse patient mix and their requirements to provide 24/7 emergency care for all, regardless of their ability to pay, put them at a competitive disadvantage when compared with IPOs and ASCs. The AHA has previously claimed that the federal government reimburses hospitals 84 cents for every dollar spend on Medicare beneficiairies.

"Hospitals and health systems provide around-the-clock care — including emergency services — to all who come to us. This includes the sickest patients and those left behind economically in our communities," says AHA President / CEO Rick Pollack. "Medicare already reimburses hospitals, which have more comprehensive licensing, accreditation and regulatory requirements than independent physician offices and ambulatory surgical centers, less than the cost of providing care."

Using data from 2019-2021, the study compared 511,000 medical claims for 263,000 Medicare beneficiaries using HOPD with 203,000 ASC claims from 127,000 Medicare beneficiaries. The data does not include Medicare Advantage beneficiaries.

Over the same three-year span, the study also examined 249,000 HOPD beneficiaries with 3 million claims, and compared them with 1.1 million IPO beneficiaries with 18.1 million IPO claims.

Among the findings:

• HOPDs see nearly twice as many Medicaid dual-eligible patients (25%) compared with IPOs (13%), and 16% compared with 9% at ASCs.
   
• HOPD Medicare patients are 1.6 times more likely to be enrolled through disability and/or end-stage renal disease (31%), compared with ASCs (19%).
   
• Two thirds (63%) of HOPD Medicare patients have at least one complication/comorbidity, compared with 52% at IPOs, while 29% of HOPD patients have at least one major complication/comorbidity, compared to 16% at IPOs.
   
• Medicare beneficiaries using HOPDs were twice as likely (31%) to have used the emergency department 90 days prior, compared with 15% of IPOs, and were more than twice as likely (16%) to have had a hospital stay in that period than IPO patients (7%).
   
• HOPD Medicare patients were nearly three times more likely to have had emergency department visit in the 90 days prior (29%) compared with 10.5% of ASCs, nearly four times as likely (12%) to have had a hospital stay in that period than ASC patients (3.3%).

$471B in Site-neutral Savings

The Blue Cross Blue Shield Association recently issued a report claiming that $471 billion could be saved over 10 years if the federal government removed all exemptions and imposed site-neutral payments on all care delivery sites.

"Rising prices for medical care are one of the main drivers of the healthcare affordability crisis in this country," says David Merritt, BCBSA's SVP of policy and advocacy.

"Hospitals have strong financial incentive to continue purchasing physician practices, giving these new entities the upper hand when negotiating payment rates with insurers, resulting in higher costs for patients," Merritt says. "Congress must protect patients from these inappropriate billing practices by expanding site-neutral payment policies and cracking down on anti-competitive behavior among providers."

BCBSA recommends that the federal government eliminate the 2015 exemption for some HOPDs, and adopt site-neutral policies and lower payment rates for routine services delivered outside the hospital—excluding rural facilities.

Philip Ellis, president of Ellis Health Policy and a former Congressional Budget Office economist, says the disparity in situational Medicare payments also affects payment rates for private insurers "because they typically use Medicare's system as a basis for paying doctors and hospitals."

"BCBSA's proposals to adopt site-neutral payments would not only cut Medicare spending significantly but also would reduce private insurance premiums by $117 billion and yield another $152 billion in out-of-pocket savings for Medicare patients and enrollees in private plans," Ellis says, adding that expanding site-neutral payments "would pave the way for private insurance plans to also implement these payment policies, ultimately increasing access to high-quality and affordable care."