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Medicare Sparks Site-Neutral Payment Showdown

Analysis  |  By  
   February 18, 2016

There is likely no clear winner in the fight between hospital and physician groups who are weighing in on Medicare's new site-neutral payment policy that goes into effect next year.

Hospitals with newly acquired and almost-built physician practices located off of the main campus are hoping a congressional committee will put the brakes on payment cuts that are slated to take effect in January 2017.


Wanda Filer, MD, FAAFP

But physician groups are fighting equally hard to get the cuts expanded.

At issue is the site-neutral payment policy that was part of last year's budget agreement. A tiny section that was tacked on to the budget during negotiations makes big changes to how some hospital outpatient departments are paid.

It primarily affects off-campus physician practices that hospitals bought or built after November 2, 2015. Instead of a higher reimbursement rate because of being associated with a hospital, those practices are slated to receive the same payment as physicians who are in stand-alone offices.

There are a few caveats. The cuts do not apply to physician practices that are located on a hospital's campus, emergency departments, critical access hospitals, rural health clinics, federally qualified health clinics, and other outpatient departments.

The House energy and commerce committee is weighing the impact of the payment cuts, accepting public comment through Friday.

Physicians vs. Hospitals
Physician groups, such as the American Academy of Family Physicians and the American College of Physicians support the payment cuts because it levels the playing field for physicians and patients.

"It's not a good stewardship of federal dollars to pay more for the exact same services," says Wanda Filer, MD, FAAFP, president of the American Academy of Family Physicians.

In a Feb. 11 letter to House energy and commerce committee members, the AAFP noted that physicians should get reimbursed for patient care no matter the site of service.

"There is an element of fairness in this whole process," Filer says. "I've worked in both scenarios (independent and hospital-owned) and services are frequently the same."

But there are significant differences beyond a new hospital sign on the door, says Lawrence Vernaglia, partner and chair of the health care industry team at Foley & Lardner. Physician offices that are either built from the ground up or acquired by a hospital have to meet a number of regulations before they can qualify as an off-campus HOPD. The narrative that nothing changes but the name is "not true" Vernaglia says.

"All regulations need to be met," Vernaglia says. "We have provider-based rules for nursing, infection control, dietary counseling. HOPDs can provide a hospital-level of care."

That level of care is what the American Hospital Association also points to as an example of the difference between HOPDs and stand-alone physician offices. The AHA sent its own letter to the committee as well as put its members on high alert to send feedback about the site-neutral payment impact.


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Jacqueline Fellows is a contributing writer at HealthLeaders Media.

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