Hospital Groups Decry Medicare Site-Neutral Payment Policy

BNA’s Health Care Daily Report™ sets the standard for reliable, high-intensity coverage of breaking health care news, covering all major legal, policy, industry, and consumer developments in a...

By Michael D. Williamson

Feb. 19 — A law erasing Medicare payment differences between hospital outpatient departments and hospital-owned physician offices “seriously impedes” access to outpatient services and should be changed, a hospital group said Feb. 19.

Equalized, or site-neutral payments, have led to an approximately 50 percent payment reduction for many outpatient services, and in some instances, close to a 90 percent cut, according to the letter from America's Essential Hospitals. The group, an industry group for safety-net hospitals, sent their views to two Republican leaders of the House Energy and Commerce Committee.

Committee Chairman Fred Upton (R-Mich.) and Subcommittee on Health Chairman Joe Pitts (R-Pa.) asked for feedback on Section 603 of the Bipartisan Budget Act of 2015, which established the site-neutral policy, in a Feb. 5 letter to industry .

Congress implemented the site-neutral policy to address the practice of hospitals acquiring physician offices and then billing patients under the outpatient prospective payment system, which has higher reimbursement rates than the Medicare physician fee schedule

Comments on the policy were due Feb. 19.

Closing Outpatient Departments?

Other hospital groups also decried the law's impact. The policy is counterproductive and could cause some outpatient departments at teaching hospitals to close, the Association of American Medical Colleges (AAMC), which lobbies for teaching hospitals, said in a Feb. 17 letter to Upton and Pitts.

Moreover, the policy could reduce outpatient services at other locations, which would greatly affect “vulnerable populations—especially those with complex medical problems—that receive care there,” the AAMC told the lawmakers.

The AAMC urged lawmakers to enact a technical correction to exempt hospital outpatient departments under development at the time of the legislation’s enactment from the new payment policy and direct the Centers for Medicare & Medicaid Services to answer regulatory questions related to implementation of Section 603.

In addition, the American Hospital Association (AHA), the largest hospital industry group in the U.S., is concerned the policy “will result in substantial reductions in payments for services furnished” in provider-based hospital outpatient departments, it said in a Feb. 12 letter to Upton and Pitts.

Congress also should reject any further attempts to implement site-neutral payment policies at other types of health-care facilities, the AHA wrote.

In a March 2015 report to lawmakers, the Medicare Payment Advisory Commission, which advises Congress on Medicare, recommended site-neutral payments for certain select conditions at skilled nursing facilities and inpatient rehabilitation facilities .

To contact the reporter on this story: Michael D. Williamson in Washington at

To contact the editor responsible for this story: Steve Teske at

For More Information