Healthcare News & Insights

Warning: MedPAC wants to expand ‘site neutral’ to oupatient services

The last thing hospital executives want to hear is they’re going to have to make deep financial cuts in their outpatient departments. But unless the American Hospital Association (AHA) is successful in getting the Medicare Payment Advisory Commission (MedPAC) to reconsider its proposal to broaden its “site neutral” payment policy to hospital outpatient department (HOPD) services, that’s exactly what’ll happen.

In an Oct. 4, 2012, presentation, MedPAC took issue with the fact that Medicare payments are significantly higher for most services if they’re provided in a HOPD than if they’re provided in a freestanding physician practice or professional office.

According to MedPAC, because HOPDs get paid more, hospitals are able to pay physicians more. This causes physicians to leave private practice to work in hospitals, causing more services to be provided in HOPDs and higher Medicare program spending and beneficiary cost sharing.

In the presentation, MedPAC said, “Medicare should base payment rates on resources needed to treat patients in [the] lowest-cost, clinically appropriate setting.”

MedPAC reasons that if the rates for non-emergency evaluation and management (E/M) visits could be equalized across settings, and the rate differences for other services could be narrowed between the two settings, Medicare program spending over one year would decline by $900 million and beneficiary cost sharing would decline by $250 million.

AHA fights ‘site-neutral’ expansion

In a letter to MedPAC, the AHA expressed its strong opposition to the site-neutral payment policy expansion. It’s reason: “Hospitals are not physician offices and play a very different role in the communities they serve by providing a wide range of acute-care and diagnostic services, supporting public health needs, and offering myriad other services to promote the health and well-being of the community.”

And despite the fact that some of the services HOPDs provide are also provided by other healthcare providers, three things make the hospital’s role unique:

  • 24/7 access to care
  • the ability to provide services to all patients who seek emergency care regardless of their ability to pay, and
  • disaster readiness and response.

“These critical roles, while often taken for granted, represent an essential component of our nation’s health and public safety infrastructure,” noted Rick Pollack, AHA’s executive VP, in the letter.

Pollack also pointed out that MedPAC already made the recommendation last year to cut payments for 10 E/M services. And together these two proposed cuts would hit HOPDs extremely hard — to the tune of $2 billion in a single year. Such cuts would jeopardize routine outpatient services that are integral to hospitals and the communities they serve.

The AHA even pointed out that according to MedPAC’s own data, HOPDs margins were already 9.6% in the red in 2010. It urged that MedPAC take into account the unique roles hospitals play in the community before recommending these cuts to HOPD services.

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