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FAH Statement | Site-Neutral Payments | FAH Policy Blog Team

What’s In A Name? Because There Is Nothing Neutral about Site-Neutral Policy

The right care, at the right time, in the right setting. It’s more than a catchy phrase. It is an axiom, as well as the top priority of the hospitals and health systems represented by FAH.

Whether inside the four walls of a hospital or at an affiliated facility, every patient deserves the best care available when and where they need it most – without interference by Washington policymakers.

What is Site Neutral Payment Policy?

Longstanding Medicare payment policy recognizes that there are fundamental differences between the level of services delivered in a hospital setting versus a standalone physician office -differences that warrant different payment structures. Those who promote so-called “site-neutral” payment policy, however, assert that the site of care should not matter: Hospital payments should be strictly limited and closer to what the payment would be if that care was delivered in an unaffiliated physician office, even if the physician believes that the hospital is the appropriate setting for that care given the patient’s condition.

Site-neutral may sound appealing, but it is not as benign as many perceive. Instead, this one-size-fits-all payment ignores the fundamental functional and cost structure differences (described further below) between hospitals and physician offices – among other settings – and threatens the unique, mission-critical services that communities rely on hospitals to provide 24/7/365.

Ultimately, implementing a site neutral payment policy is nothing less than a devastating cut to hospital funding – which means patients and their access to care will be affected!

Differences in Care Settings Matter

Site-neutral payments do not take into account one simple fact: hospitals and doctors’ offices are not the same, not even close. Hospitals provide a full spectrum of critical, life-saving services to entire communities, including 24/7 access to emergency care and disaster relief. They need to maintain the ability to treat complex patients who require more intense care, and therefore require a different payment structure.

Hospital-affiliated sites offer patients more integrated care across health care settings, services for which hospitals need to be properly reimbursed to maintain coordinated, high-quality care for patients.

Increasingly, care is shifting from the inpatient to outpatient settings, meaning that patients now seen in hospital outpatient departments (HOPDs) may require a higher level of care than traditionally offered – or even available – in a physician’s office.

A recently released study from the American Hospital Association (AHA) backs up this fact. Researchers found that HOPDs treat underserved populations and sicker, more complex patients than other ambulatory care sites. The study indicates that relative to patients seen in independent physician offices and ambulatory surgical centers, Medicare patients seen in hospital outpatient departments tend to be:

• Lower-income;
• Non-white;
• Eligible for Medicare based on disability and/or end-stage renal disease
• More severe comorbidities or complications;
• Dually-eligible for Medicare and Medicaid; and
• Previously seen in an emergency department or hospital setting.

This also highlights a glaring issue with site-neutral payment policies – they fail to distinguish between the types of patients that hospitals serve when compared to other providers, as well as the difference in the level of care. While these one-size-fits-all policies may look good on paper, the reality is they put the most vulnerable patients’ access to care at risk.

It is vital that reimbursement for outpatient services provided in a HOPD reflects the higher overhead costs associated with providing care in that setting. These include regulatory requirements, such as the Emergency Medical Treatment and Labor Act (EMTALA), hospital Conditions of Participation, hospital state licensure, and complex cost reports impose substantial resource and cost burdens that physician offices and ambulatory surgical centers do not have and therefore are not reflected in their payments.

Effective Policies Already in Place – Truth About Site-Neutral Payments

A common misconception of those pushing Medicare site-neutral policies is that hospitals are purchasing off-campus physician offices one day, flipping the sign on the door, and the next day getting a hospital payment for the same service that was previously paid under the physician fee schedule. Fact: Under the Bipartisan Budget Act of 2015, with the exception of a dedicated emergency department, if a hospital-based off campus facility was not billing as a hospital before November 2, 2015, that facility will be paid through the physician fee schedule for virtually all of its services. And under a 2019 CMS regulation, clinic visits at all hospital off-campus departments, even those billing as a hospital before November 2, 2015, are paid through the physician fee schedule.

More Harm than Good – Unintended Consequences

We must remember that any cuts to hospitals are essentially cuts to patients and threaten access to care. And site-neutral payment policy is, in effect, a euphemism for Medicare cuts. Hospitals just survived one of the most challenging periods in history – the COVID-19 pandemic, combined with ongoing challenges including a workforce shortage, broken supply chains and historic inflation have left many facilities struggling to maintain access to case.

Site-neutral payment policy will make it even worse – especially for rural hospitals and other facilities that care for patients and communities in underserved areas. This is particularly true in light of the fact that according to MedPAC Medicare hospital payments are estimated to be 10 percent below the cost of care in 2023. Further cutting funding will force some facilities to cut back on services, while others may close entirely.

When you look behind the simple headline of “site-neutral payment” you quickly discover the complexities of the issue and the dangers of equating patient care and payment across ambulatory settings. By design, all settings are not equal, and differential payment policies intentionally and appropriately reflect that. No other setting comes close to the demands placed on hospitals, the scope of services delivered, and how communities rely on hospitals to provide access to the right care at the right time in the right setting. Site-neutral payment policy, however, operates at cross purposes to that principle. These misguided cuts threaten access to care that hospitals uniquely provide. Instead, we need policies that work to strengthen not weaken hospitals and preserve the access to care that patients deserve and count on.