Obama budget heats up the issue of site-neutral healthcare payments

Independent private physician practices and hospitals may find themselves on opposite sides of the debate over President Obama ‘s 2016 budget proposal to equalize Medicare rates for services provided in hospital outpatient departments (HOPD) and physician offices—with projected savings of $29.5 billion over 10 years.

The proposal is part of a bigger $431 billion package of cuts to Medicare, $350 billion of which would come from providers.

In advance of the release of the 2016 budget, the newly formed Alliance for Site-Neutral Payment Reform (ASNPR), a coalition of medical societies and organizations representing primary care physicians, health plans, nursing homes and patients, authored a January 16 letter to Congressional leaders to call attention to the payment disparities between care settings and the cost of those payment differentials.

Using the example of a colonoscopy, the letter points out that the payment in the office setting is $625 compared to $1,383 paid in an HOPD. “These disparities are far reaching—from lab work, to radiology imaging exams, to cancer care—and are driving up healthcare costs to the tune of billions annually,” the ASNPR wrote.

The trend in hospital acquisition of physician practices has increased the price tag associated with the disparity, according to the ASNPR letter. It cites an IMS Institute report that concludes cancer patients are paying higher prices for care due to the acquisition of oncology practices by hospitals. According to that report, drug administration costs in HOPDs is 187% more than physician office rates for commercially insured patients under the age of 65.

The shift in care from to the higher HOPD setting was estimated by MedPAC to have cost Medicare $1.44 billion last year, according to the letter.

Signatories of the letter included the following ASNPR member organizations: the American Academy of Family Physicians, the American College of Physicians, American Health Care Association, America’s Health Insurance Plans, Blue Cross and Blue Shield Association, Brain Tumor Alliance, Community Oncology Alliance, Lung Cancer Alliance, Men’s Health Network and The US Oncology Network.

The American Hospital Association was quick to oppose a proposal that would take HOPD rates down to the Medicare Physician Fees Schedule or Ambulatory Surgical Center payment system rates.

“Hospital-based facilities provide access to critical services that are not otherwise available in the community and treat patients with very severe conditions,” wrote Rick Pollack, executive VP, advocacy, AHA, in a blog post on Monday. “This proposal fails to recognize our communities’ need for hospital emergency stand-by capacity, upon which we all rely in times of personal crisis or natural disaster, or the costly morass of regulatory requirements imposed on hospitals.”

The Access to Medical Imaging Coalition (AMIC) also weighed in on the proposal, expressing concern that site-neutral payment and the proposal to implement prior authorization for advanced imaging would harm access to medical imaging. “Medicare should maintain separate fee schedules due to the unique combination of services provided by hospitals as compared to physician offices. Hospital outpatient departments, both on and off of a main hospital campus, play a critical role in advancing coordination of care for Medicare beneficiaries," said Tim Trysla, executive director of AMIC, in a press release. " Leveling payment rates for off-campus hospital outpatient centers down to physician office payment levels would undermine efforts to integrate services across the continuum of care.”

The ASNPR letter acknowledged that hospitals depend on generous outpatient rates to subsidize under-reimbursed services, and pointed to a potential access problem with the subsidized services:  “Reforms must be further designed to stop hospitals’ reliance on revenue from HOPD services to fund the delivery of unrelated care services. Some hospitals now depend on HOPD payments to cross-subsidize other necessary patient care services, therefore alternative funding sources may be required to secure access to this care.”