Site-neutral Payment: Prelude to a Painful Inevitability

In January 2017, a small but noteworthy group of hospital-owned imaging centers will no longer be paid under the Hospital Outpatient Prospective Payment (HOPPS) fee schedule if CMS proceeds as planned. While there is some question as to how they will be paid in the future, hospital-owned off-campus imaging centers very likely will not be paid under HOPPS. At best, they will receive payment under the Medicare Physician Fee Schedule (MPFS)—at the worst, hospitals will receive nothing and physicians will get an “enhanced fee” according to the proposed 2017 HOPPS rule.

Needless to say, hospitals are not pleased, and I can’t say I blame them. No one likes a pay cut (especially a 100% pay cut), but on the recommendation of MedPAC(1), Congress acted in the Bipartisan Budget Act (BiBA) of 2015; and President Obama signed the bill into law on November 2, 2015. CMS was charged with working out the details.

All off-campus provider-based facilities opened or changing hands after November 2, 2015 (and located more than 250 yards from the hospital campus) will no longer qualify for the much-envied hospital premium. How the studies produced in such settings will be paid will be revealed in the final rule due to drop in November.

Looking down the road, CMS is taking steps to possibly broaden site-neutral payment to include even more hospital-based sites. The agency itself is in the dark about which sites are where due to the common practice of billing for all transactions under a single provider number and hence began collecting site-of-service data last year using a voluntary modifier—it became mandatory this year.(2)

This fuzzy state of affairs was not lost on MedPAC, which has pointed out the fact that hospital outpatient department imaging was on the rise. Self-referring physician practices acquired by hospitals (in particular, cardiology practices) billing for imaging procedures under the HOPPS were said to be a contributing factor. CMS estimates that this first iteration of site-neutral payment—which will affect a relative few outpatient imaging centers—will save $500 million in the first year.2

Living with less

Radiology practices and entrepreneurs that have stayed with the freestanding outpatient imaging business—and many have not—are well versed in the challenges of living on the Medicare Physician Fee Schedule, having withstood repeated reimbursement cuts between 2005 and 2014. They have learned to account for every cost down to the last ounce of contrast, the smallest catheter and each full-time equivalent hour, and they’ve done this typically with a higher level of customer service than their HOPD counterparts, including extended operating hours. There is no room for waste in this equation, and no patient or referrer can be taken for granted.

It is important to note two things regarding the policy about to debut in 2017. Very few hospital-owned outpatient imaging centers are expected to be included in this policy. Most of the off-campus hospital-owned imaging centers that are affected are more likely to fall into the category identified by MedPAC: office-based imaging provided by self-referring physician practices acquired by the hospital.

As hospitals rethink their role in healthcare delivery in this country, they are exhibiting a keen appetite for outpatient facilities, and we are likely to see them continue to invest in developing and acquiring off-campus outpatient service sites of all stripes, including imaging centers. In his 52-page letter3 to CMS Acting Administrator Andrew Slavitt, Thomas P. Nickels, executive vice president, American Hospital Association wrote: “We are concerned that, as written, the rule would freeze the progress of off-campus clinical care in its tracks and would negatively impact access to care for Medicare beneficiaries.”

Nickels’ concern is well placed. CMS should not construct any obstacles to the movement of care into the outpatient setting, where care can be delivered more economically. The MPFS is a much better payment mechanism.

On the other hand, does it make sense to pay a premium for off-campus outpatient services just because they are owned by a hospital? As patients assume a greater share of the cost of their healthcare, I think not.

Those radiology practices that stayed in the imaging center game and learned how to deliver high quality imaging services are holding an ace when it comes to adding value for their hospital clients. Not only can they handle the complex technical and operational aspects of operating an imaging center, they can do so with a well-honed service ethic, and they can do it all on MPFS reimbursement.