Medicare’s payment rates often vary for the same ambulatory services provided to similar patients in different settings, such as physicians’ offices or hospital outpatient departments (OPDs). For example, in 2013, Medicare pays 141 percent more for a level II echocardiogram in an OPD than in a freestanding physician’s office. These variations raise questions about how Medicare should pay for the same service when it is delivered in different settings.
If the same service can be safely provided in different settings, a prudent purchaser should not pay more for that service in one setting than in another. Payment variations across settings may encourage arrangements among providers that result in care being provided in higher paid settings, thereby increasing total Medicare spending and beneficiary cost sharing. In general, the Commission maintains that Medicare should base payment rates on the resources needed to treat patients in the most efficient setting, adjusting for differences in patient severity to the extent that severity differences affect costs.
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