News & Updates

July 31, 2018

Industry split on CMS site neutrality proposal – Healthcare Dive, July 31, 2018

By Tony Abraham  |   July 31, 2018

Hospitals and health systems are up in arms over CMS’ proposal to make payments for clinic visits site neutral, a move that would essentially equalize visits to hospital outpatient departments and physician groups. Opponents say this would impede access. Doctors and some policy experts argue that access shouldn’t hinge on a funding stream that, in many ways, is difficult to justify as being in the best interest of patients.

While the hospital industry gears up to defend the status quo, proponents argue the shift to site neutrality is long overdue.

The American Hospital Association and America’s Essential Hospitals (AEH) were swift to respond to the regulation proposed last week, with the former accusing the agency of showing “a lack of understanding about the reality in which hospitals and health systems operate daily to serve the needs of their communities.”

The rule would also reduce a number of reporting requirements for providers and increase payments by 1.25%, which CMS and analysts have argued will effectively offset any reductions caused by site neutrality. CMS is framing the proposal as a mechanism to “level the playing field” while saving Medicare $610 million a year and lowering co-pays for beneficiaries.

“There’s no good rationale for paying different rates in facilities that are owned by a hospital versus those that are independent,” Fred Bentley, vice president of Avalere, told Healthcare Dive. “It’s the exact same service. It costs exactly the same.”

Opponents say the rule will impede access for Medicare beneficiaries. While the financial hit to hospitals can’t be dismissed, AEH Senior Director of Policy Erin O’Malley told Healthcare Dive that “access is at the heart of this issue” for many hospitals.

“We rely on adequate Medicare funding to ensure we can provide access to our patients when and where they need it,” O’Malley said. “The threats coming out of these policy changes really do home in on our ability to provide access to the most vulnerable patients in the most vulnerable communities.”

Off-campus hospital outpatient departments, O’Malley elaborated, have an extensive footprint in their respective communities, where they provide “very complex care” to patients in convenient locations. Equivocating the services those facilities provide with the same services provided by physicians’ offices is “fairly easy for those that don’t fully understand the type of care provided in a hospital outpatient department.”

Many hospitals, however, have used the pricing disparity as a bargaining chip at the acquisitions table. Higher payments for site visits were a draw for physician groups being courted by hospitals. The payment rate change has directly impacted beneficiaries, many of which have been slapped with higher-than-normal bills for a clinic visit after their physician group became part of a hospital system.

Site neutral payments aren’t new, having been passed into law via the Bipartisan Budget Act of 2015. However, Congress allowed hospital outpatient departments to be grandfathered into the act, exempting many hospitals from site neutrality.

“Every health system had their hit list of practices to go after next that they could then use to bill Medicare at a higher rate,” Bentley said. “That planning and those opportunities essentially evaporated.”

When the Obama administration pushed to remove the grandfather status from facilities that expanded their services, the hospital industry successfully fought back. CMS’ new proposed rule seeks to remove the grandfather status of those facilities. Now, Bentley said, hospitals’ concern has shifted to getting paid less for facilities that used to be able to charge more.

“You could say we were somewhat surprised to see this issue pop up again with this administration,” O’Malley said.

Hospitals should prepare for a site-neutral future

But it’s not all about money. The threat to access, Bentley said, is a real one.

“If you start cutting back on their payment rates, even if it makes sense from a policy standpoint, there will be implications for access to care,” he said. “That will create challenges for beneficiaries and health systems. I’m certainly sympathetic to [hospitals’ concerns], but by the same token, if there are access issues, there are more direct ways to mitigate that. Let’s address that directly.”

Bob Doherty, senior vice president of government affairs and public policy at the American College of Physicians, told Healthcare Dive the group is “very supportive and encouraged by the direction CMS is taking in the proposed rule.” ACP, which is a founding member of the Alliance for Site Neutral Payment Reform, released a statement following the rule proposal applauding the steps CMS is taking to implement site-neutral payments.

In the statement, ACP president Ana María López lambasted facility fees — add-on payments charged to patients by hospital outpatient clinics —​ saying they “do not result in better service or value to the patient.”

​Doherty shares his organization’s concern, especially considering hospitals’ primary argument against site neutrality is access. Facility fees, he said, are passed on directly to patients — and cost is certainly a barrier to access.

“I’m not sure that a compelling argument has been made that access will suffer,” he said. “From [hospitals’] point of view, I can see how they’d worry that if one part of their revenue stream is squeezed, that’s going to hurt their bottom line and potentially endanger their ability to treat underserved patients and/or to train physicians in their residency programs. We believe [hospitals] need to be compensated fairly and appropriately for their services, but not through facility fees. It’s really hard to justify that as being the appropriate way to help fund their other responsibilities.” ​

At the end of the day, the site neutrality rule is still a proposal, subject to lobbying and pushback. Bentley said that, while he has a hard time believing the rule will be finalized as-is, the proposal is a harbinger of changes to come.

“This is just the opening volley. It is sending a very strong signal,” he said. “The reality is, site neutrality is the explicit goal of this administration, as it was the prior administration. The writing’s on the wall.”