By Dr. Marcus Neubauer | August 1, 2018
Even though the United States leads the world in health care technology, biopharmaceutical innovation and our renowned providers, we somehow continue to fall dreadfully short in formulating public policies that are good for patients, taxpayers and Medicare.
It’s a key reason why the Trump administration recently released its “American Patients First” blueprint, which aims to bring down the high price of drugs and reduce out-of-pocket costs for American consumers. It’s also why concerned advocates have long pushed for reforms that establish payment parity across sites of service — policies that would not only decrease Medicare and commercial spending but would likewise ensure that patients receive the right care in the right setting, lower taxpayer and beneficiary costs, and increase patient access and choice.
This type of site-neutral payment parity is long overdue. It’s time for patients to stop shelling out increased and unnecessary out-of-pocket costs for identical services in different settings. It’s time to stop the out-of-control consolidation of independent health practices, as well as the monopolies that drive up costs and limit patient choice. And it’s time to level the playing field where hospitals and physician practices can compete on price and quality in order to attract patients.
Indeed, one element of President Donald Trump’s blueprint focuses on site-neutral reform for drug administration — and for good reason. In addition to the president’s blueprint, the administration most recently proposed expanding site-neutral payments for all outpatient clinic visits in its CY19 Medicare Hospital Outpatient Prospective Payment System and Ambulatory Surgical Center Payment System proposed rule.
Under current policy, hospital outpatient departments are reimbursed at significantly higher rates than independent physician practices for providing the exact same services. So, for the administration of chemotherapy drugs, for example, HOPDs are paid more than double the rate of community cancer clinics ($281 vs $136).
Patients feel the sting, as well: Medicare beneficiaries paid in excess of $4 million more in out-of-pocket costs between 2009 and 2012 due to higher copayments at HOPDs than at freestanding clinics for those same chemotherapy services.
Sadly, alarming payment differentials are not limited to drug administration services. Costs are consistently and unreasonably higher for services like cardiac imaging ($2,078 vs. $655) and colonoscopy ($1,383 vs. $625). Across all sites of services, that generated $2.7 billionin additional Medicare expenditures between 2012 and 2015 — and $411 million more in patient out-of-pocket costs — simply because patients visited an HOPD for their care.
Without significant policy changes, there is no realistic hope that we will see a stop to this unnecessary spending. That’s because current policy strongly incentivizes hospitals to buy out independent physician-based practices, since by absorbing independent practices into their ecosystems, hospitals can command significantly higher reimbursement rates. More than 13,000 freestanding physician offices were bought out and converted into HOPDs between July 2014 and January 2015 alone.
Site-neutral payment reform would certainly bring relief from out-of-control and unnecessary spending. But importantly, it would also remove the incentives that fuel hospital acquisitions. As a result, thousands of independent physician practices and community clinics could operate without being absorbed by larger hospitals systems. And patients would have the freedom to choose from a wider range of providers and care settings.
The importance of choice simply can’t be ignored. In fact, research suggests that monopolized health care markets limit competition, reduce quality and increase costs to patients and payers. It’s a problem that’s especially troubling in rural communities where health care options are already limited. One analysis has found that 16 percent of the U.S. mainland population lives 30 miles or more away from the closest hospital. With payment reform would come greater ability for rural patients to seek care more conveniently and closer to home — at a local physician’s office rather than at distant hospitals.
Importantly, payment parity could be achieved in a budget-neutral manner. To do so, Medicare payments for cancer drug administration and other outpatient services should be set at a rate that falls between the current higher rate for HOPD services and the lower rate for physician office services. By meeting in the middle, Medicare would more appropriately reimburse community oncologists while eliminating unfair payment incentives for hospitals to gobble up private practices.
The site-neutral payment reforms proposed by the Trump administration — in both his drug plan and the proposed outpatient rule — can’t come soon enough. Parity for drug administration services is a small but critically important step toward a system where the playing field is equal for hospitals and physician offices, and patients have greater choice when it comes to their health care.
Marcus Neubauer, MD, is the chief medical officer of the U.S. Oncology Network.