News & Updates

June 30, 2019

Center for American Progress: Impose Site Neutral Payments to Rein in High Cost of Hospital Care

In a report titled, “The High Price of Hospital Care,” the Center for American Progress examines trends in hospital profits and pricing variation across geographic areas and payers. CAP offers several policy options to rein in the high cost of hospital care, including imposing site neutral payments.

According to report, “hospital profitability has risen to its highest levels in decades, boosted by the nation’s rebound from the Great Recession and the Affordable Care Act’s expansion of health coverage.” The report looks at total margin, finding that acute care hospitals are more profitable than many other industries in the health care sector, ranking well above health insurers, pharmacies, and pharmacy benefit managers (though below profit estimates for the medical device and drug manufacturing industry).

Examining trends in the hospital industry, the report finds that hospitals have shifted their growth strategy to offer more outpatient services through the acquisition of physician practices. With less competition in the market, patients are paying higher prices.

To combat this, CAP offers several policy recommendations, including site neutral payment reforms. According to the report, “the differential between hospital and nonhospital rates financially incentivizes hospital systems to acquire physician practices, thereby leading to greater consolidation among providers. Medicare payments for procedures that can be safely performed in nonhospital settings such as ambulatory surgery centers or physician offices should not stack the deck in favor of hospitals.”

Read the full report here.