Congress is currently considering policies that would expand site-neutral payment for ambulatory services in the Medicare program. These policies would reduce hospital revenues, while generating savings for Medicare beneficiaries and the federal government and removing an incentive to shift services out of physician offices and into hospitals. Some policymakers have suggested using a portion of the federal savings to lessen the impact of a site-neutral policy on hospital finances. While we question whether this is the highest-value use of these funds, this paper discusses how policymakers could do this without reintroducing incentives to shift services into the hospital setting, as would occur under some existing proposals.
As background, Medicare payments for ambulatory services vary based on where services are delivered. Payments are generally much higher if a service is delivered in a hospital outpatient department (HOPD) that resides on a hospital’s campus (or, for some services, in certain “grandfathered” off-campus HOPDs) rather than a physician’s office. Payments for services delivered in an ambulatory surgery center (ASC) are also generally higher than those delivered in a physician’s office, albeit to a lesser degree.