The Supreme Court of the United States recently declined to hear an appeal filed by the American Hospital Association (AHA) to override a lower court’s decision enabling the Centers for Medicare & Medicaid Services (CMS) to enact site-neutral payment policies, opening a huge savings opportunity for all. A simple concept - equal payment for a service regardless of where the service was performed - has been discussed for almost a decade and hotly contested in the courts over the past few years. The CMS savings estimate alone was $800,000,000 in reduced outpatient payments in 2020.

Traditionally, CMS and private health plans have been willing to pay significantly more for outpatient services performed at a hospital-owned site of care than at a physician or non-hospital owned site of care. This was done to recognize that hospital-owned facilities may be staffed or equipped for higher risk patients and may be subject to stricter regulations. In April 2021, AHA released a study which showed that Medicare patients who received care in a hospital outpatient department were more likely to be poorer and have more severe chronic conditions than Medicare patients treated in an independent physician office.

Yet, there is another side of the story. Medicare Payment Advisory Commission research, conducted in response to a request from Congress, found that paying hospital outpatient departments at a higher rate has driven provider consolidation and created havoc in the marketplace for health care services. Responding to incentives to maximize profit, hospitals have gobbled up physician practices and dramatically expanded the number of sites billing as hospital outpatient departments.

According to the Alliance for Site Neutral Payments, these misaligned payment policies have greatly diminished the number of independent physician practices nationwide and driven costs higher for patients, employers, and taxpayers.  

The savings opportunity ushered in by this Supreme Court decision comes without impacting quality or reducing coverage and brings financial benefit to employees as well. In fact, Families USA calls it an overlooked victory for consumers.

We encourage you to talk to your health plan about their transition to site-neutral payments and to stay tuned for strategies to inform and engage employees in capturing this opportunity.

Warm regards,

Louise Y. Probst

BHC Executive Director