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Studies Show Potential Savings for Site-Neutral Payments

Procedures performed in ASCs and other outpatient settings could save the healthcare system billions of dollars

BY ALEX TAIRA | MARCH 2023

Two recent studies, along with ongoing work by the Medicare Payment Advisory Commission (MedPAC), show considerable savings potential for policies that align reimbursement for certain outpatient services at the level of the lowest cost setting, such as in ASCs. According to a recent analysis by the Blue Cross Blue Shield Association (BCBSA), adopting site-neutral payment policies could save $471 billion over the next 10 years, including $152 billion in savings from patient out-of-pocket spending reduction.

Background

Both public and private payers set reimbursements based on where procedures are performed. Procedures performed in a hospital will receive higher reimbursement than the same procedure performed in an ASC or physician office. “Site-neutral” is a term used to describe a payment policy in which reimbursement is the same for a certain service no matter where the service is provided. Site-neutral payment policies have gained traction as a method to reduce health spending for services that are considered low-risk and should not be incentivized via higher reimbursement for performance in higher cost sites of service. In 2016, pursuant to Section 603 of the Bipartisan Budget Act of 2015, the Centers for Medicare & Medicaid Services (CMS) finalized a policy in which new off-campus hospital outpatient locations would be paid a significantly lower rate (50 percent in 2017) compared to the rate normally paid to hospitals under the Outpatient Prospective Payment System (OPPS). Currently, any new off-campus hospital outpatient site will be paid 40 percent of the OPPS rate, and one clinic visit code (HCPCS G0463) is paid at a lower rate regardless of when the off-campus site was established. However, off-campus sites that were built before 2017 are excepted from the site-neutral policies and remain grandfathered into higher reimbursement under the OPPS.

Recent Research

In its June 2022 report, MedPAC published a chapter titled “Aligning fee-for-service payment rates across ambulatory settings.” In the chapter, MedPAC identified 57 ambulatory payment classifications (APCs), or code groups, for which the physician office is the most frequent site of service, indicating a low level of risk. Similarly, MedPAC identified 11 APCs for which ASCs are the most frequent site of service. If CMS had lowered payment rates to the most frequent site of service for those APCs, Medicare could have saved $6.6 billion in 2019, including $1.7 billion in beneficiary cost sharing reductions alone.

Two recent reports, one from the BCBSA and one from the Committee for a Responsible Federal Budget (CRFB) build on the MedPAC analysis by extending the site-neutral policy to the commercial market. Although the CRFB expresses uncertainty about private market effects, it estimates a range of $140 to $466 billion in savings from 2021-2030 if Medicare adopts broader site-neutral payment policies. Overall, the CRFB projects that site-neutral payment policies could reduce national health expenditures by $346 to $672 billion over the next decade. The CRFB concludes that there is “little reason for the significant payment differentials between HOPDs and physicians’ offices” for procedures that can be safely performed in physician offices.

The BCBSA analysis, conducted in conjunction with Ellis Health Policy, predicts private market effects more accurately (perhaps due to some insight into BCBS claims data). Using 2020 analysis from the Congressional Budget Office (CBO) as a baseline, BCBSA estimates that adopting site-neutral payment policies could save Medicare an estimated $202 billion from 2024 to 2033. However, they estimate more conservative savings potential for private insurance, citing lower usage of HOPD services at off-campus sites and contract negotiations that might offset some savings. Despite this, BCBSA still projects $117 billion in spending reduction from 2024-2033 by private insurers if site-neutral payment policies are adopted. All told, combining Medicare, private premium and enrollee out-of-pocket savings, BCBSA estimates total potential savings of $471 billion from 2024-2023 if site-neutral payment policies are adopted.

While ASCA supports efforts to make Medicare a more cost-conscious program that better aligns payment with patient services, we are also watching policy recommendations carefully. Aligning payment rates across site of service to the lowest cost setting might cause issues of patient access, especially for sicker patients who might require a higher level of service. In comments responding to the CY 2018 Medicare Physician Fee Schedule, ASCA expressed concern about the ease of off-campus hospital sites to convert to ASCs, as well as reliance on a non-surgical code to set site-neutral payment rates. Currently, there is no Medicare proposal to further implement site-neutral policies.

Write Alex Taira with any questions.