Medicare site-neutral pay reforms: 5 things ASCs need to know

Some leaders have become increasingly frustrated with hospital outpatient department reimbursements far outpacing ASCs, but there are efforts at the federal level to move toward site-neutral payments. 

"Our costs are increasing, especially salaries and benefits, which need to be competitive with HOPDs and hospitals, yet reimbursements still sit at 50% of the HOPD rates," Andrew Weiss, administrator of Vorhees, N.J.-based Summit Surgical Center, told Becker's in October. 

KFF laid out five things to know about site-neutral payment reforms in a June 14 article:

1. Medicare pays more for procedures and services in hospital outpatient departments than ASCs or physician offices, which results in higher costs or Medicare beneficiaries. Site-neutral payments could result in massive cost savings. In a June 2023 report, MedPAC estimated that aligning Medicare payment rates for outpatient service categories would have reduced Medicare Part B spending by $6 billion in 2021 and beneficiary cost sharing by $1.5 billion.

Additionally, higher payments for HOPDs could create an incentive for hospitals to acquire physician practices, further increasing costs, the report added. 

2. There have been legislative efforts to reform site-neutral payment policies. The Bipartisan Budget Act of 2015 introduced site-neutral payment reforms to align Medicare payments for services, aiming to reduce Medicare spending. It applied lower payment rates to off-campus HOPDs, with some exemptions. In 2019, CMS extended site-neutral payments to all off-campus HOPDs for clinic visits, including those previously exempt, and in 2022, rural hospitals were exempted from those reforms. MedPAC has recommended further expanding site-neutral payment reforms, suggesting aligning payments for 57 service categories. 

The House passed the Lower Costs, More Transparency Act in December 2023; it aimed to implement site-neutral payments for Medicare. It would have aligned the payments for drug administration services administered in outpatient settings with those of freestanding physician offices. However, those reforms were excluded from the March 2024 government spending package. 

3. While site-neutral payment proposals vary in scope, the Congressional Budget Office estimated that aligning payments for drug administration services in off-campus HOPDs would save $4 billion over 10 years. Proposals vary based on sites of care, covered services, exempt providers, budget neutrality and timing, according to the report. 

4. Critics of site-neutral payment reforms say they would affect hospital revenue, leading hospitals to scale back services that they offer in HOPDs or other departments. These critics are primarily hospital industry representatives, according to the report. MedPAC estimated that its recommended policy would lead to large decreases in Medicare revenues for smaller and rural hospitals. Critics also say higher payment rates for HOPDs are justified by higher overhead costs and higher costs of maintaining essential services. 

5. To limit the potential impact on rural and safety-net hospitals, the report proposes using savings to target vulnerable hospitals, capping losses for those hospitals or excluding certain hospitals altogether.

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