Site-Neutral Payments Would Save Nearly $500 Billion Over 10 Years

WASHINGTON – Today, the Blue Cross Blue Shield Association (BCBSA) released policy solutions that could save patients and taxpayers $471 billion over 10 years. The paper, Delivering Lower Costs for Patients and Taxpayers Through Site-Neutral Payment Reform, expands on BCBSA’s Affordability Solutions for the Health of America —a comprehensive set of health care affordability proposals. These commonsense solutions would lower costs for patients and the Medicare program by bringing payment parity for certain medical services regardless of where the care is administered or who owns the facility.

Under current law, Medicare patients are being overcharged for health care services, like routine office visits and lab work, at certain practices owned by hospitals labeled as hospital outpatient departments (HOPDs). These services cost patients less when provided in a doctor’s office or another setting outside of the hospital. Hundreds of millions of dollars are spent on those services with little evidence of improvement in the quality of care.

“Rising prices for medical care are one of the main drivers of the health care affordability crisis in this country,” said David Merritt, BCBSA’s senior vice president of policy and advocacy. “Hospitals have strong financial incentive to continue purchasing physician practices, giving these new entities the upper hand when negotiating payment rates with insurers, resulting in higher costs for patients. Congress must protect patients from these inappropriate billing practices by expanding site-neutral payment policies and cracking down on anti-competitive behavior among providers.”

The Balanced Budget Act of 2015 (BBA) established site-neutral payments under Medicare for services received at newly established off-campus HOPDs which restricted new HOPDs from charging patients more for the same medical services that would cost less in other care settings. However, current off-campus HOPDs as of 2015 were exempted and allowed to expand—and can charge higher rates that apply to hospital settings, despite the services not being rendered in a hospital.

To lower health care costs and generate a total savings of $471 billion for Americans over the next decade, BCBSA recommends that:

  • Policymakers enact federal legislation to eliminate the BBA exemption that allows certain HOPDs to overcharge Medicare patients.
  • Medicare adopt site-neutral payment policies for services that are commonly delivered outside the hospital—excluding rural facilities—at the lower payment rates applicable in non-hospital settings.

“Medicare generally pays more for services provided in hospital outpatient departments than it does for the same services at other sites of care,” said Philip Ellis, president of Ellis Health Policy and a former Congressional Budget Office economist who estimated the savings for BCBSA’s site-neutral policy recommendations. “This disparity directly affects payment rates for private health insurance plans because they typically use Medicare’s system as a basis for paying doctors and hospitals. BCBSA’s proposals to adopt site-neutral payments would not only cut Medicare spending significantly but also would reduce private insurance premiums by $117 billion and yield another $152 billion in out-of-pocket savings for Medicare patients and enrollees in private plans.”

Medicare’s move to expand site-neutral payments would pave the way for private insurance plans to also implement these payment policies, ultimately increasing access to high-quality and affordable care.

“We are committed to advancing commonsense solutions to improve care and lower costs for Americans because the bottom line is that no one should have to pay more for health care services based only on the site of care,” continued Merritt.

The Blue Cross Blue Shield Association is an association of 35 independent, locally operated Blue Cross and/or Blue Shield companies.