3 questions to help save patients $500 billion

Published February 28, 2023

As health care becomes less affordable for American families, Blue Cross and Blue Shield companies are working with policymakers to advance commonsense solutions that will improve care and lower costs.

We know the leading driver of these costs is the rising price of medical care. Today, Medicare patients are being overcharged when they receive health care services at certain hospital outpatient departments.

What are hospital outpatient departments?

Hospital outpatient departments, or HOPDs, are hospital-owned medical practices that may be located on or off a hospital’s campus. They are places where providers perform procedures and tests, like routine office visits, x-rays, and lab work.

Why are patients being charged more at some HOPDs?

The Bipartisan Budget Act of 2015 is a law intended to prohibit HOPDs from charging Medicare patients more for the same medical services that cost less in other care settings. However, some HOPDs were exempted from this law and have been charging patients higher hospital-based rates, even when not in a hospital. These same services, when provided in a doctor’s office or other setting, cost significantly less. Exempted HOPDs include:

  • All off-campus HOPDs in existence as of 2015
  • Off-campus HOPDs under construction as of 2015
  • Physician practices that are purchased and then incorporated into pre-existing, exempted HOPDs

This last point creates a strong financial incentive for hospitals to purchase physician practices and turn them into HOPDs. In fact, between 2012 and 2018, the share of physician practices owned by hospitals more than doubled. In all cases, the average price for a given service at these new HOPDs was higher and rose faster compared to a physician-owned setting. In many cases, the same physician was still providing the same services to the same patients in the same physical location. Costs rose literally overnight – as soon as the physician’s practice was purchased by the hospital.

Patients covered by commercial insurance and Medicare Advantage are also affected by these higher rates. That’s because traditional Medicare payment rates are often used as a basis for contract negotiations between providers and insurers. So, when Medicare payments are higher due to site of care, the same is usually true for commercial insurers.

How can we prevent higher costs at HOPDs?

Congress must protect patients by updating the Balanced Budget Act of 2015 to eliminate HOPD exemptions, thus adopting a “site-neutral” payment policy. This would save Americans nearly $500 billion over 10 years and is expected to make care more affordable for those with private insurance, too.

The Blue Cross Blue Shield Association is urging Congress to take action to protect patients from these costly and inappropriate price differences. This policy recommendation is part of BCBSA’s comprehensive set of proposals—Affordability Solutions for the Health of America—to reduce health care costs by a total of $767 billion over 10 years.

The Blue Cross Blue Shield Association is an association of independent, locally operated Blue Cross and Blue Shield Companies.