Here's a healthcare puzzle. When a doctor administers chemotherapy in their office, Medicare pays one rate. When the same doctor performs the same procedure in a hospital's outpatient facility down the street, Medicare often pays more.
This disparity is at the heart of a push among some lawmakers for "site-neutral payments," which would broadly require Medicare to pay the same rate for the same service regardless of where it's performed. A bipartisan framework from Sen. Bill Cassidy, R-La., and Sen. Maggie Hassan, D-N.H., estimates that site-neutral payments could save Medicare over $100 billion in the next decade.
The argument for site-neutral payments makes sense. The current policy encourages hospitals to buy up independent physician practices just to charge Medicare higher rates. And it requires Medicare beneficiaries to pay more out of pocket for a given service based solely on where it's delivered.
But in the rush to fix this genuine problem, policymakers risk creating another one. Site-neutral payment reforms, as currently proposed, could jeopardize the ability of super-specialty hospitals and their outpatient facilities to deliver the high-quality care they're renowned for.
These aren't your typical community hospitals that handle everything from broken arms to pneumonia. Super-specialty hospitals focus on specific types of care -- think cancer treatment at Memorial Sloan Kettering, joint replacements at the Hospital for Special Surgery, or pediatric care at the likes of Children's Hospital Colorado.
Super-specialty hospitals' outpatient facilities aren't converted doctor's offices with a hospital logo plastered on the door. They're purpose-built extensions of the main hospital, offering the same sophisticated care but in more accessible locations.
The difference matters for three key reasons.
First, super-specialty hospitals’ outpatient facilities are fully integrated with the main hospital to provide the same high-quality diagnosis and treatment of specific conditions. They do not provide standard primary care services.
Superior outcomes stem from what researchers call "quality-of-care factors" unique to specialized centers: complex surgical procedures, better coordination of care, more intensive monitoring, and superior management of complications.
Second, these specialty outpatient centers can actually save Medicare and other payers money in the long run, even if individual procedures cost more upfront. Studies show that high-volume specialty centers have significantly lower complication rates and longer survival rates across multiple types of procedures. Patients avoid the need for repeated procedures and extended hospital stays.
Third, super-specialty hospitals' outpatient clinics offer patients better access to care. Many super-specialty hospitals are located in urban centers where it may not be possible to build within 250 yards of the main hospital location, as required by CMS to be considered part of the 'main campus.' Their outpatient facilities allow them to bring their superior care model closer to patients while maintaining the same rigorous standards their main facilities uphold.
Convenient access to a specialized outpatient center can provide patients with the confidence and ability to seek diagnosis earlier -- and deliver better-quality outcomes.
Of course, narrowly tailored site-neutral payments make a good deal of sense. Medicare's payment schedule should not incentivize hospitals to engage in regulatory arbitrage by buying up doctor's offices, declaring them hospital outpatient departments, and then jacking up rates.
But applying the same logic to purpose-built specialty facilities risks undermining a model of care that actually works better for both patients and payers.
The solution is targeted exemptions for facilities that meet specific criteria: high volume in their specialty area, superior outcomes, and integrated care delivery systems that extend from their main hospital. Such a framework would preserve the cost-saving benefits of site-neutral payments while protecting centers of excellence.
Some will argue that any exemption would create loopholes that enterprising hospitals can exploit. But we can police potential malfeasance through rigid, data-driven qualification criteria and ongoing performance requirements.
Healthcare policy often requires balancing competing goods -- in this case, the drive to reduce unnecessary spending against the need to support care models that deliver better value.
Site-neutral payment reform is a good idea that needs careful tuning to avoid unintended consequences. For super-specialty hospitals and their satellite facilities, paying more for better care isn't waste -- it's wisdom.
Mathias P. Bostrom, MD, is Associate Surgeon-in-Chief & Director, Quality & Safety at the Hospital for Special Surgery.
