Hospital CEOs have been called on the carpet by Congress. Earlier this summer, the House Ways & Means Committee grilled executives from the nation’s largest healthcare systems about how they drive up healthcare costs by abusing federal exemptions and program favoritism fees.
Lawmakers are right to put these conglomerates under scrutiny. But if they want to back up their words with action, they must fix the misguided federal policies that reward consolidation, limit healthcare choices, and put the interests of big hospital systems ahead of independent doctors and patients.
One issue is especially ripe for action from policymakers: equalizing Medicare’s hospital reimbursement rates with those for independent doctors’ offices. Hospitals overcharging Medicare and patients both encourages consolidation and drains taxpayer dollars; a course correction is desperately needed.
The largest hospital groups in America gain a significant portion of their operating revenues through Medicare, the federal health program that serves tens of millions of America’s seniors and citizens with disabilities. But hospitals also use Medicare as a money-making machine and are allowed to charge the government higher prices for the same service than independent doctors’ offices do under federal law.
Hospitals add these “facility fees” to bills in every department, no matter the test or treatment. This means that even basic services like pap smears, X-rays, or checkups cost taxpayers more by a hospital than if they were performed by an independent physician. In fact, primary care visits can be double the cost in a hospital than at an independent doctor’s office. For more complex procedures, the cost can be up to four times higher.
These price excesses don’t just sustain hospitals; they enable them to keep growing unchecked. Hospital systems take advantage of these higher government payments by buying primary care centers, renaming them “outpatient departments” of the hospital, and then charging higher prices.
The hospital lobby claims these price increases are due to more involved, higher-quality care in outpatient departments. But that’s not true. Studies show that hospital care is not necessarily higher quality compared to your local independent primary care office. When hospital systems grow larger and spread overhead across more patients, costs should become lower, not higher.
Likewise, the hospital lobby would have you believe that pinning Medicare prices to market rates would reduce vital funding for rural hospitals. But this reasoning isn’t accurate either: between the Rural Hospital Fund — a $50 billion federal program created to support financially vulnerable rural providers over five years — and an increased number of providers thanks to more competition, patients in rural areas would be better able to access medical care.
For a lasting fix, Congress would be wise to mandate “site-neutral” payments to ensure Medicare reimbursement payments are the same wherever a patient receives treatment, be it in a hospital complex or a private doctor’s office. This small, commonsense measure would save patients upwards of $3.7 billion over the next decade.
Senators Bill Cassidy and Maggie Hassan put together a bipartisan framework that future legislators can model to enact site-neutral legislation. Even as recently as March, Congress made a crucial change to Medicare’s payment tracking, mandating that outpatient departments bill Medicare separately from their big hospital owner.
Even better, if Congress were to advance these reforms for Medicare, site-neutral reforms could help the private insurance market. Since private insurers follow Medicare payment schedules, insurers would be encouraged to lower commercial premiums and other health costs in response.
Lawmakers must come together and move fast on a lasting solution. Ensuring free-market competition in our healthcare system cannot be done piecemeal – instead, congressional lawmakers must reach across the aisle and fight for solutions that will save patients money.
In the meantime, we can continue the fight to raise awareness of hospital waste among doctors, healthcare professionals, and patients. Site-neutrality is a practical, bipartisan reform to cut waste and lower healthcare costs. Call, write, or email your congressman or woman to help policymakers make the leap to site-neutral payments and lower healthcare costs for patients.
Craig M. Wax, D.O., is a family physician in Mullica Hill, NJ.
