Perhaps as a sign of the Centers for Medicare & Medicaid Services (CMS) coming to grips with its inevitable bankruptcy, the agency has recently made a rational decision, however slight. The proposed rule, site neutrality for imaging, reverses an extremely damaging position years ago CMS should never have taken. We can only hope that they will completely reverse the political decision to overpay for hospital provided physician services, a decision which has all but decimated the private practice of medicine in the US.
Right now, Washington often pays hospitals more than independent physicians for providing the exact same service simply because it happens inside a hospital-owned outpatient facility. That policy encourages hospitals to buy up smaller physician practices and consolidate healthcare markets nationwide, driving up costs by as much as 33%. These price increases matter for patients because more than one-third of imaging tests are performed in hospital outpatient settings.
Hospitals are simply responding to the incentives Washington created. But CMS’s proposed rule would begin leveling the playing field by reducing those payment disparities for certain imaging services. Patients shouldn't pay more simply because their doctor's office happens to be owned by a hospital.
Congress should follow in CMS’s footsteps and expand site-neutral payments to all services, not just imaging, to save billions in health spending and lower out-of-pocket costs for patients. Bills like the Same Care, Lower Cost Act and the Lower Costs, More Transparency Act would do exactly that.
Current Medicare payment policy pays hospitals more for outpatient care that isn't necessarily higher quality. In fact, studies show that higher-priced hospitals only show a decrease in mortality rates if they operate in less-consolidated markets – which is bad news for most metro areas that are in highly-consolidated healthcare markets. Many patients value the convenience, continuity, and often lower costs offered by independent physician practices. Closer doctor-patient relationships and lower costs are just two reasons many Americans choose independent physicians whenever they have the option.
Thanks to public pressure, CMS is working to unwind a system that favors large healthcare institutions instead of hardworking Americans. While this proposal only tackles certain imaging services, it creates momentum for broader reforms that could lower insurance premiums, hold healthcare monopolies accountable, and improve price transparency.
If Congress expanded this approach across outpatient care, the savings could be enormous. Private insurers often follow Medicare’s lead when setting payment rates. According to a study from the Niskanen Center, broad site-neutral payment reforms could reduce private insurance premiums and cost-sharing by between $135 billion and $466 billion over 10 years. Paying the same amount for the same outpatient service — regardless of whether it's performed in a hospital-owned clinic or an independent physician's office — could also help stop the disappearance of affordable community medical practices, giving patients more choices and more competition.
The same payment policies that encourage hospitals to buy independent physician practices also contribute to confusing and costly billing practices. Once a physician's office is owned by a hospital, patients can be charged additional "facility fees" for receiving the exact same care in the exact same building simply because it is now considered a hospital outpatient department. One woman seeking a cortisol shot was charged more than $2,600 for a procedure that otherwise cost about $250, with most of the difference coming from a facility fee.
By reducing the financial advantage hospitals receive for providing the same outpatient services, site neutral payments would also reduce one of the incentives for acquiring physician practices and imposing these additional charges on patients. CMS’s proposed rule would also require hospital-owned outpatient facilities to be more clearly identified in Medicare claims, helping shed more light on where these charges originate.
Thankfully, CMS is taking the lead by beginning to fix this broken payment system for certain imaging services. But Congress shouldn't stop there. It should build on this momentum by expanding site-neutral payment reforms to additional outpatient services through legislation like the Same Care, Lower Cost Act or the Lower Costs, More Transparency Act.
Lowering healthcare costs for American patients is a team effort, and it can't rest on CMS rulemaking. Congress should finish the job by ensuring that patients pay for the care they receive, not simply because the same service was provided in a hospital-owned building instead of an independent doctor's office.
Keith Smith, M.D. is the co-founder of the Surgery Center of Oklahoma.
