Senate leaders release a blueprint for comprehensive site-neutral payment policies

To the disappointment of hospital groups, two Senate leaders have produced bipartisan policy options for advancing site-neutral payment in Medicare.

The framework released Nov. 1 by Sens. Bill Cassidy (R-La.), who is a physician, and Maggie Hassan (D-N.H.) goes further than site-neutral payment plans that were passed by the House as part of broader healthcare transparency legislation in late 2023. The House provisions would incorporate site-neutral payment for drug administration services in off-campus hospital outpatient departments (HOPDs) and would require each such facility to bill Medicare using a unique identifier.

The newly published framework sets the stage for a more expansive version of site-neutral payment to receive consideration in Congress. Numerous steps remain for the proposals to become law, especially because they were released as a policy document and not a formal bill, but wide-ranging, bipartisan support for the concept suggests expanded site-neutral payment is a feasible policy development in 2025.

The current situation

Aside from the House bill, which has spent this year languishing in the Senate, the most recent activity with respect to site-neutral payment has been at the regulatory level. Going into 2019, CMS stipulated that HCPCS code G0463 (hospital outpatient clinic visit for assessment and management) would be paid at the Medicare physician payment rate rather than the hospital outpatient rate, amounting to a 60% reduction.

The impetus for the regulation was to control “unnecessary increases in the volume of covered OPD services,” according to CMS. In 2020 litigation, the U.S. Court of Appeals for the Washington, D.C., Circuit overturned a lower court’s ruling and allowed the regulation to proceed. Off-campus HOPDs of facilities designated as rural sole-community hospitals have been exempt since 2023.

The other noteworthy step toward site-neutral payment happened nearly a decade ago with passage of the Bipartisan Budget Act of 2015. That bill instituted the Medicare physician payment rate for all services furnished at off-campus HOPDs but exempted most facilities — any that were operating or under construction as of November 2015.

Details on the recommendations

The newly released framework includes two options and seems to allow for the possibility of passing both in tandem. One option would remove the exemption to site-neutral payment policies for off-campus HOPDs as carved out in the Bipartisan Budget Act.

A more sweeping proposal would apply to on-campus HOPDs and would require HHS to identify a range of procedures for which ambulatory surgical centers (ASCs) or physician offices are viable locations. Those procedures would be subject to a corresponding site-neutral reduction. In a 2023 report to Congress, the Medicare Payment Advisory Commission pinpointed 57 ambulatory payment classifications (APCs) for which a lower payment rate would be reasonable.

Past estimates from the Congressional Budget Office (CBO) pegged 10-year federal savings at $39.1 billion from incorporating site-neutral payment at all off-campus HOPDs and $102.3 billion from applying the policy to some APCs at on-campus departments.

Questions have arisen as to whether expanded site-neutral payment in Medicare would lead to accelerated cost shifting by hospitals, potentially increasing costs for commercial health plans and their members. In written testimony this year, the CBO said that is an unlikely outcome.

A helping hand

Vulnerable hospitals would receive financial assistance if site-neutral payment is applied to selected APCs at all outpatient departments, according to the framework. A portion of savings from the policy would be reinvested in rural and safety-net hospitals.

One proposed reinvestment approach would focus on specific service lines (e.g., trauma, obstetrics). Another would use alternative payment models to funnel transitional funding to the designated hospitals. Tables published in the framework indicate that the net payment impact on rural and safety-net hospitals would range from a loss of 2% to a gain of 2%, depending on size and geographic location.

The reinvestment plan would be intended, in part, to assuage concerns of policymakers who see site-neutral payment as worthwhile but have expressed trepidation about the impact on under-resourced hospitals. One person in that category is Sen. Ron Wyden (D-Ore.), chair of the Senate Finance Committee.

“We’ve got so many challenges in rural Oregon,” Wyden said earlier this year in a published interview. “I just want to make sure that people walk through what site-neutral means for rural facilities.”

In a 2024 report, McDermott+ Consulting suggested that site-neutral payment may be less prudent in markets with fewer ASCs or physician offices because the viability of HOPDs is even more essential in those places.

“It will be important for policymakers to understand the clinical, economic and patient access issues that could arise at the state, MSA [metropolitan statistical area] and county levels as a result of site-neutral payment policies,” the report states.

Hospitals push back

In a news release, Cassidy touted endorsements from a range of stakeholders that included business groups, the Blue Cross Blue Shield Association and Arnold Ventures.

Hospital groups had a different take on the new proposal. The American Hospital Association (AHA) and the Federation of American Hospitals (FAH) quickly issued statements saying implementing the framework would adversely affect patients.

Noting a driver of site-neutral payment policy is an effort to limit incentives for hospitals to buy up independent physician practices (and subsequently charge the higher HOPD rate at the acquired facility), the AHA said Congress would be better served by addressing factors such as Medicare underpayments to providers, along with payment delays and denials by health plans.

FAH said the policies would threaten access to 24/7 hospital care and noted Congress has been disinclined to risk such consequences in the past.

“Seniors deserve better than tired old policies pushed by the insurance industry that just threaten access to reliable hospital care,” the group said in comments attributed to Charlene McDonald, executive vice president of public affairs.