Site-of-care payment issues get highlighted by UnitedHealthcare and MedPAC

• A report by UnitedHealthcare highlights the potential for nearly $700 in average out-of-pocket savings when procedures are moved from the outpatient setting to an ambulatory surgical center.
• Medicare analysts plan to take a closer look at site-of-care policies as a way to address spending.
• CMS is reprocessing 2019 claims for care at some off-campus provider-based departments to reflect a lower payment rate.
• Cuts to the 340B program may be spurring care shifts to outpatient departments, one policy expert said.

A new report issued by a leading health plan is the latest sign that hospitals and health systems can expect payers to look to ramp up implementation of site-neutral payments.

UnitedHealthcare (UHC) released a fact sheet with new data showing that shifting common outpatient procedures to ambulatory surgical centers (ASCs) for patients with noncomplex conditions would reduce spending by 59% and save $684 in out-of-pocket costs per procedure.

For procedures included in the claims-based analysis, the average price was $7,716 in the hospital outpatient setting and $3,157 at ASCs, a difference of 144%.

UHC excluded procedures from its assessment for patients whose condition was considered complex based on factors such as pregnancy, obesity, disability and cognitive impairment. The health plan also considered whether an ASC was within “reasonable” distance for the patient in accordance with the network adequacy standards established by the Affordable Care Act.

Of all procedures performed in the outpatient setting, UHC stated, 56% could be safely and conveniently moved to ASCs.

The implications of such findings make a diversified facility strategy all the more important for health systems over the next five to 10 years, said Peter Shorett, chief strategy officer with Beth Israel Lahey Health in Cambridge, Massachusetts.

“Payers are just no longer going to pay for care in a hospital outpatient department environment for a lot of the things that health systems have relied on,” Shorett said in an interview. “And that’s really forcing care more into freestanding settings and forcing health systems to become much more significant players in those freestanding settings.”

The latest federal update on site-neutral payments

The Medicare Payment Advisory Commission (MedPAC) discussed site-neutral payments during a public meeting this month. Between 2013 and 2019, according to a 2021 MedPAC report, the volume of clinic visits rose by 25% in hospital outpatient settings and decreased by 4.7% in physician offices.

The trend has led Congress and the U.S. Department of Health and Human Services (HHS) in recent years to establish a lower payment rate for clinic visits furnished at off-campus provider-based departments (PBDs). In 2020, that rate dropped to 40% of the full Outpatient Prospective Payment System (OPPS) rate.

Hospitals mounted a court challenge to the policy as it pertained to off-campus PBDs in operation before November 2015, which initially were exempt. The plaintiffs won at the district court level but lost in 2020 after HHS appealed the original ruling. The Supreme Court this summer declined to hear the case.

With hospitals’ legal options seemingly exhausted, CMS recently sent notice that by Nov. 1 it will begin reprocessing 2019 claims for clinic services provided at previously exempt PBDs. Payment for those claims will be reduced to 70% of the OPPS rate, which was the reduction in place that year for nonexempt PBDs. Providers “must refund the coinsurance difference to patients (or payers) who paid the higher coinsurance rates based on new remittance advice information,” CMS stated in a bulletin.

Potential plans for site-neutral payments

Advocates of site-neutral payments have noted opportunities to expand the policy, including to stand-alone emergency departments, on-campus outpatient departments and even ASCs.

MedPAC commissioners see such an approach as a way to tackle the issue of accelerating Medicare spending, especially given projected increases in both the number of beneficiaries (more than 2% per year through 2029) and the volume and intensity of services (2.6% per year).

“The number of beneficiaries, there’s not a whole lot we’re going to do on that,” said Jaewon Ryu, MD, JD, a MedPAC commissioner and the president and CEO of Geisinger. “But the volume and intensity, I think there are a lot of areas that are ripe for opportunity, whether it’s place of service and the HOP billing or other aspects of low-value care.”

The debate could intensify as Medicare considers payment rates for acute care delivered in the home, which obviously qualifies as a lower-cost and less intensive setting than the hospital.

“It’s important that we call out that that’s a significant opportunity,” said Jonathan Jaffrey, MD, a MedPAC commissioner and professor of medicine at the University of Wisconsin School of Medicine and Public Health.

Right now payment for hospital-at-home programs is available through a waiver introduced in response to the COVID-19 pandemic. Inpatient rates apply, but that aspect most likely would change in a permanent program.

340B as a factor in the site-of-care question

Dana Barr, a MedPAC commissioner and founder and executive chairwoman of Caravan Health, said the site-of-care issue is more nuanced than critics of Medicare spending suggest. Reductions over the last few years to the 340B Drug Pricing Program are a big impetus for health systems to convert clinics to outpatient departments, she noted.

Part B payment rates for separately payable 340B drugs were cut from average sales price (ASP) plus 6% to ASP minus 22.5% in 2018. More recently, some drugmakers have been withholding sales of 340B drugs to contract pharmacies.

 “This is a very complicated problem that is not just about providers going to try to convert to a more expensive billing method so that they can make more money,” Barr said. “Nobody likes it, but it is very, very tied to the 340B program.”

Detailed data, she said, might show the extent to which the increase in HOPD activity is linked to “340B entities that are trying to recover lost revenue that’s being pulled away from them without any recourse.”