As health care costs climb and the population ages, policymakers face ongoing pressure to limit spending while expanding access to care, especially for vulnerable and underserved populations.
Economic Stability
Every aspect of our nation’s health care system, from physicians to nurses, the drug and device industries to insurers (private and public), shares in the commitment to deliver care to the people in our communities. In this effort, America’s hospitals serve a unique role on the frontlines of our nation’s health care system, serving all who come through their doors—regardless of ability to pay. Yet, given their unique roles as economic engines in their communities and the dollars required to fund daily operations, hospitals are increasingly being put in the crosshairs of those seeking quick fixes to save scarce health care funds.
In Search of Dollars
When it comes to hospitals, there has been growing interest among policymakers in “site neutrality” proposals that would seek to level the cost and reimbursement for various services that can be provided in variety of settings, including hospital outpatient departments (HOPDs), ambulatory surgical centers (ASCs), and physician offices. Dating back to the Bipartisan Budget Act of 2015, there has been a movement within Medicare, supported by both legislation and regulation, toward equalizing payments for clinical visits at off-campus HOPDs and all other services provided at off-campus HOPDs—with a few exceptions. While off-campus HOPDs that billed Medicare before November 2, 2015, were exempted from these changes, the camel’s nose was now under the tent, and interest in expanding on these ideas has only grown in recent years.
While the years following have brought more noise than action, in 2023, the House revisited the issue and passed with broad support the Lower Costs, More Transparency Act, which included a provision that would equalize Medicare reimbursement for physician-administered drugs between physician offices and all off-campus HOPDs, including those which were previously exempt from these changes.
In November 2024, Sens. Bill Cassidy (R-LA) and Maggie Hassan (D-NH) released a “Lowering Health Costs for Seniors Framework,” which proposes establish site-neutral payments for common outpatient procedures across HOPDs, ASCs, and physician offices. The framework also proposes to re-invest the subsequent Medicare savings into low-volume rural and urban safety net hospitals. Even though the framework has yet to be introduced as formal legislation, the release of the paper signals further bipartisan interest in enacting site-neutral payments.
The Whole Picture
What site-neutral proposals can miss is that attempting to equate the services provided in a hospital with those delivered in an office setting is not an easy apples-to-apples comparison—especially when considering the overhead costs required to support a hospital instead of a physician’s office. In addition, the patients served by hospitals are more likely to come from lesser-served areas, are more likely to have more limited resources, and are often sicker and have more comorbidities than those who often seek care in the office setting.
Financial Realities
Hospitals appear to outside observers to be “where the money is.” That may be true—to a point. But one should not mistake capital for being flush with dispensable cash. If site neutral proposals become law, hospitals could be faced with reimbursement cuts for services—especially when those payments fail to fully account for the costs of maintaining a hospital.
With the capital expenses and infrastructure costs that come with being a hospital, it is essential to note that Medicare does not fully cover the costs that hospitals incur in caring for patients, paying only an average of 82 cents for every dollar of hospital care provided to Medicare patients.
All-Comers
Where site-neutrality proposals can miss the mark is that there is nothing site-neutral about the commitment that our hospitals have made to take all comers. Free-standing centers and offices simply are not neutral when it comes to whom they extend care, whereas such facilities can turn away those who they might see as a financial liability. That is not a criticism as much as it is a recognition of reality.
What’s Next
As a new administration and Congress converge on Washington in 2025, we expect renewed interest in moving health care legislation and, with it, policymakers’ perennial search for pay-fors to offset the costs of any new initiatives. Until site-neutrality proposals are willing to consider what “neutrality” would mean—not only in dollars but also in our hospitals’ commitment to the community and caring for all—they will fall short of recognizing the commitment and responsibility hospitals take on in our communities.