Opinion

Medicare Proposal to Better Align Payments Deserves Broad Support

When it comes to health care services, many Americans assume that the government pays for health care the same way consumers pay for products in the retail setting. A consumer buying a bag of chips at Grocery Store A would expect to pay a comparable price for that exact same bag of chips at Grocery Story B three blocks away. In most cases, this would be true.

The same cannot be said for America’s health care system. Under current payment policies, a Medicare patient pays dramatically different costs for the exact same outpatient procedures delivered in different settings. For the administration of chemotherapy drugs, for example, the current Medicare payment to a hospital outpatient facility is more than double the rate paid to a community cancer clinic ($137 vs. $281). And, since Medicare patients are responsible for a portion of these charges, this disparity results in higher out of pocket costs for Medicare patients.

This has long been the case in the Medicare Physician Fee Schedule policy under which providers are reimbursed for outpatient care services. The current system pays hospital outpatient departments (HOPD) more than their physician-owned counterparts for the exact same services, allowing hospitals to rake in higher profits. This illogical cost differential is due to hospital payment rules that HOPDs are permitted to follow despite their off-campus, often distant locations from the hospitals themselves.

This may not seem like a big deal to those of us in urban and suburban areas, where a plethora of care options exist. But imagine being a Medicare patient in a more rural place, where there are no private physician practices nearby offering more affordable options — only a hospital outpatient department. As a result, both taxpayers and Medicare patients are stuck paying higher prices for the same services urban beneficiaries are getting for a lower cost.

To address these disparities, the Alliance for Site Neutral Payment Reform (the Alliance) has been advocating for payment parity across the Medicare program, calling for payment reforms that make the site of service a nonfactor in the cost of care. It shouldn’t matter where a patient decides to receive medical services, pricing should be affordable and reimbursement comparable across all settings.Fortunately, CMS’s recently proposed PFS rule for FY2018 recognizes the importance of this, addressing the issue head on with a new proposed payment rule that promotes fairer competition between the two options and makes hospital outpatient services more affordable for taxpayers and patients.

Fortunately, CMS’s recently proposed PFS rule for fiscal year 2018 recognizes the importance of this, addressing the issue head on with a new proposed payment rule that promotes fairer competition between the two options and makes hospital outpatient services more affordable for taxpayers and patients.

Under current Medicare policy, newly built or acquired HOPDs are reimbursed at a rate based on 50 percent of the Outpatient Prospective Payment System rate, which still provides a much higher payment than the same care offered in the physician practice setting. CMS’s proposed PFS rule for 2018 would change that. The proposed rule for next year would reduce the PFS rate for new hospital outpatient care services by half, reimbursing HOPDs at 25 percent of the OPPS rate. This would better align payments with the physician-office setting and reduce out of pocket costs for Medicare beneficiaries.

The proposed rule for next year would reduce the PFS rate for new hospital outpatient care services by half, reimbursing HOPDs at 25 percent of the OPPS rate. This would better align payments with the physician-office setting and reduce out of pocket costs for Medicare beneficiaries. Further, it would help calm an alarming trend in health care marketplace consolidation that is reducing patient access to community-based services. Because HOPDs currently receive higher reimbursement for services, they are economically incentivized to scoop up struggling independent practices and fold them into their hospital system where they can receive higher reimbursement rates.

Further, it would help calm an alarming trend in health care marketplace consolidation that is reducing patient access to community-based services. Because HOPDs currently receive higher reimbursement for services, they are economically incentivized to scoop up struggling independent practices and fold them into their hospital system where they can receive higher reimbursement rates.

The Alliance commends CMS for their efforts to lower patient out-of-pocket costs, decrease Medicare spending and better align reimbursement for care in different settings. We feel that the same services should be paid for in the same way, regardless of where the patient happens to seek treatment. We are pleased to see CMS and lawmakers recognizing site neutral payment as an easy, common sense reform that protects patients and reduces spending.

 

Randy Broun is the president and chairman of the board of directors for Oncology Hematology Care Inc. in Cincinnati, Ohio.

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