Analyzing the high costs of health care has become one of our most time- and energy-consuming national pastimes. In Washington, a great deal of that activity focuses on Medicare — a program at risk of buckling under the strain of aging baby boomers, runaway spending and outdated policies.
Although policymakers have, for years, been looking at how and where Medicare can be modernized, there remain immediate, enormous and common-sense opportunities to improve the program — at tremendous savings to taxpayers.
One of the most logical steps is perhaps the most obvious: stop Medicare from paying higher prices for identical care delivered in different settings.
For years, reimbursement rates have varied significantly across the Medicare program because payments are made based on the site of service rather than the type of care provided. For example, studies have found the average price for an MRI of a knee is approximately $900 in the hospital setting, but just $600 when conducted in a physician office or freestanding imaging center. Similarly, hospital outpatient departments charge an average $1,383 for a basic colonoscopy, compared to $625 in a community outpatient setting.
These payment disparities result in higher Medicare costs and place an additional burden on patients, employers and taxpayers.
Site neutral payment reform could save Medicare an estimated $29.5 billion over the next decade. It could also prevent Medicare beneficiaries from paying millions of dollars in higher cost sharing for care received in hospital outpatient departments (HOPDs). The Medicare Payment Advisory Commission estimates that equalizing payments across 66 groups of care in physician offices and hospitals would save Medicare patients between $140 million and $360 million in cost sharing in just one year.
In addition, enacting site neutral payment reform could put a stop to the troubling practice of hospitals acquiring small community practices, which only serves to restrict patient choice and access to care while further increasing costs.
It’s time for the administration to use its authority to level the playing field and rein in costs.
A good place to start is for policymakers to expand site neutral payment policies across all outpatient care settings – eliminating higher reimbursements that encourage hospitals to purchase physician practices in order to increase their revenues and profits. Likewise, eliminating payment of facility fees for hospital-based care would serve to better align reimbursement rates across care settings. Most importantly, it would lower out-of-pocket costs for Medicare beneficiaries.
Furthermore, Medicare beneficiaries should be empowered to make financially smart care decisions so they can have more control over their out-of-pocket costs. In addition to a searchable website that enables patients to compare the cost of services provided in an HOPD versus an ambulatory surgical center (a provision included in the bipartisan 21st Century Cures Act), Medicare patients should have full and transparent access to their copayment cost sharing requirements for all services provided in an outpatient care setting.
The Alliance for Site Neutral Payment Reform recently shared recommendations for reform with HHS Secretary Tom Price and CMS Administrator Seema Verma. The Alliance called on both leaders to use their authority to set fair and equal payment rates for services provided across all outpatient sites of service. The Alliance also encouraged both agencies to eliminate the payment of facility fees to hospitals, increase oversight to identify non-compliant HOPDs and improve educational tools that will help beneficiaries make smarter care decisions.
The reasons behind the high costs of health care are complex, but some are easier to fix than others. Adjusting Medicare’s payment system to ensure identical care isn’t reimbursed differently would be a relatively easy, yet beneficial, fix. As the new administration looks for ways to modernize Medicare, reduce taxpayer spending and provide patients with more health care choices at lower costs, it should consider eliminating these senseless payment disparities once and for all.
David Hakimian is a practicing medical oncologist at Illinois Cancer Specialists in Niles, Ill. He is part of The US Oncology Network.
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