CMS Site-Neutral Payments Affect Small Share of Spending
Summary
Payments to off-campus hospital sites affected by site-neutral payment policy amount to only 2.3% of Medicare outpatient spending.The Centers for Medicare & Medicaid Services (CMS) has paid for Medicare fee-for-service (FFS) services at certain off-campus provider-based departments (PBDs) at a reduced rate since calendar year (CY) 2018. The policy was intended to reduce differences in payments between hospital-affiliated locations and independent physician offices. A review of claims processed in CY 2022 shows that only 2.3% of CMS payments for outpatient services are made at the site-neutral rate for off-campus PBDs.
Background
Under Medicare FFS reimbursement policies for outpatient services, payment can vary based on whether a service is provided in a hospital outpatient department or in a physician office that is unaffiliated with a hospital. When services are provided in a hospital outpatient department, Medicare makes two payments: one payment under the outpatient prospective payment system (OPPS) for hospital services and one payment under the physician fee schedule (PFS) for physician services. When outpatient services are provided in physician offices, payment is only made under the PFS. Therefore, prior to 2018, this approach resulted in wide disparities in payment rates for similar patients receiving similar services depending on where they sought care.
The Bipartisan Budget Act of 2015 allowed Medicare to make site-neutral payments at certain off-campus PBDs. The policy only applies to sites that opened after passage of the law and excludes certain services. Unaffected sites are referred to as “excepted off-campus PBDs.” CMS fully implemented the policy in 2018, applying a PFS-equivalent rate for affected sites and services, set at 40% of the OPPS rate, phased in over 2 years. In operationalizing these requirements, CMS introduced a new claim modifier (the ‘PN’ modifier) to identify services that should be paid at the lower PFS-equivalent rate. In 2019, CMS expanded its site-neutral policies by applying a site-neutral rate for clinic visit services billed by excepted off-campus PBDs under G0463 (Hospital outpatient clinic visit for assessment and management of a patient); this change was fully implemented in 2020. There is continued discussion and consideration among stakeholders about further expansions of site-neutral payment policies.
Part B Site-Neutral Payment Analysis Results
In a review of CY 2022 spending on Medicare Part B services at hospitals, Avalere utilized claims data to determine the amount Medicare paid for services provided in three categories: on-campus outpatient department services, off-campus services provided at grandfathered (or excepted) sites paid at the OPPS rate, and off-campus services provided at non-excepted sites and paid at the PFS-equivalent rate. In CY 2022, $1.34B in spending was made under the PFS-equivalent rate to non-excepted off-campus PBDs, representing 2.3% of total Medicare outpatient spending.
Table 1. Share of Outpatient CMS Payments to Hospitals By Site of Care
Through On-Campus HOPD | Through Non-Excepted Off-Campus PBD | Through Excepted Off-Campus PBD | |
---|---|---|---|
All Hospitals | 87.4% | 2.3% | 10.3% |
Rural hospitals receive a smaller share of their outpatient revenue through off-campus PBDs than urban hospitals (8.6% versus 13.1%).
Table 2. Share of Outpatient CMS Payments to Hospitals By Site of Care and Rural vs. Urban Location
Through On-Campus HOPD | Through Non-Excepted Off-Campus PBD | Through Excepted Off-Campus PBD | |
---|---|---|---|
Urban Hospitals | 86.9% | 2.4% | 10.7% |
Rural Hospitals | 91.4% | 1.3% | 7.3% |
Overall, rural hospitals represent a much smaller share of Part B spending than urban hospitals (10.8% of total Part B spending). Rural hospitals also generate less revenue through off-campus PBDs than urban hospitals; of all the payments made to off-campus PBDs, rural hospitals represent 7.6% of payments to excepted off-campus PBDs and 6.2% of payments to non-excepted off-campus PBDs.
In a review of regional trends, Avalere found that hospitals in New England and the East North Central regions derived the greatest share of their outpatient revenue from off-campus PBDs (16.4% and 15.8% respectively). Hospitals in the West South Central and Pacific regions had the smallest share of revenue generated through off-campus PBDs (8.0% and 9.5% respectively). However, hospitals in the Pacific region have the greatest share of off-campus revenue that is excepted from site-neutral policies, while the Mountain region has the lowest share of off-campus revenue through excepted sites.
Table 3. Share of Outpatient CMS Payments to Hospitals By Site of Care and Geographic Location
Through On-Campus HOPD | Through Non-Excepted Off-Campus PBD | Through Excepted Off-Campus PBD | |
---|---|---|---|
East North Central | 84.2% | 2.4% | 13.4% |
East South Central | 86.4% | 4.0% | 9.6% |
Middle Atlantic | 85.2% | 2.2% | 12.6% |
Mountain | 89.2% | 3.3 | 7.6% |
New England | 83.6% | 2.7 | 13.7% |
Pacific | 90.5% | 0.9% | 8.6% |
South Atlantic | 87.9% | 2.6% | 9.5% |
West North Central | 88.2% | 1.5% | 10.3% |
West South Central | 92.0% | 1.7% | 6.3% |
Considerations
Policymakers continue to consider potential cost savings associated with site-neutral payment that would reduce the differential between similar services provided at different settings. Changes implemented to date have been limited in scope; as policymakers assess options, some important considerations may include:
- Narrowing Exceptions: While site-neutral payments to non-excepted off-campus PBDs accounted for 2.3% of Part B spending in 2022, policymakers may consider whether site-neutral rates should be applied more broadly to excepted sites, which accounted for an additional 10.3% of spending. Under the current policy, excepted sites have also been able to add new service lines (or clinical families of service) that benefit from the site’s ‘excepted’ status and are exempt from site neutral payment policies.
- Applicable Services: The site-neutral payment changes for outpatient clinic visits (under G0463), which standardize payment at the PFS-equivalent rate for both on- and off-campus outpatient sites, could be adopted for a broader set of services that can be safely provided in hospital or physician office settings.
- Rural Impact: Policymakers may be particularly sensitive to the impact of site-neutral payment changes on providers in rural settings where access to care is of highest concern. However, revenue generated via off-campus PBDs is lower for rural providers than for urban providers.
Methodology
Avalere conducted an analysis of hospital outpatient department claims using 2022 Medicare Standard Analytic Files. Hospital outpatient department claims were identified from the 2022 Medicare Outpatient Standard Analytic Files based on facility type and service classification codes. Off-campus excepted provider-based departments (PBDs) were identified using the PO modifier and off-campus non-excepted PBDs were identified using the PN modifier. Claims were limited to those occurring in the United States with payment amount greater than zero. The CMS Data Use Agreement does not permit analysis of beneficiary samples reflecting more than 20 percent of the total Medicare fee-for-service population. To remain in compliance with this requirement, Avalere conducted the analysis on a 20 percent sample and multiplied all estimates by 5 to estimate totals reflective of the full Medicare FFS population.
January 23, 11 AM ET
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