Despite extensive data documenting large payment disparities across sites of service for healthcare delivery, and the opportunities for cost savings through site neutral payment reforms, healthcare leaders and policy makers still face enormous obstacles and opposition to payment parity policies that have the potential to ensure patient choice and preserve Medicare dollars.

In a study it released late last year, the Government Accountability Office revealed what cancer care providers, insurers and consumer advocates have known for many years: Medicare reimbursements that vary across sites of service increase Medicare spending and encourage integration of physician practices with hospitals, further increasing costs and limiting patient choice.  

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The GAO data show Medicare paid $51 more for mid-level evaluations and management (E/M) office visits when the service was performed in an HOPD instead of a freestanding physician’s office in 2013 - fees that quickly add up across the Medicare beneficiary population. Similar findings from the IMS Institute revealed that the cost of providing cancer care in an HOPD is significantly higher than the exact same care delivered at a community cancer clinic: HOPDs charge approximately 126 percent more for administering common cancer drugs and 100 percent more for drug infusion services overall.

This compelling data illustrate that reimbursement disparities across sites of service are more than just costly – they are inconsistent with Medicare’s goal to improve efficiencies and reward the delivery of cost-effective healthcare.

The impact of these policies on healthcare services – and on patients – might best be illustrated by what’s transpired with U.S. cancer care over the past decade. Although patients prefer community-based cancer care as a convenient, comprehensive, more cost-effective care setting, Medicare’s payment structure has put community cancer clinics at a direct disadvantage. Between 2004 and 2014, the proportion of chemotherapy delivery in the office-based setting declined from 84 percent to 54 percent nationally – shifting instead to HOPDS, at a significant expense to patients and insurers.

In fact, patient co-payments for cancer care are approximately 10 percent higher in the HOPD, totaling more than $650 in extra out-of-pocket costs each year. Added to those expenses are the additional costs for commonly used cancer drugs – which are approximately $134 more per dose if received in the outpatient hospital setting. The cumulative effect is startling: data show between 2009 and 2012, Medicare beneficiaries paid $4.05 million more in out-of-pocket costs because of the higher patient co-payments due to the HOPD, even though the care is identical to what’s delivered in community setting.

As a direct result of this imbalance, community-based cancer practices have been consistently bought up by hospital systems.  Patients have less access to the care they prefer and are subject to increased expenses. Systematic healthcare costs are being driven up for everyone.

Put simply, unequal payments have long created a system of flawed incentives that hurt both patients and taxpayers at large. 

Fortunately, there’s an easy fix: site-neutral payments, which ensure that healthcare payments are based on the needs of the patient and not the site of service. 

Congress has given us reasons for optimism: the Bipartisan Budget Act of 2015 included a site-neutral payment provision that aligns payments for all newly acquired provider-based off campus HOPDs with payments to physician practices. Not only is this provision expected to save Medicare approximately $9.3 billion over 10 years, it could help put an end to the senseless acquisition process – stomping out unnecessary medical spending, returning dollars to the pockets of taxpaying Americans, and safeguarding access to needed care. This is great news and truly incredible progress for vulnerable patients and our nation’s healthcare system.  

Nevertheless, there has been a recent outcry on the part of hospitals that could undermine Congress’ intent when formulating the policy last year. In attempts to seek exemptions, hospitals contend that HOPD departments under construction should be grandfathered into past payment policies.  Allowing these exemptions serves no purpose other than to perpetuate a flawed payment structure that Congress has already rejected.

If we are truly interested in defending patients, as well as stabilizing the budget, it is critical that Congress not look back, and move forward with site-neutral payment policies as they had originally intended.  Site-neutral payments are a policy that makes sense in any case, not only when the pressure is off. 


Dr. Debra Patt is the Medical Director for The US Oncology Network.