Site-Neutral Payments Finalized Despite Hospitals' Objections

The policy change constitutes a 40% reduction for some hospital outpatient departments.

Despite objections from powerful hospital groups and lawmakers, the Centers for Medicare & Medicaid Services on Friday finalized a site-neutral payment policy for outpatient clinic visits.

The change, which came in the 2019 Outpatient Prospective Payment System (OPPS) final rule, calls for hospital outpatient departments to be paid at a rate equivalent to the Physician Fee Schedule (PFS) for clinic visits. That's 40% less than their current reimbursement.

"Today's rule advances competition by creating a level playing field for providers so they can compete for patients on the basis of quality and care," CMS Administrator Seema Verma said in a statement Friday. "The final policies remove unnecessary and inefficient payment differences so patients can have more affordable choices and options."

This may not be the final word on the matter, however, as both the American Hospital Association (AHA) and America's Essential Hospitals (AEH) have suggested CMS seems to be overstepping its legal authority. The AHA announced Friday that it and the Association of American Medical Colleges intend to challenge the site-neutral provisions in court.

"Hospitals have been fighting to little avail," Lyndean Brick, JD, president and CEO of The Advis Group, told HealthLeaders in an email Friday. Congress expressly exempted certain outpatient facilities from site-neutrality in 2015, so CMS appears to be breaching these statutory limits with this rule, she said.

"We expect the implementation of the site neutral reduction to excepted grandfathered [hospital outpatient departments] to be one of the first rules challenged," Brick said.

The most consequential change in this rule is the site-neutral payment rate for the clinic visit under code G0463, Brick added.

"This is the most commonly billed service in off-campus hospital outpatient departments," she said, arguing that the policy will inhibit hospitals' ability to offer these clinic visits in outpatient settings in compliance with federal quality standards.

"We may see a number of off-campus hospital outpatient departments convert to hospital-owned 'freestanding' sites as a result," she added. "This transition will allow hospitals to maintain an integrated continuum without being subjected to the higher federal quality/safety standards. This rule, however, will not ultimately benefit patient care."

The administration released a fact sheet summarizing the changes along with a draft of the final rule.

Blair Childs, senior vice president of public affairs for Premier, said the site-neutral payment policy is "misguided" not only because it exceeds CMS' statutory authority but also because it fails to recognizes "the overhead cost differences between physician practices and provider-based outpatient clinics."

"At a time when providers are focusing on total cost of care and two-sided risk, this policy applies micro-managing cuts that foreclose health system decision-making based on how to best deliver care to patients," Childs said in a statement.

AEH President and CEO Bruce Siegel, MD, MPH, said the final OPPS rule "undermines stability and choice for vulnerable patients."

"It's especially troubling that CMS has framed these changes as empowering patients and providing more affordable choices and options," Siegel said in a statement. "In fact, these changes create new road blocks to care in communities with chronic provider shortages—health care deserts plagued by severe economic and social challenges."

Editor's note: This story has been updated to include a note that the American Hospital Association and the Association of American Medical Colleges intend to file a legal challenge.

Steven Porter is an associate content manager and Strategy editor for HealthLeaders, a Simplify Compliance brand.