Health Savers Initiative: Equalizing Medicare Payments Regardless of Site-of-Care

Currently, the Medicare program pays higher rates for medical services performed in hospital outpatient departments (HOPDs) than it pays for the same services when they are performed at physicians’ offices or Ambulatory Surgical Centers (ASCs), even when the care is equally safe and effective. In order to lower health care costs for patients and the Medicare program, policymakers could consider changing this policy.

As part of the Health Savers Initiative, this paper presents a description and savings estimate for an option to equalize payments for a specific set of services across care settings in Medicare. This policy, often called site-neutral payment reform, has bipartisan support and has been recommended by the Medicare Payment Advisory Commission (MedPAC) and proposed by Presidents Trump and Obama.

This policy would not only save Medicare dollars and reduce Medicare premiums and cost-sharing, but it could also generate savings in other parts of the health system. Commercial payers could achieve savings by also adopting site-neutral payments given strengthened negotiating leverage from Medicare’s change. Furthermore, by reducing payment rates for HOPDs, there would be less incentive for hospitals to purchase physician practices to convert to HOPDs, which has led to higher private sector prices.