Key senators release 'site-neutral' plan to stop Medicare paying hospitals more for same service

Two key senators released a bipartisan plan Friday to require Medicare to pay the same rate for the same service, regardless of where the service is delivered. 

The “site-neutral” payment reform plan from Sens. Bill Cassidy (R-La.) and Maggie Hassan (D-N.H.) is aimed at stopping hospitals from getting more money from Medicare for procedures that can be done in less expensive settings, like a physician's office or an ambulatory surgical center. 

According to Cassidy and Hassan, the plan will save taxpayers billions of dollars. They proposed equalizing payments for some services provided in off-campus hospital outpatient departments with what Medicare pays for physicians' offices.  

“Patients should not be forced to pay higher bills just because their regular doctor’s office was purchased by a hospital,” Hassan said. “There is bipartisan agreement that by pursuing site neutral payment in Medicare, we can lower costs and ensure that more people can get the health care that they need.”  

But hospitals have long fought off any attempts to equalize payment rates, arguing such a move would hurt rural providers and those that rely on a high proportion of Medicare and Medicaid reimbursement. Hospitals also argue they have higher overhead costs and so need higher reimbursements.  

To combat that issue, the plan would reinvest some of the savings into rural and safety net hospitals through Medicare. The plan would also create another bonus for hospitals to keep providing services like maternity care, trauma centers, burn units and neonatal intensive care units. 

“If the same care can be safely provided in different settings, patients should not pay hundreds more simply because their doctor works in a hospital. Our framework provides a path to ensure that,” Cassidy said in a statement. 

Cassidy is the ranking member of the Senate Health Committee and stands to take over as chair if Republicans win control of the chamber.  

There has been a disconnect between House and Senate Republicans on site-neutral payments, and the proposal faces long odds as currently designed. It was also released as a policy paper, not legislative text. 

Last year, House Republicans wanted to use the savings from a site-neutral services policy to pay for extending expiring health programs. But Senate Republicans feared rural hospital losses and weren’t on board. 

Despite the reinvestment provision, hospital groups immediately blasted the proposal.  

“Simply put, this framework from Senators Hassan and Cassidy will limit and eliminate critical hospital-based care, resulting in increased wait times and decreased access to care for patients,” said Stacey Hughes, executive vice president of the American Hospital Association. She said the framework proposes “dramatic and untenable Medicare cuts, reducing seniors’ access to critical hospital-based care.” 

The Federation of American Hospitals similarly said the plan equates to Medicare cuts that “threaten access to 24/7 hospital care – a framework Congress has rejected time and again,” according to Charlene MacDonald, the organization’s executive vice president of public affairs.