With the 2015 Medicare Physician Fee Schedule(MPFS), CMS began a dialogue about how the growing trend toward hospital acquisition of physician offices and subsequent treatment of those locations as off-campus provider-based outpatient departments was impacting Medicare reimbursement and overall Medicare spending. Specifically, CMS sought comment regarding the best method for collecting information that would allow them to analyze the frequency, type, and payment for services furnished in off-campus provider-based hospital departments where reimbursement is generally higher. This is not the first time that site-neutral payments have been part of CMS's agenda. You may remember that in the proposed 2014 Medicare Physician Fee Schedule (MPFS), CMS proposed limiting the amount paid for a service in the physician office setting to the amount paid for the same services when provided in a hospital outpatient department or ambulatory surgery center (ASC). However, after many negative comments from the health care community, CMS did not finalize that proposal nor did it mention the topic in the 2015 Proposed Medicare Physician Fee Schedule. However, the interest in identifying and addressing the site payment differences continues. The Robert Wood Johnson Foundation helped reignite the discussion by publishing an excellent health care policy brief in July explaining the origin of these differential payments and the debate over the very different approaches that have been proposed for developing site-neutral payments. Although there were no changes to the 2015 fee schedule, Site-Neutral Payments are very much still on the table. 2015 Medicare Physician Fee Schedule As a result of their study, CMS finalized their proposal to require a change in place of service codes for physician/professional billing and a new modifier to be used for hospital billing. For physician billing, CMS will delete the current Place of Service (POS) code 22 (outpatient hospital location) and replace it with two new POS codes, one to identify outpatient services furnished in on-campus, remote or satellite locations of a hospital and the second, to identify services furnished in an off-campus hospital Provider Based Out-patient Department setting. CMS will maintain the separate POS code 23 (emergency department). The new place of service code will be required for professional claims as soon as it is available, but not before January 1, 2016. Data collection will be voluntary for hospitals in 2015 and required beginning on January 1, 2016. The Alliance for Site-Neutral Payment Reform (ASNPR) In January 2015, shortly before the President’s 2016 budget was announced, a newly formed group called the Alliance for Site-Neutral Payment Reform (ASNPR) wrote a letter to Congressional Leaders to call attention to the “disparities in payments between the same clinical patient services provided in different healthcare settings,” and that these “disparities are far reaching – from lab work, to radiology imaging exams, to cancer care – and are driving up healthcare costs to the tune of billions annually.” The Alliance is made up of physicians, health insurers and other health care organizations that are promoting reimbursement parity across site of service but encouraging a parity policy that does not reduce patient access or quality of care. MedPAC Update Also in January, the Medicare Payment Advisory Commission unanimously voted to recommend site-neutral payments for certain post-acute services, eliminating differences in payments between inpatient rehabilitation facilities and skilled nursing facilities for selected conditions, a continuation of their long-held belief that payments should be equalized among locations of services. In its cover letter on its report to Congress last month, MedPAC reiterated its recommendation for site-neutral payments for certain select conditions between two post-acute care sectors: skilled nursing facilities and inpatient rehabilitation facilities. Stating "this recommendation builds on our past recommendations for site-neutral payments between hospital outpatient departments and physicians’ offices for certain services, and for consistent payment between acute care hospitals and long-term care hospitals for certain classes of patients. Medicare often pays different amounts for similar services across sectors. Site-neutral payments that base the payment rate on the less costly sector can save money for Medicare, reduce cost sharing for beneficiaries, and reduce the incentive to provide services in the higher paid sector, without compromising beneficiary access to care or health outcomes." The President’s 2016 Fiscal Year Budget In February, President Obama’s 2016 fiscal year budget contained a provision supporting MedPAC proposals to lower payments provided in off-campus hospital outpatient departments to either the applicable physician fee schedule rate or the ambulatory surgical center (ASC) rate. The administration’s proposal would essentially end the system of different prices for similar services. Medicare would pay the same for any visit, test or procedure offered by doctors who work in private practice and by those who work in off-campus practices that are owned by hospitals. Doctors who work in the hospital building could still be paid the higher hospital rate. But the free-standing practice that suddenly changes hands would not continue to be paid more. The budget proposed changes would be phased in, beginning in 2017. It is estimated that Medicare would save an estimated $29.5 billion for the years FY2017-2025. The two main entities involved in Medicare rate setting are the Centers for Medicare and Medicaid Services (CMS) and the Medicare Payment Advisory Committee (MedPAC). Although both CMS and MedPAC agree on price parity, they have butted heads on how to equalize payments. CMS had proposed to limit the amount paid for a service in the physician office setting to the amount paid for the same service when provided in a hospital outpatient department or ambulatory surgical center. MedPAC, on the other hand, promotes paying outpatient services at the rate of the physician fee schedule. While site-neutral payments are likely, it isn't yet clear in which direction they will tilt.