Editor’s note: Richard Fogel is the chief health outcomes officer at Ascension, one of the nation’s largest nonprofit and Catholic health systems. He previously served as Ascension’s chief clinical officer from 2019 to 2024.
Lawmakers in Washington are considering legislation to impose so-called “site-neutral payment” policies, which would significantly undermine the ability of many healthcare providers to ensure patients receive the appropriate care they need.
Under site neutrality, Medicare would evaluate the lowest cost at which a given service is most frequently provided, then apply the same reimbursement amount for that service regardless of where it’s provided. In other words, Medicare would reimburse physician offices, surgery centers, hospital outpatient departments and any other provider setting at the same levels for the same service.
While that might sound fair, the concept of site neutrality has a fatal flaw — it completely ignores the clinical needs of the patient. Site neutrality dictates that if a majority of patients can receive a particular service in a low-cost setting, then all patients should.
However, not all patients are the same. Many have complex needs and require a higher level of care in a hospital or hospital outpatient department setting. That’s one reason why hospitals sometimes receive higher reimbursement from Medicare for services that non-hospital, independent health providers also offer . These higher payments are essential because many vulnerable patients with more complex needs require the advanced capabilities that only a hospital can provide.
Hospitals deploy a greater level of resources to ensure they can provide around-the-clock care, lifesaving trauma care and emergency services, especially to uninsured and underinsured patients. If Congress enacted site-neutral payments, hospitals everywhere will struggle to continue to provide these services, threatening access to care for everyone who relies on hospitals in their communities.
To offer an example, it’s one thing for an ambulatory surgery center to provide me — a relatively healthy 63-year-old — with a colonoscopy. It would be low-risk and likely go off without complication.
It’s quite another challenge for an ASC to provide a different 63-year-old man with morbid obesity, a weak heart, severe chronic obstructive pulmonary disease and brittle diabetes with the same procedure. It would be much safer in a hospital outpatient department where there are many other resources and personnel to treat potential life-threatening complications.
It doesn’t make any sense to reimburse the ASC and the hospital at the same rate. From the perspective of what’s best for the patient, care should be provided in the most clinically appropriate setting.
Take another example. Many Americans live in rural communities where there are no ASCs or specialty physician clinics. The only option for them to receive the care they need is at their local community hospital. But if Medicare reimbursements to that hospital are based on the lowest cost it takes to provide the same service at an ASC on the other side of the state, then the community hospital will be grossly underpaid.
Rather than imposing a one-price-fits-all system, reimbursements should acknowledge the reality that patients have unique needs, and different sites of service have unique capabilities.
Proposals to impose site-neutral payments are not new and have often been dangled as potential cost savings. Later this year, some policymakers will want it wedged into a reconciliation package as a pay-for, but lawmakers should exercise extreme caution.
The problem is that such a policy would create a situation where many patients will no longer be able to access the care they need, as hospitals across America would face the prospect of service cutbacks and closures. While some proposals have floated possible “reinvestments” in rural hospitals and trauma services, this wouldn’t mitigate the fundamental flaws of site-neutral payments.
Often driven by special interest groups, some policymakers have embraced site-neutral payments across the board because it gives the impression of fairness and would save Medicare money.
However, it not only serves as a distraction from the underlying causes of high healthcare costs in the United States, but it also ignores the important principle of guiding patients to receive their care in the most clinically appropriate setting.
Ultimately, the across-the-board cuts proposed by site-neutral payments rob Peter to pay Paul. It places the providers who millions of patients rely upon at risk, and it disregards the unique needs of each patient and the clinical setting that’s best for them.
Rather than adopting oversimplified proposals, Congress should focus on ensuring patients have access to the care they need where they need it.
