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A Common-Sense Medicare Solution: Site-Neutral Payment Reform | Commentary

By Barry Brooks Imagine this basic scenario: You are out of milk. You could go to your local convenience store and purchase a gallon for $3. But instead, you drive 25 miles to buy the identical gallon of milk for $5 at a large chain grocery store.  

If this sounds absurd, that’s because it is. However it’s analogous to current health care payment policies that allow significantly higher reimbursements for health care services provided in certain settings, when identical, more convenient, and less expensive care in alternative settings exists.  

After years of ostensibly trying to reign in unnecessary healthcare spending and maintain Medicare sustainability for future generations, misguided policies on site of service reimbursement have perversely been doing the exact opposite. Medicare continues to pay more for services provided in Hospital Outpatient Departments (HOPDs) ranging from blood work to radiology to chemotherapy administration while other doctors and facilities in the community providing the same services are paid far less. This unfortunate practice for Medicare has increased healthcare costs by billions and simultaneously forced more cost-efficient community providers into hospital settings, which drives costs higher still.  

Earlier this month, we were pleased to see President Barack Obama’s FY2016 budget proposal recommend incentives to encourage the delivery of efficient care in the most appropriate ambulatory setting. In his proposal, the President states, “Evidence suggests that in recent years, billing of many ambulatory services has been shifting from physicians’ offices to the usually higher paid hospital outpatient department setting, increasing Medicare spending and beneficiary cost-sharing.”  

The White House estimates this reform alone could save $29.5 billion over 10 years.  

Under current Medicare policy, for example, a colonoscopy that costs $625 in the office setting is reimbursed more than double that amount – $1,383 – when performed in an HOPD. An MRI scan to diagnose or monitor a patient’s disease progression costs $600 at a community-based imaging facility, but totals $900 or more when conducted by an identical scanner in a hospital radiology suite.  

It’s not just Medicare; this problem extends to private insurers as well. The National Institute for Health Reform studied private insurance claims of nearly 600,000 workers and found that increased HOPD spending is leading to overall spending growth among privately and publicly insured individuals because of higher prices charged by hospitals.  

Most troubling of all, data reveals that these disparities adversely impact patients. Data from researchers at Milliman show that patients receiving cancer treatments in HOPDs spend $650 more in out-of-pocket copayments compared to patients receiving community-based cancer care.  

The negative result of these policies goes beyond the fiscal impact. Particularly in rural areas, many patients are losing access to their trusted healthcare providers due to closure and consolidation of community-based healthcare centers as they are forced to join hospitals. This trend is directly attributable to lower reimbursements for physician-run healthcare practices. Since 2008, 313 independent cancer centers have closed their doors and 544 have entered into contractual relationships with larger hospital centers merely to keep their doors open.
Closures are only one troubling byproduct of payment disparities. Another is the perverse higher reimbursement incentive that encourages hospitals to buy up physician practices in order to increase their profits. They buy the practice, change the name on the door and double the prices. While the hospitals win, everyone else loses. Unfair payment policies have put independent physician practices nationwide in a position in which selling to hospitals is their only option. The solution is clear — neutralize payments across sites of service. Pay the same fee for the same service regardless of where it is performed. This policy reform has the bipartisan support of lawmakers, the Medicare Payment Advisory Commission and a broad group of health care stakeholders including providers, insurers and consumers.  

To advance such reforms in cancer care, Congress should adopt a policy to secure site-neutral payments to keep costs down for seniors fighting cancer, Medicare and taxpayers. Specifically, Congress should create a level playing field in Medicare payments for outpatient cancer-care services. This would preserve patient access to high-quality, cost-effective care in the community setting and help stem the tide of hospital acquisitions of community cancer clinics.  

As Obama and bipartisan leaders in Congress call for the delivery of efficient care in the most appropriate setting, we urge them to advance policy changes to establish parity across sites of service in health care. We owe our patients, taxpayers and the nation’s health care system common sense solutions that protect patient choice and reduce costs.  

Barry Brooks, M.D., is chairman of the Pharmacy & Therapeutics Committee at The US Oncology Network.

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