AAFP to Congress: Expand Site-neutral Physician Payment

February 16, 2016 03:22 pm News Staff

Although Congress took an initial step toward equal payments for physicians' services regardless of where they practice when it passed the Bipartisan Budget Act last November, many office-based physicians still receive lower payments for the same services than do their colleagues in hospital outpatient settings.

[Two physicians walking with elderly woman]

In a Feb. 11 letter, AAFP Board Chair Robert Wergin, M.D., of Milford, Neb., urged leaders of the House Committee on Energy and Commerce to address the disparity by expanding the policy of site-neutral payments.

"We strongly urge lawmakers to stand by this site-neutral payment reform, especially now when some hospital outpatient departments are seeking exemptions from this new payment policy," the letter states.

Beginning in January 2017, physicians will be paid either according to the Medicare physician fee schedule or the Ambulatory Surgical Center Physician Payment Schedule, depending on their practice location. But a loophole in the law permits many hospital facilities to continue charging higher rates for an evaluation and management (E/M) visit. Physician practices that were acquired by a hospital before Nov. 2, 2015, are exempt from the requirement. Some hospitals that are in the process of acquiring physician practices are pushing for the date to be extended.

Story Highlights
  • The AAFP urged leaders of the House Committee on Energy and Commerce to expand the policy of pay equity for physicians regardless of whether they work in hospital outpatient settings or stand-alone offices.
  • A loophole permits higher rates for evaluation and management visits that take place in physician practices that were acquired by a hospital before Nov. 2, 2015.
  • The AAFP supports site-neutral payments for all facilities.

"Patients should not be burdened with higher costs for similar care because a hospital acquired their physician's practice on Nov. 1 instead of Nov. 2," the letter states.

The AAFP also supports site-neutral payments for all facilities -- not just recently acquired physician practices -- because several recent studies show that hospital billing practices are contributing to higher overall costs.

Hospitals are eligible to receive a facility fee from Medicare, but physicians in stand-alone offices that provide the same services are not. Such variance in Medicare payment rates across the medical spectrum drives up overall costs and contributes to increasing consolidation among physician practices and hospitals.

In a study published in December 2015(archinte.jamanetwork.com) in JAMA: the Journal of the American Medical Association, researchers found that payments for physician visits at a hospital were $68 higher than for those at stand-alone offices. The authors also reviewed changes in price associated with physicians that integrated with hospital systems. In the markets studied, they found that annual outpatient spending increased by $75 per Medicare patient, "almost entirely owing to price increases rather than changes in utilization."

A recent report(www.gao.gov) by the Government Accountability Office (GAO) showed that between 2007 and 2013, the number of hospitals that achieved vertical integration with physician practices increased from 1,400 to 1,700, while the number of physicians with a hospital affiliation increased from 96,000 to 182,000. The report indicated that Medicare paid $51 more for midlevel E/M visits performed in a hospital outpatient setting compared to those at independent physician practices. The agency noted that the inconsistency in Medicare payment policy is not justified.

"While vertical consolidation has potential benefits, we found that the rise in vertical consolidation exacerbates a financial vulnerability in Medicare’s payment policy: Medicare pays different rates for the same service, depending on where the service is performed," the GAO report stated.

There is significant political support for site-neutral payment reform because Congress, the Obama administration, the Medicare Payment Advisory Commission and the GAO all recognize its value for containing costs without diminishing the quality of patient care.

"Indeed, it is time to expand site-neutral payment policies, not reverse recent progress that has not yet had the opportunity to illustrate its value," Wergin said in the letter.

CMS does not have the authority to address the disparity in Medicare payments across multiple settings but Congress can change the policy. The GAO recommended that Congress grant HHS authority to set equitable Medicare rates for E/M visits and other services deemed appropriate for revision and return the savings to the Medicare program.