As medical costs become ever more crushing for average Americans, our own federal government makes things worse.
Thanks to a long-standing policy quirk, Medicare currently pays twice as much — and often far more — for routine procedures such as X-rays and endoscopies when performed by hospitals as opposed to independent facilities.
That rule costs federal taxpayers billions — and contributes to driving up prices for everyone else. All it would take for those added costs to dissipate is for lawmakers to exhibit some political will.
The fix is to institute “site-neutral pricing,” which would base Medicare’s fees on the care being delivered rather where it is performed.
It’s a common sense, broadly nonpartisan solution that unites advocates across the political spectrum. The co-authors of this piece come from different places politically, but on this issue we agree — because the problem is obvious.
The existing policy began as a way to reimburse hospitals for overhead. Over time it has created a perverse financial incentive for hospitals to buy up clinics, labs, ambulatory surgery centers and physician practices.
The result has been a three-decade shopping spree in which hospitals and health systems have acquired independent health facilities, redefined them as hospital outpatient departments, and then charged Medicare and patients much higher prices for care.
These acquired practices have become a cash cow. And the more hospitals buy, the less choice you have in who’s delivering (and charging for) your care.
As a result, most U.S. doctors are now employed by hospitals and large health systems. This anti-competitive practice leads to more expensive care. A colonoscopy done in a hospital outpatient department costs Medicare a bit more than $1,000. The same procedure at a private practice: $345.
Site-neutral pricing would allow Medicare to pay hospital outpatient departments based the procedure or service provided. So, if a procedure is commonly and safely done at a doctor’s office, imaging center or ambulatory surgery center, the hospital outpatient department would get that lower rate.
This change could also indirectly bring down prices for people with private or employer-based insurance, because insurers often use Medicare rates as a baseline.
Congress has approved site-neutral policy before, albeit in a limited way. The 2015 federal budget required site neutral pricing for off-campus hospital outpatient departments, but exempted those operating at the time the law passed, limiting its reach. Just this year, the Center for Medicare & Medicaid Services introduced rules requiring site-neutral pricing for drug administration.
Sens. Bill Cassidy and Maggie Hassan introduced a legislative framework worthy of support. This bipartisan proposal would do away with the exemption from the 2015 budget and require site-neutral Medicare payments at all off-campus hospital outpatient facilities. It would also empower the secretary of Health and Human Services to identify where common procedures are usually performed (hospital, ambulatory surgery center, doctor’s office) and set reimbursements accordingly.
Site-neutral pricing will save taxpayers money while ending the perverse incentive that drives consolidation. That consolidation has made hospital systems a tremendous amount of money, and the powerful hospital lobby has for years stifled overdue reform to protect its bottom line.
So what can you do? Urge your representatives in Congress to stop wasting Medicare dollars on overpaying wealthy hospital systems at the expense of taxpayers and patients. Both our health and our wallets depend on it.
Hammond is senior fellow at the Empire Center for Public Policy. Bottini is policy coordinator for the New York Public Interest Research Group.