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Are Site-Neutral Payments Coming? What does the prospect of paying the same regardless of where a procedure is performed mean for ASCs?


n the US health care system, it is not uncommon for the price of a service

to vary greatly depending solely upon the building where the service is pro- vided. For example, if a Medicare ben- eficiary has a colonoscopy done at an ASC, it costs the patient and Medi- care $388 while the same proce- dure at a hospital outpatient depart- ment (HOPD) costs $691. While in any other commercial venture, this practice might be expected, in the health care setting, it remains surprising. Still, the practice continues, and patients and the health care system pay 78 percent more for the same surgical service when it is performed in an ASC instead of an HOPD. One factor that contributes to the

variations in prices based on the site of service is that unlike others who pur- chase goods and services, health care consumers, or patients, are indirect purchasers. In general, patients don’t pay health care providers directly. In- stead, payments are made through middlemen insurance companies or, for Medicare beneficiaries, the fed- eral government. The end result is that patients do not have as much of an in- centive to comparison shop for their health care as they do for other goods and services. So why don’t payers, insurance companies or state and federal gov- ernments demand the same price for surgical services regardless of where these procedures are performed? One reason is that large health care systems have a strong bargaining chip when it comes to negotiating with insurance companies: the customers of the insur- ance companies (patients) want access to these large well-known facilities. These larger facilities are, therefore, often able to command a larger price

from the insurance companies than smaller independent facilities. There are several arguments that hospitals make to Medicare to support the idea that they should be paid more than providers in other settings such as ASCs. One used most commonly is that the higher payments are needed to subsidize the provision of inadequately reimbursed services or the uncompen- sated care that the law requires hospi- tals to provide. It will be interesting to see if this argument will continue to be considered after the provisions of the health care reform act are fully imple- mented and hospitals are required to provide less uncompensated care. Another common argument that

hospitals make is that to the extent that they treat more complex or sicker patients, they should be paid more. While few argue with that basic prem- ise, many disagree about the numbers

of more complex cases hospitals actu- ally see.

Despite these systemic reasons

driving different prices for different settings, policy makers are beginning to look more closely at the wisdom of paying different rates depending on where a service is provided. Notably, it has garnered the recent attention of the Medicare Payment Advisory Commis- sion (MedPAC), the independent com- mission tasked with advising Congress on Medicare policy. The commission’s discussion is still in its early stages, but several proposals that would equalize payments across care settings have al- ready been proposed. MedPAC’s rec- ommendations are nonbinding, howev- er, its willingness to consider the issue might signal that the idea of equalizing payments is gaining traction. Additionally, payment reforms that are being proposed and enacted today might have the effect of equalizing


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