Press Release

Embargoed Until Contact

July 24, 2014

Sue Ducat
Director of Communications
(301) 841-9962


Site-Neutral Payments<


Bethesda, MD -- A new Health Policy Brief from Health Affairs and the Robert Wood Johnson Foundation describes the different proposals designed to eliminate differences in Medicare’s payment systems that depend on where care and services are delivered. Currently, services that can be provided in a variety of clinical settings may sometimes be paid for at dramatically different payment rates. Recently, the Centers for Medicare & Medicaid Services (CMS) and the Medicare Payment Advisory Committee (MedPAC) proposed eliminating this differential payment for certain services. This brief explains the origin of these differential payments and the debate over approaches that have been proposed for developing so called "site neutral" payments.


Topics covered in this brief include:


  • What’s the background, and what’s the policy?  As the brief explains, each Medicare payment system has its basis in Medicare law, which provides general parameters for how each type of provider is paid. For example, claims made under the Inpatient Prospective Payment System (IPPS) and the Outpatient Prospective Payment System (OPPS) for similar services will be paid out differently. In some cases, the capabilities of the facility or the clinical needs of the patient dictate that a certain setting is necessary, but often the decision is discretionary. The setting in which a particular service is provided can affect how much Medicare and the beneficiary pay for the service because Medicare pays different types of providers under separate payment systems. 
  • What’s the debate? The brief examines the different approaches taken by CMS and MedPAC in addressing the payment differential. Both MedPAC and CMS have made proposals or recommendations to eliminate differential payments for certain services. While MedPAC first concentrated its analysis and recommendations on differences in payments between hospital outpatient departments and physician offices, it noted that this effort was part of a broader push toward having “the same payment for the same service provided to similar patients across sites of care.”  One of the primary issues in pursuing these proposals is determining which services and payments should be addressed. CMS and MedPAC took divergent approaches.
  • What’s next? Both CMS and MedPAC have indicated continued interest in identifying and addressing situations where differences in payment are not considered appropriate or supported by differences in cost or the needs of the patient. In the proposed rule updating physician payments for 2015, CMS asked for comment on use of hospital cost data (not OPPS payment rates) in determining or validating physician payments. Congress has taken its first steps on site neutral payments by requiring that long term care hospitals be paid a rate comparable to the IPPS rate for patients that do not meet certain criteria. This payment adjustment does not take effect until fiscal year 2016. CMS is expected to include details about how the adjustment will be applied in its rulemaking next year.
About Health Affairs

Health Affairs is the leading journal at the intersection of health, health care, and policy. Published by Project HOPE, the peer-reviewed journal appears each month in print, with additional Web First papers published periodically and health policy briefs published twice monthly at Read daily perspectives on Health Affairs Blog. Download weekly Narrative Matters podcasts on iTunes.