One of the greatest contributors to America’s rising high health care costs is bloated hospital bills for simple procedures. We hear plenty of stories about how patients are increasingly confused by the shockingly expensive bills they receive from their providers, especially when their medical care shifts from an outpatient to a hospital-based setting.
Both Medicare and private health insurances pay hospital-owned facilities higher rates than independent medical practices and other outpatient facilities for the exact same services. These higher payment rates create an incentive for hospitals to acquire these independent practices, resulting in higher prices charged to patients. Clinic visits are the most commonly billed service under Medicare, which only reimburses $116 for each visit to an outpatient hospital clinic doctor and $46 for the same level visit for an independent doctor.
Congress is considering two different approaches — site-neutral payment reform and “honest billing” for creating greater price transparency and lowering hospital costs. Both have attracted bipartisan support, but site-neutral payment reform holds greater promise for lowering patients’ medical bills and saving taxpayers money.
Making payments “site-neutral” means reimbursing providers by the same amount regardless of where they provide medical services to patients. For example, several bills would apply that principle to Medicare reimbursements. This would save the federal government billions of dollars and reduce premiums for seniors.
Another set of proposals that fall under an “honest billing” category, would not make any changes to Medicare reimbursement and instead focuses on billing hospitals separately for each off-campus outpatient department. While these other “honest billing” proposals present a step forward in advancing site-neutral payment reform to cut costs, they don’t fully move towards equalization of reimbursing hospital versus non-hospital settings and thereby don’t truly implement site-neutral payments. These bills give insurers more transparency about where services are being performed, but they wouldn’t meaningfully reduce costs.
Both the House Education and Workforce (E&W) and House Energy and Commerce (E&C) Committees have separate bills that were recently marked up in committee and fall under the “honest billing” category. The House E&W bill, H.R. 4509, the Transparency In Billing Act, would require hospitals and their hospital outpatient departments (HOPDs) to provide unique health identifiers to insurers for the location where the service was provided to ensure that insurers can bill appropriately. If not, then insurers wouldn’t be required to pay the claims. However, this would only apply to the group market and would require the Department of Labor to issue rulemaking and establish a process for reporting violations. The House E&C bill, H.R. 3237, would also require each provider’s department to include a unique identifier number for claims and services on any billing and requires hospitals to attest every two years that it is in compliance.
The House Committee on Ways and Means held their markup yesterday to consider their own legislation to implement site-neutral payments, which included consideration of H.R. 4822, the Health Care Price Transparency Act. The bill was approved by the Committee in a party-line vote: Democrats opposed the bill due to a removal of a provision to address private equity acquisitions of hospitals and nursing homes, while Republicans all voted in favor.
Similar to the House E&C proposal, this bill would require all off-campus outpatient departments to have a separate national provider identification (NPI) number to bill Medicare. The bill would equalize payments between off-campus hospital outpatient services and physician practices for only drug administration services. On-campus hospitals would still be able to charge more than physician offices for performing the exact same service, which would leave most of the potential savings from site-neutral payments unrealized.
Meanwhile, the Senate Committee on Health, Education, Labor, and Pensions (HELP) postponed their markup scheduled for this week of a health workforce package that contains several additional health reforms, including a provision that would regulate hospital facility fees. Different from the other “honest billing” proposals, the provision would prohibit hospitals from charging facility fees for services provided by off-site physicians and prohibits both the hospital and physician from separately billing for services. Notably, it would cap both the hospital and physician fees at “the median amount the health plan or issuer pays when those services are provided in a physician’s office.” Hospitals would also be prohibited from charging facility fees for on-site primary care, telehealth, and low-complexity services that could be provided in an ambulatory setting.
This type of proposal is a more promising approach than the “honest billing” policies that are under consideration since it would directly affect patient health care costs since facility fees are billed directly to the patient and “honest billing” only addresses NPI numbers for insurance coding. While there are other issues with the bill that likely make it a nonstarter for Republicans, Senator Bill Cassidy has signaled that he’s open to the facility fee provision in another context which is a hopeful sign for future bipartisan support.
Hospitals have countered attempts by Congressional efforts to curb the rising costs of hospital-based care, claiming that any reform to reduce payment rates for hospital outpatient departments would lead to negatively impacting their financial stability. However, a recent study released by the JAMA Network that evaluated hospital financial performance before and during the COVID-19 pandemic shows that 75% of hospitals had a net positive operating income during 2020 and 2021. This was partly due to the COVID-19 relief funding dedicated to aiding hospital net operating margins, resulting in an all-time high in profitability for those hospitals. The study concludes that the relief funds received during COVID-19 were likely larger than necessary for many hospitals.
Congress needs to focus on implementing targeted policies that equalize payments across the three types of facilities, including outpatient departments, off and on campus departments, and ambulatory surgical centers, to save the most for patients and the federal government. It’s abundantly clear that Americans should not be paying more out of pocket for medical services — like chemotherapy, cardiac imaging, and colonoscopies — because of where they received the services at, especially at a time when most hospital profits are at an all time high.
