Examining the Impact of Site Neutral Payment on Costs for Cancer Care

Key Findings

There are persistent trends of growth in Medicare Part B spending and acquisitions of independent physician practices. One driver of these trends is differential rates paid for the same services provided in different settings of care. Under existing reimbursement policies, hospital outpatient departments (HOPDs) are paid significantly more than independent physician practices for the same service. Policymakers have explored whether site neutral payments should be expanded under Medicare for outpatient services. A review of Medicare costs for services a hypothetical breast cancer patient receives in a calendar year found that:

• Services provided in HOPDs were reimbursed at a rate that was 3 times higher than services provided in a physician office setting;
• Certain services provided in HOPDs were reimbursed at rates that were more than 5-6 times higher;
• The hypothetical patient would have experienced a $1,500 reduction in out-of-pocket (OOP) costs over the course of a year if site neutral payment had been implemented;
• Medicare Part B spending would have been $7,750 less if site neutral payment was in place; and
• Targeted site neutral payment reforms could lower both patient OOP costs and overall Medicare Part B spending.