Spending on outpatient care—the care sufferers obtain in a hospital outpatient division (HOPD), ambulatory surgical heart (ASC), or a free-standing doctor workplace—is likely one of the quickest rising elements of well being care prices. A brand new proposal in New York State seeks to rein on this spending for business payers, employers, and the millions of consumers they insure.
Background
One reason for increased spending on outpatient care is the vertical integration of well being care markets, which happens when hospitals purchase unbiased doctor practices or different outpatient suppliers. As soon as acquired, these newly affiliated practices successfully turn into off-campus HOPDs which might cost considerably greater costs for a similar providers, because the well being system they now belong to can leverage its market energy in charge negotiations with insurers. These greater charges are usually break up between two payments for normal workplace visits, with one invoice overlaying the well being care skilled’s charge and one other invoice purportedly overlaying the hospital’s overhead, which might embrace intensive assets that these sufferers are unlikely to wish. These mixed prices are significantly greater than the invoice for an workplace go to at a free-standing apply and drive up spending on outpatient care.
Policymakers have recognized site-neutral fee as a doable answer to this dynamic. The underlying precept of site-neutral fee is that insurance coverage firms, public packages, and different payers would pay the identical charge no matter whether or not the affected person receives care at an HOPD, an ASC, or a free-standing doctor’s workplace. This single fee quantity for a given service is predicated on the quantity insurers pay for care within the most-efficient, lowest-price setting and due to this fact displays the assets suppliers want to offer secure and applicable care, however not the upper overhead prices or pricing energy emblematic of hospital-affiliated settings. Amongst main medical health insurance packages, solely Medicare makes use of site-neutral fee in restricted circumstances—however new laws within the New York State Senate would introduce site-neutral fee to the New York business market for a subset of outpatient care.
New York’s Laws
As launched by State Senator Liz Krueger, S 9952 would require well being care suppliers, together with hospitals, doctor places of work, and pressing care clinics, to invoice not more than 150 p.c of what Medicare would pay for an outlined set of outpatient providers which might be secure and applicable to offer in lower-cost settings, comparable to a doctor’s workplace or ASC. (Suppliers would invoice on the charge they’ve negotiated with business payers if this charge is lower than 150 p.c of Medicare’s fee degree.) The invoice would additionally prohibit suppliers from charging an extra facility charge for lined providers. These billing limits apply to in- and out-of-network care and to care supplied to individuals with out medical health insurance.
Providers recognized for site-neutral fee embrace analysis and administration providers, wellness visits, and the 66 ambulatory fee classifications (APCs) the Medicare Fee Advisory Fee (MedPAC) recognized in a 2023 report as applicable for site-neutral fee. APCs, which group providers based mostly on scientific and price similarity with a single fee charge assigned to every APC, are the muse for Medicare’s outpatient potential fee system (OPPS). The invoice additionally anticipates that ought to New York State, the federal authorities, or MedPAC establish further providers which might be secure and applicable to offer in lower-cost settings, these providers could be enfolded into the state’s site-neutral fee requirement.
This proposal additionally stipulates that community contracts between well being care suppliers and well being profit plans—outlined within the invoice as a plan supplied by an insurance coverage provider, a third-party administrator performing on behalf of a plan sponsor, comparable to an employer or a labor union, or a nonfederal public plan comparable to a state worker well being profit plan—should specify that plans won’t pay greater charges for this outlined set of outpatient providers. Payers additionally wouldn’t be allowed to pay facility charges for lined providers. To make sure that hospitals can’t shift these prices to sufferers, S 9952 would require community contracts to ban suppliers from accumulating uncovered prices associated to the power charge prohibition and site-neutral fee necessities from sufferers themselves.
A standard concern with facility charge bans or different reimbursement modifications for outpatient care is the affect these coverage modifications might have on the viability of rural and safety-net hospitals and different suppliers who might rely upon income from institutional prices for HOPD-based workplace visits to stay solvent. Below this proposal, new site-neutral billing and fee necessities wouldn’t apply to public hospitals, sole group hospitals, crucial entry hospitals, rural emergency hospitals, and safety-net hospitals, nor to federally certified well being facilities.
Potential for Shopper, Employer, and Well being Plan Financial savings
As launched, the invoice is more likely to generate financial savings for business insurers and New York employers and supply vital protections for shoppers. In line with an evaluation by RAND, costs for outpatient providers in New York State averaged 304 percent relative to Medicare in 2022. A fee cap of 150 p.c of Medicare charges is due to this fact more likely to cut back business spending on the outpatient providers focused by this proposal, though precise financial savings will rely upon each present negotiated charges for this set of providers, and whether or not negotiated charges for different providers, not included on this reform, finally improve in response. These financial savings would accrue to insurance coverage, employers, and different plan sponsors. For instance, 32BJ Well being Fund, a union-sponsored profit plan, estimates that it might have saved $31 million, or two p.c of its complete well being profit expenditures, in 2022 if this charge cap had been in place.
This proposal may additionally present actual monetary safety to shoppers. Customers with high-deductible well being plans, who might be accountable for all allowed prices earlier than they attain their deductible, would instantly profit from the proposal’s cap on funds for these outpatient providers in addition to the ban on facility charge prices. Equally, sufferers with plan designs that embrace separate cost-sharing obligations for outpatient hospital prices would not owe that fee given the prohibition on facility charges. Customers can also see reductions of their medical health insurance premiums ought to this reform lead to important reductions in outpatient spending. Put up-implementation evaluation of this proposal’s financial savings results on insurers, employers, and shoppers would inform future site-neutral fee efforts.
Monitoring Results on Well being Care Suppliers
Equally, enactment and implementation of S 9952 would offer vital insights on site-neutral fee’s impact on hospitals and well being methods. As launched, the proposal exempts rural and financially weak suppliers from site-neutral fee necessities, whereas making use of these necessities to the forms of well being methods which have pushed vertical integration of the supply system. The invoice’s reporting necessities for pricing and utilization information, and its associated name to the state that these information be made publicly accessible, will assist reply questions on how these entities reply to site-neutral fee and what affect it might have on facility funds.
Takeaway
If enacted into regulation, S 9952—the primary detailed state-level site-neutral fee proposal for the business market—wouldn’t solely create a brand new mannequin for different states to think about however would additionally present important real-world expertise with site-neutral fee. Whereas it’s too early to know whether or not S 9952 will move the New York legislature, and what modifications it would undergo earlier than enactment, it creates an vital marker for different states grappling with elevated spending on outpatient providers. Ought to this proposal be carried out, employers, well being plans, and shoppers might understand financial savings and new monetary protections.
