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 parts of well being care prices. A brand new proposal in New York State seeks to rein on this spending for industrial payers, employers, and the tens of millions of customers they insure.
Background
One cause for elevated 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 develop into off-campus HOPDs which might cost considerably larger 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 larger charges are sometimes break up between two payments for traditional workplace visits, with one invoice protecting the well being care skilled’s price and one other invoice purportedly protecting the hospital’s overhead, which might embrace intensive assets that these sufferers are unlikely to want. These mixed costs are significantly larger 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 attainable resolution 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 subsequently displays the assets suppliers want to offer secure and acceptable care, however not the upper overhead prices or pricing energy emblematic of hospital-affiliated settings. Amongst main medical 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 industrial 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 can be secure and acceptable to offer in lower-cost settings, reminiscent of a doctor’s workplace or ASC. (Suppliers would invoice on the charge they’ve negotiated with industrial payers if this charge is lower than 150 p.c of Medicare’s fee stage.) The invoice would additionally prohibit suppliers from charging a further facility price for coated providers. These billing limits apply to in- and out-of-network care and to care supplied to individuals with out medical 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 acceptable for site-neutral fee. APCs, which group providers primarily based on scientific and value 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 determine extra providers which can be secure and acceptable to offer in lower-cost settings, these providers can 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 provided by an insurance coverage service, a third-party administrator performing on behalf of a plan sponsor, reminiscent of an employer or a labor union, or a nonfederal public plan reminiscent of a state worker well being profit plan—should specify that plans is not going to pay larger charges for this outlined set of outpatient providers. Payers additionally wouldn’t be allowed to pay facility charges for coated providers. To make sure that hospitals can not shift these costs to sufferers, S 9952 would require community contracts to ban suppliers from gathering uncovered costs associated to the ability price prohibition and site-neutral fee necessities from sufferers themselves.
A typical concern with facility price bans or different reimbursement modifications for outpatient care is the influence these coverage modifications could have on the viability of rural and safety-net hospitals and different suppliers who could rely upon income from institutional costs for HOPD-based workplace visits to stay solvent. Underneath this proposal, new site-neutral billing and fee necessities wouldn’t apply to public hospitals, sole neighborhood hospitals, essential 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 industrial insurers and New York employers and supply vital protections for customers. In line with an evaluation by RAND, costs for outpatient providers in New York State averaged 304 p.c relative to Medicare in 2022. A fee cap of 150 p.c of Medicare charges is subsequently more likely to cut back industrial 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 could 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 customers. Customers with high-deductible well being plans, who might be liable for all allowed costs 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 price costs. Equally, sufferers with plan designs that embrace separate cost-sharing obligations for outpatient hospital costs would now not owe that fee given the prohibition on facility charges. Customers might also see reductions of their medical insurance premiums ought to this reform lead to vital reductions in outpatient spending. Publish-implementation evaluation of this proposal’s financial savings results on insurers, employers, and customers 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 susceptible 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 knowledge, and its associated name to the state that these knowledge be made publicly obtainable, will assist reply questions on how these entities reply to site-neutral fee and what influence it could have on facility funds.
Takeaway
If enacted into regulation, S 9952—the primary detailed state-level site-neutral fee proposal for the industrial market—wouldn’t solely create a brand new mannequin for different states to think about however would additionally present vital real-world expertise with site-neutral fee. Whereas it’s too early to know whether or not S 9952 will go 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 customers could understand financial savings and new monetary protections.
