A refresher on the 2018 update for site-neutral payments
CMS in 2017 implemented a site-neutral payment provision to reduce payment discrepancies between services performed at hospital outpatient departments (HOPDs) and provider-based sites. The policy mandates that newer off-campus HOPDs receive reimbursement at a site-specific Medicare Physician Fee Schedule (MPFS) rate. This rate equaled 50% of the hospital rate in calendar year (CY) 2017. In the CY 2018 final rule, the agency decreased this to 40% of the hospital rate.
Read on to find answers to your top 10 questions on site-neutral payments, and join us for a webconference on Thursday, Dec. 7 to learn more about how we saw outpatient imaging care evolve in 2017 and what the 2018 Medicare final rules for hospital and physician reimbursement will mean for your organization.
The top 10 questions
1. What are site-neutral payments?
Site-neutral payments, also called payment leveling or payment equalization, refer to a reduction in payment for services performed at HOPDs to minimize the reimbursement discrepancy across sites of care.
Prior to 2017, all HOPDs received higher reimbursement than freestanding clinics for the same services. For example, payment for a knee MRI without contrast performed at an HOPD was 162% of the freestanding payment.
Reimbursement by site of care
2. What prompted the shift to site-neutral payments?
Over the years, higher reimbursement rates at HOPD sites, along with physician employment and provider consolidation, led to disproportionate growth in HOPD volumes. This caught the attention of many and led Congress to address the matter in the Bipartisan Budget Act of 2016. The law mandated site-neutral payment for certain sites in 2017. The law prevents off-campus HOPDs opened or acquired after Nov. 1, 2015 from billing at the higher HOPPS rate.
Under the 21st Century Cures Act, passed in December 2016, sites that were "mid-build," as of Nov. 1, 2015 may bill on the HOPPS fee schedule if they can submit a "binding written agreement with an outside unrelated party," created prior to Nov. 1, 2015, stating their intent to construct an HOPD.
All agreements had to be submitted within 60 days of the bill being signed into law. Currently, the policy impacts a relatively small number of sites, as it allows sites operating prior to Nov. 1, 2015 to retain their current fee schedule.
3. How are site-neutral payments being implemented?
CMS is responsible for implementing new policies, such as the site-neutral payment policy included in the Bipartisan Budget Act.
Under the law, impacted HOPDs can no longer bill and be paid on the HOPPS fee schedule. Yet many HOPDs do not have the infrastructure to bill on MPFS. As a result, CMS allows impacted sites to continue using the HOPPS schedule for billing while using a special "PN" modifier on claims.
However, the agency reimburses them at a special, newly established rate, called the "non-facility MPFS rate," which is set to be equivalent to 40% of the HOPPS rate for each service in 2018.
4. Which sites are impacted by site-neutral payments?
Sites were impacted by site-neutral payments as of Jan. 1, 2017 if they were:
- Designated as "off-campus," provider-based sites;
- Located at least 250 yards from hospital's campus; and
- Acquired or built after Nov. 1, 2015, unless the exempted facility is part of a health system merger.
In addition to new sites, existing HOPDs can be shifted to site-neutral payment as a result of facility relocation or remodeling. Any change in the address of an off-campus HOPD, including changes as small as a unit or suite number, will cause a facility to move onto the physician fee schedule. This includes both full relocation and an extensive remodeling. However, off-campus HOPDs that must relocate due to "extraordinary circumstances" such as natural disasters are permitted to keep their billing status.
Additionally, a change of ownership results in loss of excepted status. If an off-campus HOPD is acquired directly by another facility, it will lose its ability to bill on the higher HOPPS rate. If the off-campus HOPD is acquired as a result of the acquisition of the HOPD's parent entity (i.e. health system), it may remain on the higher fee schedule.
5. I'm planning on expanding my services. Will I be able to continue billing on HOPPS?
Off-campus HOPDs that were billing for any service on HOPPS prior to Nov. 1, 2015 can also bill at the higher HOPPS rate for any services added after that date.
6. What impact will this proposal have on the ED?
CMS proposes to continue to pay all services furnished at existing and future EDs under HOPPS, regardless of whether a given service is emergent in nature.
7. How will billing work if my facility is impacted by this policy?
There are two major billing challenges for services impacted by site-neutral payment policy:
First, CMS is unable to differentiate between multiple HOPD facilities billing under the same hospital tax identification. Currently, there is no mechanism for the agency to tell whether a site meets the criteria for payment reduction under this policy.
Immediate solution: The agency requires all impacted sites to submit the modifier "PN" on all claims.
Upcoming solution: 2017 marked the first year providers used the "PN" modifier, and CMS plans to use this data to calculate a more precise site-neutral payment rate in next year's rulemaking cycle.
Second, CMS's systems are structured to prevent facilities designated as HOPDs from billing under the MPFS. However, the law clearly states that affected sites cannot bill under HOPPS.
Immediate solution: For 2018, CMS finalized that all impacted HOPDs will be paid on a non-facility MPFS rate that is specifically adjusted to be 40% of the HOPPS rate and billed through the HOPPS system.
Upcoming solution: CMS will explore a full transition of impacted sites to MPFS claims.
8. Why did reimbursement change from 50% of the HOPPS rate to 40%?
This year, CMS examined all 2016 claims from off-campus HOPDS (which were required to use the modifier "PO" beginning in 2016). This allowed CMS to identify the top 22 codes billed at off-campus sites and compare the corresponding 2016 HOPPS and MPFS payment rates.
The agency's analysis revealed that reimbursement under MPFS was, on average, approximately 35% of HOPPS reimbursement. To account for additional variables like packaging, the agency set the payment rates to 40% for 2018.
CMS had used the same methodology for 2017 but was able to access claims only from Jan. 1, 2016 to Aug. 26, 2016, since the full year's data had not been collected. This calculation set the payment rate to 50% of HOPPS for 2017, a percentage CMS thought was overestimated.
Regardless, imaging leaders should note that eight of the top 22 codes most commonly performed at off-campus HOPDs are related to imaging, including CT exams and chest X-rays. CMS is aware of discrepancies in payments related to imaging and is likely to impose broader reimbursement cuts in the future.
9. Is this the last we'll hear about site-neutral payments from CMS?
No, expect to hear more about site-neutral payments, as CMS still has the option to modify and expand the policy through rulemaking. Currently, CMS is collecting the data it needs to implement a more holistic approach to site-neutral payments.
Private payers have also taken note of the payment discrepancies between HOPDs and freestanding sites. For example, Anthem recently announced that it will no longer pay for certain advanced imaging services at hospital-based facilities.
10. How can imaging leaders succeed under site-neutral payments?
Identify whether any of your sites will be impacted by site-neutral payments. Even within a single health system, not all outpatient sites will be affected by the policy. Imaging leaders must first determine whether any of their HOPDs are excluded from HOPPS beginning in 2017. If you are unsure as to whether a given site is impacted, you can contact your CMS regional office.
If any sites are impacted:
- Adjust billing processes. CMS is requiring impacted sites to add the modifier "PN" to all claims.
- Assess the revenue impact and make budgetary adjustments. Impacted sites should consider margin management strategy in preparation for reduced reimbursement under site-neutral payment.
Capitalize on owning a lower-priced site of care before more comprehensive payment leveling. Though few imaging sites are currently affected by site-neutral payments, more are expected to shift off HOPPS in the future. To help offset these impending revenue cuts, health systems should compete for imaging market share now.
Consider leveraging a lower-priced site of care to attract price-sensitive patients and cost-accountable referring providers—and do so soon, as continued payment neutralization will reduce or eliminate the pricing advantage of these sites.
Rethink acquisition strategy. Historically, acquiring a freestanding imaging site was seen as an opportunity to transition it to an HOPD for the higher reimbursement rate. Now that it is no longer a viable strategy, hospitals and independent physician groups must reconsider their approach to clinic acquisition and partnership.
Learn the basics of site-neutral payments in 5 minutes
Download our cheat sheet to learn what site-neutral payments will mean for imaging reimbursement.
How will the 2018 Medicare final rules affect your imaging strategy?
Join us on Dec. 7 to learn how we saw outpatient imaging care evolve in 2017 and what the 2018 Medicare final rules for hospital and physician reimbursement will mean for your organizations.