This blog post has been updated to reflect changes to site-neutral payments presented in the HOPPS final rule, released November 1, 2016.
A brief refresher on site-neutral payments
Currently, reimbursement differs by site of care, with hospital outpatient departments (HOPD) receiving higher reimbursement than freestanding clinics for the same services. For example, payment for a knee MRI without contrast performed at an HOPD is 162% of the freestanding payment.
Site-neutral payment, also called payment leveling or payment equalization, refers to a reduction in payment for services performed at HOPDs to minimize the reimbursement discrepancy across sites of care.
|Site of care
|Hospital outpatient department (HOPD)
||Hospital or health system
||Hospital Outpatient Prospective Payment System (HOPPS)
|Freestanding clinic: Independent testing facility (IDTF)
||Independent physician(s) or physician group (typically); hospital or health system (rarely)
||Medicare Physician Fee Schedule (MPFS)
The higher reimbursement rate at HOPD sites, along with physician employment and provider consolidation, has led to disproportionate growth in HOPD volumes. Unbalanced volume and payment growth has caught the attention of many, including Congress and CMS (Centers for Medicare and Medicaid Services), leading to policy changes and uncertainty around the future of HOPD reimbursement.
The big news is that site-neutral payment will set in for some sites on January 1, 2017.
1. Will site-neutral payment definitely happen?
Yes, for some sites.
The Bipartisan Budget Act of 2016 mandated site-neutral payment for certain sites in 2017. The law prevents off-campus HOPDs opened or acquired after November 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 November 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 November 1, 2015, stating their intent to construct an HOPD.
All agreements must be submitted within 60 days of bill being signed into law. The policy is expected to impact a relatively small number of sites, as it allows sites operating prior to Nov 1, 2015, to retain their current fee schedule.
2. How will site-neutral payments be implemented?
CMS is responsible for implementing new policies, such as the site-neutral payment policy included in the Bipartisan Budget Act. With CMS’s release of the Hospital Outpatient Prospective Payment System final rule in November 2016, we now have a better understanding of how CMS will apply this policy in 2017.
Under the law, impacted HOPDs can no longer bill and be paid on the HOPPS fee schedule. CMS has therefore announced that they will be paid on MPFS, the physician fee schedule. But many HOPDs do not have the infrastructure to bill on MPFS. As a result, CMS will allow impacted sites to continue using the HOPPS schedule for billing (while using a special “PN” modifier on claims).
However, the agency will reimburse them at a special, newly established rate, called the “non-facility MPFS rate” which is set to be equivalent to 50% of the HOPPS rate for each service.uu
3. What sites will be impacted by site-neutral payments?
As the law currently stands, sites meeting three criteria will be impacted by site-neutral payments beginning January 1, 2017.
- Designated as “off-campus,” provider-based sites
- Located at least 250 yards from hospital’s campus
- Acquired or built after November 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. Though current policies only impact a small number of sites, CMS intends to expand the reach of site-neutral payment in the coming years.
4. 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 November 1, 2015 can also bill at the higher HOPPS rate for any services added after that date.
5. What impact will this proposal have on the Emergency Department?
CMS proposes to continue to pay all services furnished at existing and future emergency departments under HOPPS, regardless of whether a given service is emergent in nature.
6. 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:
- CMS is unable to differentiate between multiple HOPD facilities billing under the same hospital tax identification. There is no current mechanism for the agency to tell whether a site meets the criteria for payment reduction under this policy.
Immediate solution: The agency is requiring all impacted sites to submit the modifier "PN" on all claims.
Upcoming solution: CMS is planning to use a new claims form to identify sites that should receive reduced payments. It is soliciting comments from the public on the structure of this form.
- 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: CMS finalized that all impacted HOPDs will be paid on a non-facility MPFS rate that is specifically adjusted to be 50% of the HOPPS rate and billed through the HOPPS system.
Upcoming solution: CMS plans to create a new payment mechanism for impacted sites by 2018.
Why is reimbursement going to be 50% of the HOPPS rate? Is this going to change?
CMS examined all claims from off-campus HOPDS (which were required to use the modifier “PO” on all claims in 2016) from January 1, 2016 to August 26, 2016. This allowed CMS to identify the top 22 codes that were billed, and compare the corresponding 2016 HOPPS and MPFS payment rates.
CMS found that reimbursement under MPFS was, on average, approximately 45% of HOPPS reimbursement. As a result, CMS believes the current rate of 50% may be too high, and intends to continue analyzing claims data to create a more accurate payment adjustment in the future.
Imaging leaders should note that 8 of the top 22 codes most commonly performed at off campus HOPDs are related to imaging. CMS is distinctly aware of discrepancies in payments related to imaging, and is likely to instill broader reimbursement cuts in the future.
8. Is this the last we will hear about site-neutral payment?
This is almost certainly just the beginning of site-neutral payment in health care, as CMS still has the option of expanding site-neutral payment policy through its rulemaking cycle. Currently, CMS is collecting the data it needs to implement MedPAC’s more holistic approach to site-neutral payments.
It is worth noting that imaging, specifically cardiac imaging, was the focus of MedPAC’s approach and is likely to be a focus for future expansion of site-neutral payment.
9. How can imaging leaders prepare for 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 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. With that strategy no longer viable, hospitals and independent physician groups must reconsider clinic acquisition and partnership strategy.