Site-Neutral Payment Reform: Little Impact On Outpatient Medicare Spending Or Hospital-Physician Integration

Medicare pays hospital outpatient departments higher rates than physician-owned practices, leading to higher spending and incentivizing hospitals to acquire physician practices. The Bipartisan Budget Act of 2015 introduced site-neutral payments for new outpatient departments but excepted existing ones. To evaluate the impact of this law, we analyzed 2013-20 Medicare claims data, comparing spending under site-neutral rates with spending under site-based rates and using difference-in-differences analysis to assess the effect on hospital-physician integration. During the period 2017-20, most Medicare payments were unaffected by the Bipartisan Budget Act: Only 1.5 percent of outpatient department spending occurred at site-neutral facilities. Counties subject to the Bipartisan Budget Act did not show a statistically significant difference in the percentage of hospital-integrated physicians (2020 estimate: -0.2 percentage points). The act did little to reduce Medicare spending or hospital-physician integration, suggesting that site-neutral legislation could be strengthened by reducing exceptions.