Site-neutral payment for routine services could save commercial purchasers and patients billions

Medicare and commercial payers pay more for services delivered in hospital outpatient departments than in physicians' offices or ambulatory surgery centers. These "site-of-care" payment differentials contribute to rising health care spending and drive hospital acquisition of physician practices. Because many non-hospital settings can provide equivalent or higher-quality care at lower costs, site-neutral payment has gained traction in Medicare, with the potential to save patients and taxpayers billions. A growing number of states are exploring similar policies in the commercial market by capping payments for routine services at a percentage of the Medicare payment in non-hospital settings. The impact of such policies for commercial purchasers and patients has not yet been modeled.

This study uses 2022 commercial claims data from the Health Care Cost Institute and estimates potential savings by capping prices for 2561 routine services (Current Procedural Terminology codes) at 150% of the Medicare payment in hospital, office, and ambulatory surgery center settings.

Site-neutral payment for commercial purchasers and patients could save $10.8 billion across 48 states and Washington, D.C. State level aggregate hospital operating margins would decline modestly.

Site-neutral policies could yield substantial savings but require ongoing monitoring for unintended effects.