Hussain: Site-neutral reforms are the key to cutting healthcare costs

Would you buy hamburger for the price you pay for filet mignon? Apparently, you would if you were the federal government.

The Medicare program reimburses physicians affiliated with hospitals at higher rates — sometimes two to three times higher — than they reimburse independent physicians … for the same service. These services include things like chemotherapy, cardiac imaging and colonoscopies.

Since Medicare pays more to hospital-affiliated doctors for the same routine services, all patients end up paying more through higher premiums and out-of-pocket expenses. Why? Because private insurers base their rates on a percentage of what Medicare pays.

In other words, when Medicare’s costs increase, everyone’s costs increase. Medicare reimburses hospitals 141 percent more than an independent physician’s office for chemotherapy infusion. In Dallas, Medicare paid a doctor’s office $375 for a heart muscle image but paid a hospital $1,300 for the same thing.

The major hospital lobbies oppose site neutrality, claiming that the new legislation will disproportionately harm rural hospitals. However, such claims are primarily theoretical and conveniently ignore that existing policies promote hospital consolidation, which creates regional monopolies and higher prices at the expense of patients and taxpayers. Paying more to hospital-affiliated doctors encourages hospitals to acquire or merge with outpatient facilities to capture higher reimbursements from Medicare.

Site neutrality is precisely what it sounds like. Regardless of the location, the service is reimbursed at the same rate that “reasonably efficient providers would incur in furnishing high-quality care.” It is a central plank of the health transparency reform package that overwhelmingly passed in the House in December, overcoming bitter party divisions and winning bipartisan support. The Senate would be wise to follow suit.

Site neutrality would increase competition by slowing hospital consolidations. With more doctor offices remaining independent and with lower reimbursement rates, hospitals will be forced to become competitive and lower costs.

The Committee for a Responsible Federal Budget estimates site neutrality could save Medicare $117 billion over 10 years. With the Congressional Budget Office recently reporting that the deficit will double to $2 trillion this fiscal year, we need to do all we can to lower government spending, and site neutrality should be an easy call.

Lowering healthcare spending benefits everyone, from helping taxpayers to increasing the GDP and paying the debt. Indeed, Blue Cross/Blue Shield claims site neutrality “could save our patients, businesses, and taxpayers nearly $500 billion” in a decade. The CRFB says it would lower healthcare spending by $458 billion.

Site neutrality would also help address other drivers of ever-increasing healthcare costs for American patients. Hospital consolidation is a big problem, with research showing it leads to fewer services at higher prices.

The favorable payouts Medicare gives to hospital systems have flooded them with money to acquire more private practices.

In many localities, hospital consolidation and mergers threaten to produce regional healthcare monopolies. And many state governments have left hospital systems “immune” from antitrust enforcement.

Given these factors, it isn’t surprising that the United States had the highest healthcare spending of any country, primarily attributed to reduced competition and market inefficiencies. Site neutrality legislation may be one of the last areas where government agencies can meaningfully reign in the astronomical cost of hospital care.

MedPAC, the nonpartisan agency established to advise Congress on the Medicare program, recommended in its June 2023 report that Congress “more closely align payment rates across ambulatory settings for selected services that are safe and appropriate to provide in all settings and when doing so does not pose a risk to access.” All 17 commissioners — Republicans and Democrats — were in agreement.

Ultimately, legislators, industry experts and patients agree that site neutrality is the common-sense answer to high healthcare expenses.

The American people expect their government to spend their taxpayer dollars wisely. They know if you buy a hamburger, you should pay the price of hamburger, not filet mignon. It is time for Congress to make site neutrality the new standard for Medicare reimbursement.

Dr. Aamir Hussain is a dermatology physician in northern Virginia.