Spending on outpatient care—the care sufferers obtain in a hospital outpatient division (HOPD), ambulatory surgical heart (ASC), or a free-standing doctor workplace—is likely one of the quickest rising elements of well being care prices. A brand new proposal in New York State seeks to rein on this spending for business payers, employers, and the thousands and thousands of shoppers they insure.
Background
One purpose for elevated spending on outpatient care is the vertical integration of well being care markets, which happens when hospitals purchase impartial doctor practices or different outpatient suppliers. As soon as acquired, these newly affiliated practices successfully turn out to be off-campus HOPDs which might cost considerably greater costs for a similar companies, because the well being system they now belong to can leverage its market energy in charge negotiations with insurers. These greater charges are usually cut up between two payments for normal workplace visits, with one invoice overlaying the well being care skilled’s price and one other invoice purportedly overlaying the hospital’s overhead, which might embody intensive assets that these sufferers are unlikely to want. These mixed costs are significantly greater than the invoice for an workplace go to at a free-standing apply and drive up spending on outpatient care.
Policymakers have recognized site-neutral fee as a attainable resolution to this dynamic. The underlying precept of site-neutral fee is that insurance coverage firms, public applications, and different payers would pay the identical charge no matter whether or not the affected person receives care at an HOPD, an ASC, or a free-standing doctor’s workplace. This single fee quantity for a given service relies on the quantity insurers pay for care within the most-efficient, lowest-price setting and due to this fact displays the assets suppliers want to supply protected and applicable care, however not the upper overhead prices or pricing energy emblematic of hospital-affiliated settings. Amongst main medical insurance applications, solely Medicare makes use of site-neutral fee in restricted circumstances—however new laws within the New York State Senate would introduce site-neutral fee to the New York business market for a subset of outpatient care.
New York’s Laws
As launched by State Senator Liz Krueger, S 9952 would require well being care suppliers, together with hospitals, doctor workplaces, and pressing care clinics, to invoice not more than 150 p.c of what Medicare would pay for an outlined set of outpatient companies which can be protected and applicable to supply in lower-cost settings, similar to a doctor’s workplace or ASC. (Suppliers would invoice on the charge they’ve negotiated with business payers if this charge is lower than 150 p.c of Medicare’s fee degree.) The invoice would additionally prohibit suppliers from charging an extra facility price for coated companies. These billing limits apply to in- and out-of-network care and to care offered to folks with out medical insurance.
Companies recognized for site-neutral fee embody analysis and administration companies, wellness visits, and the 66 ambulatory fee classifications (APCs) the Medicare Cost Advisory Fee (MedPAC) recognized in a 2023 report as applicable for site-neutral fee. APCs, which group companies based mostly on medical and value similarity with a single fee charge assigned to every APC, are the muse for Medicare’s outpatient potential fee system (OPPS). The invoice additionally anticipates that ought to New York State, the federal authorities, or MedPAC determine further companies which can be protected and applicable to supply in lower-cost settings, these companies can be enfolded into the state’s site-neutral fee requirement.
This proposal additionally stipulates that community contracts between well being care suppliers and well being profit plans—outlined within the invoice as a plan supplied by an insurance coverage service, a third-party administrator appearing on behalf of a plan sponsor, similar to an employer or a labor union, or a nonfederal public plan similar to a state worker well being profit plan—should specify that plans won’t pay greater charges for this outlined set of outpatient companies. Payers additionally wouldn’t be allowed to pay facility charges for coated companies. To make sure that hospitals can not shift these costs to sufferers, S 9952 would require community contracts to ban suppliers from gathering uncovered costs associated to the ability price prohibition and site-neutral fee necessities from sufferers themselves.
A standard concern with facility price bans or different reimbursement adjustments for outpatient care is the affect these coverage adjustments could have on the viability of rural and safety-net hospitals and different suppliers who could rely upon income from institutional costs for HOPD-based workplace visits to stay solvent. Beneath this proposal, new site-neutral billing and fee necessities wouldn’t apply to public hospitals, sole neighborhood hospitals, important entry hospitals, rural emergency hospitals, and safety-net hospitals, nor to federally certified well being facilities.
Potential for Client, Employer, and Well being Plan Financial savings
As launched, the invoice is more likely to generate financial savings for business insurers and New York employers and supply vital protections for shoppers. In response to an evaluation by RAND, costs for outpatient companies in New York State averaged 304 p.c relative to Medicare in 2022. A fee cap of 150 p.c of Medicare charges is due to this fact more likely to cut back business spending on the outpatient companies focused by this proposal, though precise financial savings will rely upon each present negotiated charges for this set of companies, and whether or not negotiated charges for different companies, not included on this reform, finally enhance in response. These financial savings would accrue to insurance coverage, employers, and different plan sponsors. For instance, 32BJ Well being Fund, a union-sponsored profit plan, estimates that it will have saved $31 million, or two p.c of its whole well being profit expenditures, in 2022 if this charge cap had been in place.
This proposal might additionally present actual monetary safety to shoppers. Customers with high-deductible well being plans, who may be chargeable for all allowed costs earlier than they attain their deductible, would instantly profit from the proposal’s cap on funds for these outpatient companies in addition to the ban on facility price costs. Equally, sufferers with plan designs that embody separate cost-sharing obligations for outpatient hospital costs would now not owe that fee given the prohibition on facility charges. Customers can also see reductions of their medical insurance premiums ought to this reform end in vital reductions in outpatient spending. Submit-implementation evaluation of this proposal’s financial savings results on insurers, employers, and shoppers would inform future site-neutral fee efforts.
Monitoring Results on Well being Care Suppliers
Equally, enactment and implementation of S 9952 would supply vital insights on site-neutral fee’s impact on hospitals and well being methods. As launched, the proposal exempts rural and financially weak suppliers from site-neutral fee necessities, whereas making use of these necessities to the varieties of well being methods which have pushed vertical integration of the supply system. The invoice’s reporting necessities for pricing and utilization knowledge, and its associated name to the state that these knowledge be made publicly obtainable, will assist reply questions on how these entities reply to site-neutral fee and what affect it might have on facility funds.
Takeaway
If enacted into legislation, S 9952—the primary detailed state-level site-neutral fee proposal for the business market—wouldn’t solely create a brand new mannequin for different states to think about however would additionally present vital real-world expertise with site-neutral fee. Whereas it’s too early to know whether or not S 9952 will move the New York legislature, and what adjustments it would undergo earlier than enactment, it creates an vital marker for different states grappling with elevated spending on outpatient companies. Ought to this proposal be applied, employers, well being plans, and shoppers could understand financial savings and new monetary protections.
