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 among the quickest rising parts of well being care prices. A brand new proposal in New York State seeks to rein on this spending for industrial payers, employers, and the tens of millions of customers 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 unbiased doctor practices or different outpatient suppliers. As soon as acquired, these newly affiliated practices successfully grow to be off-campus HOPDs which might cost considerably larger costs for a similar providers, because the well being system they now belong to can leverage its market energy in charge negotiations with insurers. These larger charges are usually break up between two payments for traditional workplace visits, with one invoice masking the well being care skilled’s payment and one other invoice purportedly masking the hospital’s overhead, which might embody intensive assets that these sufferers are unlikely to want. These mixed prices are significantly larger than the invoice for an workplace go to at a free-standing follow and drive up spending on outpatient care.
Policymakers have recognized site-neutral cost as a potential answer to this dynamic. The underlying precept of site-neutral cost is that insurance coverage corporations, public packages, 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 cost quantity for a given service is predicated 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 offer secure and applicable care, however not the upper overhead prices or pricing energy emblematic of hospital-affiliated settings. Amongst main medical insurance packages, solely Medicare makes use of site-neutral cost in restricted circumstances—however new laws within the New York State Senate would introduce site-neutral cost to the New York industrial 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 places of work, and pressing care clinics, to invoice not more than 150 p.c of what Medicare would pay for an outlined set of outpatient providers which can be secure and applicable to offer in lower-cost settings, comparable to a doctor’s workplace or ASC. (Suppliers would invoice on the charge they’ve negotiated with industrial payers if this charge is lower than 150 p.c of Medicare’s cost stage.) The invoice would additionally prohibit suppliers from charging an extra facility payment for coated providers. These billing limits apply to in- and out-of-network care and to care supplied to folks with out medical insurance.
Providers recognized for site-neutral cost embody analysis and administration providers, wellness visits, and the 66 ambulatory cost classifications (APCs) the Medicare Fee Advisory Fee (MedPAC) recognized in a 2023 report as applicable for site-neutral cost. APCs, which group providers primarily based on medical and price similarity with a single cost charge assigned to every APC, are the muse for Medicare’s outpatient potential cost system (OPPS). The invoice additionally anticipates that ought to New York State, the federal authorities, or MedPAC determine extra providers which can be secure and applicable to offer in lower-cost settings, these providers can be enfolded into the state’s site-neutral cost 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 provided by an insurance coverage service, a third-party administrator performing on behalf of a plan sponsor, comparable to an employer or a labor union, or a nonfederal public plan comparable to a state worker well being profit plan—should specify that plans is not going to pay larger charges for this outlined set of outpatient providers. Payers additionally wouldn’t be allowed to pay facility charges for coated providers. To make sure that hospitals can’t shift these prices to sufferers, S 9952 would require community contracts to ban suppliers from accumulating uncovered prices associated to the ability payment prohibition and site-neutral cost necessities from sufferers themselves.
A typical concern with facility payment bans or different reimbursement adjustments for outpatient care is the impression these coverage adjustments could have on the viability of rural and safety-net hospitals and different suppliers who could rely upon income from institutional prices for HOPD-based workplace visits to stay solvent. Below this proposal, new site-neutral billing and cost necessities wouldn’t apply to public hospitals, sole neighborhood hospitals, crucial entry hospitals, rural emergency hospitals, and safety-net hospitals, nor to federally certified well being facilities.
Potential for Shopper, Employer, and Well being Plan Financial savings
As launched, the invoice is more likely to generate financial savings for industrial insurers and New York employers and supply necessary protections for customers. Based on an evaluation by RAND, costs for outpatient providers in New York State averaged 304 p.c relative to Medicare in 2022. A cost cap of 150 p.c of Medicare charges is due to this fact more likely to cut back industrial spending on the outpatient providers focused by this proposal, though precise financial savings will rely upon each present negotiated charges for this set of providers, and whether or not negotiated charges for different providers, not included on this reform, finally enhance in response. These financial savings would accrue to insurance policy, employers, and different plan sponsors. For instance, 32BJ Well being Fund, a union-sponsored profit plan, estimates that it could 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 customers. Shoppers with high-deductible well being plans, who could be liable for all allowed prices earlier than they attain their deductible, would instantly profit from the proposal’s cap on funds for these outpatient providers in addition to the ban on facility payment prices. Equally, sufferers with plan designs that embody separate cost-sharing obligations for outpatient hospital prices would now not owe that cost given the prohibition on facility charges. Shoppers may see reductions of their medical insurance premiums ought to this reform lead to important reductions in outpatient spending. Submit-implementation evaluation of this proposal’s financial savings results on insurers, employers, and customers would inform future site-neutral cost efforts.
Monitoring Results on Well being Care Suppliers
Equally, enactment and implementation of S 9952 would supply necessary insights on site-neutral cost’s impact on hospitals and well being techniques. As launched, the proposal exempts rural and financially weak suppliers from site-neutral cost necessities, whereas making use of these necessities to the kinds of well being techniques 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 cost and what impression it could have on facility funds.
Takeaway
If enacted into regulation, S 9952—the primary detailed state-level site-neutral cost proposal for the industrial market—wouldn’t solely create a brand new mannequin for different states to think about however would additionally present important real-world expertise with site-neutral cost. Whereas it’s too early to know whether or not S 9952 will cross the New York legislature, and what adjustments it’d undergo earlier than enactment, it creates an necessary marker for different states grappling with elevated spending on outpatient providers. Ought to this proposal be applied, employers, well being plans, and customers could notice financial savings and new monetary protections.
