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 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 motive 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 change into off-campus HOPDs which might cost considerably increased costs for a similar companies, because the well being system they now belong to can leverage its market energy in price negotiations with insurers. These increased charges are sometimes cut up between two payments for normal 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 sources that these sufferers are unlikely to want. These mixed prices are significantly increased 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 cost as a doable answer to this dynamic. The underlying precept of site-neutral cost is that insurance coverage firms, public applications, and different payers would pay the identical price 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 relies on the quantity insurers pay for care within the most-efficient, lowest-price setting and subsequently displays the sources suppliers want to supply secure and acceptable care, however not the upper overhead prices or pricing energy emblematic of hospital-affiliated settings. Amongst main medical health insurance applications, 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 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 are secure and acceptable to supply in lower-cost settings, reminiscent of a doctor’s workplace or ASC. (Suppliers would invoice on the price they’ve negotiated with industrial payers if this price 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 companies. These billing limits apply to in- and out-of-network care and to care offered to folks with out medical health insurance.
Companies recognized for site-neutral cost embody analysis and administration companies, wellness visits, and the 66 ambulatory cost classifications (APCs) the Medicare Cost Advisory Fee (MedPAC) recognized in a 2023 report as acceptable for site-neutral cost. APCs, which group companies primarily based on scientific and price similarity with a single cost price assigned to every APC, are the inspiration 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 companies which are secure and acceptable to supply in lower-cost settings, these companies 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 supplied by an insurance coverage provider, a third-party administrator appearing on behalf of a plan sponsor, reminiscent of an employer or a labor union, or a nonfederal public plan reminiscent of a state worker well being profit plan—should specify that plans won’t pay increased 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’t shift these prices to sufferers, S 9952 would require community contracts to ban suppliers from gathering 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 affect these coverage adjustments could have on the viability of rural and safety-net hospitals and different suppliers who could rely on income from institutional prices for HOPD-based workplace visits to stay solvent. Beneath this proposal, new site-neutral billing and cost necessities wouldn’t apply to public hospitals, sole neighborhood hospitals, essential 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 essential protections for customers. Based on an evaluation by RAND, costs for outpatient companies in New York State averaged 304 p.c relative to Medicare in 2022. A cost cap of 150 p.c of Medicare charges is subsequently more likely to cut back industrial spending on the outpatient companies focused by this proposal, though precise financial savings will rely on each present negotiated charges for this set of companies, and whether or not negotiated charges for different companies, not included on this reform, in the end improve 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 will have saved $31 million, or two p.c of its complete well being profit expenditures, in 2022 if this price cap had been in place.
This proposal may additionally present actual monetary safety to customers. Shoppers with high-deductible well being plans, who might be chargeable for all allowed prices 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 payment prices. Equally, sufferers with plan designs that embody separate cost-sharing obligations for outpatient hospital prices would not owe that cost given the prohibition on facility charges. Shoppers might also see reductions of their medical health insurance premiums ought to this reform lead to vital 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 offer essential insights on site-neutral cost’s impact on hospitals and well being methods. As launched, the proposal exempts rural and financially susceptible suppliers from site-neutral cost 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 information, and its associated name to the state that these information be made publicly out there, will assist reply questions on how these entities reply to site-neutral cost and what affect it might 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 contemplate however would additionally present vital 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 essential marker for different states grappling with elevated spending on outpatient companies. Ought to this proposal be applied, employers, well being plans, and customers could notice financial savings and new monetary protections.
