Spending on outpatient care—the care sufferers obtain in a hospital outpatient division (HOPD), ambulatory surgical middle (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 business payers, employers, and the hundreds of thousands 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 turn out to be off-campus HOPDs which might cost considerably larger 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 larger charges are usually cut up between two payments for traditional workplace visits, with one invoice protecting the well being care skilled’s charge and one other invoice purportedly protecting the hospital’s overhead, which might embrace intensive sources that these sufferers are unlikely to wish. These mixed expenses are significantly larger than the invoice for an workplace go to at a free-standing observe and drive up spending on outpatient care.
Policymakers have recognized site-neutral cost as a potential resolution to this dynamic. The underlying precept of site-neutral cost is that insurance coverage corporations, 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 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 sources suppliers want to supply secure 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 cost in restricted circumstances—however new laws within the New York State Senate would introduce site-neutral cost 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 might be secure and applicable to supply in lower-cost settings, equivalent 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 cost degree.) The invoice would additionally prohibit suppliers from charging an extra facility charge for lined 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 cost embrace 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 applicable for site-neutral cost. APCs, which group companies based mostly 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 further companies which might be secure and applicable to supply in lower-cost settings, these companies could 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 provider, a third-party administrator performing on behalf of a plan sponsor, equivalent to an employer or a labor union, or a nonfederal public plan equivalent 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 companies. Payers additionally wouldn’t be allowed to pay facility charges for lined companies. To make sure that hospitals can not shift these expenses to sufferers, S 9952 would require community contracts to ban suppliers from amassing uncovered expenses associated to the power charge prohibition and site-neutral cost necessities from sufferers themselves.
A typical concern with facility charge bans or different reimbursement modifications for outpatient care is the influence these coverage modifications might have on the viability of rural and safety-net hospitals and different suppliers who might depend upon income from institutional expenses for HOPD-based workplace visits to stay solvent. Underneath 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 business insurers and New York employers and supply vital 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 due to this fact more likely to scale back business spending on the outpatient companies focused by this proposal, though precise financial savings will depend upon 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 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 customers. Customers with high-deductible well being plans, who may be liable for all allowed expenses earlier than they attain their deductible, would straight profit from the proposal’s cap on funds for these outpatient companies in addition to the ban on facility charge expenses. Equally, sufferers with plan designs that embrace separate cost-sharing obligations for outpatient hospital expenses would not owe that cost given the prohibition on facility charges. Customers may see reductions of their medical insurance premiums ought to this reform end in important reductions in outpatient spending. Put up-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 vital insights on site-neutral cost’s impact on hospitals and well being programs. As launched, the proposal exempts rural and financially susceptible suppliers from site-neutral cost necessities, whereas making use of these necessities to the kinds of well being programs 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 out there, will assist reply questions on how these entities reply to site-neutral cost and what influence it might have on facility funds.
Takeaway
If enacted into regulation, S 9952—the primary detailed state-level site-neutral cost proposal for the business market—wouldn’t solely create a brand new mannequin for different states to contemplate 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 modifications it’d undergo earlier than enactment, it creates an vital marker for different states grappling with elevated spending on outpatient companies. Ought to this proposal be carried out, employers, well being plans, and customers might notice financial savings and new monetary protections.