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 without doubt 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 industrial payers, employers, and the tens of millions of shoppers 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 turn out to be off-campus HOPDs which might cost considerably greater costs for a similar providers, because the well being system they now belong to can leverage its market energy in fee negotiations with insurers. These greater charges are usually cut up between two payments for normal workplace visits, with one invoice protecting the well being care skilled’s price and one other invoice purportedly protecting the hospital’s overhead, which might embody intensive sources that these sufferers are unlikely to wish. 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 cost as a potential resolution to this dynamic. The underlying precept of site-neutral cost is that insurance coverage firms, public packages, and different payers would pay the identical fee 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 protected and applicable care, however not the upper overhead prices or pricing energy emblematic of hospital-affiliated settings. Amongst main medical health 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 might be protected and applicable to supply in lower-cost settings, comparable to a doctor’s workplace or ASC. (Suppliers would invoice on the fee they’ve negotiated with industrial payers if this fee is lower than 150 p.c of Medicare’s cost stage.) The invoice would additionally prohibit suppliers from charging an extra facility price for coated providers. These billing limits apply to in- and out-of-network care and to care supplied to folks with out medical health 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 scientific and price similarity with a single cost fee 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 further providers which might be protected and applicable to supply 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 provider, a third-party administrator appearing 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 greater 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 costs to sufferers, S 9952 would require community contracts to ban suppliers from accumulating uncovered costs associated to the power price prohibition and site-neutral cost necessities from sufferers themselves.
A standard concern with facility price bans or different reimbursement modifications for outpatient care is the impression these coverage modifications might have on the viability of rural and safety-net hospitals and different suppliers who might depend upon income from institutional costs 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 group hospitals, crucial 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 industrial insurers and New York employers and supply essential protections for shoppers. In keeping with 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 scale back industrial spending on the outpatient providers focused by this proposal, though precise financial savings will depend upon each present negotiated charges for this set of providers, and whether or not negotiated charges for different providers, 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 could have saved $31 million, or two p.c of its whole well being profit expenditures, in 2022 if this fee cap had been in place.
This proposal may additionally present actual monetary safety to shoppers. Customers with high-deductible well being plans, who might be accountable for all allowed costs earlier than they attain their deductible, would straight profit from the proposal’s cap on funds for these outpatient providers 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 cost given the prohibition on facility charges. Customers might also see reductions of their medical health insurance premiums ought to this reform lead to important reductions in outpatient spending. Put up-implementation evaluation of this proposal’s financial savings results on insurers, employers, and shoppers 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 sorts 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 obtainable, will assist reply questions on how these entities reply to site-neutral cost and what impression it might have on facility funds.
Takeaway
If enacted into legislation, 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 important real-world expertise with site-neutral cost. Whereas it’s too early to know whether or not S 9952 will move the New York legislature, and what modifications it would undergo earlier than enactment, it creates an essential marker for different states grappling with elevated spending on outpatient providers. Ought to this proposal be applied, employers, well being plans, and shoppers might understand financial savings and new monetary protections.
