Medicare Proposal to Cut Costs by Reducing Payment Disparities

Understanding the Proposal

The Centers for Medicare & Medicaid Services (CMS) have introduced a proposal that aims to lower costs for certain beneficiaries. This change targets a payment disparity that leads patients to pay higher prices for the same service based on service location. As part of CMS’s proposed 2027 outpatient payment rule, this proposal suggests expanding ‘site-neutral’ payments for specific imaging services at hospital-owned outpatient facilities, including X-rays, CT, and MRI scans.

According to CMS estimates, this modification could reduce beneficiary cost-sharing by approximately $70 million in 2027. Additionally, it could lower Medicare spending by around $260 million.

Current Payment Disparities

Medicare has a history of paying more for outpatient services performed in hospital-owned outpatient departments than in physician offices or ambulatory surgery centers. Such higher payments often lead to increased coinsurance costs for Medicare beneficiaries.

Implications and Objectives

CMS intends to prevent beneficiaries from facing higher premiums and cost-sharing based solely on where care is provided. The proposal would expand an existing policy that covers some clinic visits and drug-administration services performed at off-campus hospital outpatient departments. For 2027, the policy aims to include imaging services done without contrast, like X-rays, CT scans, and MRIs.

Alex Beene, a financial literacy instructor at the University of Tennessee at Martin, stated that site-neutral payments indicate Medicare’s stance that similar services should not cost significantly more just because they occur in a hospital-owned department rather than in a doctor’s office.

Exemptions and Possible Challenges

Medicare plans to pay for these services at rates comparable to those under the physician fee schedule, exempting Rural Sole Community Hospitals from this policy. Kevin Thompson, CEO of 9i Capital Group, noted that competition is a driving factor. Hospitals have expanded by acquiring independent practices, resulting in diminished competition.

Potential Savings for Patients

Beneficiaries could save money through reduced coinsurance obligations. Medicare patients usually pay a portion of the approved amount for outpatient services. This proposal aims to decrease the financial burden by reducing payment differences for services at hospital-owned outpatient facilities.

Michael Ryan, a finance expert, suggests that beneficiaries using repeated imaging services could see substantial savings over time. CMS estimates nearly $190 million in Medicare Part B savings, $70 million in reduced beneficiary premiums, and $70 million in lower cost-sharing obligations for 2027.

Average Savings Per Beneficiary

While CMS projects $70 million in reduced cost-sharing and $70 million in lowered premiums, exact savings per beneficiary remain uncertain. Recipients who receive imaging services at hospital-owned outpatient facilities could benefit the most.

Thompson highlighted the difficulty of implementing site-neutral payments due to economic factors and the trend of independent practices being acquired for financial incentives.

Implementation Chances and Next Steps

The proposal was released on July 2 as part of CMS’s 2027 outpatient payment rule. Public comments are being collected before a final rule is issued. Given the existing site-neutral payment policies for clinic visits and drug administration services, this proposal has a higher likelihood of being finalized.

Previous opposition by hospitals to site-neutral payment efforts focuses on the additional costs faced by hospital systems compared to physician offices. Broader reform could face challenges as Congress considers patient costs and community access concerns.

Upcoming Actions

CMS will review public comments on the proposed rule before issuing a final version for 2027. If implemented, changes to imaging payments will take effect that year, applying to services at specific off-campus hospital outpatient departments.