By Dr. Jack Feltz and Dr. Michael Hagg
Most people over a certain age are familiar with going in for a colonoscopy, a routine method of screening for and preventing colon cancer. What they might not know is that the cost of the procedure can vary wildly depending on where they get it done.
The problem is that Medicare — the taxpayer-funded health insurer for Americans 65 and above — pays hospitals significantly more for common procedures than it pays physicians in private practices or ambulatory surgery centers.
This discrepancy contributes to the swelling cost of health care in our country. It’s also compelled hospitals to acquire physician practices in increasing numbers. That saps competition, results in higher prices, and leaves patients with fewer options.
Medicare pays more to hospitals for a long list of procedures. In addition to cancer screenings, these include x-rays, chemotherapy infusions, and heart-imaging procedures like echocardiograms and nuclear cardiology, as well as follow-up appointments.
The current system is good for hospitals’ bottom lines. But it’s bad for everyone else. Medicare serves some 66 million older Americans. Multiply the price of millions of procedures by two or more, and the cost to the federal government adds up.
This system of unequal payments has other negative impacts, too. For example, it requires Medicare to keep seniors’ monthly premiums higher than they need to be. MedPAC estimated that switching to site-neutral payments — in which the federal government pays the same for procedures no matter where they’re performed — would have saved Medicare beneficiaries $1.5 billion in 2021.
And since private insurers use Medicare reimbursements as the basis for their own payments, premiums for their beneficiaries are higher than they need to be as well. The insurance company Blue Cross Blue Shield estimates that site-neutral reforms would save people with private insurance $117 billion a year in premiums.
The double standard has encouraged hospitals to gobble up freestanding clinics and small practices so that they can charge Medicare more, according to MedPAC. As soon as a hospital completes an acquisition, it starts billing for the clinic’s services at the hospital rate — without even making changes that might justify a higher price.
Ultimately, this consolidation leaves patients with fewer options to choose from when deciding on providers. And if all the health facilities in a community end up owned by the same hospital or health system, then there’s no competition to drive better quality or pricing for patients.
The solution is for Medicare to establish site-neutral payments. Such reforms would disincentivize large hospital groups from buying up independent outpatient clinics or the surgery centers where doctors in private practice perform procedures.
In the bigger picture, site-neutral payments would decrease overall healthcare spending. According to the American Action Forum, adopting them would save Medicare $153 billion over 10 years and the healthcare system as a whole $672 billion.
It makes little sense to pay hospitals many times more than physicians for equivalent work. Implementing site-neutral payments would make patients, taxpayers, and the healthcare system as a whole much better off.
Dr. Jack Feltz is an OB/GYN and Federal Health Policy Chair for the American Independent Medical Practice Association. Dr. Michael Hagg is a urologist and President of the Pennsylvania Independent Physician Practice Association.