HomeHealth Care NewsBipartisan Deal Removes Medicare Loophole

Bipartisan Deal Removes Medicare Loophole

With Medicare facing insolvency before the end of the decade, a bipartisan trio of senators is proposing savings by reforming the sprawling program’s billing practices.

Sens. Mike Braun (R-IN), Maggie Hassan (D-NH), and John Kennedy (R-LA) introduced the Site-based Invoicing and Transparency Enhancement (SITE) Act. Their bill would adopt some site-neutral payments in Medicare and increase the transparency of hospital billing, according to their joint press release on June 12.

“Due to Medicare’s billing structure, even if care is received at an off-campus outpatient facility, it can be billed as though the care was provided at the main hospital campus,” states the press release. “This means the higher hospital rate is charged.

“This issue has become more prevalent as more and more small physician-owned practices and off-campus facilities are acquired by larger hospital systems,” the press release states. “In 2020, the Congressional Budget Office estimated that taxpayers will pay close to $40 billion in excess costs to Medicare due to exorbitant facility fee payments over the next decade.”

The billing practice, and the resulting higher costs, is rooted in a provision of the 2015 Bipartisan Budget Act. That law established “site-neutral” payments under Medicare for services received at off-campus outpatient facilities but exempted most hospitals.

Key Provisions

The SITE Act (S. 1869) “would end the 2015 Bipartisan Budget Act site-neutral exceptions, prevent off-campus emergency departments from charging higher rates from on-campus emergency departments when standalone emergency facilities are located in close proximity to a hospital campus,” states the press release.

In addition, the bill would “…require that health systems establish and bill using a unique National Provider Identifier number for each and every off-campus outpatient department, direct [the U.S. Department of Health and Human Services] to treat outpatient departments as subparts of the parent organization and to issue these subparts unique provider identifiers, and remove liability for services rendered for payers that are not billed in accordance with this section’s requirements.”

Savings earned from the revisions to Medicare billing practices would go toward filling the shortage of nurses by creating a graduate nursing education program that would provide payments to cover the costs of training.

“Granite staters who have been going to the same doctor for years are experiencing sticker shock when a hospital acquires a doctor’s office or clinic and all of a sudden and starts charging extra fees for the same service,” Hassan stated. “Our bipartisan bill takes on the health care industry to eliminate unfair fees, lower costs for patients, and save taxpayer dollars—and then we use these savings to invest in the in the health care workforce.”

Gaming the System

“Hospitals are gaming the system to charge Louisiana patients and taxpayers more for outpatient, off-site care,” Kennedy stated. “That’s wrong, and I’m proud to work with Sens. Braun and Hassan to make it right by correcting Medicare’s billing policy.”

 The nonpartisan Committee for a Responsible Federal Budget stated that “adopting site-neutral payments will reduce the incentive for hospital consolidation, which can help lower overall costs and improve quality of care,” in a press release supporting the SITE Act. “Furthermore, commercial insurance payment practices often follow Medicare’s lead; site-based payments are no exception.”

Price Control Problem

 The site-neutrality issue is part of the larger problem of Medicare price controls, says Merrill Mathews, resident scholar at the Texas-based Institute for Policy Innovation.

“The Medicare site-neutrality issue is an old story in a new setting,” said Matthews. “When government imposes price controls, which is what Medicare does, the affected parties seek to game the system, to maximize their income.

“Hospitals had been buying up physician practices for years to take advantage of the higher fees hospitals can charge,” said Matthews. “The Affordable Care Act exacerbated the practice. Congress tried to address the issue in 2015, but hospitals found other ways to continue charging higher hospital rates.

“The SITE Act is yet another attempt to counteract the economic incentives that are created when price controls are imposed. If it passes, it may work for a while, but it is a reasonable assumption that hospitals will find other ways to game the system.”

Bonner Russell Cohen, Ph.D. (bcohen@nationalcenter.org) is a senior fellow at the National Center for Public Policy Research.

Bonner R Cohen
Bonner R Cohen
Bonner R. Cohen is a senior fellow with the National Center for Public Policy Research, a position he has held since 2002.

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