Hospital Outpatient Departments Are Different from Independent Physician Offices

Every health care provider strives to deliver their patients the best possible care, but not all providers offer the same level or complexity of care. Current Medicare payment rates recognize the fundamental differences between patient care delivered in hospital outpatient departments compared to other settings. Any expansion of so-called site-neutral payment cuts will result in limiting or eliminating critical hospital-based care, increased wait times for services and reduced access to care for all patients.

A new study the AHA released this month conducted by KNG Health Consulting further highlights these differences. It shows that Medicare patients who receive care in a hospital outpatient department are more likely to come from geographically isolated and medically underserved communities and be sicker and more complex to treat than Medicare patients treated in independent physician offices.

Specifically, the study found that Medicare patients — including those with cancer — who are seen in hospital outpatient departments are more likely to be:

• From rural and lower-income areas.
• Living with more severe chronic conditions.
• Dually-eligible for both Medicare and Medicaid.
• Previously hospitalized or cared for in a hospital emergency department.
• Under 65 and eligible for Medicare based on disability.

The study’s findings reinforce prior research on the repercussions of flawed site-neutral payment policies and underscore why reimbursing hospitals and health systems the same as independent physician offices would put patient access to care at risk.

Such proposals fail to recognize the many legitimate and important differences in the types of services hospitals provide — as well as the types of patients and communities hospitals serve — compared to other providers. Unlike other providers, hospitals maintain standby capacity for natural and man-made disasters, public health emergencies, other unexpected traumatic events, and the delivery of around-the-clock complex and emergency care to all who come through their doors, regardless of ability to pay or insurance status.

Despite increased expenses for hospitals in delivering care to patients, Medicare reimbursement continues to lag behind inflation — covering just 83 cents for every dollar spent by hospitals in 2023, resulting in over $100 billion in underpayments, according to AHA analysis of AHA Annual Survey data. From 2022 to 2024, general inflation rose by 14.1%, while Medicare net inpatient payment rates increased by only 5.1% — amounting to an effective payment cut.

Hospitals play a unique and irreplaceable role in caring for patients in all communities, but especially in rural and other medically underserved areas. Additional site-neutral cuts will exacerbate the challenges hospitals are experiencing and lead to more hospitals reducing services or closing.

Rejecting proposals that would implement additional so-called site-neutral cuts continues to be a top priority for the AHA. Please visit our webpage for several resources that can assist your advocacy efforts on this important issue.