As health system consolidation increases in Michigan and nationally, its impact on pricing is much in the news as is the idea of site neutral payment. With site neutral reimbursement, payers (usually starting with Medicare) pay the same rate for the same service, whether it is provided in a hospital outpatient department (HOPD), ambulatory surgical center (ASC), or freestanding physician office. Now, Medicare pays hospital outpatient departments higher rates than freestanding ambulatory surgical centers and physician offices for providing similar health services. This difference in payment across settings for the same service has created a financial incentive for hospitals to acquire physician practices and other entities.
MedPAC, the independent, non-partisan legislative branch agency that advises the U.S. Congress on the Medicare program, has supported implementation of site-neutral payment since its 2023 report to Congress and recommended that payments be aligned across HOPDs, both on-campus and off, ASCs and physician offices for certain ambulatory payment classification (APC) groups.
Site neutral payment was introduced in a limited way in the Bipartisan Budget Act of 2015 with a wide range of exceptions, but a recent analysis by Post, et. al., (10.1377/hlthaff.2024.00972
HEALTH AFFAIRS 44) NO. 6 (2025): 659–667) found that there were so many exceptions that “the act did little to reduce Medicare spending or hospital-physician integration, suggesting that site-neutral legislation could be strengthened by reducing exceptions.” Hospital and health systems have traditionally opposed expanding site neutral policy and express concern about implications for patients.
However, a recent study by Lou, et. al. (10.1377/hlthaff.2024.01501 HEALTH AFFAIRS 44, NO. 6 (2025): 668–676) thoughtfully assesses the impact of broadening the extent of site level payment and finds that small and rural hospital would absorb the smallest share of cuts and that “site-neutral payments would not have substantially different effects on beneficiary groups defined by dual-eligibility status or age”. Lou and colleagues suggest a nuanced way to implement expanded site neutral policy that protects against undue adverse effects. It is a publication worth a second and third reading as the nation searches for policy solutions.
Michigan Multipayer Initiatives 