On November 1, 2024, Senators Bill Cassidy (R-LA) and Maggie Hassan (D-NH) released a framework titled “Lowering Health Costs for Seniors Framework” (the Framework). The Framework proposes site-neutral payment for services in off-campus hospital outpatient departments.
The Framework establishes two site-neutral reform options. The first reform option involves eliminating the grandfathering provision of the Bipartisan Budget Act of 2015 and expanding the policy to all hospital-owned sites. The second reform option calls for reimbursing services commonly provided outside of a hospital setting at one rate under Medicare. In the second option, the Secretary of HHS would identify procedures that are performed in a hospital setting, ambulatory surgical center, and physician setting and set the Medicare reimbursement rate based on where the procedure was most commonly and safely performed and apply that single rate to the service regardless of where it was performed.
The second reform option would also involve reinvestment in rural hospitals and high-needs hospitals. Rural hospitals would include Sole Community Hospitals, Low-Volume Hospitals, and Medicare-Dependent Hospitals. High-needs hospitals criteria would potentially include metrics such as the percentage of total payor mix from public payers, charity care, and bad debt; the percentage of dual eligible inpatient days as a percentage of total inpatient days; total uncompensated care per bed above a certain amount; or proximity to a high number of major disaster declarations. The reinvestment mechanism would provide additional Medicare reimbursement bonuses for rural hospitals or high-needs hospital for the following essential services that are often critical but not profitable for rural or high-needs hospitals: Level I or Level II Trauma Center, Obstetrics Department, Burn Unit, Neonatal Intensive Care Unit, and Emergency Psychiatric Services.
The reinvestment mechanism would utilize Medicare alternative payment models as a transitional benefit to hospitals during the implementation of site-neutral payments, including one-sided risk contracts with the Medicare program or two-sided risk contracts with the Medicare program. A one-sided risk contract requires providers to meet quality and spending benchmarks to receive payment bonuses at the end of the year. Two-sided risk contracts require providers to share in the savings they create for the Medicare program or assume financial responsibility for any extra costs to Medicare. The Framework also includes two alternative payment models to encourage hospitals to move toward the two-sided risk contract, as two-sided risk contracts increase provider accountability.
The proposal was released as a policy paper, so many steps remain before the Framework would become law, but site-neutral policies could be used as “pay-fors” in future budget cycles.
The full Framework is available here.
