Latest / Off the Chart: A Business of Medicine Podcast / S1 Ep125: Site-neutral payment and independent practice, with Christopher M. Whaley, Ph.D.
Transcript
- 0:00 I think the key question is, is, you know, the kind of the genie out of the bottle, if you will, and can we actually go back towards having more independent physician practices? You 0:20 Austin, welcome to off the chart, a business of medicine podcast featuring lively and informative conversations with healthcare experts, opinion leaders and practicing physicians about the challenges facing doctors and medical practices. My name is Austin Luttrell. I'm the associate editor of medical economics, and I'd like to thank you for joining us today before we get started. Just a quick note, physicians practice will be hosting its practice Academy event on March 19. The new practice management track is a virtual learning experience designed for physicians and practice administrators who want to build stronger, more efficient, more resilient practices. It focuses on practical, real world strategies that you can apply right away from optimizing operations to adapting to an evolving healthcare landscape. You can register today by clicking the link in the show notes or by going to registration.physicianspractice.com. That said in today's episode at medical economics, senior editor Richard perryton sat down with Dr Christopher Whaley, an associate professor in the Department of Health Services, policy and practice at the Brown University School of Public Health, they're talking about site neutral payment policy and what it can mean for physician reimbursement, hospital consolidation and Medicare spending in 2026 Whaley explains why Medicare often pays dramatically different rates for the same service depending on where it's delivered, how those differences of fueled hospital acquisition of physician practices, and why momentum towards site neutrality might be building. Dr Christopher Whaley, thank you again for joining us, and now let's get into the episode. 1:40 Professor Whaley, thank you for joining us 1:42 today. Thank you, Richard and great to talk 1:46 the title of your article that came out in late 2025 is a promising step towards site neutrality. What the 2026 opps and ASC rule gets right and what's still missing? In your own words, what's one of the things that's going right for payment in 2026 2:03 that's a great question. And so just to take a step back, I think one of the curious things of the healthcare system is that many payers, driven by Medicare, but also spilling over to many commercial insurers, pay for the exact same service, whether it's done in a hospital or a non hospital setting quite a bit differently. And so if you look at the Medicare system, a standard procedure, whether it's a imaging test like an MRI or lab test, or even a surgical procedure like a colonoscopy, are paid roughly double if they're done in a hospital versus non hospital setting. This has been a, I think, a pretty strong driver of both increased spending in the Medicare program, as well as among commercial insurers, and it's also been a strong driver of why the health care system in the United States is so consolidated. So if you're a hospital or health care system, you can go out and acquire a physician practice and say, now that you're now my employee, send all your referrals back to me as a hospital system where we can bill Medicare double the rate. And so that's a key reason why over half of us physicians work for a hospital healthcare system. And so this has been a, I think, a pretty key driver of the Medicare system for many years. And Medicare has through a variety of channels, whether it's the Medicare payment Advisory Commission or internal CMS reports, has thought about reforming this payment and saying, if a service can be done safely in a variety of settings, we're just going to pay a single rate for that that that setting and kind of let the delivery system, if you will, shake itself out. And so what Medicare recently announced is small steps towards this site neutrality, payment difference, and starting with payment for for drug administration, to have a single payment rate regardless of setting. So I think that's certainly a step in the right direction. It's a fraction of the the services that are done in multiple settings. And so while it's a certainly a step towards the right direction, and a small set of procedures that are being paid site neutral, there are many other services where Medicare could also pay site neutral loan. 4:16 You know what? It's a great introduction. And I wanted to say that physician reimbursement consolidation, Medicare payment reimbursement rates are all exactly in our coverage area, and we'll sort of maybe continue on that train of thought, because you talked about some of the number of services definitely wanted to ask about in the article. You cite the elimination of the inpatient only list as a way to increase patient choice while saving money for Medicare to expand on that. Can you explain? What is that list and why is that so important? 4:46 Sure, so one of the I think, really encouraging things that we've seen over the last decade or so is that due to a variety of technological advancements, improvements in surgical techniques, many. Procedures that were formally done in a hospital based or inpatient setting can now be done in hospital outpatient or even in ambulatory surgical settings. And so I think the most common example is knee and hip replacements. If you got a knee and hip replacement, you know even a decade or so ago, is a very intensive procedure. It was a multiple day visit in the hospital and stay in the hospital, and that's both very expensive. It's also exposing patients to increase risk of infection and delaying many cases their their physical rehabilitation timelines. And so we've seen for many services is that they can now be done in non inpatient settings, whether, again, whether again, whether it's a hospital outpatient department or an ASC, and can be done on a same day basis. This is both much less expensive for patients and payers, and then there's also lots of evidence that it's higher quality and improves recovery times. Now, you 5:55 had mentioned a few moments ago some of the small steps and the number of different procedures and treatments that can be that could be, maybe, what's the word I'm looking for here? Sort of qualify, so to speak, in the future for site neutral payment, based on the IPO list and the three year phase out of that list. Would you call 2026? A breakthrough year for site neutral payment? 6:18 I think it's certainly the, the strongest year we've had. And so while there are always more that can be done, this is the strongest shift towards site neutral payments that at least I can remember 6:33 a question as I phrased it here is sort of on the flip side, so to speak. And you touched on this earlier in our conversation, the amount of consolidation that has taken place across healthcare, given that there has been a lot of consolidation across healthcare, including hospitals and health systems purchasing physician offices, is site neutral payment, an idea whose time has gone, so to speak, is it too little, too late to bolster independent medical practice? 7:00 I think that's a very important question for policy. And if you look at the payment systems in the United States, site of care, payment differentials, I refer to as the arbitrage opportunity within healthcare, because, again, you can, if you're a hospital or healthcare system, can acquire a physician practice and say, send all your referrals to me, is a healthcare system, and that you can double payment support for everyone. And so that's a huge financial incentive to go out and acquire physician practices. And so, as I said earlier, that's a key reason why over half of us physicians work for a hospital healthcare system, which is a key restructuring in what it means to be a doctor United States. I think the key question is, is, you know, the kind of the genie out of the bottle, if you will, and can we actually go back towards having more independent physician practices? I do think if the payment differential and the incentives, the financial incentives to acquire and own physician practices, were reversed, then that might actually lead to a reversal of many of these acquisitions, and at least level the playing field between independent physicians and health systems. 8:09 That notion of kind of leveling the playing field and having fair and functioning markets, market competition, I think our audience, I think that's going to resonate with our audience. I'm really glad you touched on that, and also wanted to kind of follow up on that, because we talk about physician reimbursement, but then that money comes from somewhere. Your article touches on payment for off campus hospital outpatient departments as a potential source of savings for Medicare. Can you explain what those are and why those are so important? 8:41 Sure, so like many government programs, the Medicare system is soon potentially facing huge financial and fiscal headwinds, and at least the way I view it, reforming site of care payment differentials and having site neutral payments is probably the low hanging fruit to shore up Medicare's finances. The Congressional Budget Office has estimated that kind of they're full of scope site neutral payments would save the Medicare system about $150 billion over a 10 year period, and that's money that comes directly from taxpayers. 9:18 One of the issues I did want to touch on. And I think this is this also comes up in discussion and argument around site, neutral payment, to be sure, hospital leaders argue and for many things rightly so, that hospitals and health systems have different liabilities, different responsibilities and needs compared with physician offices. Do they have a case for getting greater pay for some of those treatments and procedures? 9:43 Think that's a nuanced question. So in many areas, hospitals are correct that they are not adequately paid, and so they have the you know, the argument is that we're underpaid for services like staffing our emergency department and. And therefore we need to get additional payments on surgical services from our hospital outpatient department versus an ASC to offset underpayments on, say, the emergency department. There may be some truth into that. I think the problem is that we're then into a landscape where we're playing policy whack a mole, rather than just addressing problems head on, we're essentially asking patients who are getting a colonoscopy to pay more because of site of care payment differentials if they get their colonoscopy and, say, a hospital outpatient department versus an ASC, to subsidize the fact that Medicare may not be paying emergency departments adequately. And so I think it makes much more sense to if there are areas where the Medicare system or others are underpaying, to pay adequately for those services and not to rely on kind of this complicated payment model where we're gonna pay some services more when we can generate cheaper in other settings and making patients pay those price differences. I 11:09 Hey there. Keith Reynolds here and welcome to the p2 management minute in just 60 seconds, we deliver proven, real world tactics you can plug into your practice today, whether that means speeding up check in, lifting staff morale or nudging patient satisfaction north, no theory, no fluff, just the kind of guidance that fits between appointments and moves the needle before lunch. But the best ideas don't all come from our newsroom. They come from you got a clever workflow, hack an employee engagement win, or a lesson learned the hard way, I want to feature it. Shoot me an email at K Reynolds at mjh, life sciences.com with your topic, quick outline or even a smartphone clip, we'll handle the rest and get your insights in front of your peers nationwide. Let's make every minute count together. Thanks for watching, and I'll see you in the next p2 management minute. 12:01 I like the approach and and I'll follow up on that, not only based on type of service provided, but let's talk a little bit about location, and at the risk of of you know, playing more policy whack a mole, a lot of our audience could make strong cases in favor of site, neutral payment. Rural Hospital hospitals especially support their communities in a financial, social, medical way that few other organizations do. How would you generate a payment formula that is fair and equitable to both independent physicians and rural hospitals 12:34 so a lot of the site of care, payment differentials are less impactful to rural hospitals just because they tend not to have both inpatient settings as well as a say attached ASC or hop to so they tend to be just within the same same facility. And so I in general, think that site neutral payments would have much less impact on rural or critical access hospitals than it would for other standard hospitals or general acute care hospitals. But then it keeps back to the previous point that if we think that rural hospitals are underpaid or are facing financial distress, then we should pay those hospitals directly, rather than again, having a complicated policy Whack a Mole system. 13:19 No, like I said, I like the approach, and it one of the things that we our audience traditionally, really caters. We cater to smaller and medium sized, independent medical practices. There are still a lot of physicians in independent practice in rural areas, having lived in a rural area, like I said, just the rural hospitals under the umbrella of healthcare, that may be an entirely different discussion, but I'll tell you what, if I may, I'll continue with that vein, because CMS, in the last year, has come out with some announcements regarding the Rural Health Transformation Program. Have you had a chance to review that program? And if so, what might stand out to you as potentially promising or challenging? 14:01 I have. I do think that this is a important funding mechanism for for rural and critical access hospitals. I would be concerned that much you know, at least some portion of this money may be captured, if you will, and whether that's say, by private equity companies that have acquired stakes in rural hospitals, or even what we've seen into my own work is that many large, what I would refer to as non rural hospitals can duly classify and for at least some portions of Medicare payment designate themselves as rural hospitals. So for example, we see under kind of, you know, formal Medicare payment models. There are hospitals in Manhattan, obviously, not a rural area, that have duly classified as rural and so I think when we're allocating money to rural hospitals and to support. Towards rural health care, it's important that it actually ends up in those providers and ends up in those communities. 15:05 Can you elaborate, maybe a little bit more on that example? I'm curious about how a hospital in Manhattan lands on a list of rural hospitals 15:12 in I believe 2016 hospitals were given discretion, and how they self classify, and many hospitals have chosen to at least, I would, for refer to as take advantage that that classification system. And I think it's quite surprising just the number of hospitals that have duly classified and are not in rural areas, but at least for payment purposes classify themselves as rural, and the kind of financial advantage that is that you receive both higher payments for Medicare, but then also, if you have a teaching hospital, you're allowed to get additional payment bumps for being a classified as a rural teaching hospital. 16:00 One of the things that strikes me about health care, of course, there have to be different criteria, and say, certain standards, for judging the effectiveness of treatments, programs, payment, policy. You know, we need, we need to have something to use as a measuring stick, so to speak, a good segue though, to maybe a bigger question as of right now, what are some policy changes you'd like to see that could really improve US healthcare, 16:27 as we talked about earlier, I think that there is positive momentum towards site neutral, but I think there's still a long ways to go, and I think that expanding site neutral payment policies to the broader set of services that can be done in non hostile settings, besides just Drug Administration, would be something that would be very important 16:51 as we sit and talk here today. It's Tuesday, January 20. Just a few days ago, President Donald Trump announced the great health care plan. Did you have a chance to review that? And what's your first impression? 17:03 I, like many people that have had a chance to review it, I think right now, it's fairly light details, and so I think that will depend on kind of how things actually shake out. But I do think that pushes towards more transparency in healthcare markets, whether it's prices, but I think also importantly, organizational structure is something that's very important. 17:27 You know, it's a it's a great point and a great segue to a question that I wanted to ask about because, yourself, other researchers have really made a deep dive into particularly hospital price transparency, and hospital price transparency, and perhaps greater transparency among insurance companies could be a way to help regulators and patients easily have more information and find out about health care costs and maybe save some money from a consumer perspective, it sounds like it could be a great idea, given the complexity of health care and the health care market. Why is price transparency so difficult to achieve in healthcare? 18:05 It's difficult to achieve because there's a lot of, least, my opinion, institutional inertia against having price transparency, and so it's just not really how the healthcare industry in the United States has evolved over the last several decades, unlike basically every other industry in the country, I do think that's something that, with new data, is changing pretty rapidly, and I think it's kind of a question of what's the right use of price transparency, and so now that there's lots of price information, are patients going to be shopping for, say, every single procedure? I think that's probably less likely to happen. But I think a kind of more immediate use of price transparency is rather a kind of hub, if you will, that enables lots of other policy innovation. So whether it's say, employers or purchasers deciding on network design, or how to essentially audit prices negotiated by the insurers on their behalf, or regulators or researchers trying to understand how to make healthcare markets work better. I think that's kind of the first place where price transparency data will be used 19:15 if and when more price transparency data is used in a way that's more clear. Do you think that that idea and philosophy and frankly, regulation will trickle down to independent medical practices? 19:28 I think so. I think that whether it's price transparency or just the growing concern around rising healthcare spending and healthcare affordability, there is a opportunity for independent providers to basically position themselves as lower cost, efficient and higher quality providers, and to use that efficiency argument, I think, to capture market share. And I would say we have seen several groups. Are doing that. So there are several surgical groups in the state of Indiana. There's a well known Surgery Center in Oklahoma, and that's their volume value proposition, that they are transparent, pricing, more affordable. And I think they've been fairly successful. 20:17 You know what? Looking at the date here, a year ago, President Trump took office again, like I said, just a few days ago, the great healthcare plan was introduced, and while the plan did not address site neutral payment specifically, have there been any other Telltales that the administration has given on future directions for site neutral payment and physician payment more generally, 20:40 I am not exactly sure what signs I've given. There has been continued pushes from the Medicare payment Advisory Commission on site neutral payments. 20:52 So to follow up on that, any predictions then, for, say, the next two, three years, 20:58 at least, as it regards to site neutral payments, I think there's a strong consensus among these many Policy Advocates and researchers that this would be something that would be important for the Medicare program. The challenge, though, is that that money, or these those savings, wouldn't come out of thin air. They'd come from hospital systems and from providers, and so that's the, I guess, the policy balance that the Medicare system is facing. 21:23 Not to belabor the point, but this is something I've been curious about, because there have been, again, around some of the discussion and argument involving site neutral payment. It seems like, depending on which side you are on or who you may work for, there's been some arguments that, you know, if we have site neutral payment, that reimbursement will go down for hospitals. There's been some arguments that payment should and will go up for physicians. Where do you see that balance happening? Obviously, it's going to depend on on the total amount of money that Medicare has. Are hospitals going to lose? Are doctors going to win, or is it a win for everybody or a lose for everybody? 22:04 So with the caveat that we don't know exactly how these policies would be implemented, but at least examining some of the policies that have been designed and proposed, I think hospitals and health systems would likely lose patient volume and those patients my work and others have shown go to independent physician practices, or say, ambulatory surgical centers. And so if you're a physician who has ownership stake in ASC, there may be benefits as well, but it sounds 22:36 like and you had touched on this earlier in our conversation. I don't want to put words in your mouth, but if there was a reworking of some payment formulas to adequately reimburse some hospital services, it sounds like that could be a shift in payment, as opposed to just a drastic loss to the bottom line. 22:53 That's right. So if site neutral payments are paired with policies that do address underfunding within the Medicare or other payers, then that could be something that could actually make health systems kind of net neutral. 23:11 Our main audience is primary care physicians. What would you like to say to them, or what would you like them to know? 23:17 So at least as in regards to site neutral, I think that, just to reiterate, a key reason why hospital systems have acquired so many physician practices, including many primary care doctors, is to influence referral patterns and to leverage payment differences under site neutral, or site of care payment differences. And so if there were to be site neutral payment policies, my guess is that the land or the playing field between independent physicians and especially primary care doctors and health systems would be much more even I'm 23:54 Richard payer chin reporting for medical economics. My guest today has been Professor Christopher Whaley, an associate professor in the Department of Health Services, policy and practice at Brown University, School of Public Health. We've covered a lot of ground in a short amount of time, and it's been a great conversation. Hopefully we'll get a chance to talk again soon. 24:13 Thank you, Richard, great to talk you. 24:20 Hey, once again, that 24:30 was Dr Christopher Whaley, an associate professor in the Department of Health Services, policy and practice at the Brown University School of Public Health, speaking with medical economics senior editor Richard parachute on behalf of the whole medical economics and physicians practice teams, I'd like to thank you for listening to the show and ask that you please subscribe so you don't miss the next episode, and don't forget physicians practice will be hosting a practice Academy event on March 19, featuring a new practice management track with practical, actionable education for physicians and practice administrators. You can register today by clicking the link in the show notes or by going to register. Operation.physicianspractice.com as always, be sure to check back on Monday and Thursday mornings for the latest conversations with experts, sharing strategies, stories and solutions for your practice. You can find us by searching off the chart wherever you get your podcasts. Also, if you'd like the best stories that medical economics and physicians practice published delivered straight to your email six days of the week, subscribe to our newsletters at medical economics.com and physicians practice.com off the chart, a business medicine podcast is executive produced by Kristin asolini And Keith Reynolds and produced by Austin Latrell. Medical economics and physicians practice are both members of the mjh Life Sciences family. Thank you. 25:42 Applause.