There has been a lot of research estimating the amount of money that could be saved by paying the same price for common health care services in Medicare regardless of where those services are delivered. A new brief by the Actuarial Research Corporation dives further by analyzing how often service provision moves from lower-cost locations – like independent physician offices, to higher-cost locations – like hospital-owned clinics or outpatient departments.
The study compares service delivery volume in the state of Maryland to the rest of the country. Maryland pays hospitals using global budgets, which set a fixed, predetermined amount hospitals receive to cover care over a period of time and remove the incentives favoring higher-paid sites-of-service seen in the rest of the country. What they find is that for many services that can be safely provided in any location, the share delivered in hospital-owned locations declined in Maryland while remaining flat nationally.
This is important to know because broad trends, such as technological innovation and clinical advances, have enabled more services to be safely delivered in physician offices, at reduced cost. Yet, that transformation appears to have been held at bay by site-of-service payment differentials that continue to favor hospitals.
This dynamic is particularly plausible for imaging services: technological progress has been well-documented, and a growing share of physician offices maintain in-house imaging capacity, yet the share of imaging in higher-cost locations remains high outside of Maryland.
Finally, the brief updates estimates for how much money could be saved if Medicare expanded site‑neutral payments. Expanding site‑neutral payments to imaging, clinic visits, and more services could save over $200 billion for the federal government and more than $100 billion for Medicare beneficiaries over ten years. The authors conclude that broader site‑neutral payment reform could significantly reduce costs without hurting care quality.
