Budget Deal Curbs Payment Strategy

November 16, 2015


Starting January, 2017, hospitals will no longer be able to purchase “off campus” physician offices or ambulatory surgery centers, turn them into “outpatient hospital departments,” and bill for a higher payment rate from Medicare. This is the result of a provision included in the two-year budget deal recently approved by Congress and signed into law by President Obama.


The tendency of hospitals to seek higher reimbursement by switching acquired practices from the physician fee schedule to the more-generous hospital outpatient department system has been criticized by Congress. Estimated budget savings from the change would be $9 billion over 10 years.


The change means that, after January 1, 2017, a hospital that purchases a physician office or ambulatory surgery center not located on the hospital campus—or a very short distance away—must continue to bill for the services provided by the new facility under the original payment system the facility used before the acquisition. The change comes in the context of even broader proposals that would impose “site neutral” payments—in which reimbursement for services in physician offices and outpatient departments is equalized—across the health care system.