In collaboration with state officials, 32BJ Labor Industry Cooperation Fund, and legal experts, NASHP has released a site-neutral payment model legislation for state policymakers. State leaders who want to address rising health care prices while reducing costs for consumers may want to explore adopting site neutrality for certain services, as defined in this model legislation.
Challenges Driving the Model’s Development
State officials have long been interested in designing a site-neutral payment approach — both to reduce health care prices and to ensure consumers have more transparency and choice for services.
The policy seeks to address the rising prices for care provided within hospital-owned or affiliated outpatient providers that can be safely and appropriately delivered at a lower price in an independent physician’s office. Essentially, provider offices affiliated with a hospital or health system become a hospital outpatient department (HOPD), and their services reflect hospital facility fees, even if they are not on a hospital campus. The hospital facility fees increase the price of the outpatient services delivered by those providers, as well as the overall costs for consumers and their health insurers.
Another goal of this policy is to ensure the price for care is not dictated by where the service is provided. Adopting site neutral pricing gives more flexibility to individuals who can choose providers without needing to research if their chosen physician is part of a health system or not. Nor do consumers need to figure out whether and how prices for their needed service vary across providers based on the site service is delivered. Even with federal transparency efforts, such pricing information is not always readily available to the public.
Model Legislation Overview
The model legislation utilizes the Medicare Payment Advisory Commission (MedPAC) recommendation from 2023 that certain outpatient service payments should be aligned across delivery sites. As written, the model law extends to future services that Medicare or a state determines should be paid on a site-neutral basis, including the drug administration codes recommended in a recent Centers for Medicare and Medicaid Services (CMS) proposed rule.
In the model legislation, site neutral payments are designed to reimburse all providers (regardless of their service site or affiliation) for the specific services recommended by MedPAC, a rate that cannot exceed a threshold set by the state. The model offers that for certain services, providers accept payments at no more than 150 percent of Medicare’s non-hospital rate, also known as the Medicare Physician Fee Schedule (PFS).
Evidence of Potential Impact of the Model Legislation
Recent Health Care Cost Institute (HCCI) claims analysis highlights an increase of approximately $100 each for an adult primary care evaluation and a pediatric wellness visit that were accessed at a HOPD versus a non-affiliated physician. This represents an 87 percent and 67 percent increase respectively for the visits.
According to a recent Government Accountability Office (GAO) report, health care consolidation of physicians has been significantly increasing, with as many as 47 percent of physicians affiliated with hospitals in 2024 as compared to 30 percent in 2012. The report further notes that there are significant utilization increases for office visits occurring in hospitals, which is increasing prices and spending.
In an analysis using its own claims data from services delivered in New York, 32BJ estimated that adopting the site-neutral payment policy for the outpatient services MedPAC recommends at 150 percent of Medicare’s PFS rate would yield an overall savings to the union’s health plan. This is confirmed by a study of New York’s site-neutral model legislation on the potential impact for New York state’s overall spending. The study found a savings of over $1 billion for commercial payers if they had used site neutral payment for low complexity services in 2022.
