An Overview of Site-Neutrality

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By Adrienne Dresevic, Esq., and Leslie A. Rojas, Esq., of The Health Law Partners, P.C. 

Imaging services often are on the receiving end of healthcare payment cuts. One proposal that has captured the attention of the imaging community, as well as the wider healthcare community and hospitals in particular, involves site-neutral payments. Currently, CMS pays different rates for the same healthcare service depending on the location where the service was provided (eg, hospital vs. physician’s office). In its purest form, a site-neutral payment policy would entail CMS paying the same rate for the same healthcare service regardless of the location in which the service is provided. From the government’s perspective, the reason behind a site-neutral payment policy is simple: potentially billions of dollars in savings.

Medicare payment rates are tied to location. 

CMS established different payment systems for different healthcare settings. For example, payment rates for healthcare services provided in a physician-owned medical practice are determined by the MPFS, and payment rates for services provided in a hospital outpatient department are determined by the HOPPS. As a result, payment rates may vary widely across locations – even when the same exact service is provided. The rationale for using various payment systems is that there are different costs associated with providing healthcare services in different locations.

Facilities such as hospitals are required to submit annual costs reports as a condition of participation in Medicare, and the cost reports are intended to show the actual costs incurred by the hospital. This is the data that Medicare uses to determine payment rates. The MPFS has its own methodology for determining payment rates. Each MPFS rate takes into account the physician’s work, the practice expense, and the malpractice expense associated with a particular service.1 The practice expense component is similar to the “facility fee” a hospital would receive.

Because rates are calculated based on costs, then isn’t the payment differential justified if different locations incur higher costs when providing the same service? The answer to this question often depends on who you ask (ie, the government, hospital providers, or other providers). Additionally, this question is complicated by the fact that many physician practices are now owned by hospitals. For example, if these practices meet certain requirements, then they are reimbursed at the higher HOPPS rate rather than the lower MPFS rate – simply because they are hospital-owned. The recent prevalence of hospital-owned physician practices has caused the most recent push for site-neutral payment policies.           

Site neutrality gains speed. 

The Medicare Payment Advisory Commission (MedPAC), which advises Congress on Medicare payment policies, has advocated for site neutrality for years. In a June 2013 report, MedPAC recommended site-neutral payments for certain services, including imaging services, that:

  • are safe and appropriate to provide in physician offices and where the MPFS payment rate is sufficient to ensure access to care;
  • involve payment rates across payment systems that include a similar set of services;
  • are unlikely to incur costs associated with emergency room department visits;
  • have patient severity that would be no greater in outpatient departments than in physician offices; and
  • are not 90-day global codes, which are associated with higher costs when performed in the hospital setting.2

Using these factors, MedPAC identified 66 categories of services to which site-neutral payments should be applied, including a number of imaging services. MedPAC estimated that these site-neutral payment policies would result in Medicare program and beneficiary cost-sharing savings of approximately $1.8 billion per year.2

CMS also has considered how to best implement site neutrality. In its 2015 HOPPS and ASC Payment System Proposed Rule, CMS sought public comments on how to collect data to analyze payment rates for services provided in the off-campus, provider-based outpatient departments (eg, physician’s office) in light of the increase in hospital acquisition of physician practices. In finalizing this rule, CMS created the HCPCS modifier “PO” to be attached to every code for outpatient hospital services furnished in an off-campus, provider-based department of a hospital.3 It is yet to be seen what the data will reveal and how CMS will react during the rulemaking process. But, the signs point to CMS adopting some form of site neutrality.

In fact, President Obama’s 2016 Fiscal Year Budget includes a provision to reduce payment for services provided in provider-based, off-campus hospital outpatient departments to either the lower MPFS rate or the ASC payment system rate.4 If the MPFS rate is used, this would essentially equalize payments for the same services whether provided in a physician-owned medical practice or in an off-campus, hospital-owned physician office. The estimated savings could equal $30 billion over the next decade.5

How can hospitals and imaging departments prepare for site neutrality? 

So, what can hospitals and their departments do to prepare? First, it is imperative that hospitals dedicate the time and resources necessary to ensure accurate cost reports and claims data so that the payment rates – which are calculated based on this data – accurately reflect the cost of providing the services.

Second, the Advisory Board Company recommends that hospitals prepare by redesigning their healthcare delivery model and shifting certain ancillary services to more appropriate outpatient, off-site locations.6 According to the Advisory Board, “returning certain outpatient services to the practice setting” will “lower costs,” “provide greater access [to care],” reduce “duplication of equipment and labor,” and allow hospitals to “backfill hospital outpatient space with services that are truly needed in that setting.”6

Third, the Advisory Board recommends that hospitals seek to regain some of the lost revenue by participating in the Medicare Shared Savings Program or Medicare Advantage.6 The Advisory Board recognizes that participation in these programs will not entirely offset the losses incurred from site neutrality policies, but “they can help tremendously.”6 


When CMS issues proposed regulations, there is a comment period for interested parties in the community to submit comments to the drafters. The comment period for the 2016 HOPPS and ASC Payment Proposed Rule will end on August 31, 2015, and the comment period for the 2016 Proposed MPFS will end on September 8, 2015. Providers may also consider appealing to their professional organizations to advocate on behalf of them and fellow members.

Check out the forthcoming September/October issue of Radiology Management for an expanded article by Adrienne and Leslie on site-neutrality!


  1. Centers for Medicare and Medicaid Services. Medicare Claims Processing Manual, Ch 12 Physician/Non-Physician Practitioners, Transmittal 20.1. Available at:
  2. June 2013 MedPAC Report to Congress, Medicare and the Health Care Delivery System.
  3. 79 FR 66769 at 66914 (November 10, 2014)
  4. https://www.whitehouse.gove/omb/budget/overview
  5. The Advisory Board Company. Obama Wants to Equalize Payments for Doctors Inside and Outside of Hospitals. February 9, 2015. Available at:{4044DA86-AB72-4D5C-89BB-E7FD1B8FDBFF}.
  6. Passon E and Molden M. Site-Neutral Payments: The Billion Dollar Medicare Revenue Hit You Should Plan for Now. April 10, 2015. Available at:

Adrienne Dresevic, Esq. graduated Magna Cum Laude from Wayne State University Law School. Practicing healthcare law, she concentrates in Stark and fraud/abuse, representing various diagnostic imaging providers, e.g., IDTFs, mobile leasing entities, and radiology and multi-specialty group practices.

Leslie Rojas, Esq. graduated from Wayne State University Law School and is licensed to practice law in Michigan and Illinois. Practicing healthcare law, she concentrates on fraud/abuse issues, compliance with federal and state healthcare regulations, health information privacy and technology issues, and transactional and corporate aspects of healthcare.

The authors are members of The Health Law Partners, P.C. and may be reached at (248) 996-8510 or (212) 734-0128, or at

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