Site-Neutral Payments

Medicare wants the same service to cost the same, no matter where it’s delivered. Here’s what’s changing, who it hits, and how to get ahead of it.

~$780 vs ~$150
Medicare reimbursement for the same standard office visit: delivered in a hospital outpatient department versus an independent physician office. That gap is what site-neutral policy exists to close.

Why the same visit bills so differently.

1. Two fee schedules. Medicare pays hospitals under the Outpatient Prospective Payment System (OPPS) and independent physicians under the Physician Fee Schedule (PFS). OPPS rates are significantly higher.
2. The facility fee. When a hospital owns a physician practice, that site becomes a Hospital Outpatient Department, and Medicare adds a facility fee on top of the physician payment: a separate charge just for using a hospital-owned location, often 2-3x higher.
3. Consolidation. As hospitals acquired physician practices over the past decade, more care migrated to hospital billing with no change in clinical service. Medicare spending rose accordingly.

The reform sounds simple. The dispute is real.

The case for reform:

• Same service, different bill. A chemo infusion at a hospital-owned off-campus clinic triggers a Medicare payment 2-3x higher than the same infusion at a freestanding cancer center.
• The rate follows the owner, not the care. When a hospital acquires a practice, the reimbursement jumps even if nothing about the care changes. Patients pay more in cost-sharing too.
• Congress calls it a loophole. The 2015 law grandfathered most hospitals into higher rates. Reformers say that exemption was never meant to be permanent, and closing it has bipartisan support.

The case hospitals are making:

• Hospital outpatient departments carry costs clinics don’t. Stricter regulatory, accreditation, and licensing requirements, plus 24/7 emergency infrastructure and ICU standby that no freestanding clinic maintains.
• The patient mix is fundamentally different. HOPDs disproportionately serve sicker, lower-income, more complex patients, often as the only option in rural or underserved communities.
• Medicare already underpays. Hospitals receive roughly 83 cents per dollar of Medicare costs. The industry argues site-neutral cuts compound an existing shortfall and put rural and safety-net hospitals at greatest risk.

Where the cuts land depends on where the facility sits.

• Off-campus HOPDs: cuts in effect now. Hospital-owned clinics, infusion centers, and acquired practices located away from the main building but billed under the hospital’s tax ID. Drug administration services (chemo, infusions) took site-neutral rates in January 2026.
• Main hospital campus: protected, for now. On-campus outpatient departments keep higher rates under current law, but full legislative expansion would reach them next.
• Freestanding clinics: the benchmark. Independent offices and ambulatory surgery centers already bill at the physician fee schedule rate the reformers want everywhere.

Which version passes matters enormously.

• Narrow: extend the 2019 rule. Site-neutral rates for currently grandfathered off-campus HOPDs, with rural and critical access carve-outs and a 3-5 year phase-in. The most likely version.
• Broad: full Medicare parity. All outpatient HOPDs paid at physician fee schedule rates, with fewer carve-outs, an estimated $9B+ per year in Medicare savings. The MedPAC recommendation.
• The spillover risk: commercial follows Medicare. The legislation is Medicare-focused, but many commercial contracts benchmark to Medicare rates. If Medicare compresses, commercial may follow. The delta between narrow and broad could be billions for a single health system; industry estimates put full expansion at $182 billion in revenue reduction nationwide.

What it means for your system.

The financial exposure is already being modeled by your CFO. The strategic exposure is broader: as payment gaps close, patients gain more reasons to choose freestanding care, and every system faces the same question with new urgency: why come to us? Facilities acquired for the billing premium now need a value story that doesn’t depend on it. And the policy isn’t finished: carve-outs and phase-in timelines are still being written, which means systems shaping the conversation now, with their congressional delegations and in their communities, have leverage that systems waiting for the final rule won’t.

Three questions for your leadership table:

1. Exposure. Do you know what your off-campus HOPD volume looks like under a broader version of the policy, and has anyone put a number on it?
2. The value answer. If payment parity arrives, what’s the reason patients and employers should still choose your sites, and can you say it in terms they’d believe?
3. The window. The carve-outs are being negotiated now. Who is making your case, with your delegation and in your market, and with what story?

Where BPD comes in.

BPD Healthcare helps health systems build the value story that outlasts the billing premium: positioning, stakeholder alignment, leadership visibility, and physician voice, in market before the policy lands. If any of the three questions above is hard to answer, that’s the conversation to have now.