Cost Calculation Methodology Exacerbates Site-of-Service Differentials by 10- to 18-Fold for Soft Tissue and Joint Injections in Hospital Outpatient Departments

Abstract

In recent years, physicians and facilities have faced a multitude of reforms, regulations, and payment models to reduce health care costs, and to improve access and quality. Despite these measures, total health care cost increased to $3.3 trillion in 2016, up 4.3% from 2015. An aging population and an increase in cost are two of the factors that account for most of the increase in costs. Price intensity from physicians and facilities are influenced by Medicare rate-setting methodology with site-of-service differentials. Site-of-service differentials for payments are increasingly being recognized as a topic that requires discussion. Intraarticular and soft tissue injections are performed in physician offices (90%), ambulatory surgery centers (ASCs) (1%), and hospital outpatient departments (HOPDs) (9%), however, the payment rates differ 10- to 18-fold among these settings with 63% of total payments to HOPDs, 2% to ASCs, and 37% to offices. In this manuscript, we describe significant payment differentials, based on cost calculation methodology that indicate a potential substantial savings of more than $125 million per year if HOPDs are reimbursed at the same rate as ASCS, utilizing any of the formulas, even if the current ASC rate is doubled. This effort would also save significantly when it comes to copayments, which are 27% by patients, instead of the 20% in offices and ASCs. The addition of Medicare Advantage recipients, which constitutes approximately 30% of the overall Medicare population will increase these estimations by 30%. In conclusion, utilizing accurate payment rate calculations for intraarticular and soft tissue injections will result in substantial changes in the payment rates. In fact, just the differences in the copay itself would make the copay $66.06 (which is 27% of $244.68). This rate is 3- to 5-fold higher than the current Medicare rates for office payment or even 2-fold higher than the ASC payment. Key words: Medicare, physician payment schedules, HOPD and ASC payment schedule, site-of-service differentials, soft tissue injections, intraarticular injections