Under Medicare rules in effect since 2000, hospital systems have been permitted to charge so called “facility fees” on top of their normal charges for professional care based on where the care took place. Reports issued in both 2012 and 2014 by the Medicare Payment Advisory Commission (MedPAC) found that Medicare often pays double for office visits and routine tests performed at hospital-owned doctor’s offices, clinics, and outpatient facilities when compared to the same procedures conducted at private physician offices. MedPAC determined that a failure to equalize payments between hospital-owned and private physician offices would increase Medicare spending by over $2 billion by 2020. Given these figures, MedPAC has long lobbied Congress for the reduction or outright elimination of facility fee payments and the implementation of “site payment neutrality.”
MedPAC has achieved a partial victory. On January 1 of this year, Medicare implemented a new payment schedule for services and procedures at many hospital-owned facilities by decreasing facility fee payments by 50%. The new rule applies only to outpatient facilities that are not on a hospital’s main campus and in locations where providers had not timely billed for services as of November 2, 2015.
While the new rule will save Medicare (along with consumers) some pretty substantial dollars, it has potentially interesting implications for the future of private practice acquisitions by larger hospitals and hospital systems. A recent article from Medical Economics notes that many hospital systems have been incentivized to acquire independent medical facilities and practices as a way of driving revenue via th ability to charge facility fees. The fact that they will no longer be able to enhance revenues with facility fees may drive down the pace of private practice acquisitions. Private practitioners, who may be used to being the pursued parties in the hospital acquisition game, may now find themselves having to do a bit more of the courting if they are interested in selling their practice. Demonstrations of practice efficiencies, board certifications, healthy specialist referral figures, and the use of up-to-date technologies will be much more attractive to potential buyers than a practice that has fallen behind in terms of its facility and technologies.
Brian E. Dickerson
Nicole Hughes Waid