Study Projects Billions in Savings From Site-Neutral Payments for Routine Services
Key Takeaways
- Commercial site-neutral payment caps tied to Medicare rates could generate $10.8 billion in savings across 48 states and Washington, DC.
- Average per capita savings were estimated at $72.10 in 2022, with wide state-level variation.
- Hospital operating margins would decline modestly, by less than 1 percentage point on average under a 150% Medicare cap.
Medicare has long paid more for services delivered in hospital outpatient departments than in physician offices or ambulatory surgery centers, a practice that has fueled higher spending and hospital consolidation. An analysis using national commercial claims data estimates that extending site-neutral payment policies to the commercial market could generate substantial savings for purchasers and patients with only limited effects on hospital finances.
Study Findings
Using 2022 commercial claims data from the Health Care Cost Institute, investigators modeled the impact of capping payments for 2561 routine services at 150% of Medicare non-hospital rates across hospital, office, and ambulatory surgery center settings. These services included evaluation and management (E&M) visits and 57 ambulatory payment classifications considered safe for office-based care.
Across 48 states and Washington, DC, the analysis found that commercial site-neutral payments could have reduced spending by $10.8 billion in 2022. This translates to an average savings of $72.10 per commercially insured individual. Per capita savings varied widely, ranging from $6.20 in Florida to $281.20 in Alaska.
Commercial prices relative to Medicare rates also differed substantially by state. Average relative prices for E&M and selected outpatient services ranged from below 318% of Medicare in Arkansas, Hawaii, Massachusetts, Michigan, and Mississippi to more than 668% in Vermont, West Virginia, Wisconsin, and Wyoming. The national average relative price was 448%.
When higher payment caps were modeled, projected savings declined. At a cap of 400% of Medicare non-hospital rates, aggregate savings fell to $2.9 billion annually, or $20.30 per capita.
Clinical Implications
For payers and managed care organizations, the findings highlight the financial impact of site-of-care price variation in the commercial market. Many routine services can be delivered safely and effectively in non-hospital settings, yet commercial insurers often pay substantially more when care is provided in hospital outpatient departments.
Implementing site-neutral payment caps could help align prices with care settings that offer comparable quality at lower cost. For employers and purchasers, the projected savings represent nearly 1% of total private health care spending, a meaningful reduction in an era of rising premiums.
From a provider perspective, the modeled reductions in hospital revenue were relatively small on average. State-level aggregate hospital operating margins declined from 16.6% to 15.8% under a 150% cap, suggesting that broad financial stability would largely be preserved. However, the impact would vary by state and potentially by individual hospital, underscoring the need for careful policy design.
The authors emphasized that the affected services represent a relatively small share of hospital volume, helping to explain the modest average effect on hospital operating margins.
Conclusion
This national modeling study suggests that commercial site-neutral payment policies could deliver substantial savings for purchasers and patients while exerting limited pressure on hospital margins. Policymakers and payers will need to monitor for unintended consequences, but the findings strengthen the case for broader adoption of site-neutral payment reforms in the US health care system.
Reference
Murray RC, Janjua H, Whaley CM. Site-neutral payment for routine services could save commercial purchasers and patients billions. Health Aff Sch. 2025;3(12):qxaf241. doi:10.1093/haschl/qxaf241
