In proposing a plan May 11 to lower drug prices, President Donald Trump's administration also raised the idea of reducing the amount Medicare pays outpatient hospital clinics for administering drugs for chemotherapy and other procedures.

Under Medicare, the U.S. health insurance program for older and disabled Americans, hospitals and physicians are reimbursed comparable amounts for drugs they administer to patients. However, the facility fees when medicines are provided at hospitals and hospital-owned outpatient departments are "many times higher than the fees charged by physician offices," the administration noted in the drug pricing blueprint released last week.

Trump's proposal to reduce payments to hospital-affiliated clinics to the same level as nonhospital affiliated ones — known as site neutrality — has gotten less attention than his other ideas, such as cracking down on pharmacy middlemen, and his blueprint is short on details. But attorneys and advocates for hospitals and for physician groups say it could have a substantial impact on hospitals.

One analyst, Cowen's Rick Weissenstein, wrote in a May 11 note that the proposal would "hit the hospitals hard" if put into effect.

The idea, which is pitting hospital groups against doctors' organizations such as the American Academy of Family Physicians, would continue a push to do something about the higher amount hospitals receive for outpatient procedures compared to free-standing physicians clinics — a disparity that has been criticized as wasteful by a committee that advises Congress on the Medicare program.

The Medicare Payment Advisory Commission, or MedPAC, in a 2013 report to Congress noted that hospital-owned clinics receive substantially more for the same procedures than independent clinics. Hospital clinics, for example, get 141% more from Medicare for echocardiograms than other facilities, the group noted.

Reducing payments to hospitals for 65 procedures, MedPAC estimated, would save a program projected to become insolvent in 2029 about $900 million a year. Medicare enrollees would also have to pay $140 million to $380 million less for their share of the bills.

The American Hospital Association and other groups advocating for health systems declined to comment on the idea. But the AHA has opposed other attempts to make payments site-neutral. The hospitals say that it is not fair to pay hospital clinics the same amount for outpatient services as nonaffiliated doctors' offices because they have unique costs that benefit the public.

'Drastic impact'

American Hospital Association Executive Vice President Tom Nickels was not available for comment. But in a March 2 op-ed in The Hill, a Washington, D.C., publication that covers the federal government, he broadly called site neutrality proposals "misguided."

"Americans rely on hospitals each day to provide 24/7 access to care for all types of patients, to serve as a safety net provider for vulnerable populations, including low-income people, children and the elderly, and to have the resources needed to respond to disasters," Nickels wrote.

"Implementing these 'site-neutral' policy proposals could have a drastic impact on the ability of hospitals and health systems to carry out their mission — to care for their patients and communities," he wrote.

Richard Church, a K&L Gates healthcare attorney who represents nonprofit healthcare systems, said in an interview that those concerns would apply to changing rates for administering drugs on an outpatient basis. He noted the higher payments also help offset the cost of treating people who show up at emergency rooms without coverage at a time when the number of uninsured patients is rising.

In an interview, American Academy of Family Physicians president Michael Munger said equalizing payments for administering drugs could affect a number of outpatient procedures, including medications given in clinics for chemotherapy.

Encouraging consolidation

Munger said the higher prices hospital clinics can charge for outpatient care has encouraged health systems to acquire more physicians practices. A 2016 study by Avalere Health for the Physicians Advocacy Institute found that while only 1 in 7 physician practices was owned by a hospital in 2012, the percentage had grown to 1 in 4 by 2015.

The result of that trend, a study by consulting firm Milliman Inc. found, is that more outpatient procedures are taking place in more expensive hospital settings than in physicians clinics. Between 2004 and 2014, the study said, the percentage of Medicare chemotherapy infusions in hospital outpatient departments nationally increased from 15.8% to 45.9%, the study said.

"We believe at the core, there should be the same reimbursement for services regardless of where the services are," Munger said in an interview.

It is unclear whether the changes will be made. Cowen's Weissenstein in the note said Congress would have to reduce hospital clinic payments and face opposition from hospital groups.

"That makes it unlikely," he wrote.

Congress, however, backed the idea of site-neutral payments in the 2015 budget for newer outpatient clinics. The Centers for Medicare and Medicaid Services, or CMS, began implementing the policy beginning in January 2017 to pay hospital off-campus clinics established after Nov. 2, 2015, half as much as hospitals and older clinics.

Then after initially proposing to further cut the payments to 25% of what the other facilities receive, CMS on Jan. 1 began paying the newer clinics 40% as much as hospitals and older clinics, about the same as what independent physicians offices receive.

An option, Church said, is for the administration to propose reducing the payments to the older outpatient clinics as well as the newer ones.