Medicare takes ‘a step in the right direction’ toward site-neutral payment, economist says

Medicare reimbursement is a huge part of the U.S. health care system, and it has influenced whether physicians practice independently or as employees of hospitals and health systems.

Site-neutral payment has been debated for years as an antidote, or at least part of the solution, to the continuing consolidation taking place across health care. Medicare pays more to hospitals than to physicians for the same medical treatments that doctors say they can provide at lower costs and with better outcomes.

Could that change under the administration of President Donald J. Trump?

In late 2025, health economists published “A Promising Step Toward Site Neutrality: What the 2026 OPPS and ASC Rule Gets Right — And What's Still Missing,” an analysis in Health Affairs. Co-author Christopher M. Whaley, Ph.D., spoke with Medical Economics about this year’s outlook for Medicare reimbursement. Whaley is associate professor, health services, policy and practice, and associate director of the Center for Advancing Health Policy through Research at Brown University. His co-authors were Corrie Mook and Roslyn Murray, Ph.D., M.P.P., both also at Brown University.

This transcript has been edited for length and clarity.

Medical Economics: The title of your article that came out in late 2025 is “A Promising Step Toward Site Neutrality: What the 2026 OPPS and ASC Rule Gets Right — And What's Still Missing.” In your own words, what's one of the things that's going right for payment in 2026?

Christopher M. Whaley, PhD: Just to take a step back, I think one of the curious things of the health care system is that many payers, driven by Medicare but also spilling over to many commercial insurers, pay for the exact same service whether it's done in a hospital or a nonhospital setting, quite a bit differently. And so if you look at the Medicare system, a standard procedure, whether it's an imaging test like an MRI or lab test, or even a surgical procedure like a colonoscopy are paid roughly double if they're done in a hospital versus nonhospital setting. This has been, I think, a pretty strong driver of both increased spending in the Medicare program, as well as among commercial insurers, and it's also been a strong driver of why the health care system in the United States is so consolidated. So if you're a hospital or health care system, you can go out and acquire a physician practice and say, now that you're now my employee, send all your referrals back to me as a hospital system where we can bill Medicare double the rate. And so that's a key reason why over half of U.S. physicians work for a hospital or health care system. And so this has been, I think, a pretty key driver of the Medicare system for many years, and Medicare has, through a variety of channels, whether it's Medicare Payment Advisory Commission or internal CMS reports, has thought about reforming this payment and saying, if a service can be done safely in a variety of settings, we're just going to pay a single rate for that setting and kind of let the delivery system, if you will, shake itself out. And so what Medicare recently announced is small steps towards this site neutrality payment difference, and starting with payment for drug administration, to have a single payment rate regardless of setting. So I think that's certainly a step in the right direction. It's a fraction of the services that are done in multiple settings. And so while it's a certainly a step towards the right direction and a small set of procedures that are being paid site-neutral, there are many other services where Medicare could also pay site-neutral.

Medical Economics: In the article, you cite the elimination of the inpatient-only list as a way to increase patient choice while saving money for Medicare. To expand on that, can you explain what is that list, and why is that so important?

Christopher M. Whaley, PhD: One of the, I think, really encouraging things that we've seen over the last decade or so is that due to a variety of technological advancements, improvements in surgical techniques, many procedures that were formerly done in a hospital-based or inpatient setting can now be done in hospital outpatient or even in ambulatory surgical settings. And so I think the most common example is knee and hip replacements. If you got a knee and hip replacement even a decade or so ago, it was a very intensive procedure, it was a multiple day visit in the hospital and stay in the hospital. And that's both very expensive, it's also exposing patients to increase risk of infection and delaying in many cases their physical rehabilitation timelines. And so we've seen for many services is that they can now be done in noninpatient settings, whether it's a hospital outpatient department or an ASC, and can be done on a same day basis. This is both much less expensive for patients and payers, and then there's also lots of evidence that it's higher quality and improves recovery times.

Medical Economics: Based on the IPO list and the three-year phase out of that list, would you call 2026 a breakthrough year for site neutral payment?

Christopher M. Whaley, PhD: I think it's certainly the strongest year we've had. And so while there are always, you know, more that can be done, this is the strongest shift towards site-neutral payments that at least I can remember.

Medical Economics: Given that there has been a lot of consolidation across health care, including hospitals and health systems purchasing physician offices, is site-neutral payment an idea whose time has gone, so to speak? Is it too little, too late to bolster independent medical practice?

Christopher M. Whaley, PhD: I think that's a very important question for policy. And if you look at the payment systems in the United States, site-of-care payment differentials I refer to as the arbitrage opportunity within health care, because, again, you can, if you're a hospital or health care system, can acquire a physician practice and say, send all your referrals to me as a health care system, and that you can double payments for everyone. And so that's a huge financial incentive to go out and acquire physician practices. And so that's a key reason why over half of U.S. physicians work for a hospital health care system, which is a key restructuring what it means to be a doctor United States. I think the key question is, is the genie out of the bottle, if you will? And can we actually go back towards having more independent physician practices? I do think if the payment differential and the incentives, the financial incentives to acquire and own physician practices, were reversed, then that might actually lead to a reversal of many of these acquisitions, and at least level the playing field between independent physicians and health systems.

Medical Economics: President Donald Trump announced the Great Healthcare Plan. Did you have a chance to review that? And what's your first impression?

Christopher M. Whaley, PhD: Like many people that I've had a chance to review it. I think right now, it's fairly light details, and so I think that it will depend on kind of how things actually shake out. But I do think that pushes towards more transparency in health care markets, whether it's prices, but I think also importantly, organizational structure is something that's very important.

Medical Economics: Why is price transparency so difficult to achieve in health care?

Christopher M. Whaley, PhD: It's difficult to achieve because there's a lot of, at least in my opinion, institutional inertia against having price transparency, and so it's just not really how the health care industry in the United States has evolved over the last several decades, unlike basically every other industry in the country. I do think that's something that, with new data, is changing pretty rapidly. And I think it's kind of a question of what's the right use of price transparency, and so now that there's lots of price information, are patients going to be shopping for, say, every single procedure? I think that's probably less likely to happen. But I think a kind of more immediate use of price transparency is rather a kind of hub, if you will, that enables lots of other policy innovation. So whether it's, say, employers or purchasers deciding on network design or how to essentially audit prices negotiated by their insurers on their behalf, or regulators or researchers trying to understand how to make health care markets work better, I think that's kind of the first place where price transparency data will be used.