Site-neutral payment: Leveling the competition, or too little, too late?

Site-of-care payment differentials create a powerful financial incentive for hospitals and health systems to acquire physician practices, helping explain why more than half of U.S. physicians now work for health systems. Christopher M. Whaley, Ph.D., is associate professor, health services, policy and practice, and associate director of the Center for Advancing Health Policy through Research at Brown University, said reversing those payment incentives through site-neutral payment could still help level the playing field and potentially slow or even reverse consolidation affecting independent medical practices. He’s the co-author of a Health Affairs analysis of 2026 Medicare physician payment.

Medical Economics: Given that there has been a lot of consolidation across healthcare, 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, Ph.D.: 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, kind of, 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.