Site-neutral payments

Kaiser Health News reported on Medicare eliminating an extra facility fee that it has paid out for services performed in clinics that are owned by hospitals. The extra facility fee was not paid out for the same services performed in otherwise similar clinics that are not owned by hospitals.

The original thought was that hospitals have to maintain a higher capacity for medical care, and so services performed at hospitals should be compensated more than the same care performed at clinics. For example, if a complication arose during a procedure at a clinic, the patient could be sent to the hospital for further treatment. Hospitals then saw this extra facility fee as a means of further enriching themselves and proceeded to buy clinics, imposing that fee on services performed at those ancillary clinics. This differential in payments made it more difficult for independent clinics to compete.

Medicare's elimination of the facility fee ("site neutral payments") might even the competitive field and slow down the consolidation of clinics into larger hospital networks. However, some hospitals are probably still buying clinics to help secure referrals to the hospitals themselves.