Why are we paying more for routine doctor appointments?

Why are we paying more than ever for routine doctor appointments? One reason is that hospital systems are buying up physician practices and charging patients, even in outpatient settings, using their hospital billing codes.  That costs patients and our insurers more with no added benefit to our treatment. 

Hospitals are legally allowed to bill Medicare at a higher rate for the same services that can be safely and easily done elsewhere. When physician practices are purchased by hospital systems, they charge patients hospital rates in outpatient settings and doctor’s offices. This means that outpatient care often costs a whole lot more than it should.

When doctor practices are bought up by hospitals, prices for regular doctor visits increase. 

How does this work? Say a person breaks their arm and is put in a cast while it heals. The cast removal process is simple and doesn’t require an inpatient stay or any special hospital services. That means the person can choose whether they’d like to go back to the hospital or just to a regular doctor’s office to get their cast removed. 

In a doctor’s office, the cost to remove a full-arm cast averages $43. The same procedure in a hospital outpatient department costs an average of $298 – nearly seven times as much. Any cost-conscious patient would seek the lower priced option, and the lower prices at the outpatient/doctor office would help keep costs down for Medicare, too.  

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Cast removal

Doctors office charge (not hospital-owned): $43

Hospital-owned doctor location charge: $298

Added cost because of hospital ownership: + $255

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Medicare’s payment policy is causing everyone to pay more, even when care can be safely received in lower cost health care offices.

As hospital systems purchase physician’s offices, they can bill at the higher hospital rate in non-hospital settings. That increases the income for the hospitals but people lose out on the savings of outpatient care. Even when patients seek out care in less expensive settings, they’re hit with hospital prices.  

Right now, we pay too much for our health care. Congress is looking to reduce government spending, and patients want to spend less on health care too. Addressing this payment rate disparity is one simple way to find significant savings for both patients and the taxpayer-funded Medicare program.  

For services and treatments that can be done safely in a non-hospital setting, Medicare should pay one fair price, regardless of who owns the practice or where that service was performed. This “same service, same price” idea is called “site neutral” payment.

The Commission that sets payment rates for Medicare services supports site neutral:

“…Medicare should base payment rates on the resources needed to treat patients in the most efficient setting. If the same service can be safely provided in different settings, a prudent purchaser should not pay more for that service in one setting than in another.”

This responsible cost-saving concept was initiated ten years ago,  but Congress only applied it prospectively – to new facilities. The exception for preexisting clinics means that today, only 1% of health care outpatient facilities are actually covered by this site neutral payment rule. As a result, Medicare and most patients pay the higher hospital rates in almost every non-hospital health care facility.

If implemented more broadly, site neutral payment reform would lower prices for simple procedures at both hospitals and hospital-owned doctor’s offices.

It’s estimated to save Medicare $138 billion and Medicare beneficiaries $21 billion in out-of-pocket costs over just ten years.

Smart cost-savings gained from site neutral payments will help sustain Medicare and save money for Medicare patients with their regular doctor visits.

Why do hospitals oppose site neutral payment policies? 

Hospitals say that they need to bill at a higher rate to make up for the higher overhead costs that come with running a hospital, like staffing an ICU 24 hours a day and purchasing expensive specialized equipment. But for most patients, they don’t need these inpatient services and should only pay those higher rates if they are admitted as an inpatient.

Hospitals also argue that by being forced to charge a lower rate consistent with outpatient settings, some hospitals, particularly those in rural areas, may struggle financially. The budget challenges of rural hospitals, if proven and analyzed,  should be addressed in a more holistic way. Meanwhile, we need to keep reforming our health care payment system to ensure patients receive care in the safest, but least expensive setting. 

What about patients who don’t have Medicare? 

Like Medicare, most private insurance companies will pay more for services provided at a hospital. At the moment, there are no site neutral requirements for private insurance companies. However, if site neutral payment rules were to be expanded to apply to other health insurance plans alongside Medicare, it would protect many more people from hospital prices in non-hospital settings. A comprehensive site neutral policy would likely save insurance companies, patients, and the government nearly $500 billion over ten years.

Is there a solution to bring down the price of doctor visits?

Congress has debated this policy for years. As recently as December 2024, Senators Bill Cassidy (R-LA) and Maggie Hassan (D-NH) proposed a bipartisan framework that includes site neutral provisions to apply a “same service, same price” policy to include the 99% of practices previously exempted. 

As Congress develops a new federal budget, it should include site neutral payment reforms, saving Medicare and its beneficiaries billions.

Learn more about site neutrality:  Why doctors’ offices bill patients as if they’re in a hospital – and why that should stop.