Health Care 1 Doctor

Health: Medicare Payments by Place of Service (2016-30)

Medicare could save billions of dollars if Congress were to equalize the rates Medicare pays for certain health care services, which often vary depending on where the service is performed.

Year Identified: 2016
Area Number: 30
Area Type: Cost Savings & Revenue Enhancement

1 Total Action(s)

Action 1
Partially Addressed

Congress should consider directing the Secretary of Health and Human Services to equalize payment rates between settings for evaluation and management office visits and other services that the Secretary deems appropriate and return the associated savings to the Medicare program.

Last Updated
March 31, 2022

As of March 2022, no additional legislative action has been identified that would address GAO's December 2015 suggestion. Congress enacted legislation in November 2015 to exclude services furnished by off-campus hospital outpatient departments from higher payment rates. Effective January 1, 2017, this exclusion, as amended, does not apply to services furnished by providers that were under construction or billing as hospital outpatient departments prior to November 2015. All providers billing as hospital outpatients during GAO's study (issued in December 2015) continue to be paid under the higher rate. In addition, this exclusion does not apply to services provided by on-campus hospital outpatient departments.

However, the Centers for Medicare & Medicaid Services (CMS) has taken some actions. In November 2018, CMS issued a final rule adopting payment changes that capped payment rates for certain services furnished by the off-campus hospital outpatient departments that existed or were under construction in 2015 at the physician fee schedule rate. Since these services furnished by these off-campus hospital outpatient departments were paid at a higher rate, the payment cap, which was to be implemented over 2 years, was intended to equalize payment rates for certain clinical visits between settings where services can be provided, for example, physicians offices. In 2019, CMS applied 50 percent of the payment reduction and adopted another final rule to apply 100 percent of the payment reduction in 2020 and subsequent years. The rule applied to specific clinical visits; other services would continue to be paid at the higher rate. In response to a lawsuit challenging CMS's authority to issue the November 2018 rule, a federal court of appeals ruled in July 2020 that CMS had the authority to adopt these payment changes. An appeal of that ruling was filed, and in June 2021, the Supreme Court declined to take up the case.

GAO plans to continue monitoring congressional action and any additional agency actions, including actions to equalize payment rates that Medicare pays for evaluation and management services in all hospital outpatient departments, regardless of whether they are deemed on-campus or off-campus. Until action is taken to equalize the rates Medicare pays for certain health care services, Medicare and beneficiaries could continue to pay more for the same health care service depending on where the service is performed.

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