LUGPA Policy Update: Momentum Builds for Site-Neutral Payment Reform

May 2026

At-a-Glance Essentials

What Happened

On April 28, 2026, the House Ways and Means Committee held a high-profile hearing on rising healthcare costs, featuring CEOs from major health systems including HCA Healthcare, Common Spirit Health, New York-Presbyterian, and ECU Health.

While discussions covered consolidation, 340B, and administrative burden, a notable shift emerged: several hospital executives signaled openness to a “rational reworking” of Medicare’s site-neutral payment policies—an area that hospitals have historically opposed.

Key Context

• Jason Smith and committee Republicans emphasized that payment differentials between hospital outpatient departments (HOPDs) and physician-led settings drive consolidation and higher costs.
• Examples included colonoscopy payments of ~$1,222 in HOPDs vs. $656 in ASCs, along with disparities in imaging and biopsies.
• Hospital leaders acknowledged reform opportunities for lower-acuity services, while highlighting higher costs tied to complex care, emergency readiness, and safety-net responsibilities.
• The Centers for Medicare & Medicaid Services has already advanced site-neutral policies, including applying Physician Fee Schedule-equivalent rates to certain drug administration services in off-campus departments beginning in CY 2026—projected to save $220 million for Medicare and $70 million for beneficiaries.

LUGPA Position

LUGPA strongly supports comprehensive site-neutral payment reform. Medicare should reimburse the same amount for the same service regardless of the site of care, provided clinical quality and patient needs are equivalent. This levels the playing field for independent practices, reduces incentives for hospital acquisition, lowers costs, and improves patient access to community-based care.

Why Site-Neutral Payments Matter

The current system creates a structural imbalance:

• HOPDs are often reimbursed 2–4 times more than physician offices or freestanding centers for identical services due to facility fees.
• This differential fuels consolidation—nearly half of U.S. physicians are now employed by hospitals, and most hospital beds are part of large systems.
• Higher hospital-based payments increase costs for Medicare and beneficiaries without consistent evidence of better outcomes for routine care.
• For urologic conditions (prostate, bladder, kidney cancers; BPH; stone disease), these disparities increase out-of-pocket costs and can shift care away from coordinated, physician-led models.

Broader Implications

Site neutrality promotes value over volume, discourages anticompetitive consolidation, and supports affordability and access. Potential savings could reach tens of billions over a decade and help offset other healthcare priorities, including workforce investments.

LUGPA supports expanding site-neutral policies while maintaining appropriate adjustments for complex, emergent, and rural safety-net care.

Impact on LUGPA Members

Positive Impacts

• Financial Stability & Competition: Removes incentives for hospital acquisition, helping preserve independent practices and integrated care models.
• Patient Access & Choice: Supports care in lower-cost, convenient community settings.
• Cost Savings: Reduces beneficiary coinsurance and overall Medicare spending, particularly for cancer and chronic care.
• Policy Alignment: Reinforces LUGPA priorities, including the Provider Reimbursement Stability Act (H.R. 8163), RVU updates, and Stark Law modernization.

Challenges & Considerations

• Hospitals provide higher-acuity and safety-net care, requiring thoughtful policy design.
• Practices must maintain strong coding, documentation, and quality reporting under site-neutral frameworks.
• Ongoing radiation oncology payment changes continue to pressure freestanding providers, though site neutrality may help mitigate disparities.

LUGPA Recommendations & Next Steps

• Congress should advance targeted legislation expanding site-neutral payments with safeguards for complex and rural care.
• CMS should continue data-driven expansions beyond current policies while ensuring accurate practice expense inputs.
• LUGPA will engage with Congress and the Administration to provide specialty-specific data on cost, quality, and access.
• Members are encouraged to share real-world examples of site-of-service impacts.

Looking Ahead

Hospital executives’ openness to reform marks a meaningful shift in the site-neutral debate. Combined with recent CMS actions and bipartisan cost-containment efforts, this creates a window for progress.

LUGPA will continue leading advocacy to ensure policies reward efficiency, support physician-led innovation, and prioritize patient access over site-based payment disparities.