Editor’s note: Dr. Josh Umbehr is a family medicine specialist in Wichita, Kansas. He’s the founder of AtlastMD, a full-service medical practice.
A decades-long push by Medicare payment reform advocates may finally gain traction this year: eliminating Medicare’s payment disparities between hospitals and independent physician practices through site-neutral payment reform.
MedPAC, the nonpartisan legislative body that advises Congress on Medicare policy, recently released a report urging lawmakers to adopt site-neutral payments — a reform that would require Medicare to reimburse hospitals and independent physician offices equally for providing the same outpatient service. Today, Medicare typically pays hospitals substantially more than independent physicians for identical care simply because the service is delivered in a hospital-owned facility.
Congress should seize this bipartisan excitement for site-neutral policies to pass the bipartisan Same Care, Lower Cost Act, which would finally bring Medicare reimbursement in line with the value of the care patients receive rather than the ownership structure of the provider delivering it. Doing so could lower costs for patients and taxpayers, reduce incentives for hospital consolidation and slow one of Medicare’s fastest-growing categories of spending without reducing benefits or limiting access to care.
Historically, higher payments to hospitals were intended to account for greater overhead costs and the assumption that they cared for more medically complex patients. But that rationale has become increasingly difficult to defend as hospitals have acquired thousands of physician practices, transforming independent offices into hospital-owned outpatient departments eligible for higher Medicare reimbursement. For many common services, Medicare is no longer paying more for better care; it is paying more because of who owns the building.
There is little evidence that patients receive better care at hospitals that receive higher reimbursements. A national study found that larger, more complex health systems were not associated with better quality than independent hospitals and physician practices.
The financial incentives to receive these higher reimbursement rates have fueled rapid consolidation throughout the healthcare system. There were 72 hospital mergers and acquisitions in 2024 and another 46 in 2025.
As independent physician practices disappear, patients have fewer choices, and Medicare continues to pay more for the same care.
Research shows consolidation drives up healthcare spending beyond Medicare, too. In a three-year period, consolidation between hospitals and primary care physicians led to a $40 million increase in Medicare spending for certain imaging procedures and a $33 million increase for certain lab tests, mainly due to a shift in the site of service to hospital settings. Meanwhile, increased market power enables health systems to negotiate higher prices with commercial insurers, driving up premiums.
Hospitals argue that higher outpatient reimbursement rates are necessary to support emergency departments, trauma centers, teaching programs and other essential services. Yet, evidence suggests those concerns are overstated for routine outpatient care that can safely be delivered in physician offices.
For example, Connecticut’s restrictions on facility fees — additional charges hospitals bill simply because care is delivered in a hospital-owned facility — had little effect on hospital operating budgets. That experience suggests equalizing reimbursement for routine outpatient services need not threaten hospitals’ financial viability.
The cost of maintaining these payment disparities is growing rapidly. Medicare Part D spending is projected to nearly double by 2050, while the Medicare Hospital Insurance Trust Fund is projected to be depleted by 2033. Absent congressional action, policymakers could eventually face difficult Medicare cuts ranging from reducing provider payments to limiting benefits or increasing taxes.
Site-neutral payments represent one of the few reforms capable of generating meaningful Medicare savings without reducing benefits or limiting access to care.
Legislation now before Congress would put these reforms into practice. The bipartisan Same Care, Lower Cost Act would establish site-neutral payments, requiring Medicare to pay the same rate for the same outpatient service regardless of whether it is delivered in a hospital outpatient department or an independent physician's office.
By eliminating payment disparities that reward ownership rather than value, the bill would lower costs for patients and taxpayers while reducing unnecessary Medicare spending, without changing the services beneficiaries receive or restricting their access to care.
The benefits would extend beyond Medicare. Because many commercial insurers benchmark their reimbursement rates to Medicare, site-neutral payments could also help moderate healthcare costs throughout the private insurance market.
The economics are straightforward. Medicare should pay for the care patients receive, not the ownership structure of the provider delivering it. Realigning reimbursement with value would lower costs for beneficiaries, reduce unnecessary federal spending, discourage further consolidation, slow one of Medicare’s fastest-growing categories of spending, and put Medicare on a more sustainable fiscal path.
Washington has debated site-neutral payments for years. With Medicare's finances under mounting pressure and bipartisan support finally emerging, there is no time left to waste.
