Understanding Site-Neutral Payments
Recent legislative proposals have reignited the debate over site-neutral payments, a policy aimed at equalizing Medicare reimbursement rates across different care settings. With bipartisan interest and ongoing discussion in Congress, lawmakers are considering further site-neutral reforms to address rising healthcare costs. Site-neutral payments ensure the same service is reimbursed at the same rate, regardless of where the service is performed, whether in a hospital outpatient department, an ambulatory surgery center (ASC), or a physician’s office. These efforts build on previous reforms and could have significant implications for hospitals, ASCs, physician groups, and payers, reshaping where outpatient services are delivered and how they are reimbursed.
The Case for Site Neutrality
Supporters argue that equalizing payments across care settings could save Medicare billions and reduce out-of-pocket costs for patients, who often face higher copays for hospital-based services. Proponents also contend that, if a service can be provided safely in a lower-cost setting, Medicare should not pay a higher price simply because it is performed in a hospital.
Supporters also emphasize that the current payment structure incentivizes provider consolidation. They point to evidence that hospitals have acquired physician practices and their associated ancillary services and converted them into outpatient departments under their hospital provider license, allowing them to achieve higher facility fees. By removing this financial advantage, site-neutral payments could slow provider consolidation and encourage more cost-efficient care. Generally, payers support these policies as a way to curb spending and improve healthcare affordability.
The Case Against Site Neutrality
Opponents argue that site-neutral policies ignore critical differences in cost structures between settings. Hospitals provide 24/7 emergency departments, maintain expensive infrastructure, and must comply with stricter regulatory requirements than ASCs or physician offices. They contend that the higher hospital outpatient payments support this infrastructure and safety-net services.
Industry groups like the American Hospital Association warn that large cuts to hospital outpatient reimbursements could force hospitals to reduce services, close outpatient departments (especially in underserved or rural areas), or otherwise threaten patient access to care. They emphasize that underserved populations rely on hospital-based clinics, and site-neutral cuts could undermine the financial viability of those services.
Legislation & Policy Momentum
Site neutrality policies have gained bipartisan support in recent years, with MedPAC consistently supporting the approach. The 2015 Bipartisan Budget Act took the first major step by reducing Medicare payments for newly established, off-campus hospital outpatient departments. In 2019, CMS extended site-neutral payments to clinic visits at off-campus hospital facilities protected under prior rules, a move upheld by courts despite hospital opposition., a move upheld by courts despite hospital opposition.
More recently, Congress has debated further site-neutral reforms, such as equalizing drug administration and imaging payments across all settings, which could save Medicare an estimated $3.7 billion over 10 years. Several bipartisan bills have been introduced to fully eliminate historical exemptions, bringing all off-campus hospital outpatient departments to the same reimbursement level as physician offices and ASCs.
Another bipartisan proposal, the FAIR Act, sought to increase transparency in hospital billing and lay groundwork for broader site-neutral payments (initially focusing on cancer care services). In November 2024, Senators Bill Cassidy and Maggie Hassan introduced a framework proposing comprehensive site-neutral payment reforms for hospital outpatient departments. Although none of these bills have passed as of early 2025, their continued support from Republicans and Democrats reflects growing momentum in Congress toward site-neutral payment reforms.
Public Company Insights: How Industry Leaders Are Responding
During Q4 2024 earnings calls held between January and March 2025, executives from major healthcare organizations shared insights on how different stakeholders are responding to the prospect of site-neutral payment reforms.
HCA Healthcare CFO Michael Marks emphasized the company’s stance against site neutrality, stating, “The idea of paying the same rate for [a 24/7 hospital]… with full capabilities of physicians, staff, and equipment versus [an 8–4 outpatient surgery center] does not seem to make a lot of sense to us.” Despite the policy threat, Marks said HCA has “not seen a bill yet that would give us enough information to estimate a potential impact,” but acknowledged that cuts to hospital outpatient surgical procedures “would have a bit more notable impact.”
Tenet Healthcare focused on the potential impact to its ASC business. CEO Saum Sutaria noted that Tenet’s ambulatory business already operates under ASC payment structures, meaning the company is somewhat protected from site-neutral cuts. “Our ASCs operate with free-standing ASC rates, which insulates that important part of our business from potential changes in site neutrality rules,” he explained.
Ardent Health Partners CEO Marty Bonick indicated that the company has limited exposure to site-neutral payment reforms, stating, “…broadly speaking, we would likely have more limited exposure to site-neutrality proposals given our relatively smaller ambulatory footprint.”
Surgery Partners CEO Eric Evans said the company “supports efforts to encourage procedures to move to the best site of care, such as our short-stay surgical facilities.” CFO David Doherty continued, “Site neutrality is kind of core to our business… Supporting shifting procedures to the right site of care is our business model.” Evans noted that site-neutral legislation could be a net positive for the company, explaining, “Our facilities will be the net beneficiary as procedures may transition faster from acute care health systems and their outpatient department [to] the facilities that we own and manage.” He added, “We do expect this to be a net tailwind.” .
UnitedHealth Group CEO Andrew Witty framed site neutrality as a cost-saving opportunity, stating, “Lower-cost equivalent quality sites of service, for example, can be good for consumers and patients, but threaten revenue streams for organizations that depend on charging more for care.” This reflects insurers’ broader efforts to steer patients toward lower-cost care settings.
The Bottom Line
The push for site-neutral payments is part of a broader effort to control healthcare costs, but it remains a divisive issue. Hospitals warn that lowering outpatient reimbursement in a hospital setting could jeopardize essential services, particularly in rural and underserved areas. ASC operators and physician groups see it differently, arguing that site neutrality levels the playing field and allows more procedures to move to lower-cost settings. Insurers and payers back the shift, seeing it as a necessary step toward reducing costs and making care more affordable.
Earnings calls from major healthcare companies highlight this divide. Hospital operators warn of financial pressures and potential service reductions, while ASC operators and payers see site-neutral policies as reinforcing the ongoing shift toward lower-cost settings. Despite pushback from hospitals, bipartisan support in Congress and MedPAC’s continued advocacy suggest more site-neutral reforms are on the horizon. Future policies may roll out gradually, incorporate carve-outs for critical services, or offer protections for rural providers. Either way, the industry should prepare for a changing reimbursement landscape where cost efficiency continues to play a bigger role.
