Site-Neutral Payments

Medicare uses different payment systems depending on where care is delivered. Recent proposals seek to eliminate this differential.

A woman and man sitting next to each other; he holds a TV remote control, she is looking at a bill.

The origins of Medicare's different payment systems and proposals for developing so-called site-neutral payments are explored in this brief.

Medicare uses more than a dozen different payment systems to set payment rates for the medical items and services the program covers for beneficiaries. The location where a beneficiary receives a service determines which payment system applies. Each system has its own methodology for rate-setting reflecting costs of operating the setting and the different patient populations served in each.

However, these methodologies rarely account for the amount Medicare might pay for the same service provided in a different clinical setting. As a result, services that can be provided in a variety of clinical settings may sometimes be paid for at dramatically different payment rates.

Recently, the Centers for Medicare and Medicaid Services (CMS) and the Medicare Payment Advisory Commission (MedPAC) have been exploring options to eliminate this differential payment for certain services. This brief explains the origins of these differential payments and the debate over approaches that have been proposed for developing so-called site-neutral payments.

Media Contacts

Sue Ducat

Health Affairs (301) 841-9962

Additional Media Contact: Melissa Blair

Robert Wood Johnson Foundation (609) 627-5937