Hospitals Chafe Under A Medicare Rule That Reduces Payments To Far-Flung Clinics

Eric Lewis’ plans of expanding his community hospital’s reach have been derailed.

As CEO of Olympic Medical Center, he oversees efforts to provide care to roughly 75,000 people in Clallam County, in the isolated, rural northwestern corner of Washington state.

Last year, Lewis planned to build a primary care clinic in Sequim, a town about 17 miles from the medical center’s main campus of a hospital and clinics in Port Angeles.

But those plans were put aside, Lewis says, because of a change in federal reimbursements this year. Medicare has opted to pay hospitals that have outpatient facilities “off campus” a lower rate — equivalent to what it pays independent doctors for clinic visits.

Over the past decade, hospitals have been rapidly building outpatient clinics or purchasing existing independent ones. It was a lucrative business strategy because such clinics could charge higher rates, on the premise that they were part of a hospital.

With its new policy, Medicare is essentially saying that an off-campus office is an off-campus office, regardless of whether it’s owned by a hospital, a group of doctors or a solo practitioner.

Taking that position will save Medicare — and possibly patients — money.

The federal insurer bore the brunt of its members’ extra charges, but beneficiaries sometimes picked up part of that expense through deductibles and copayments. Patients with commercial insurance often were blindsided by high bills — going to what seemed to be a normal primary care clinic, only to discover they were charged a hospital facility fee, for example. – National Public Radio