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A quiet but powerful policy shift is gaining traction in Congress, and it has hospital CFOs, revenue cycle leaders, and IT teams on alert: site-neutral Medicare payments. Promoted as a cost-saving strategy with bipartisan appeal, site-neutrality would eliminate the payment differential between hospital outpatient departments (HOPDs) and ambulatory surgical centers (ASCs) or physician offices for the same services. The financial and technical implications of this policy could be seismic for health systems—especially those in rural or underserved markets.
Originally introduced in a bipartisan framework by Senators Bill Cassidy, M.D. (R-LA) and Maggie Hassan (D-NH) in late 2024, the site-neutral proposal would redirect savings from equalized reimbursements into funding for rural hospitals. It has since gained support from employer groups and cost-conscious lawmakers across party lines. Now, with March’s budget reconciliation process complete and attention shifting toward long-term Medicare reform, the proposal is firmly back on the table.
What’s at Stake Financially?
The American Hospital Association (AHA) has repeatedly pushed back on site-neutral proposals, arguing that higher payments for hospital outpatient departments reflect the broader scope of services, regulatory obligations, and emergency preparedness hospitals are required to maintain.
“These additional payment cuts… do not recognize legitimate differences among provider settings,” the AHA stated in its 2025 Advocacy Agenda.
According to the Federation of American Hospitals (FAH), site-neutral reimbursement could strip hospitals of more than $40 billion over the next decade—an unsustainable blow for facilities already facing rising labor costs, shrinking margins, and increasing charity care burdens due to Medicaid disenrollments.
Rural hospitals could be especially hard-hit. Even though the policy framework proposes reallocating funds to protect critical access hospitals, implementation risks and data lags could create short-term instability.
IT and Operations: The Overlooked Burden
While most of the public debate has focused on economics, healthcare IT leaders are raising alarms about the technical challenges site-neutral payments would introduce. Charge capture systems, billing logic, revenue recognition software, and even scheduling algorithms are often built around current payment hierarchies.
“Most hospital billing platforms are still architected for differentiated payment logic by location type,” said Danika Paul, VP of Revenue Integrity at Epic Systems. “Eliminating that distinction means remapping service codes, rebuilding analytics dashboards, and retraining staff—and doing it quickly.”
Vendors in the revenue cycle space—including Oracle Health, Change Healthcare, and Optum—are expected to release site-neutral update packages in Q3 2025, but these may not be fully customizable or tested for downstream integration issues.
Hospital CIOs are also watching for potential impacts on Medicare Advantage plans, which often mimic traditional Medicare payment structures. If site-neutrality is implemented broadly, the ripple effect could cascade into payer contracts, cost estimation tools, and financial clearance workflows.
Employer and Payer Pressure Mounts
Employer coalitions and health economists argue that site-neutral payments are long overdue. A MedPAC report released in February 2025 found that, on average, Medicare pays 70% more for a service performed in an HOPD compared to the same service at an ASC or physician’s office.
“This isn’t about slashing hospital budgets. It’s about aligning payment with actual cost and value,” said Shawn Gremminger, CEO of the National Alliance of Healthcare Purchaser Coalitions. “When hospitals charge $1,200 for an echocardiogram that costs $350 across town, someone’s paying for that inefficiency.”
Insurers are already leveraging transparency data to steer members toward lower-cost sites of care. If Medicare adopts site-neutral rules, commercial payers are expected to follow suit, using new AI-based tools to drive utilization management and network redesign.
The Path Ahead: Negotiations and Industry Strategy
As of April 2025, no final legislative language has been introduced. But sources close to the Senate Finance Committee suggest that a site-neutral provision could appear in upcoming entitlement reform discussions tied to debt ceiling negotiations this summer.
In anticipation, some health systems are beginning internal audits to model reimbursement loss scenarios and prepare operationally for code-set reclassifications. Others are doubling down on service line consolidation, looking to offload low-margin outpatient services to partners or affiliated ASCs.
“The transition to site-neutrality, if it comes, won’t be kind to organizations that aren’t technologically agile,” said Corinne Ellis, managing director at Chartis, a healthcare consulting firm. “This is not just about revenue—it’s about digital readiness.”
Site-neutral payment reform may sound like a bureaucratic adjustment, but it has all the markings of a major healthcare IT event. From billing to budgeting, from compliance to contracts, the implications are wide-reaching. If implemented, the rule will force hospitals to move quickly—not just to maintain margins, but to prove their value in a system that increasingly refuses to pay more for geography alone.
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