The Centers for Medicare and Medicaid Services is proposing to cut Medicare spending by $260 million in the first year by ending price differences for imaging services like MRIs and CT scans based on who owns the facility, according to a new analysis from the Niskanen Center. The proposed Outpatient Prospective Payment System rule would make Medicare pay the same amount for imaging services without contrast whether they're done at a hospital clinic or a physician's office. The think tank argues the changes tackle pricing distortions that push hospitals to buy up independent practices and charge higher rates for identical care.
Right now, Medicare pays vastly different amounts for the same scan depending on where it happens. A bone density scan to diagnose osteoporosis costs nearly three times more at a hospital clinic than at a physician's office, the analysis shows. A heart scan runs $429 more at a hospital facility, while a breast ultrasound costs $120 at a hospital versus $84 at a doctor's office. The agency expects the change would save Medicare Part B $190 million and cut beneficiary premiums by $70 million, with patients saving another $70 million through lower out-of-pocket costs from the 20 percent coinsurance they pay. CMS is also phasing out the inpatient-only list over three years, removing 637 procedures in year two — roughly 37 percent of the original list — that can now be done in lower-cost outpatient settings like ambulatory surgery centers.
The report notes that these price gaps reflect "facility fees" for hospital overhead that don't cover costs specific to the patient being treated, just the higher expenses of the hospital system that owns the building. There's no proof that hospital ownership makes imaging better quality despite the much higher prices, the analysis states. One study found that changes in hospital ownership of physician practices led to more than $40 million in added Medicare spending for just five common imaging services, according to the report. In the commercial insurance market, hospital-employed radiologists get professional rates 43 percent higher than independent radiologists. The Medicare Payment Advisory Commission identified imaging as a candidate for "payment rate alignment across ambulatory settings," suggesting these services could be done in physician offices with the same quality but lower cost.
The Niskanen Center argues the pricing gaps create incentives for large hospital systems to buy independent physician practices to capture the higher fees, fueling consolidation that raises costs without improving care. Making payments equal across settings could stop hospitals from acquiring freestanding imaging clinics by removing the financial motive to consolidate, preserving competition and keeping prices down, the report says. Critics worry site-neutral payments would strain rural hospitals, but the analysis notes that critical access hospitals — more than half of rural facilities — aren't paid through this system, and CMS exempts rural sole community hospitals, insulating most rural providers from the change. The think tank supports CMS using its regulatory power to keep expanding site-neutral payment to more services while Congress stalls on broader legislation, arguing the agency should continue chipping away at incentives that pay more for the same care based solely on who owns the building where it's delivered.