Site neutrality: What health systems need to know now

For over a decade, Medicare has mulled expanding the use of site-neutral payments for certain services, paying the same rate regardless of whether a service was delivered in a hospital outpatient department (HOPD), ambulatory surgery center (ASC), or physician’s office.  

Site neutrality was first introduced in the Bipartisan Budget Act of 2015, specifically for hospital-owned, off-campus outpatient locations. However, existing facilities were grandfathered into the original payment structure, so most hospitals didn’t feel that impact.  

Last fall, a bipartisan framework was introduced in the Senate that would eliminate the grandfather exemption and expand site neutral payments to include the most common outpatient services, and the Same Care, Lower Cost Bill was introduced earlier the year proposing similar policies. The Trump administration could take executive action to broaden the scope of services and facilities included in these policies as a part of its efforts to rein in healthcare spending.  

Preparing for potential site neutrality expansion 

As site neutrality gains momentum across legislative and regulatory channels, health system leaders are navigating a shifting landscape of reimbursement models, care delivery strategies, and portfolio optimization. While site-neutrality may reduce costs, it risks undermining access for vulnerable populations. HOPDs serve sicker, lower-income, and rural patients at higher rates than other facilities, and a hospital’s standby capacity, regulatory burden, and emergency services may justify higher reimbursement. Health systems must advocate for nuanced policy frameworks that preserve funding for essential services and differentiate high-acuity HOPD offerings (e.g., emergency hyperbaric care) to protect them from cuts. 

To explore the implications and opportunities, Guidehouse convened a roundtable of its experts, with Partners Mark Bethke and Michael Lenahen, and Associate Director Dylan Smith, to share insights on how organizations can respond proactively and strategically. 

How would health systems reassess care mix and revenue sources? 

Bethke: Expansion of these policies could be the tipping point for hospitals to stop performing various procedures and surgeries that can be done more economically in alternative locations with the same—or sometimes better—level of safety and quality. Alternative sites like ambulatory surgery centers and other outpatient facilities have already been eroding a lot of hospital volume, revenue, and ultimately, margin. Many systems realized long ago that they had to embrace this change, so they built, bought, or partnered to expand their footprint and asset base with alternative sites of care. They are embracing the step-down approach, which currently offers varying payment levels depending on the site of service.  

Focusing only on their historical core facility operations, inpatient and outpatient, is short-term thinking. Health systems not yet using this model—or only dipping their toes in it—should begin considering it now. That starts with reenvisioning your strategic plan for impacted procedures and surgery services. Examine every line of service and determine where the impacted procedures should be performed based on volume and margin. Embrace the idea of taking care of your population—not just providing specific services based on their current patterns.  

Lenahen:  Provider organizations should consider accelerating their ASC and imaging portfolio expansion efforts. Providers who can proactively shift outpatient services to freestanding ASCs and imaging centers will create longer-term sustainability amidst the evolving landscape. It will be important to be on the offensive and collaborate with payers to be a price-setter by negotiating competitive rates and preserving value, as opposed to reacting to competitive threats like vertical integration, private equity, and disruptors in a more defensive manner. 

It is also critical for provider organizations to conduct impact modeling, along with mapping geographic access points to ASCs and HOPDs, to identify high-risk HOPD services most vulnerable to rate compression, like IPO services and drug administration. Using benchmarking tools to assess ASC performance and identify opportunities for rate improvement and margin impact should be a foundational exercise.   

Smith: It’s important that health systems consider the downstream impacts on commercial contracting and health plan policies. For instance, UnitedHealthcare recently introduced a new policy effective September 1st that aligns their commercial reimbursement with the 2015 law. These policy changes may push some systems to shift their focus to offering higher acuity services in the hospital setting or force them to reconsider the services they offer and where that care is being provided.   

How could site neutrality policies impact M&A? 

Lenahen: In recent years, some proactive health systems have been aggressive in growing their ambulatory services, acquiring or building new surgery centers and intentionally keeping them as freestanding sites of service. Some leaders did this to balance their portfolios in anticipation of major reform, while others sought to counter lower-price facilities in adjacent markets or compete with providers outside their market. That being said, health systems shouldn’t just blindly acquire lower-cost assets—there needs to be strategy behind it. To retain volume and mitigate referral leakage, organizations may consider offering shared ownership models for ASCs to incentivize physician participation and create alignment strategies with independent providers through co-investment opportunities. 

Smith: As part of the due diligence process, it’s important to consider service mix and what may be at risk under site neutrality policies. If you’re considering acquiring a system that has concentrated lower acuity services at the hospital or has a large percentage of off-campus HOPD sites, that could pose challenges.  

What benefits can site neutrality bring to health systems? 

Bethke: In the short term, there will be pain for many hospitals. But if you’re a leader in reenvisioning your strategy to embrace site neutrality, you can win in your market. Frankly, the industry needs site neutrality—payers are clamoring for it, I’d bet that an educated consumer would expect it, and ultimately it’s a critical step for whole-person care. It pushes health systems to think more about value-based care, population health, and innovative payment models, and that’s a good thing and needed step for our industry.  

Smith: Site neutrality forces providers to focus on getting the best outcomes for the lowest cost. It helps us shift more payments to incentivize value. I’m not sure it has been proven that a procedure delivered in a hospital offers more value than a physician’s office for certain services—in fact, research suggests otherwise. If we haven’t proven it has a higher value, why are we paying more for it?  

Lenahan: It’s understandable that health systems struggle with this—hospital expenses are inherently high. There is a natural tension between payers and health systems, and site neutrality is expected to alleviate that tension—admittedly to the detriment of health systems. But no good change occurs without difficulties and tensions. If providers embrace a focus on value rather than specific payment methodology, they’re likely to find new efficiencies and be better prepared when additional site neutrality policies inevitably are announced.   

Embracing a forward-looking approach 

With site neutrality potentially gaining more traction—whether through legislative reform or executive action—health systems must move beyond reactive strategies and embrace a forward-looking approach. By reevaluating care delivery models, rebalancing portfolios, and aligning with value-based principles, leaders can position their organizations not just to withstand disruption but to thrive within it. The shift may be complex, but it offers a clear opportunity: to deliver smarter, more equitable care while building resilience for the future.