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Are Contracted Payments for Selected Outpatient Services at Risk?

March 12, 2014 | By: Guest Blogger

Are Contracted Payments for Selected Outpatient Services at Risk?

Lisa W. Clark,
Partner, Duane Morris LLP

Guest blogger Lisa W. Clark, Partner, Duane Morris LLP,  practices in the area of health care law with a specific focus in health information technology issues and mobile health for hospitals, physicians, and other providers.


A prominent announcement on Pittsburgh-based Highmark Blue Cross Blue Shield’s website states that effective April 1, 2014, Highmark is amending its infusion fee schedule to pay the same rates whether the drugs are provided in hospital facility settings or physician offices. 

Highmark explains this change as necessary to restore “rational payments” and avoid the “costly markup” of oncology-related drugs in the hospital. 

This development is part of a larger discussion on whether hospital “provider-based” on-campus and off-campus outpatient sites should be able to charge hospital rates, including a technical fee, for services provided in these settings, whereas stand-alone physician practices are paid lower fees. 

This practice of paying differently for services provided in provider-based sites versus physician practices has been in place for over ten years under Medicare. Many private payor contracting arrangements follow the same practice. 

A change in this payment policy could be of major consequence, given hospitals’ interest in expanding into their communities to provide high-quality outpatient services at hospital-affiliated sites that are closer to patients' homes. 

The higher costs for services at provider-based sites result from the fact that to obtain provider-based status, the hospital must demonstrate true clinical, administrative, and financial integration with the provider-based site. 

To integrate and continue to monitor the site like any other department costs the hospital money, and so, like any other department, the site is paid at hospital rates. 

Highmark does not agree with the provider-based fee variance, at least in the oncology setting for now. This development could violate contract terms that set fees for outpatient departments and provider-based sites. 

Given the media coverage of Highmark’s announcement, it would not be surprising if other payors followed suit. Hospitals and health systems with provider-based sites would be wise to keep this issue on the radar.




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