Site-neutral payment debate intensifies in hospital affordability hearing

Site-neutral payment is at the forefront of the debate on policy levers to enhance affordability in the hospital industry, as indicated during a congressional hearing Tuesday.

The House Ways and Means Committee hosted a panel of hospital CEOs, seeking insights on ways to tamp down spending on hospital care. Prices in the sector have risen by 300% over two decades, Rep. Jason Smith (R-Mo.), chair of the committee, said during his opening statement (Bureau of Labor Statistics data suggest an increase of roughly 170% since 2005).

The 4.5-hour hearing had plenty of partisan bickering, with Republicans blaming the Affordable Care Act for the lack of healthcare affordability, while Democrats pointed the finger at the coverage cutbacks in the One Big Beautiful Bill Act (OBBBA). Among various topics that generated substantive attention were consolidation, community benefit, and regulatory and administrative burden

Executives appearing before the committee were Brian Donley, MD, president and CEO of NewYork Presbyterian; Sam Hazen, CEO of for-profit HCA Healthcare; Wright Lassiter III, president and CEO of CommonSpirit Health; and Michael Waldrum, MD, CEO of ECU Health.

Even committee members who criticized the hospital sector acknowledged that no single constituency can unilaterally make healthcare more affordable. The same committee hosted a hearing with insurance executives in January.

“The entire healthcare system — hospitals, insurance companies, drug manufacturers, pharmacy middlemen — all bear responsibility for the high costs patients face,” Smith told the panelists.

What site-neutral payment policy proposals would change

Several Republican committee members focused on site-neutral payment and related issues such as the facility fees sometimes charged by hospital-owned clinics.

“There are some things hospitals can do that outpatient physician groups can’t,” acknowledged Rep. Jodey Arrington (R-Texas). “We want you to be motivated to do that and do that well. There’s a cost structure associated with that. We want you to be adequately funded.”

But Arrington was one of the committee members touting site-neutral payment, saying that enactment merely of proposals made by the Obama and Biden administrations, as well as President Donald Trump’s first administration, would save $160 billion for taxpayers and $672 billion in healthcare spending.

“There are certain aspects of your discussion here that have merit,” HCA’s Hazen replied. “There’s also merit to the hospital receiving a premium in certain circumstances.”

The CEOs said they would work with Congress on precise policies, such as pinpointing which hospital services can be subject to site-neutral payment and which services should continue to be paid more because transferring them to other settings would be impractical.

But even a nuanced solution might not recognize the structural reasons why hospitals need higher payment rates, according to testimony. For example, hospitals are unique among categories of providers in that they cannot turn away uninsured patients in emergency scenarios. They also tend to see a sicker population than physician practices or ambulatory surgical centers and face a higher regulatory burden, the CEOs said.

Role of consolidation in payment policy debates

Vertical consolidation is linked to site-neutral payment in policy debates, with hospitals allegedly buying up physician practices for the opportunity to charge higher fees in accordance with Medicare payment regulations.

Rep. Greg Steube (R-Fla.) said the issue has proliferated in his state and commended the 2026 appropriations bill for requiring HOPDs to bill Medicare using a unique national provider identifier (NPI) starting in 2028. That newfound transparency could spur an expansion of site-neutral payment.

ECU Health’s Waldrum said the idea that hospitals consolidate in rural markets for the sake of boosting their bottom lines is a misperception.

“I can only speak to what we face,” he said. “Our system grew because eight rural hospitals were failing and were about to be closed when those communities approached us, because they had years of deficits in their community and they were losing doctors.”

Democrats, who generally were more benign in their assessment of hospital pricing and put more of the blame for unaffordability on the OBBBA, agreed that consolidation can serve a valid purpose.

“Consolidation is driven in part by necessity — [the] necessity to survive,” said Rep. Brad Schneider (D-Ill.). “Access to quality hospital care is becoming more difficult and more expensive, irrespective of where we live. In rural parts of the country, hospitals are closing, but also in urban centers as well.”

Community benefit and nonprofit hospital scrutiny

In recent years, there has been chatter in Congress about changing the tax exemption for not-for-profit (NFP) hospitals. Such a policy might entail tightening the community benefit standard via narrower, clearly defined criteria.

“When I look at your systems, I don’t know that I see a lot of difference between a for-profit and a nonprofit,” said Rep. Lloyd Smucker (R-Pa.), citing issues such as executive compensation levels and activities that he implied make large NFP systems resemble large corporations.

The CEOs of the not-for-profit (NFP) hospitals said their organizations live up to the rules around the tax exemption. NYP annually provides community benefit valued at $2.4 billion, amounting to more than 20% of operating expenditures, Donley said. That includes covering Medicaid underpayments that total $1 billion.

CommonSpirit, the largest not-for-profit health system in the U.S. by bed count, delivers $5.2 billion per year in community benefit, Lassiter said.

“That is approximately 12 times the value of our taxes forgone,” he said.

Supplemental allocations for hospitals, including savings from the 340B Drug Pricing Program, allow the organizations to provide community benefit, the CEOs said.

Given that 340B revolves around manufacturer discounts to providers, “It’s important to point out that the feds don’t pay for it,” Waldrum said. “This is a program that’s put in place, and I get that Pharma doesn’t like it. However, this is really important for us to maintain the programs that we need to maintain, to [ensure] the access.”

Medicare Advantage and revenue cycle challenges

Several pending bills were touted during the hearing, although the chances that any of them will advance to become law are unclear.

The Medicare Advantage Prompt Pay Act, which has bipartisan sponsorship in both chambers, would require MA plans to make payments faster and more reliably, using a standardized definition of a clean claim.

Such a bill could bring needed relief to MA providers, panelists said. Lassiter said CommonSpirit is fighting to resolve $4.3 billion in unpaid claims sitting with MA plans. More than $1 billion worth of those claims is older than five months.

“We don’t get paid regularly or timely,” Lassiter said.

Waldrum noted that 20% of healthcare expenditures are to manage administrative burden, specifically the complexity of insurance markets.

“Medicare Advantage is overwhelming our staff and our reporting,” he said.

Legislation called the Defend Rural Health Act would be less favorable to some providers. The Republican bill seeks to prohibit dual reclassifications, i.e., classifying a hospital as both urban and rural for Medicare payment purposes.

Donley was asked why eight of NYP’s hospital campuses have classified as rural despite locations in or around New York City.

“We do not consider ourselves a geographically rural hospital, but under CMS [regulations], we are designated as a rural referral center,” Donley said. “We are proud of the thousands of patients from rural America that come to us when there’s nowhere to turn.”