Site-Neutral Payment

Key facts

Main statute

Section 603 of the Bipartisan Budget Act of 2015

Section 603 scope

Off-campus hospital departments not billing under OPPS before November 2, 2015

Reduced rate

Physician Fee Schedule equivalent, set at 40 percent of the OPPS rate

Claim modifiers

PN for non-excepted and PO for excepted off-campus department services

Also used for

Long-term care hospital cases that do not meet patient criteria

What is site-neutral payment?

Medicare often pays more for a service in a hospital outpatient department (HOPD) than in a physician office, because the hospital receives a facility payment under the Outpatient Prospective Payment System (OPPS) in addition to the professional fee. Site-neutral payment aims to remove that gap when the care is comparable.

Supporters, including the Medicare Payment Advisory Commission (MedPAC), argue that higher hospital rates encourage hospitals to buy physician practices and bill their services at hospital rates. Hospitals counter that they carry costs physician offices do not, such as standby emergency capacity and added regulatory requirements.

How site-neutral payment has been implemented

Medicare has applied site-neutral policy in steps:

• Section 603 of the Bipartisan Budget Act of 2015: most services at newer off-campus provider-based departments are paid a Physician Fee Schedule equivalent rate, now 40 percent of the OPPS rate. Dedicated emergency departments and on-campus departments are exempt.
• Calendar years 2019 and 2020: CMS applied the reduced rate to clinic visits at older, excepted off-campus departments, a policy a federal appeals court upheld in 2020.
• Calendar year 2026: CMS extended the reduced rate to drug administration services at excepted off-campus departments, with an exception for certain sole community hospitals.
• Long-term care hospitals: since fiscal year 2016, cases that do not meet criteria such as a prior intensive care unit stay of at least three days are paid a lower site-neutral rate.

Why site-neutral payment matters

Site-neutral policy changes the economics of hospital outpatient expansion and physician practice acquisition. When a hospital-owned clinic loses its facility payment premium, buying a practice and converting it to hospital billing is less attractive, which matters for health system strategy, private equity and physician recruiting.

For drug companies, the 2026 drug administration change affects where infused therapies are given and billed. Oncology and other infusion-heavy specialties are sensitive to any shift in volume from hospital departments to physician offices or home infusion. Congress has repeatedly considered broader site-neutral legislation, so the policy remains contested and subject to change.