Congress may scale back Medicare payments for outpatient care

HOUSTON – The Houston Chronicle reports that Texas hospitals like Houston Methodist have devoted big parts of their businesses in recent years to buying up doctors’ practices and rebranding them as part of their outpatient networks. But they may soon have to figure out a different strategy. Under existing federal Medicare rules, hospital-operated outpatient facilities get higher fees than what a traditional doctor’s office would receive for the same procedure or treatment — sometimes double or even five times the amount, according to KFF, formerly known as the Kaiser Family Foundation. Now Congress is considering whether to end the practice as part of a larger effort to reduce the cost of Medicare, the more than $900 billion program that provides healthcare to more than 2.3 million Texans 65 years of age or older. The Congressional Budget Office estimates such reforms could save the federal government up to $100 billion over the next decade, on the back of recent cuts to reimbursement rates for in-hospital care for Medicare patients.

“It would be a big deal for hospitals,” said Kristie Loescher, a healthcare professor at The University of Texas’ McCombs School of Business. “A lot of outpatient care is actually being done in hospitals (and the facilities they operate) and it’s driving a lot of revenue.” Hospitals are lobbying hard to block the reforms, arguing the higher fees are justified by the fact they are required to treat all those who come through their doors, regardless of whether they have insurance or not. Without the extra fees, Texas hospitals would likely be forced to eliminate some outpatient services, hurting access for patients, said John Hawkins, president of the Texas Hospital Association, a trade group. Baylor St. Luke’s Medical Center, for instance, received more than $43 million from Medicare for outpatient care in fiscal year 2023, according to data compiled by the Rand Corporation. Houston Methodist took in more than $140 million. Methodist and other Houston-area hospitals declined or did not respond to requests for comment for this story. “A lot of these systems have expanded their outpatient capability outpatient to provide a pretty high level of care without patients having to go into the medical center,” Hawkins said. “A small (physicians) group wouldn’t necessarily be able to do that.”