Even amid conflict in Iran and rising gas prices, healthcare affordability remains a top voter concern. KFF reports that 64% of adults are worried about affording healthcare costs, including insurance, office visits, and prescriptions.
Republicans looking for a cost-saving, pro-patient item for a “reconciliation 3.0” should start with one of the most obvious distortions in American medicine: Hospitals get paid more than independent physicians for the same care.
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That payment mismatch is not a minor accounting problem. It is a business model. Federal rules allow a hospital outpatient department to receive higher reimbursement than an independent physician office for identical services, even when quality, complexity, and patient risk are the same. Once the payment is higher, hospitals have every incentive to buy independent practices, rebrand them as hospital outpatient departments, and send patients a larger invoice.
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The predictable result has been consolidation, higher prices, and fewer choices. Nearly 4 out of 5 physicians now work for hospitals, health systems, or other corporate entities, and roughly 6 in 10 practices are owned by hospitals or corporate owners. Patients experience this as shrinking access, higher out-of-pocket costs, and the quiet disappearance of the independent physician.
Site-neutral payment reform is a straightforward correction: same service, same payment, regardless of whether care is delivered in a hospital-owned clinic or an independent doctor’s office. Medicare should not be used as the cash register for regulatory capture.
The price differences are staggering. Routine outpatient services can cost two to four times more when performed in a hospital outpatient department instead of a physician’s office. Cancer patients are hit especially hard. One recent analysis found that site-neutral payments could save many Medicare cancer patients more than $1,000 in out-of-pocket costs during the first year of treatment while saving Medicare more than $5,500 per patient on average.
The virtual hospital experiment makes the case even clearer. Under Medicare’s Acute Hospital Care at Home initiative, certain hospitals were permitted to admit patients as inpatients while delivering much of the care in the patient’s home. The Centers for Medicare and Medicaid Services found these patients were treated for common medical conditions, including respiratory, circulatory, renal, and infectious diagnoses; mortality was generally lower than for comparable brick-and-mortar inpatients, and post-discharge Medicare spending was lower for more than half of the top diagnosis-related groups studied.
If a hospital can bill Medicare as though a patient’s bedroom is a hospital bed, then Congress should ask the next obvious question: Why should only hospitals be allowed to organize and be paid for that model? Much of this market could be served better by physician-supervised virtual care, particularly for stable patients who need monitoring, medication management, home nursing support, and clear escalation pathways — not a default trip through the emergency department and the hospital corral.
This does not mean hospitals are obsolete. True hospitals remain essential for trauma, surgery, intensive care, unstable sepsis, complex procedures, and emergency standby capacity. But it does mean Congress should stop confusing the building with the care. The hospital is not the therapeutic ingredient. Too often, it is simply the invoice.
Lawmakers already have a road map. Sens. Bill Cassidy (R-LA) and Maggie Hassan (D-NH) have released a bipartisan framework for Medicare site-neutral reform, and Sen. John Kennedy’s (R-LA) Same Care, Lower Cost Act would move Medicare toward paying the same rate for the same service. Broad site-neutral reform could save taxpayers roughly $150 billion over the next decade, and even narrower proposals have scored tens of billions in savings.
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That makes site neutrality an ideal reconciliation target. Republicans are searching for savings to offset other priorities while telling voters they are serious about reducing waste, fraud, and overspending. Because reconciliation bills can pass the Senate with a simple majority, a reconciliation 3.0 package may be the clearest opportunity this year to act. Site-neutral reform fits the promise perfectly. It cuts a government-created overpayment, lowers costs for patients, and challenges the hospital lobby’s regulatory advantage.
The conclusion should be simple: pay for care, not for the sign on the building. Congress should use reconciliation to end this distortion, protect true emergency and safety-net capacity where it is actually needed, and let physicians and patients — not hospital billing departments — decide where affordable, high-quality care belongs.
Dr. Raymond Kordonowy is a certified clinical lipidologist based in Fort Myers, Florida. He is also the Florida chapter leader of the Free Market Medical Association.
