Hospitals dodged the most substantial efforts in the year-end spending package to reform their industry, but advocates tell Peter the door has at least been cracked opened by a limited measure on outpatient billing.

Why it matters: After years of focusing on drug costs, this Congress started to train more attention on hospitals, which constitute a much larger share of U.S. health spending.

Driving the news: The CR includes a measure that would require off-campus hospital outpatient departments to have a unique identifier number, known as an NPI.

• That’s a cost-saver designed to prevent outpatient departments from billing payers at higher amounts associated with full-service hospitals.
• But the package still leaves out more substantial reforms known as site-neutral payments, which would have more closely aligned Medicare payments to hospital outpatient departments, ambulatory surgery centers and freestanding physician offices.
• It also delays through 2026 scheduled Medicaid cuts to hospitals that serve a disproportionate share of low-income, uninsured and underinsured patients.

What they’re saying: The NPI provision “is a sign that a small victory can be won,” said Sophia Tripoli, senior director of health policy at Families USA.

• She called it a “steppingstone,” given that it “barely scrapes the surface on addressing the roles of hospital consolidation and hospital pricing abuses in the markets.”

Between the lines: Although hospitals opposed the NPI provision, site-neutral was more of an industry focus and a much bigger threat because of the way it addressed how hospital-owned providers charge Medicare more for the same services that independent doctors deliver in their offices.

• It could have saved more than $100 billion over a decade.
• The American Hospital Association and Federation of American Hospitals both issued statements praising the package without even mentioning the NPI provision.
• “Congress’ health package hits the spot — it protects rural health care and assures seniors continued telehealth services while preventing cuts to hospitals serving the most vulnerable,” said FAH CEO Chip Kahn.

Still, hospitals realize they need to remain on guard heading into next year.

• “Hospitals went unscathed for the most part this go around,” said a hospital industry source. “But the bigger threats linger.”
• Jason Kleinman, the AHA’s director of federal relations, said that “we regret the inclusion” of NPI, which he called “unnecessary and duplicative.” He said AHA “will continue to educate lawmakers on the indispensable” role of hospitals in patient care.

The big picture: Hospitals are a powerful political force, given that they’re major employers in many members’ districts.

• The House Energy and Commerce Committee held a hearing in early 2023 on a range of health measures that included some sweeping site-neutral proposals.
• By the time the panel’s health care legislation got to the House floor a year ago, site-neutral provisions had been pared down so they only applied to physician-administered drugs.
• Even that option was never seriously considered in talks on the CR, with a back-and-forth instead focused on whether NPI would make the cut.
• The Senate has been a larger obstacle to hospital cost legislation.

The other side: Hospitals argue that site-neutral payments do not account for higher costs at hospital outpatient departments and would especially harm rural areas — a particularly potent potent argument in the Senate.

• The NPI provision that did make it in applies for billing Medicare, but backers expect there will be spillover to the commercial market.

What’s next: Backers of hospital cost reforms are hoping Congress will take broader action on site-neutral next year.

• Sen. Maggie Hassan praised NPI’s inclusion and said it “demonstrates the strong, bipartisan interest in making additional progress on site neutral payments next year.”