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Site of Service Billing Reform Affecting Healthcare Leaders

TL;DR:
Medicare’s 2025 site-of-service billing reforms cut reimbursement rates for many outpatient services by 40–60%, potentially reducing hospital revenue by $167 billion over the next decade. Urban health systems face new compliance burdens and strategic pressures, making efficient care delivery models and revenue diversification—such as outsourced clinical services and telehealth billing—essential for financial sustainability.

The Core Change: Site-Neutral Payments

Beginning in 2025, Medicare is reimbursing most services delivered in off-campus hospital outpatient departments—and in some cases on-campus sites—at rates similar to physician offices or ambulatory surgical centers (ASCs). These site-neutral payments are often 40–60% lower than traditional hospital outpatient rates.

According to the American Hospital Association (AHA), expanded site-neutrality could result in $167 billion in lost hospital and health system revenue nationwide over the next decade. Service lines most affected include:

  • Outpatient drug administration

  • Imaging

  • Evaluation and management visits

Rural sole community hospitals are largely exempt, but urban and multi-location systems will experience significant revenue compression.

Compliance Burden and Operational Pressure

Beyond reimbursement cuts, compliance requirements are increasing. Hospitals must now:

  • Implement unique NPIs for every off-campus location

  • Submit regular attestations

  • Upgrade billing, provider enrollment, and audit systems to ensure accurate coding and reporting

For many organizations, these requirements compound the financial strain and accelerate the need for operational efficiency.

Strategic Implications for Healthcare Organizations

Site-neutral reforms are forcing healthcare leaders to reconsider the structure and sustainability of their outpatient portfolios. Pressures include:

  • Rationalizing service lines: Streamlining or closing departments that cannot demonstrate clinical necessity or financial viability

  • Workforce reallocation: Shifting clinicians to higher-value or reimbursable areas of care

  • Contract renegotiation: Revisiting payer agreements under new reimbursement realities

At the same time, the reforms are designed to reduce incentives for hospital acquisition of physician practices—likely shifting market competitiveness back toward physician offices and ASCs.

The Path Forward: Efficient Care and Revenue Diversification

Given this environment, organizations cannot rely on traditional hospital-based revenue streams alone. Two strategies stand out:

  1. Efficient Care Delivery
    Outsourced clinical care models, including turnkey chronic care management and remote patient monitoring, allow organizations to maintain high-quality care while reducing the internal burden of staffing, compliance, and reporting. These models extend capacity without requiring significant capital or workforce expansion.

  2. Revenue Diversification
    Expanding into fee-for-service (FFS) models such as telehealth visits, behavioral health integration, and other reimbursable virtual care services provides new revenue streams. Proper coding and documentation of telehealth CPT codes can create financial resilience while aligning with evolving patient demand for accessible care.

How do I prepare for reimbursement reductions?

The 2025 site-of-service billing reforms represent a structural shift, not a temporary reimbursement cut. Healthcare leaders who respond with operational efficiency and strategic revenue diversification will be best positioned to sustain financial performance while continuing to meet patient needs.

The organizations that adapt quickly—through efficient turnkey care models and expanded FFS telehealth billing—will be the ones to weather this transition and emerge more competitive in the long run.

References

  1. American Hospital Association. Fact Sheet: Estimated Impact of Hospital Campus and Off-Campus Site-Neutral Proposal. May 2025. Link

  2. KFF. Five Things to Know About Medicare Site-Neutral Payment Reforms. 2025. Link

  3. McDermott Will & Emery. CMS Proposes Expanded Site-Neutral Payment Policy for Drug Administration Services. 2025. Link

  4. ICD10 Monitor. 6 Key Healthcare Policy Changes to Know for 2025 and Beyond. 2025. Link

  5. OS Healthcare. Navigating 2025 Reimbursement Changes in Healthcare Revenue Cycle Management. 2025. Link