Significant reimbursement gap between independent physician and hospital physician

It is found that nearly 70% of Independent Physicians specialize in a certain aspect of healthcare and that the specialized nature of their practice within the local healthcare community enables them to remain independent. However, reimbursement of physicians working for a hospital or health system is significantly higher than that paid to independent physicians.

According to research integrated primary care physicians have earned 78 percent more in independent physician reimbursement, medical specialists’ 74 percent, and surgeon’s 224 percent.

Vertical integration in healthcare also known as hospital-physician integration is rising continuously. According to a new entry in the AMA PRP report in 2018, 47.4% of practicing physicians were employed, while 45.9% owned their practices, according to AMA Policy Research Perspectives (PRP) series.

Importance of Vertical Integration

Vertical integration improves would improve care coordination, access to care, and a variety of other factors resulting in a better quality of care. Moreover, closer integration would bring down costs of care for patients and the entire healthcare system. Hospitals have a large force of resourced to take care of patients compared to patients treated by doctors in physician’s offices.

However, it is overserved that physicians and hospitals may be getting closer to raise profits rather than care quality. Moreover, rise in the probability of integrating with a hospital due to an increase in the outpatient payment differential of moving from the 25th percentile to the 75th percentile.

Now let’s look at the reimbursement gap in detail:

Reimbursement gap between independent physician and hospital Physician

Medicare ties rates to fee schedules based on site of care hence hospital-employed doctors getting higher reimbursed. There are two payments for Hospital physicians under the Outpatient Prospective Payment System (OPPS) while independent physician has only one system.

Outpatient payments comprised of a professional component and a facility component. The facility component of the reimbursement is generally higher than the reduction in the office expense component of the professional payment which leads to payment disparity between independent physician and hospital Physician.

However, this growing reimbursement gap is taking care by policymakers with introducing a site-neutral payment policy.

Site-neutral payment policy

There is a reduction in reimbursement for clinic visits furnished in off-campus PBDs to control unnecessary increases in the volume of covered outpatient services as per the 2019 site-neutral payment policy. However, The American Hospital Association (AHA) and various hospitals challenged the hospital site-neutral payment policy in court and the court ruled in favor of the hospitals, reversing the site-neutral payment policy.

After a certain time, CMS has announced that it would repay hospitals for the payment reductions made by the hospital site-neutral payment policy. Moreover, CMS has continued to push for greater site-neutral payment rates to bend the healthcare cost curve. However, Fee for Service causes all the disparity in the reimbursement gap.

Hence greater reform in the payment system as well as reducing reimbursement to hospital-employed physicians is necessary to reduce the cost of care.

We have certified medical billing and coding experts who can help physicians and hospitals increase their reimbursement. Get in touch with us at or you can call us at 888-357-3226.