Site-Neutral Payment Key Terms

Key terms used in Site-Neutral Payment Reform and the Commercial Market and What You Need to Know about Medicare Site-Neutral Payment Reform include the following:

Ambulatory Care

Health care services provided without admission to an inpatient hospital. Outpatient sites of care can include a hospital outpatient department (HOPD), an ambulatory surgical center (ASC), and a freestanding physicians’ office. This is also referred to as outpatient care.

Ambulatory Payment Classifications (APCs)

A group of items and services that are similar clinically and in their resource use. Under Medicare’s Hospital Outpatient Prospective Payment System (OPPS), all items and services within an APC are paid the same amount.

Ambulatory Surgical Center (ASC)

A freestanding health care facility that provides outpatient surgical services to patients who do not require hospitalization and for whom care is not expected to exceed 24 hours. ASCs, which can also be called ambulatory surgery centers, may be owned by or affiliated with a hospital or health system or operate independently.

Clinic Visits

Non-procedural health care services whereby health care practitioners diagnose and treat illnesses, injuries, and other conditions. These are also referred to as evaluation and management (E&M) services.

Commercial Health Insurance

Privately sponsored or purchased health insurance coverage, including fully insured and self-insured group health plans and individual market policies. More than 182 million people were enrolled in commercial health insurance coverage in 2024, representing approximately 55% of the U.S. population.

Evaluation and Management (E&M) Services

Non-procedural health care services whereby health care practitioners diagnose and treat illnesses, injuries, and other conditions. These are also referred to as clinic visits.

Facility Fee

Charges institutional health care providers bill for care that are ostensibly to reimburse facility operational expenses. These charges are distinct from a professional fee.

Freestanding Practice

A medical practice or setting that does not operate under a hospital’s license. It may or may not be affiliated with a hospital or health system, but does not bill as a hospital. Examples of settings that can operate on a freestanding basis include physician offices or clinics, urgent care and emergency centers, radiology and imaging centers, labs, and infusion centers. ASCs are by definition freestanding.

Health Care Professional

Physicians, nurse practitioners, physician assistants, physical therapists, and other individually licensed or certified health care providers. These providers may be referred to as individual or independent providers, even if they practice in a group setting, and may be employed by a hospital or another corporate entity, or be self-employed.

Horizontal Consolidation

The merger, acquisition, or affiliation of provider entities that occupy the same level in the health care supply chain, such as a merger between two inpatient hospitals.

Hospital Outpatient Department (HOPD)

A hospital department providing outpatient care that falls under the same financial and administrative contracts as the inpatient hospital or health system. Under Medicare rules, an HOPD must be located within 35 miles of a hospital’s main campus. HOPDs may include on or off-campus outpatient surgical centers and physician offices.

Independent Setting

A medical practice or setting that is not affiliated with a hospital or health system. Independent settings are inherently freestanding.

National Provider Identifier (NPI)

A federally assigned unique identifier number for health care providers to use for administrative and financial transactions.

On-Campus and Off-Campus

Outpatient departments located within the main hospital building or otherwise on a hospital’s main campus are described as “on-campus” facilities. In contrast, facilities that are physically separated from a main hospital campus are described as “off-campus.” Medicare and some state laws specify that there must be more than 250 yards separation between the main campus and an off-campus facility.

Outpatient Care

Health care services provided without admission to an inpatient hospital. Outpatient sites of care can include a hospital outpatient department (HOPD), an ambulatory surgical center (ASC), and a free-standing physicians’ office. This is also referred to as ambulatory care.

Outpatient Prospective Payment System (OPPS)

Medicare’s primary system for reimbursing hospitals for outpatient services.

Physician Fee Schedule (PFS)

Medicare’s system for reimbursing physicians and certain other health care practitioners.

Professional Fee

Charges health care professionals, including physicians, nurse practitioners, physician assistants, and physical therapists bill for their services. These charges typically account for the professional’s practice overhead, including costs for rent, equipment and supplies, and clinical and administrative support staff, in addition to the professional’s time and malpractice expenses.

Site-Neutral Payment

A payment methodology that pays the same or a similar rate for the same health care item or service, regardless of the location or site of care.

Split Billing

The practice of submitting two separate types of bills, a professional claim (covering a health care practitioner’s time and labor) and an institutional claim (covering a hospital or other facility’s overhead expenses), for a single service.

Vertical Integration

A merger, acquisition, or affiliation between provider entities that occupy different parts of the health care supply chain, such as a hospital purchasing a physician practice.

About

Authors: Christine H. Monahan, Karen Davenport, Julia Burleson, and Kennah Watts

Published April 2026

This work was completed in partnership with West Health. Related research and resources on outpatient facility fee billing is available here.