Care shifts from physician offices to outpatient settings and costs go up, HCCI study finds

hospital money
An HCCI analysis finds that more health services are shifting from physician offices to outpatient settings with an increase in costs. (Getty/PraewBlackWhile)

There are two trends going on in healthcare. More care is taking place in outpatient settings than physician offices and there’s a higher price for those services.

Those are the main findings of an analysis by the Health Care Cost Institute (HCCI) and it comes at a time when more medical practices are being taken over by hospitals and health systems.

When it comes to cost, it does matter where a patient receives healthcare, the analysis found.

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Services are increasingly taking place in the outpatient setting, where services are more expensive, according to the study, which looked at prices for 46 different services ranging from ultrasounds to drug administration. For all the services, the average price was always higher in an outpatient setting than an office setting.

Prices in outpatient settings also tended to increase at a faster rate compared to services provided at a physician’s office. For instance, the price of an upper airway endoscopy increased by 73% in outpatient settings from 2009 to 2017 compared to a 14% increase in physician offices. The average price increased in an office setting from $463 to $527, versus an increase in price in outpatient settings from $1,552 to $2,679.

“The difference in prices was higher than I expected. With some services the price is two or three times higher when rendered in the outpatient setting,” one of the report’s authors, Julie Reiff, said in an interview with FierceHealthcare.

The report may give patients the information they need to help them make decisions about where to seek healthcare services, she said.

The analysis found the share of services performed in outpatient settings increased modestly from 2009 to 2017, from 11.1% to 12.9%. The shift from office to outpatient settings varied considerably depending on the service. Some services, such as echocardiograms and drug administration, had larger shifts towards outpatient settings, while other services saw little change. 

The report did not look at causation in terms of whether the acquisition of medical practices by hospitals and healthcare systems was behind the rise in costs, Reiff said. But both shifts co-exist.

A report by the Physicians Advocacy Institute released earlier this year found that over an 18-month period, hospitals acquired 8,000 more medical practices, and 14,000 more physicians left independent practice to become hospital employees. The report found that the number of physician practices acquired by hospitals grew by 36,000 between July 2012 and July 2016, doubling the number of hospital-owned practices in that four-year period.

The new HCCI report said services performed in an outpatient setting may come with a facility fee, which is an extra payment in addition to the service rendered to help cover the cost of maintaining the facility.

The report noted that the Centers for Medicare & Medicaid Services (CMS) recently finalized a site-neutral payment policy for clinic visits intended to address those price discrepancies in the Medicare program. As a result, CMS will reimburse these visits at the same rate, regardless of where they occur. The new policy, however, does not apply to commercially insured patients.

The policy change is being challenged by hospitals. In January, 38 hospitals signed on to a lawsuit suing the Trump administration over its decision to institute site-neutral payments. The American Hospital Association also filed a legal challenge. The hospitals say the government overstepped its authority in finalizing the payment change as part of the annual outpatient prospective payment system (OPPS) rule.

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