Previous research by HCCI found that over half of all health care spending among people with employer-sponsored insurance (ESI) occurs in the hospital setting. Health care spending in hospitals comes from two types of medical bills; charges by hospitals, often called “facility bills,” and charges stemming from individual providers practicing in the hospital, sometimes called “professional bills.” Both facility and professional hospital bills can come from care delivered during overnight stays in the hospital, or from visits to a hospital outpatient department.
In 2019, half of all hospital spending was on bills charged by a facility for outpatient care. Total hospital spending averaged $3,322 per year among people enrolled in ESI in 2019, with facility spending on outpatient visits totaling $1,659 (50.0%). Similar facility bills for inpatient care accounted for $1,123 (33.8%) per person and professional services across the inpatient and outpatient settings contributed an additional $539 (16.2%).
HCCI last decomposed sources of hospital spending using 2019 data, but the role of outpatient hospital care has grown since then. From 2018 to 2022, outpatient facility spending grew by 18% while inpatient facility spending decreased by about 11%. Outpatient facility spending represented 28.1% of total health spending among ESI enrollees in 2022, while inpatient spending accounted for 17% of spending. More than 80% of outpatient facility spending occurred in hospital outpatient departments, far outpacing other sites like ambulatory surgical centers (5.0%) or other facility types (13.1%).
Hospital-based outpatient care includes a broad array of services; everything from low-cost lab tests to major surgeries like joint replacements or cardiac procedures. The broad spectrum of care delivered in hospital outpatient settings motivated HCCI to conduct a descriptive analysis of the most common and most costly hospital outpatient services. We analyzed claims data for over 55 million individuals across 2018 and 2022 to create a picture of outpatient hospital spending within the non-elderly (under 65) population with ESI.
Outpatient Spending is Driven by Hospital Charges
In 2022, facility spending remained the largest share of hospital outpatient spending. Per enrollee spending in the hospital outpatient department averaged $1,677, of which $1,448 (86.3%) was attributable to facility bills [Figure 1]. In 2018, per enrollee spending on outpatient hospital care averaged $1,383 with 85.1% of the spending from facility bills. The amount of outpatient spending per enrollee grew from 2018 to 2022, but the share of outpatient bills charged by hospitals was largely the same.
Labs, Imaging, and Consultations made up more than 75% of outpatient visits
More than three quarters of visits to hospital outpatient departments were for Diagnostic Tests and Labs (31.0%), Imaging (23.5%), or Evaluation and Management (22.1%) consultations [Figure 2]. Diagnostic tests include simple blood draws, routine laboratory tests like lipid panels, and other basic diagnostic procedures. Imaging use was primarily driven by screening mammography and chest x-rays, two relatively basic imaging procedures used for diagnosis and screening. Evaluation and Management visits are consultations with medical providers to diagnose or manage health care conditions. Most of these visits are performed in an office setting, but if a provider practices in a hospital outpatient department, evaluation and management visits may incur additional facility bills. Several policy proposals have aimed to curb the use of hospital outpatient departments for evaluation and management services because these consultations can often be performed in an office setting at a lower cost.
Major surgeries, Imaging, and Minor Procedures made up more than 50% of outpatient spending
While services like diagnostic testing and evaluation and management visits were the most common reasons for outpatient hospital visits, they represented a smaller share of overall spending in this setting [Figure 3]. Visits for major surgeries accounted for 22.4% of outpatient spending in 2022. The surgery types with the most spending were knee replacement, hip replacement, surgeries of the abdomen (e.g. hysterectomy and hernia repair), and placement of cardiac catheters. Outpatient hospital departments play an increasingly important role in performing surgeries that may have previously required an inpatient stay. In these cases, outpatient surgery can be a less disruptive, lower cost option for patients.
Imaging was the second most common reason for hospital outpatient care and represented 17.2% of total spending. Screening mammography was the most common type of imaging service and was the third highest-spending procedure, largely due to its high volume. Computed tomography (CT) scans of the abdomen, echocardiography, and magnetic resonance imaging (MRI) of the brain were less common but higher cost, making them three of the highest spending imaging services.
Minor and Other Procedures accounted for 15.5% of outpatient spending. The minor procedures with the most spending were “scope” procedures like colonoscopy, throat scopes, and abdominal scopes. This category also includes less invasive cardiac procedures performed using injections, as well as biopsy of tissue.
Conclusion
Hospital outpatient care is a large and growing component of the health care spending equation among ESI enrollees. There is a disconnect between the most common reasons for hospital outpatient visits and the drivers of spending. Diagnostic tests, imaging, and evaluation and management visits accounted for more than 75% of visits in 2022, but these three categories represented just 39% of spending, which was largely driven by imaging procedures. Meanwhile, major surgeries and minor procedures accounted for 34% of spending despite being only 8% of visits.
Site neutral payment policies are one approach to curbing the growth of hospital outpatient spending. These policies require providers to charge the same amount for a service regardless of whether it was performed in a hospital outpatient department or a less intensive setting like a doctor’s office. Site neutral payments could reduce the amount of money spent on imaging and evaluation and management visits, but may not be appropriate for major surgeries like joint replacement.
Hospital outpatient services are also nearly three times more expensive in ESI than in Medicare. Policies that aim to align Medicare and ESI payments for outpatient care may be more suited to addressing the drivers of cost like outpatient surgery and other higher intensity procedures. Payment parity policies can also impact lower-cost, high-volume services like mammography and diagnostic testing. Effective approaches to addressing outpatient hospital costs will require creativity and a blended approach that accounts for the wide spectrum of care delivered in this setting.
Methods
We used facility and professional claims from HCCI’s Commercial Claims Database for this analysis. Our data set included claims with service dates occurring in 2018 and 2022 where the payer was the primary insurer. We restricted the population to individuals enrolled in employer sponsored insurance (ESI) who were under age 65 at the time of service.
We classified the service setting of each claim using Place of Service (POS) codes. Claims with a POS code of 19 or 22 were classified as hospital outpatient department (HOPD), claims with a POS code of 24 were classified as Ambulatory Surgical Center, and all other POS codes were grouped as “other facility types.”
We applied weights to the analytic data to develop estimates representative of the national population of ESI enrollees. HCCI developed a set of enrollee weights for individuals in our database that make the age, sex, and geographic (ZIP code) composition of the research data equivalent to the population of non-elderly adults enrolled in ESI from the American Community Survey 5-year Public Use Microdata Sample.
The units of analysis for this project were HOPD visits, which we defined as all claims incurred by a patient on a single date of service when that patient used any HOPD care. Outpatient visits may include care delivered by different providers (e.g. both a physician and a facility or multiple professional providers). When analyzing HOPD spending we included only dollars from claims with a POS indicating HOPD, even if other services were delivered during the same visit.
We classified visits and spending into service categories using a simplified version of Restructured Berenson-Eggers Type of Service (BETOS) Classification System (RBCS). We assigned RBCS codes to claims using a crosswalk developed by HCCI that links Healthcare Common Procedure Coding System (HCPCS) and UB-04 Revenue Codes to BETOS codes. The RBCS include eight categories based on procedure codes. We implemented a methodology from the Massachusetts Health Policy Commission (MA HPC) to further classify claims into the categories reported in this brief. This approach uses the Agency of Health Care Research and Quality (AHRQ) Surgery Flags to further refine RBCS groupings.
We assigned each HOPD visit to the category that represented the largest amount of spending during the visit, breaking ties randomly. All HOPD spending during the visit was assigned to the focal category to determine a “primary reason” for each visit. For example, this process assigned spending on testing and imaging that preceded surgery to the Major Surgery category because that spending would likely not have occurred in the absence of the surgery. The data in Figure 3 reflect the composition of spending based on the primary category for each visit.