Shifting Care from Office to Outpatient Settings: Services are Increasingly Performed in Outpatient Settings with Higher Prices

Where people receive health care matters, especially in terms of costs. The same services may have a much higher price tag when performed in one setting rather than another, but this price difference is rarely publicized to patients. To understand what settings people used and how prices differed, we looked at the utilization and average price paid from 2009 to 2017 for a set of services commonly performed in both physician office and outpatient settings. We found that:

• The share of these services performed in the outpatient setting increased between 2009 and 2017.
• For this set of services, the average price was always higher in an outpatient setting than an office setting.

Health care costs for the commercially insured have increased substantially in recent years, as detailed in the 2017 Health Care Cost and Utilization Report. In addition to increases in the average price of the same services year-over-year, prices of services may increase when there are changes in where they are performed, e.g. in a doctor's office or emergency room. One trend affecting rising prices of health care services is hospitals buying physician practices. According to a report from Physicians Advocacy Institute, 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 a four-year period.

This trend is important, as services performed in an outpatient setting may come with a facility fee, which is an extra payment in addition to the service rendered that is intended to cover the cost of maintaining the facility. To address these price discrepancies in the Medicare program, the Centers for Medicare & Medicaid Services (CMS) recently finalized site-neutral payments for clinic visits – meaning that CMS will reimburse these visits at the same rate, regardless of where they occur. This new policy, however, does not apply to the commercially-insured population.

We examined a set of services that are a subset of ambulatory payment classifications (APCs), defined by CMS as outpatient services with similar intensity and resource utilization, and determined by MedPAC to be safe and appropriate to provide in freestanding physician offices, despite being frequently performed in the outpatient hospital setting. This work expands on an analysis we performed in collaboration with the Wall Street Journal. We've now incorporated data from 2017 and made the data for all services available to download.