Cardiac imaging payments are more than triple when a patient receives care at a hospital outpatient department instead of a physician office, roughly $2,100 versus $655, respectively, research shows, but quality was not studied.
Medicare payments for cardiac imaging, colonoscopy, and evaluation and management services are significantly higher when procedures are done in a hospital outpatient department as compared to an ambulatory surgical center or a physician office.
That is the upshot of a recent study conducted by Washington, D.C.-based healthcare consulting firm Avalere Health and funded by the Physicians Advocacy Institute.
Payments Higher for Primary and Follow-up Services
Avalere researchers compared Medicare payments for the three procedures to understand the impact of site of service on payment rates.
"The analysis piece itself looked at Medicare claims data to see payment rates for services across settings of care and episodes of care… We looked not at cost, but at payments," says Carrie Bullock, director of Avalere's reimbursement practice.
"In considering the results, there are two major takeaways. The first is that payment of services at HOPDs are highest among the care sites, which is entirely expected given everything we know about how Medicare pays for services in the hospital setting compared to ASCs and physician offices."
The second key point, Bullock says, is that there also tend to be higher rates of additional services during the episode of care when a patient is treated at an HOPD.
"Payments for services in the HOPD are higher for the primary service, and also for many related services during the episode examined. Thus, the higher payments often associated with a HOPD procedure are not limited to the primary procedure, but can extend to related services performed adjacent to the primary procedure analyzed," the report states.
Medicare Sparks Site-Neutral Payment Showdown
"Second, many HOPD-related procedures tend to be followed by a higher rate of additional procedures in the HOPD setting compared to office-based procedures… Together, these findings suggest that when care is initiated in the typically higher-paying HOPD setting, the services that follow also result in higher spending relative to when care is initiated in the office setting."
While this difference in service mix may be attributable to factors such as severity of illness and the existence of chronic conditions and comorbidities, researchers used a risk-adjusted methodology when conducting the data analysis and still concluded that payment rates are substantially higher for HOPDs.
"Importantly, we did account for different primary and comorbid conditions for the people receiving the services because you can imagine that depending on what sort of health conditions the person has, particularly for services that occur both before and after services, payments would be affected in general by the severity of illness. We did account for the person's demographics and other acute and chronic conditions they had when they received services," says Ed Drozd, vice president of Avalere's data analytics practice.
Demonstrably Higher Costs
Even when adjusting for certain risk factors, the analysis shows a steep hike in Medicare payments to HOPDs for the three services studied. For example, cardiac imaging payments are more than triple when a patient receives care at a HOPD instead of a physician office, roughly $2,100 versus $655, respectively.
Further, for echocardiograms and colonoscopies, researchers examined a three-day window, including the day of procedure and one day before and after, and a 22-day window, including the day of the procedure and the seven days before and 14 days after.
The results were significant. For an echocardiogram, average payments are 217% higher in a HOPD for a three-day episode and 80% higher for a 22-day episode. Additionally, average payments are 35% higher for colonoscopies for a 22-day episode in a HOPD setting.
For evaluation and management services, researchers examined two profiles: E&M visits within seven days of hospitalization and E&M visits for new patients. For both, E&M visits that originate in an HOPD are associated with higher payments (22% and 29%, respectively).
Quality Not Considered in Study
While the study points to a significant payment differential between HOPDs and other care settings, it is important to note that the analysis does not factor in quality or outcomes.
"There are significant differences in payments at care sites that deliver services for essentially the same patients and that is what we were focused on. We don't get into the quality piece or the piece of whether the payment differential is justified," says Matthew Katz, a PAI board member and executive vice president and chief executive officer of the Connecticut State Medical Society.
"If, in fact, patients in the hospital setting were much sicker, were older, or had more comorbidities, then there obviously would be justification for the price differential to recognize that sicker, older patients would need more services. But, we were able to account for those types of things [with the risk-adjusted methodology] and did not find much difference. It raises a policy question as to whether the payment differential is justified. We cannot say one way or the other that the delivery of care was different or the outcomes were improved in one setting."
Hospitals Should Be Concerned About Revenues
While HOPDs have traditionally received higher payment rates than other care sites for the same procedures, Medicare is clamping down on this with its site-neutral payment policy, which is slated to go into effect on Jan. 1, 2017.
Under this policy, newly acquired HOPDs will receive the same payment as ambulatory surgery centers and stand-alone physician practices. Existing HOPDs will not be affected.
Harry Nelson, founder and managing partner at Los Angeles-based law firm Nelson Hardiman, LLP, says hospital administrators should be concerned about shrinking revenues as CMS continues its push toward value-based care.
"The report should serve as yet another warning sign for hospitals about declining revenues from outpatient services. The past few years have seen increasing proactivity from Medicare about suppressing hospital inpatient utilization in favor of lower cost care settings, and this study gives good reason to think that hospitals can expect similar things in the area of outpatient procedures," Nelson says.
In addition, he says, hospitals should also be concerned that patients with high-deductible health plans will become savvier about costs when making decisions about where to receive outpatient services.
"The trend of greater patient financial responsibility as well as greater price transparency tools will drive more market-oriented consumer behavior and greater price-shopping, which is good news for lower cost providers," he says.
"This is good news for everyone who wants to see more responsive market behavior from providers driving towards reduced cost."
Hospitals, however, should be worried, he says. "They have relied on lack of price transparency and are going to suffer unless and until they become price competitive."
Rene Letourneau is a contributing writer at HealthLeaders Media.