“From 2004 through 2009, the volume of Medicare outpatient services per FFS beneficiary increased at roughly a 4.3 percent annual rate for a cumulative increase of 23 percent over the six-year period. During the same period, Medicare inpatient discharge volume declined at roughly a 0.9 percent annual rate, and inpatient discharges per FFS Part A beneficiary decreased by about 4 percent from 2004 to 2009.”
Will this trend save or cost Medicare money?
According to MedPAC’s March 2011 report, there are two key reasons for this. The first is a shift in the site of service from inpatient to outpatient units. For instance, many routine surgical procedures can now be conducted in the outpatient setting. This development likely reduces cost per treatment, but may increase costs if individuals are more likely to receive invasive treatments. Alternatively, if physicians are more likely to have an ownership stake in the outpatient facility, surgery rates per diagnosis may increase.
Another reason for the rise in outpatient costs is hospital acquisition of physician practices. Hospitals want to acquire physician practices for two reasons: first, it makes their patients more likely to use their hospital, and second, fees for visits to physicians in hospital-based facilities (consider outpatient) are more lucrative to visits in free-standing facilities. Specifically, “When patients visit a physician office that is part of a hospital’s outpatient department, Medicare pays a facility fee to the hospital and a reduced fee for the physician’s services. The combined fees paid for visits to hospital-based practices are often more than 50 percent greater than rates paid to freestanding practices.”
Thus net effect of the shift to outpatient services, thus, has an ambiguous effect on total Medicare payments.
- Source: MedPAC March 2011 Report to Congress.