Accelerating the Shift of Care to Lower Cost Settings

March 11, 2019

The migration of care from inpatient (IP) to outpatient (OP) and ambulatory surgery center (ASC) settings is revolutionizing healthcare delivery. The trend began with cataract and cosmetic surgery moving from IP to OP and ASC settings more than a decade ago, and now the list of ASC procedures has grown to include endoscopy, colonoscopy, anterior cruciate ligament and shoulder repairs, sinus and cataract surgery, and lithotripsy.

Several factors have enabled this evolution, including the growing sophistication of surgical tools and techniques; new pain management and diagnostic techniques; a boom in the development of OP care delivery options; consumer demand for convenience and access; and changing perspectives on site-specific reimbursement.

This transition is good news for consumers and employers as it promises to lower costs, improve access and convenience, and, if done right, deliver better outcomes. Payers who can accelerate this change can deliver better value and gain competitive advantage. But a strategic approach is needed to avoid antagonizing key stakeholders.

For years, IP care was reimbursed at a higher rate than the same care from a clinic or ASC. These reimbursement incentives encouraged IP overuse and contributed to healthcare cost inflation, and today many payers, including CMS, are encouraging care delivery in the most appropriate, least costly site. In 2016, 3.4 million Medicare beneficiaries were treated in 5532 CMS-certified ASCs for $4.3 billion, and more recently CMS decided to reimburse total knee arthroplasty in an OP setting.

CMS rolls out these kinds of changes slowly, primarily because it reviews quality and outcome data for procedures performed in less-intensive settings before making a reimbursement decision. Many commercial payers wait for CMS to make the first move, and thus the entire process can be a circular waiting game.

Those same quality and safety concerns can be a barrier to IP institutions’ use of lower-intensity settings as OP and ASC settings aren’t always appropriate — especially for frail patients with multiple comorbidities. Therefore, another challenge is establishing clear criteria for candidates and buy-in for that protocol.

Yet another barrier involves OP and ASC availability. OP and ASCs can streamline admission, discharge and be geographically convenient, but in some markets, population density or other factors have delayed their evolution. Ownership can also be an issue, when ownership of IP facilities doesn’t sufficiently overlap with that of OPs and ASCs, which can further increase migration resistance.

Even if these issues are avoided, payers may still have difficulty accelerating migration without provider and patient abrasion. Many providers rely on high-cost fee-for-service procedures as revenue streams and will resist change that threatens that. As for individual policy holders, patients often accept physician recommendations without asking questions, but the pace of change must still be a consideration.

What It All Means for Payers

The need to avoid provider and patient abrasion begs the question — what strategies and tactics can payers use to painlessly advance site-of-care decision making? Fortunately, there are several.

Offering the opportunity to benefit from savings — through payment arrangements that hold providers accountable for costs via capitation or bundled payments – creates an incentive that will eventually influence providers. Patients can also be motivated by financial incentives. If IP co-pays or co-insurance force consumers to have higher out-of-pocket costs, patients will likely opt for OP and ASC settings when suitable.

To get to this point, payers must encourage both providers and patients to become decision makers. Payers can encourage patients by making prices more transparent — ideally through websites that compare costs in inpatient, outpatient, and ASC settings – and requiring preapprovals for expensive procedures that are scheduled as IP but can be done in an OP or ASC setting. Such preapprovals could trigger care navigators and financial counselors to offer guidance to insureds, prompting patients to ask more questions.

Payers can help providers in several ways to establish evidence-based guidelines for deciding which patients need IP care and which can safely use other settings. First, payers can collaborate with providers to establish guidelines using payer-provided data. Second, they can help ASCs measure and demonstrate quality and safety, data which can be used to promote ASCs as centers of excellence, drive market differentiation, and enhance transparency.

Payers can also build compliance with triage protocols into pre-approval decisions on selected inpatient procedures. Site of care decisions that are not in compliance would require documentation by the treating physician.

Next Steps

Payers must embrace their role in driving down costs and increasing value by assessing the readiness of their markets for these various strategies and tactics. There is no “one-size-fits-all” strategy, and only after careful market assessment can payers move the migration of care forward without pushback from providers, employers, and members.