Medicare Payments Vary Considerably Across Settings of Care

New research indicates that spending is relatively higher when care is initiated in the hospital outpatient department setting compared with the physician's office or an ambulatory surgical center.

New research analyzing the Medicare payments for care treatments in hospital outpatient departments (HOPD) and physicians’ office settings reveals a substantial differential of payments. The findings indicate that the spending is relatively higher when care is initiated in the typically higher-paying HOPD setting than in physicians' offices or ambulatory surgical centers (ASC).

The new study by Avalere Health ascertains differences in Medicare payment rates for episodes across outpatient settings of care. For the purpose of the study, 3 types of procedures and services were included: cardiac imaging, colonoscopy, and evaluation and management (E&M) services. The Physicians Advocacy Institute provided funding for this research.

Cardiac Imaging: Spending is higher when the procedure initiates in the HOPD compared to the office setting. The average payment in the HOPD is $1423 (or 217%) higher for a 3-day episode and $2286 (or 80%) higher for a 22-day episode vs the Medicare spending in office setting.

Colonoscopy: When average payments are compared across the physician office, ASC, and HOPD settings, it is revealed that the total payment for 22-day colonoscopy episode is highest in the HOPD setting ($1784), second highest in the ASC setting ($1435), and lowest in the physician office setting ($1322).

E&M Services: The average payments were compared across the HOPD and office setting over a 7-day period. For 2 separate profiles, it was found that treatments in HOPD settings were $84 (22%) and $119 (29%) higher than the office setting.

Several factors could contribute to these differences across settings. It could be because of different payment systems or costs associated with operating the facility or some unknown patient demographics and clinical severity.

Conclusion

The study draws the following 2 conclusions:

  1. The higher payments associated with an HOPD procedure are not limited to the primary procedure but can extend to primary procedure-related services too.

  1. Many HOPD-based procedures tend to be followed by a higher rate of additional procedures in the HOPD setting compared to office-based procedures.

Cardiovascular imaging, colonoscopy, and E&M services are three services commonly provided in outpatient settings. Therefore, Avalere studied the payment differentials across settings for these services specifically.

Medicare beneficiaries can receive the same services in different outpatient settings. However, various providers in those settings can receive different payments for that care and beneficiaries can face different cost-sharing amounts. For example, a Medicare beneficiary could receive a colonoscopy in an HOPD, an ASC, or a physician office. But each setting has a different system of Medicare payment because of which there can be significant differences in Medicare payment rates for the same service.