Study shows Medicare payments for cardiac imaging are three times higher when services are provided in hospital outpatient departments than in physician offices

Provides first-ever look at full ‘episode of care’ spending for common procedures administered in different care settings

February 18, 2016 — A new study comparing Medicare payments for three common services finds that cardiac imaging payments are more than triple when patients receive care at a hospital outpatient department instead of a physician’s office—roughly $2,100 vs. $655, respectively.

Download the Report "Medicare Payment Differentials Across Outpatient Settings of Care" (PDF - 43 pages)

The report, prepared by researchers at Avalere Health and released by the Physicians Advocacy Institute, comes at a time when the federal government considers major changes in how new off-campus hospital outpatient departments—called HOPDs—are paid. PAI provided the report to the House Energy and Commerce Committee, which has asked for feedback on implementing a new Medicare policy that would create ‘site neutral’ payments—a set amount regardless of where a patient is treated.

View the letter to the House Energy and Commerce Committee (PDF).

Experts say Medicare’s current approach of paying more for services in hospital-owned facilities has created a strong incentive for hospitals to acquire physician practices and build new satellite outpatient departments in order to maximize their revenue from Medicare. Researchers compared Medicare payments for three common procedures typically performed either in a hospital outpatient department or a doctor’s office: echocardiograms, colonoscopies, and evaluation and management services. Even after adjusting for certain risk factors, the study showed that for all three types of services, Medicare spends more when patients receive services in a HOPD instead of a physician office.

“This study demonstrates that for many common procedures, Medicare spends much less when patients receive treatment in a physician’s office,” said Kelly Kenney, PAI executive vice president. “At a time when all Americans are concerned about rising healthcare costs, it’s heartening to see opportunities for substantial savings.”

For the first time, researchers also looked at Medicare’s payments for an entire ‘episode of care’—the full 22-day period encompassing preparatory and follow-up care for a given procedure. Under this measurement, Medicare’s payments for echocardiograms averaged $5,148 when provided in HOPDs, but were $2,862 when provided in a physician’s office.

“The study suggests that when care is initiated in hospital-owned facilities, more services follow and these services are also more costly, compared to care that’s provided in a doctor’s office,” said Kenney. “The payment differential that begins with the initial service extends and is amplified throughout the entire episode.”

The study found that ‘episode-of-care’ payments for colonoscopies and related services for Medicare patients are nearly 35 percent more when patients received care in hospital outpatient departments instead of physician offices. It also showed that payments for evaluation and management services for new patients were 29 percent more in HOPDs, as opposed to similar visits in offices.

The study adds important new information for federal policymakers as they consider ways to shift care to the most cost-effective settings. According to data from the federal Agency for Healthcare Research and Quality, more than 7 million Medicare patients received echocardiograms in 2011.

As part of their methodology, Avalere researchers adjusted their findings to account for certain risk factors and demographic characteristics of patients who received care in the hospital setting, which can impact the cost of providing services.

Medicare’s new site neutral payment policy would affect newly acquired, off-site HOPDs after Jan. 1, 2017. Existing HOPDs would not be affected.