HOPDs cost Medicare 164% More

Colonoscopies cost Medicare 164% more when they’re performed in a hospital outpatient department (HOPD) rather than independent physician offices, according to a report released last week by Physicians Advocacy Institute and Avalere.

The study compares Medicare HOPD payments to independent physician offices for four specialties, showing the stark disparity in payment between settings based on ownership.

“Hospital consolidation pushes healthcare costs upward,” said Robert Seligson, president of Physicians Advocacy Institute. “The impact of hospitals owning outpatient practices places a greater financial burden on Medicare beneficiaries and on taxpayers.”

From July 2012 to July 2015, the study authors examined physician employment trends and procedural cost increases. The percentage of hospital-employed physicians increased nearly 50 percent over the three-year study period, with incremental increases every six months. All regions of the country reported an increase in hospital employment, up to 114%.

The number of physician groups owned by hospitals also increased from 36% in July 2012 to 67% in July 2015, encompassing 67,000 physician practices by the end of the study period.

Here are five key observations based on the cost differential:

1. Medicare’s rate for colonoscopy in HOPDs is $1,090, while the same procedure performed by the same physician in the office setting is reimbursed at $413. Of the amount spent on the HOPD for colonoscopy, around $880 is attributable to the facility fee, as reported in Medscape.
2. Comparing four specific cardiology, orthopedic and gastroenterology services, the study found Medicare paid $2.7 billion more for services performed in the hospital outpatient setting than physician office or independent ASC. Beneficiaries also paid more in the HOPD, totaling $411 million in financial responsibility that wouldn’t have been paid if the procedures were done in the physician office.
3. Costs were 27% higher for the Medicare program and 21 percent higher for patients when they sought care from hospital-employed physicians based on their practice patterns for the cardiology, orthopedic and gastroenterology services analyzed.
4. The risk-adjusted pay differential for cardiac imaging between the HOPD and physician office is significant; Medicare reimburses $2,862 in the physician office and $5,148 for hospital-owned facilities. The report also outlines echocardiogram practice patterns, with 70% of hospital-employed physicians performing them in HOPDs over the study period, compared to 24 percent of independent physicians, as reported in Medscape.
5. In 2017, CMS decided to pay 50% of the Medicare payment designated to HOPDs for off-campus sites, and in 2018 the agency will reduce that to 40 percent to further align payments with independent physician offices. However, on-campus HOPDs remain paid in full at a much higher rate than independent physician offices.