We also categorized hospitals by the degree to which they receive revenue from quality and value contracts see the Appendix for further details.
Some health plans are tying payment to provider cost and quality performance through new payment arrangements such as:. Between and , hospitals with any revenue from quality and value contracts accounted for about 10 percent of the approximately 3, hospitals in our database. We divided that group into two: those with large incentives had an average of 23 percent of their revenue from quality and value contracts, and those with small incentives received 3 percent of their revenue from such arrangements.
Hospitals with any incentives large or small generally differed from the rest. Hospitals with large incentives were more likely to be medium-sized 48 percent vs. To control for the possible influence of hospital characteristics on the association between outpatient services mix and quality and value incentives, we used a seemingly unrelated regressions estimation framework see the Appendix. Regression results reveal that, on average and controlling for their other characteristics, hospitals with any incentives had more outpatient visits and revenue than other hospitals.
Moreover, we saw an even stronger relationship between outpatient services and quality and value contracts for hospitals with large incentives figure 4. Compared with hospitals that did not report any revenue from quality and value contracts:. However, we did not see larger drops in inpatient visits and revenue for hospitals with any incentives, compared with other hospitals during the period we examined figure 4.
Was the relationship between growth in outpatient services and presence of incentives more pronounced in certain therapeutic areas? We found the relationship was strongest for major diagnostic categories MDCs with higher rates of physician-hospital affiliation and technological change.
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Outpatient revenue was 18 percent higher for diseases of the circulatory system 17 and 13 percent higher for diseases of the musculoskeletal system 18 among hospitals with large incentives. What might explain the relationship between incentives and outpatient volume in the different therapeutic areas? We see a stronger relationship between incentives and outpatient visits and revenue for therapeutic areas that have seen high physician-hospital affiliation and technological change throughout the period of our study.
Among physicians who bill Medicare, for instance, 53 percent of cardiologists and 35 percent of orthopedists reported hospital or health system affiliation in For diseases of the musculoskeletal system, 21 outpatient revenue was 13 percent higher MDC 8. Diseases and disorders of the musculoskeletal system.
Laser spine surgery is a minimally invasive procedure that no longer requires an inpatient stay. Endoscopy and live imaging are used to visualize the damaged disc, and the damaged tissue is removed using a precision laser. Since the surgical scar is small, little or no postsurgery care is typically needed.
Diseases and disorders of the circulatory system.
Patterns of Hospital Ownership and Control
Certain cardiology interventions—such as catheterization, percutaneous coronary intervention PCI , and stent and percutaneous transluminal coronary angioplasties—are increasingly performed in outpatient settings. Diseases and disorders of the digestive system. A growing number of bariatric surgeries are performed on an outpatient basis.
For instance, gastric balloons ingested by patients to achieve weight loss can now be removed endoscopically, without the need for anesthesia or incision. Diseases and disorders of the ear, nose, throat, and mouth. Diseases and disorders of the respiratory system. More than 70 percent of patients who undergo thoracoscopic surgery can be discharged on the day of surgery itself due to the use of new techniques and technologies such as short endoscopes with small incisions and advanced robotic technological aids.
Our original hypothesis was that we would find a more pronounced shift from inpatient to outpatient care among health systems with greater value and quality incentives. While we found higher use of outpatient care, we did not find lower use of inpatient care than for other hospitals. One reason may be the very small proportion of hospitals with any type of incentive contracts at all, the relatively recent experiences with these contracts, or the limited amount of risk these hospitals may be facing. Nevertheless, it is interesting to find that hospitals with incentives have greater outpatient services.
Patterns of Hospital Ownership and Control
Many hospitals are trying to increase their outpatient services both as a defensive mechanism to react to new and more aggressive competitors and to diversify their revenues. Greater outpatient business may also position hospitals to do well under contracts that consider the whole spectrum of care in the future and that reward closer physician-health system collaboration. Going forward, hospitals and health systems, especially those that get a large portion of their revenue from value contracts, will likely have to address the need to move treatment from inpatient to outpatient settings.
Is there a road map for this transition? Health systems may want to consider their investments in both human and physical capital. Expanding outpatient services may call for building partnerships with organizations that now have the capacity for example, ambulatory surgery centers, outpatient clinics, and retail centers and human capital physicians and other clinical staff to support care in these settings, as well as considerations around referral patterns, workflow, and operational improvements.
Building physician relationships and networks through partnerships or affiliations can help increase capacity and attract patients. Capacity and capabilities can help health systems succeed in both fee-for-service payment systems and value-payment arrangements. Finally, technology can help health systems manage operations and patient care more efficiently. For example, case management, supported by analytics, can help health systems work with patients to decide on which care setting is the most effective, safe, and efficient.
The Deloitte Center for Health Solutions performed regression analyses to study the association between quality and value incentives and hospital inpatient and outpatient visits and revenue.
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Our main regression specification was a system of four linear equations one for each of the four hospital service metrics of the following form:. In these models, the unit of observation is the hospital-year cell.
Since we include state and year indicators, the association between quality and value incentives and hospital service mix is estimated from changes in incentives in a given hospital over time, as compared to other hospitals with similar characteristics in the same state. We use a seemingly unrelated regression estimation framework to account for the correlations between our hospital service metrics, and we correct the standard errors for clustering on hospital referral regions HRRs. The adjusted R-squared in our estimations varied between 70 and 79 percent.
MDCs were devised by physician panels to ensure DRGs are clinically coherent, since MDCs are mutually exclusive categorizations of all possible diagnosis codes.
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- Growth in outpatient care.
Each MDC corresponds to a single organ, system, or medical specialty. Public health departments 28 use MDC coding in their inpatient discharge and emergency department modules. In our data, information was not available for MDC 15 newborns and neonates with conditions. The 24 other MDCs we analyzed are listed below in table 1. He is based in Miami. Andreea Balan-Cohen , Deloitte Services LP, is a senior manager and health care research leader at the Deloitte Center for Health Solutions, where she leads global and quantitative research. She is based in in Arlington, VA.
She is based in Bengaluru. Project Team Divya Sharma contributed to the quantitative analyses. Erica Cischke helped with policy insights. Debanshu Mukherjee provided qualitative research support.
Growth in outpatient care
View in article. Mark E. Grube, Kenneth Kaufman, and Robert W. Richter and David R. Winn, Nancu L. Keating, and Justin G. Kimberly W. AHA annual survey of community hospitals. David B. Muhlestein and Nathan J. Ara J Deukmedjian et al. Brian C. Stagg et al. See something interesting?
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