I. Executive Summary
Healthcare cost has increased throughout the years, this is due to the increase in insured policies and government intervention with regulations. This has made the increase of cost difficult for the average patient. The increase of cost will prevent patients from receiving care. This increase may it a gateway towards providers investing in a new service line. Outpatient services has increased throughout the years due to the lowered cost to providers and patients. Other factors such as technological advances have helped increase the volume of outpatient services provided.
With the increase in new payment methods has encouraged healthcare providers to take advantage of bonus payments which are due to providing a reduced cost of healthcare. These types of payments are available to Medicare beneficiaries and will eventually make its way to other types of insurance coverages.
II. Intro to Outpatient Services
A. What are Outpatient Services
Outpatient services are medical procedures that are typically completed in a medical center that does not require an overnight inpatient stay in the hospital. Oftentimes, the procedures are completed within a few hours. Outpatient services are also known as ambulatory care, which translates to diagnostic or therapeutic services provided to patients that independently go to providers, compared to being admitted into the inpatient hospital setting. The types of outpatient services are Physician Private Practices, freestanding clinics, rehabilitation and home healthcare. Throughout the years, the use of outpatient services has increased dramatically. Outpatient services will continue to be a preferred option for both patients and hospitals, when applicable, due to the cost savings and how it allows patients to resume their daily activities.
B. Shift Towards of Outpatient Services
“The steady development since the nineteenth century of outpatient clinics owned by acute care hospitals, especially in urban settings where indigent populations did not have access to private medical services. Once the growth of not-for-profit hospitals began in the early twentieth century, outpatient clinics became a means for the hospitals to fulfill part of their charitable mission to serve the indigent populations who needed better access to private medical care.” (Ebrary, 2020). Outpatient services plays a major role in meeting community needs at a low cost to indigent population, in addition, to providing low cost services to the middle-class population. Providers are often given incentives to lower the cost of healthcare from shifting the cost from inpatient stay to outpatient services. Hospitals such as Parkland in Dallas, Texas offers the uninsured and homeless patients with HIV assistance with medicine management and healthcare services. This effort meets the community need ensures that this population is also treated.
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There are many reasons there is a shift towards outpatient versus inpatient services. For example, reimbursement rates used to be high for inpatient services in the early 1980’s, but in the mid 1980’s they implemented PPS reimbursement, which provided a fixed case-based payment to inpatient services but not outpatient. This gave hospitals more reason to minimize inpatient time in the hospital and continue treatment in outpatient settings. Payers have also discouraged long hospital stays by implementing the need for prior authorizations for inpatient admissions. The volume of outpatient services as well as new services has grown since 1980’s. This resulted in the creation and growth of nonhospital-based facilities that offer outpatient services alone. These entities created a new source of competition for hospitals to increase the outpatient services provided at a relative cost.
The increase in technology has impacted the treatment of healthcare services. Technological factors play a role in the shift since technological advances have led to less invasive surgical methods that allow procedures to be done in an outpatient basis. Due to the increase in less invasive services this has reduced the cost for providers which can be passed down to the patients. The more that technology intertwines with the healthcare field the more the cost of healthcare reduces.
III. Cost of Outpatient
Outpatient Services will provide health services at a reduced cost compared to inpatient stays. This may help with health disparities where people refuse access to service due to cost. Health disparity is an important topic to study because, “disparities in health and health care not only affect the groups facing disparities, but also limit overall gains in quality of care and health for the broader population and result in unnecessary costs”. (Orgera & Artiga, 2018). People may now be able to access healthcare at a reduced cost due to the lower cost model that outpatient services offers. Reducing cost of care is a primary objective when shifting patients from an inpatient setting to outpatient.
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The increase in technology has made more surgeries less invasive, which reduce the recovery time. Utilization control from insurance companies and social factors also play a role in the shift towards outpatient services. With the increase in outpatient service providers, hospitals now have to compete and increase outpatient services to maintain the revenue stream lost from the reduction in inpatient stays. Hospitals must meet the increased demand of outpatient services in order to stay afloat in this competitive market. A hospital that provides both inpatient and outpatient services are able to increase revenue by referring post-operative cases to its outpatient wing for follow-ups and continuation of care. This is also true for patients receiving outpatient services who are referred back to the hospital for inpatient care. “Moreover, these payers also are often using shared-savings, bundles, and other arrangements that tie payment amounts to cost and quality performance.” (Deloitte, 2018)
IV. Value Based Purchasing
Value-Based Purchasing (VBP) is a method that links the provider’s payments to improved performance by health care providers. Its purpose is to reduce inappropriate care and to identify and reward the best-performing providers. “The Medicare program has gradually been moving toward implementing VBP across various care settings, starting with pay-for-reporting programs (e.g., the Hospital Inpatient Quality Reporting program and the Physician Quality Reporting Initiative) and Pay for Performance (P4P) demonstrations to gain experience.” (Damberg, 2014). Bundled Payments cost sharing with post-acute services. A strategy would be for hospital to lower cost with outpatient services instead of post-acute impatient stay.
A new value-based payment method is called Bundled Payment for Care Improvement. BPCI is an initiative to which the purpose is to provide support to healthcare providers who invest in practice innovation to better coordinate care and reduce expenditures. This is to improve the quality of care for Traditional Medicare patients. A hospital that successfully masters this method, may strategize to reduce the inpatient stay and to increase the time spent receiving services in the outpatient setting. The introduction to new payment methods indicates that there will continue to be a push towards the outpatient setting in order to reduce the cost of care while improving quality. This forces a joint venture between the hospital and post-acute outpatient service providers.
The inference that the decline in hospital occupancy rates has had for hospital management is that it has encouraged them to look at other sources of revenue, which at the current moment would be outpatient services. Outpatient services seems to be just as lucrative, if not more than inpatient service, so in order to increase the hospital's profit, it would be best to get into the outpatient services. Outpatient services are beneficial to patients, because it allows them to return to their daily lives, a benefit that they do not get while in an inpatient setting. These are all indicators that there will be an increase of outpatient services. Special programs offer outpatient treatments that may be given to the uninsured population. This is in effort to reduce the cost of healthcare that is passed on through tax dollars. Outpatient services provides lowered cost primarily to the insured and benefits the uninsured population as well.
- Deloitte. (2018, August 29). Growth in outpatient care. Retrieved from https://www.modernhealthcare.com/article/20180829/SPONSORED/180829895/growth-in-outpatient-care
- Damberg, C. L., Sorbero, M. E., Lovejoy, S. L., Martsolf, G. R., Raaen, L., & Mandel, D. (2014, December 30). Measuring Success in Health Care Value-Based Purchasing Programs: Findings from an Environmental Scan, Literature Review, and Expert Panel Discussions. Retrieved January 29, 2020, from https://www.ncbi.nlm.nih.gov/pmc/articles/PMC5161317/
- Orgera, K., & Artiga, S. (2018, August 8). Disparities in Health and Health Care: Five Key Questions and Answers. Retrieved from https://www.kff.org/disparities-policy/issue-brief/disparities-in-health-and-health-care-five-key-questions-and-answers/
- Ebrary. (n.d.). History of Ambulatory Care Services. Retrieved February 28, 2020, from https://ebrary.net/13533/health/history_ambulatory_care_services
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