Why HOPD Medicare Expenditures Need Equalized Payment Rates
"In order to prevent the shift of services from lower paid settings to the higher paid HOPD setting from increasing costs for the Medicare program and beneficiaries, Congress should consider ... [equalizing] payment rates."
By - Medicare expenditures for hospital outpatient departments (HOPD) services are apparently on the rise, especially in recent years.
A new report to Congressional requesters from the United States Government Accountability Office (GAO) examines vertical consolidation trends between hospitals and physicians from 2007 to 2013.
Medicare expenditures for HOPD services are on the up and up from over $22 billion in 2007 to over $36 billion in 2013. GAO says this increase amounts to an approximate 8 percent increase annually.
The national economy reportedly increased on average by 2.4 percent annually, says GAO. Total Medicare Part B spending increased annually by about 5.8 percent annually during this time period.
Some policymakers attribute this growth spike to services generally performed in physician offices transitioning to the HOPD realm, GAO says.
Keeping an eye on vertical consolidation trends
Vertical consolidation is a financial arrangement that takes place when a hospital acquires a physician practice. It can also occur when a hospital hires physicians as salaried employees, GAO explains.
Once hospitals and physicians vertically consolidate, services performed in physician offices – including E/M office visits – can be classified as being performed in an HOPD, adds GAO.
“Such a shift could undermine Medicare’s ability to be an efficient purchaser of health care services, given that Medicare often pays providers at a higher rate — sometimes twice as much — when the same service is performed in an HOPD rather than in a physician office,” GAO says.
GAO dives into HOPD data, urges Congress to equalize payment rates
GAO examined the extent to which elevated levels of vertical consolidation were associated with more evaluation & management (E/M) office visits being performed in HOPDs.
Through various methods such as regression analyses, GAO investigated the latest available claims data from the Centers for Medicare & Medicaid Services (CMS).
GAO also analyzed the American Hospital Association’s (AHA’s) survey data where hospitals report what kinds of financial arrangements they have with physicians. GAO incorporated appropriate technical comments from HHS on the report draft.
“In order to prevent the shift of services from lower paid settings to the higher paid HOPD setting from increasing costs for the Medicare program and beneficiaries, Congress should consider directing the Secretary of the Department of Health and Human Services (HHS) to equalize payment rates between settings for E/M office visits — and other services that the Secretary deems appropriate — and to return the associated savings to the Medicare program,” GAO recommends.
Highlights from GAO’s findings
Healthcare providers are often paid more by Medicare when the same service is performed in an HOPD instead of within a physician office.
The total Medicare payment rate in 2013 for a mid-level E/M office visit for an established patient was $51 higher when the service was performed in an HOPD instead of a physician office.
Vertically consolidated hospitals and physicians increased in size from 2007 to 2013 from about 1,400 to 1,700. The number of vertically consolidated physicians doubled from about 96,000 to 182,000.
Growth was widespread across all regions and all hospital sizes with a spike occurring in recent years, GAO said.
