Reverse Migration of Outpatient Services to the

Hospital Campus
By Cynthia Hayward
Originally printed in the
SpaceMed Newsletter
Fall 2015
www.spacemed.com

BACKGROUND
Many medical services are provided both in hospital and community settings, such
as physician offices and freestanding imaging or ambulatory surgical centers
(ASCs). Services commonly provided in both settings include laboratory tests,
physical therapy, outpatient surgery, standard and advanced imaging, physician
visits, and noninvasive and invasive procedures, such as endoscopy or cardiac
catheterization. The Centers for Medicare & Medicaid Services (CMS) originally
developed the hospital outpatient department (HOPD) designation to establish a
higher reimbursement rate for hospital-based outpatient services. Hospitals justify
the higher payments by citing higher overhead costs related to treating people with
chronic or complex conditions, stand-ready capacity for emergencies, and additional regulatory requirements, such as the obligation to screen and stabilize all patients with a medical emergency regardless of their ability to pay that do not apply to physicians offices.
For example, in 2003, Medicare paid ASCs 83% of the amount paid to HOPDs for
performing the same services. Today, ASCs are paid 55% of the amount paid to
HOPDs. Medicare pays hospitals $1,670 for performing an outpatient cataract surgery while paying ASCs only $964 for performing the same surgery.
CURRENT TREND
The healthcare industry has experienced somewhat of a reverse migration with the
increasing acquisition by hospitals of private physician practices, independent diagnostic centers, and ASCs, and their conversion to HOPDs. The goal is to optimize reimbursement for hospitals and lessen the risk for physician owners, and
ideally, improve coordination of patient care. This shift also aligns with the goals of
the Affordable Care Act, since physicians and hospitals working together in accountable care organizations can provide better coordinated care than the traditional fee-for-service and solo practice models. Between 2001 and 2011, the number of physicians and dentists employed by hospitals across the United States grew
by more than 40 percent. Over one-third of physician practices in 2012 were either
partially or wholly owned by health systems. In a more recent survey, 53% of physicians described themselves as hospital or medical group. At the same time, physicians who remain independent are organizing into larger, more efficient group
practices to gain bargaining power, economies of scale, access to capital, enhanced practice market value, and legal safeguards.
FACILITY IMPACT
CMS specifies that a HOPD must be within 250 yards of the main hospital buildings
to be considered "on-campus." If the facility is within 35 miles of the main hospital
campus, a hospital can apply for an "off-campus" designation although this is more
difficult to justify.

2015.8.3

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Reverse Migration of
Outpatient Services
to the Hospital
Campus
Continued

Although the Medicare Payment Advisory Commission (MedPAC) has recommended reducing HOPD payments to equal those paid to physician offices, Congress has so far failed to take action to date. Some policymakers believe that the
government should pay the same fee for services, regardless of where they are
provided which could lead to reduced services in HOPDs and could cause some
HOPDs to close. In nearly half of all teaching hospitals, more than 50 percent of
Medicare visits take place in HOPDs. On the other hand, any cuts could affect care
for the vulnerable populations, especially those with complex medical problems.
This illustrates how Medicare and Medicaid reimbursement drives decisions by
healthcare providers regarding where to locate ambulatory services.
Cynthia Hayward, AIA, is founder and principal of Hayward & Associates LLC.
SOURCES
Advanced Surgical Care. 2015. Payment Disparities Between ASCs and
HOPDs. (www.advancedsurgicalcare.com).
American Medical Association (AMA). 2012. Physician Practice Benchmark
Survey Distribution of Physicians by Practice Ownership Structure. Chicago:
American Medical Association.
The Physicians Foundation. 2014. 2014 Survey of America's Physicians
Practice Patterns and Perspectives. (www.physiciansfoundation.org).

2015.8.3

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