Editor’s note: This article was originally published in the August 21, 2018 issue of Deloitte’s Health Care Current.
It has been centuries—reportedly dating back to the fifth century—since the first cataract removal. As far back as the mid-1700s, patients went under the knife to remove lenses that had become hard and opaque, leaving them with restored but limited, and mostly unfocused, vision after the surgery. During those years, cataract surgeries were saved for only the most advanced cases, and some patients didn’t survive.1 During the procedure, sandbags typically were used to immobilize the patient’s head. After the surgery, patients had to stay in a facility where they could be monitored as they healed.
Fast-forward to today: This once dangerous and seldom-recommended surgery is performed about 2 million times per year in the US. Cataract surgery is believed to actually lower the risk of mortality in patients by 40 percent (though the exact reasons why are unclear).2 This surgery has become so commonplace that patients can usually go home within 15-30 minutes of having the procedure.3
The evolution of cataract surgery—aside from changing the lives of millions of patients—is a testament to one of the major trends we see in health care: A growing number of surgical procedures are being performed in outpatient settings. Aggregate hospital revenue from outpatient services grew from 30 percent in 1995 to 47 percent in 2016.4
Some of this trend is likely due to technology advances (e.g., minimally-invasive surgical procedures and new anesthesia techniques) and consumer choice (wouldn’t you want to avoid an overnight stay if you could?). Moreover, financial incentives have likely played a role as well. For years, many health plans have been shifting toward paying for services performed in lower-cost care settings, including outpatient facilities.5, 6
Other incentives, such as paying for value, might also be driving this trend. This is what we wanted to explore in our latest report, Growth in outpatient care: The role of quality and value incentives. Are some health systems developing strategies to perform well under value-based care arrangements by reducing inpatient care and shifting more patients to outpatient settings? To answer that question, the Deloitte Center for Health Solutions conducted descriptive and regression analyses using Medicare claims data from 2012 to 2015.
We found hospitals that had greater revenue from quality and value contracts provided more outpatient services, in comparison to other hospitals. Hospitals that generated revenue from these contracts had 21 percent more Medicare outpatient visits and 13 percent higher outpatient revenue (even after controlling for characteristics such as the hospital’s size, location, and ownership) compared to hospitals that did not report revenue from such contracts.
The data also suggest this trend is more pronounced for certain types of procedures. For example, in diagnostic areas that have higher rates of physician-hospital affiliation and technological change, the relationship between quality and value incentives and outpatient growth was greatest.
But what about inpatient services? Did hospitals shift away from the inpatient setting as they increased services that could be performed in the outpatient setting? Is this shift happening faster in hospitals that have quality and value incentives? The answer is yes and no, according to the data.
Between 2012 and 2015, all hospitals in our analysis saw declines in inpatient revenues. The decline happened at the same rate, regardless of whether hospitals had quality and value incentives. A number of factors could explain why we didn’t see fewer inpatient services at hospitals with more incentives. The sample size of hospitals with incentives might have been too small to see a measurable difference. But, another explanation could be that hospitals are early into their population health strategies and started by building outpatient capacity, rather than aggressively decreasing inpatient care.
Many hospitals and health systems are moving more procedures from the inpatient to the outpatient settings to diversify revenue and prepare for new payment models. Health systems might want to invest in human and physical capital of their own, as well as develop new relationships with organizations that have alternative care settings (e.g., ambulatory care centers, retail clinics). Technology upgrades to help organizations manage operations and patient care more efficiently should also underpin any organizational transformation.
While the future of inpatient services at hospitals might be a bit blurry, we have a clear vision that outpatient settings are continuing to grow in popularity—at least in the short term.