Outpatient Services: California 33% Pricier Than Massachusetts

Higher Usage of More Expensive Procedures May Be The Culprit

PHOENIX, June 6, 2013 /PRNewswire-iReach/ -- The hospital outpatient services data recently released by the Centers for Medicare & Medicaid Services (CMS) shows that the average payment to providers in California was 33% higher than in Massachusetts.

The total number of hospital outpatient services for the top 30 Ambulatory Payment Classification (APC) Groups in Calendar Year (CY) 2011 was nearly identical at 1.3 million in California and in Massachusetts. Yet the total spending in California was $245.4 million compared to only $186.7 million in Massachusetts. The average payment for hospital outpatient services in California was $185 (or 33% higher) in comparison to only $139 in Massachusetts. Nationally, the average payment was $166, and hospitals charged 4.5 times more than the Medicare payments—with services such as MRI and Ultrasound marked up 7-8 times relative to the actual payments.

Further categorization of the 30 types of hospital outpatient procedures from hospitals across the country revealed that Cardiac Imaging (0377), Echocardiogram (0269-0270), Hospital Clinic Visits (0604-0608), Magnetic Resonance Imaging (0336), and Nerve Injections (0203-0207) accounted for 80% of the total spending of $3.545 billion, with the other 17 procedures accounting for the remaining 20% of the spending.

More than 72% of the hospital outpatient services in Massachusetts came in the form of hospital clinical visits compared to only 58% in California at $109. On the contrary, the utilization rate for more expensive procedures such as Cardiac Imaging at $890 was 2.4% in CA vs. 1.2 % in MA, ECG at $486 was 6.8% in CA vs. 3.1% in MA, and MRI at $419 was 5.3% in CA vs. 2.5% in MA.

"This drastic difference in service utilization mix—tilted toward more expensive procedures rather than cheaper clinic visits—coupled with 7-10% higher average payment for key APC categories explains why California was nearly 33% more expensive than Massachusetts." said Abhay Padgaonkar, President of Innovative Solutions Consulting. "It makes you wonder whether hospitals are more procedure-happy in California or are higher percentage of hospital clinic visits preventing expensive procedures in Massachusetts?"

Nationally, there is a strong negative correlation between average outpatient payment and the percentage of hospital clinic visits for different states. The higher the percentage of hospital clinic visits in a given state, the lower the average payment the providers in it received. Every 10 percentage point increase in hospital clinic visits was associated with a $22.7 decrease in the average outpatient payment.

Of the 25 states with a minimum of $50 million in hospital outpatient spending by Medicare in CY2011, California was ranked 11th in being above the national average; the Top 10 states with the average payment higher than the national average were: Alabama (53% higher), Tennessee (45%), Kentucky (40%), South Carolina (26%), New Jersey (26%), Oklahoma (26%), Michigan (24%), Connecticut (19%), Indiana (18%), and Georgia (16%). At the other end, New Hampshire, North Carolina, Wisconsin, Washington, and Massachusetts were 16-25% below the national average.

"With APCs assigned based on similar clinical characteristics and similar costs, are such vast differences among the states because of geographic differences, rural adjustments, differences in patient populations, or because of lack of availability and access to hospital clinics? Are financial motivations behind hospitals' greater use of more expensive procedures?" asked Padgaonkar. "Because the hospital outpatient data represents a subset of the overall Medicare outpatient service universe—with comparable services also provided in physician offices and independent diagnostic testing facilities—we need to be careful in drawing final conclusions. At the same time, the analysis does show that higher percentages of more expensive procedures are associated with substantially higher average payments."

About Abhay Padgaonkar

Abhay Padgaonkar is an award-winning management and healthcare consultant, author, and speaker. He is the president of Innovative Solutions Consulting. Mr. Padgaonkar advises clients of all sizes on leadership and management challenges by "making the complex simple and making the simple work."

Those interested in media interviews to learn more about the Medicare outpatient payment data analysis should contact Abhay Padgaonkar via email at abhay@pobox.com or call 602-628-1234.

SOURCE: Innovative Solutions Consulting, LLC

CONTACT: Abhay Padgaonkar, abhay@pobox.com, 602-628-1234

Website: http://www.innovativesolutions.org

Media Contact: Abhay Padgaonkar, Innovative Solutions Consulting, LLC, 602-628-1234, abhay@pobox.com

News distributed by PR Newswire iReach: https://ireach.prnewswire.com

SOURCE Innovative Solutions Consulting, LLC



Health Care & Hospitals, Health Insurance, Medical Pharmaceuticals, Economic News, Trends, Analysis

Need Help