News & Updates

February 24, 2021

Health Services Research: Hospital‐physician integration and Medicare’s site‐based outpatient payments

A recent study examined the relationship between Medicare’s site-based outpatient billing policy and hospital-physician integration, using Medicare claims data from 2010 to 2016. The study estimated the dollar value associated with hospitals acquiring physician practices or employing physicians by using each physician’s bundle of Medicare services.

  • Overall, the study found the financial incentive was large:
    • For the average physician, the revenue they would have generated for their bundle of services if billed from a hospital outpatient department would have been 180% the size of revenue they would have generated for the same services if billed from an office.
    • Medicare reimbursement for physician services would have been $114,000 higher per physician per year if a physician were integrated compared to being non-integrated. 
    • Primary care physicians faced a 78% increase, medical specialists 74%, and surgeons 224%.
  • The study found that an increase in the hospital-office ratio (total Medicare reimbursement value if billed in an HOPD compared to a PO) was associated with an increase in the probability of integrating with a hospital, but the effect varied by  specialty. 
  • Study also found concentrated hospital markets appear to increase the likelihood that a physician integrates with a hospital and rural providers were more likely to integrate than their urban counterparts.
  • The study noted site-specific payment differences in Medicare are likely to be magnified in commercial insurance, creating an even larger incentive to integrate among physicians with large commercial volumes. 

Citation: Post B, Norton EC, Hollenbeck B, Buchmueller T, Ryan AM. Hospital-physician integration and Medicare’s site-based outpatient payments. Health Serv Res. 2021;56:7–15.