U.S. Health Care Delivery:
Outpatient & Primary Care
Physician Payment
Session 9
Objectives
• Discuss outpatient care and its
development
• Identify various outpatient care services
and settings
• Learn about primary care and its domains
• Patient Centered Medical Home
• Physician Payment
What is Outpatient Care?
• Any health care service not requiring an
overnight stay in an institution of health
care delivery (e.g., hospital, nursing home,
etc.)
• More precise term than ambulatory care,
since patients do not always “ambulate” to
receive care
• May still be offered in a hospital or nursing
home
Outpatient Care’s History
• Previously independent of care provided in health
care institutions
• Doctors saw patients in clinics or made home
visits
• With growth and dominance of hospitals, outpatient
care was concentrated around community hospitals
• Today, outpatient care is growing tremendously and
delivered across a broad range of settings
• Increasing shift from acute to outpatient care
• Viewed by hospitals as an essential business
segment
Some Outpatient Care Statistics
• In 2010: 110.4 million outpatient visits to officebased physicians
– 22.8% of outpatient visits to family physicians
– 18.1% of outpatient visits to internal medicine
– 12.8% of outpatient visits to pediatrics
– 7.2% of outpatient visits to OB/GYN
• 86.8% of physician visits took place in metropolitan
areas
– 3.3 visits per person in urban areas vs.
2.7 visits per person in rural areas
Today’s Outpatient Care
• Physicians still providing basic diagnostic care and
minor treatments in physician offices
• Advanced outpatient care still centered around
hospital-based facilities
• Growing number of nonhospital-based facilities
offering ambulatory and outpatient care
• Intense competition between hospitals and
community-based providers for outpatient
medical services
Why the Shift to Outpatient Care?
• Reimbursement
– Payers prefer outpatient care because it costs
less
– Prospective reimbursement increased
demand for outpatient services as patients
were discharged “quicker and sicker”
– Hospitals developed outpatient services to
offset decreased inpatient income
– Growth of outpatient care to meet increased
outpatient demand (e.g., home health)
Why the Shift to Outpatient Care?
• Technology
– New diagnostic and treatment procedures
– Less invasive surgical methods
– Shorter acting anesthetics
– Reduced recovery time, less trauma
– Expansion of outpatient diagnostic, treatment,
and surgical services as office-based
physicians’ acquisition of technology is more
feasible and cost-effective
Why the Shift to Outpatient Care?
• Utilization control factors
– Payers have limited hospitalizations through
authorization
– Payers have sought to minimize length of stay
• Social factors
– Patient preference for care in home or
community-based settings, not institutions
– Desire for greater independence
What are Outpatient Services?
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Primary care
Surgery
Home health care
Urgent care
Dental care
Vision care
Chiropractic care
Where Does Outpatient Care Take Place?
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Physician offices
Hospitals
Walk-in clinics
Urgent care centers
Ambulatory surgery
centers
• Outpatient rehabilitation
clinics
• Optometry centers
• Dental clinics
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Mobile health care units
Telephone triage
Home health care
Hospice
Adult day care
Public health care
Community health
centers
• Free clinics
Physician Offices & Outpatient Care
• The backbone of ambulatory care and the vast
majority of primary care services
• Limited examination and testing, short visits
• Shift from solo practices to group practices
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Address environmental uncertainties
Compete with large health care organizations
No start-up costs, shared overhead expenses
Address complex bills and collections
Patient referral network
Negotiation leverage with managed care organizations
Shared coverage for personal time off
Attractive starting salaries, profit-sharing, benefits
Hospitals & Outpatient Care
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Safety net clinics for indigent & uninsured
Key source of profit for hospitals
Refer patients back to hospital for inpatient care
Common types of outpatient services
– Surgical – same day surgery
– Home health care – post-acute care
– Women’s health
– Emergency care
– Diagnostic services – imaging, lab
– Therapy – physical, occupational, cardiac, etc.
– Education, counseling, etc.
Freestanding Outpatient Facilities
• Walk-in clinics & urgent care centers
– Primary care & urgent care without
appointments on a nonroutine, episodic basis
– Convenient locations, times, and services
• Surgicenters (ambulatory surgery centers)
– Independent of hospitals, same-day services
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Outpatient rehabilitation clinics
Imaging centers
Optometry centers
Dental clinics
Mobile Health Care Services
• Screening vans, mobile MRI units, etc.
• Transported to patients
• Efficient & convenient means to provide
routine health services
• Advanced diagnostic services, screening
exams, health education, health promotion
• Bring health care to small towns, rural
communities, malls, fairgrounds
Public Health Centers, Community
Health Centers & Free Clinics
• Public health
– Well-baby care, venereal disease clinics, family
planning services, outpatient mental health care
• Community health centers
– Serve anyone seeking care in medically
underserved areas
– Primary care safety net
• Free clinics
– Services provided at no charge
– Clinics not supported by government agency
– Services mainly delivered by trained volunteers
Home Health & Hospice
• Home health care
– Nursing care, therapy, supplies, equipment,
homemaker services brought to patients’ homes
– Provides alternative to institutionalization, catering to
patients’ desire for independence & comfort
• Hospice
– Comprehensive care not based on location
– Pain & symptom management, psychosocial &
spiritual support for terminally ill
Additional Outpatient Settings
• Long-term care
– Case management & adult day care
• Telephone triage
• Alternative medicine clinics
– Homeopathy, herbal remedies, acupuncture,
meditation, yoga exercises, etc.
– Growing interest
Primary Care
• The conceptual foundation for outpatient care
• Not all outpatient care is primary care
• Central role in the health care system
• Distinguished from secondary & tertiary care
• Secondary care: short term, sporadic consultation
from specialist, hospitalization, routine surgery,
rehabilitation
• Tertiary care: complex, uncommon conditions,
institution based, specialized, technology-driven,
trauma care, burn treatment, neonatal intensive
care, transplants, open-heart surgery
What is Primary Care?
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Point of entry
Coordination of care
Essential care
Integrated care
Accountability
Primary Care: Point of Entry
• Way to organize health care delivery
• The first contact a patient makes with the health
care delivery system
• Primary care practitioners serve as
“gatekeepers” to specialists and hospitals
• Protects from unnecessary procedures and
overtreatment
• True primary care is community based
• Convenient, accessible, basic, routine, inexpensive
Primary Care: Coordination of Care
• Coordinates the delivery of health services across
the health care continuum
• Primary care professionals advise & advocate
• Ensures continuity & comprehensiveness
• “Hub of the healthcare delivery system wheel”
• A role not fully appreciated in the U.S.
• Advantages when primary care physicians
coordinate health care
• Better outcomes, satisfaction, expense control
Primary Care: Essential,
Integrated, & Accountable
• Essential health care that optimizes population
health
• Helps minimize disparities across population
subgroups to promote equal access
• Comprehensive, coordinated, and continuous
services that provide a seamless process
• Both clinicians and patients have accountability
Benefits of Primary Care
• Community-oriented primary care
• Partnership between providers & communities
identifies and addresses community health
problems, including vulnerability to social
problems and disease
• Effective care & preventive care
• Preventive interventions best carried out in
primary care
• Numerous studies indicate better health
outcomes where primary care is emphasized
Benefits of Primary Care
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Lower rates of hospitalization
Lower health care costs
Lower rates of self-reported poor health
Lower mortality rates
Higher life expectancy
Patient Centered Medical Home
• Team based health care delivery model
typically led by a physician that provides
comprehensive and continuous medical care
to patients with the goal of obtaining
maximized health outcomes.
• Emphasize relationship with physician
• Financial rewards based on patient outcomes
PCMH
• Comprehensive Care
– Team based
– Prevention, wellness, acute and chronic care
• Patient Centered
• Care Coordination
– Become the “shopper” for the patient
PCMH
• Accessible
– Shorter wait times for urgent care
– Enhanced in-person hours
– 24 hour telephone or internet access
• Quality and Safety
– Clinical decision support tools
– Evidence-based medicine
Physician Payment
Median Starting Range
Specialty
National 6 yrs Practicing Average
Anesthesiology
$360,000.00
$265,000.00
Cardiac & Thoracic Surgery
$522,875.00
$360,000.00
Cardiology
$402,000.00
$272,000.00
Dermatology
$365,450.00
$234,000.00
Diagnostic Radiology – Interventional
$469,800.00
$335,000.00
Family Medicine
$199,850.00
$138,000.00
Gynecology & Obstetrics
$279,750.00
$200,000.00
Hematology & Medical Oncology
$314,800.00
$222,000.00
Hospitalist
$210,950.00
$165,000.00
Neonatology
$275,400.00
$196,000.00
Neurological Surgery
$589,500.00
$395,000.00
Neurology
$237,000.00
$190,000.00
Ophthalmology
$248,000.00
$210,000.00
Orthopedic Surgery
$485,500.00
$315,000.00
Plastic Surgery
$382,000.00
$273,000.00
Psychiatry
$211,000.00
$165,000.00
Trauma Surgery
$400,000.00
$298,000.00
Urology
$400,000.00
$250,000.00
Vascular Surgery
$405,000.00
$259,400.00
Physicians
• Slide about pay
Physician Pay
• Wide range in incomes
– Pediatricians, family practice and psychiatrists on
the low end
– Surgeon, cardiologists, radiologist on high end
• Physicians get paid more for “doing things”
than for caring or thinking.
Gross Revenues
Practice Expenses
$440,000
Non-physician Wages (4 FTE
per physician)
88,000 41%
Office rent and expenses
52,800 25%
Medical Supplies
17,600 8%
Malpractice liability insurance
22,000 10%
Equipment
8,800 4%
Other Expenses
25,800 12%
Net Income
225,000
100%
Private Insurance
53%
Medicare
24%
Medicaid
12%
Patient Paid
11%
51% of gross Revenue
Physician Work
• The average physician worked an average of
57 hours per week
• Seeing 105 patients
• Giving 4 hours of uncompensated care
• Average charge per patient was about $100
How are physicians paid?
• Generally fee-for-service: about 89% of
physician revenue comes from third party
payment
• The exact formula for payment has evolved
over the years
How are physicians paid?
• Usual, Customary, and Reasonable (UCR)
– Initially the Blue Cross plans did this. When a
physician submitted a bill, they asked:
• Above his/her median charge for the same service the
previous year? (usual)
• Above the 75th percentile of charge by all doctors in the
area (customary)
• Or justifiably higher because of a patient’s complicating
illness or another acceptable reason (reasonable)
How are physicians paid?
• Next was the development of fee schedules
– A menu of prices for each service agreed upon in
advance
– Huge amount of numbers to keep track of and
update from year to year
How are physicians paid?
• This led to the relative value scale
– Give each service a point value
– A common service (standard office visit) was given
a value of 1, and all other services are given
relative point values
– Then each year decide a payment per point
• So if a point is paid $20, a physician providing a service
that is worth 3.5 points gets paid (20*3.5=$70)
– Only need to update the value per point each year
Medicare and Physician Payment
• In 1992 Resource-based relative value scale
(RBRVS)
– Calculated a point value for each service based on:
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Physician time
Intensity of effort
Practice costs
Costs of advanced specialty training
– The dollar value was $36.7856 in 2003
– It is $35.8228 in 2014
RBRVS
• The RBRVS is a list of physician services with a
relative value unit (RVU) assigned to each
service.
• The RVU is made up of three components:
– Physician work (pw) -- the time spent, effort
exerted and skills used
– Practice expenses (pe) -- wages, salaries and fringe
benefits, and other office expenses
– Malpractice insurance (mi) – highly variable across
specialties
RBRVS
• Physician work accounts for about 55% or
total RVUs
• Practice expenses about 42%
• Malpractice insurance about 3%
• CMS Common Procedural Coding System
– CPT-4 (4th edition)
• About 7,500 CPT codes are paid under this
system
Dallas Texas RVUs adjusted for geographic practices costs – 2012 and 100% Medicare payment rates.
CPT Code
Description
Pw
Pe –
Facility
Pe-NonFacility
Mi
Total
Facility
RVUs
1.34
$48.33
Total
Nonfacility
RVUs
1.87
$67.45
99202
Office or other
outpatient visit, new,
level 2
Office or other
outpatient visit, new,
level 4
Office or other
outpatient visit, establish
patient, level 2
Office or other
outpatient visit, establish
patient, level 4
Emergency department
services, level 3
.93
.35
.88
.06
2.43
.82
1.61
.16
3.41
$123.00
4.20
$151.94
.48
.17
.57
.03
.68
$24.53
1.08
$38.96
1.50
.49
1.15
.08
2.07
$74.66
2.73
$98.47
1.34
.29
na
.08
1.71
$67.68
na
1.89
0.59
na
.13
2.61
$94.14
na
29.09
11.59
na
4.79
45.47
$1640.10
na
42800
Initial hospital care, per
day, for the evaluation
and management of a
patient
Bypass graft, with vein;
common carotidipsilateral internal
carotid
Biopsy of throat
1.44
1.4
2.5
.13
2.97
$107.13
4.07
$146.80
69501
Mastoidectomy
9.21
9.2
na
.84
19.25
$694.35
na
70336
Magnetic image, jaw
joint – professional
component
1.48
na
10.76
.08
na
12.32
$444.38
99204
99212
99214
99283
99221
35501
Sustainable Growth Rate
• In 1997 Medicaid switched to a “sustainable
growth rate” when updating conversion factor
– Not only control individual prices, but overall
spending
• Each year, they establish a global budget
based on total spending the previous year
• If total spending exceeds the budget, then the
conversion factor will get cut the next year to
make up the difference