Paying More Than You Should For Outpatient Procedures?

New accreditation standards make it possible to do in physicians’ offices what’s now being done in hospitals — at significant savings
Rock Rockett, PhD
MANAGED CARE May 2010. ©MediMedia USA

New accreditation standards make it possible to do in physicians’ offices what’s now being done in hospitals — at significant savings

Rock Rockett, PhD

Recent data from a large New York health plan show that about 85 percent of colonoscopies for metropolitan New York members are performed in physicians’ offices. That’s about 26,000 gastrointestinal procedures every year per 1 million health plan members under age 65. With about 9.1 million total covered lives under age 65 in the NYC area for this company, that’s 236,600 diagnostic colonoscopies per year. These GI physicians are paid an average of $450 per procedure with no additional facility fee, since the procedures are mostly performed in physicians’ offices.

It’s a different story for a major payer in Chicago. Instead of 85 percent of GI procedures being performed in lower cost office settings, 78 percent are performed in hospital out-patient departments (HOPDs). And its rate per million members is closer to 40,000 annually. In Chicago, GI doctors are paid about $330 on average for their procedures plus facility fees for HOPD or ambulatory surgery center (ASC) charges.

With facility fee charges ranging from about $2,000 to $6,000 per procedure, depending on all the normal factors affecting HOPD fees, the potential savings from shifting these high volume procedures from higher cost HOPDs to accredited physician offices is substantial. With a difference of $1,000 per procedure, on average, the savings could be as much as $32 million per year, assuming that roughly 80 percent of the colonoscopies could be shifted to the office setting.

Accredited by whom?

In New York and about 15 other states, physicians performing diagnostic colonoscopies under intravenous sedation, or any other procedure under IV sedation, are required by new state laws to be accredited by 1 of 3 national health care accreditation agencies. Accreditation of physician offices for office-based surgery can be achieved by working with the Joint Commission, the American Association of Accreditation for Ambulatory Surgery Facilities, or the Accreditation Association for Ambulatory Health Care. All three accreditation agencies have programs to survey physician offices to be sure that the offices meet their high standards for patient safety, including infection control, review of credentials for medical professionals, ability to respond to instances of cardiac arrest, proper evacuation procedures for staff and patients in the event of a fire or other emergency, and more.

A relatively small percentage of physician offices nationally have achieved accreditation for office-based surgery, but the numbers are growing. In New York, about 900 physician offices have attained accreditation as a result of the requirement put into effect by the State Department of Health in July 2009. Typically, the drivers for physicians to take the step of going through the accreditation process and having the policies and procedures in place to maintain their accreditation status thereafter are financial incentives from health plans to do so and state health department or medical board requirements to ensure patient safety.

Accreditation for office-based surgery raises costs for physicians and adds to their office work load because of the processes that must be put in place to comply with the standards on patient safety, infection control, medication reconciliation, quality improvement, and so forth. All of these are good provisions and important requirements for office-based surgeons and GI physicians to follow, but the cost of compliance must be completely borne by the physicians.

Specialties that are appropriate for office-based surgery are not only gastroenterology but also urology, plastic and reconstructive surgery, gynecology, vascular surgery, pain management, podiatric surgery, and oral and maxillofacial surgery practices, all of which may perform surgical or endoscopic procedures in their offices.

How can health plans proactively encourage physicians to become accredited and shift high volume outpatient procedures from higher cost settings to accredited office settings?

A solution!

A few health plans are embarking on programs to pay accredited office-based surgery providers a global fee or an enhanced fee to cover the additional costs of doing the procedures in-house. These innovative programs appropriately compensate physicians for their increased equipment and labor costs.

Anthem Blue Cross Blue Shield of Virginia has implemented such a program and is having success in driving more and more outpatient procedures to accredited office settings. Other BCBS plans are designing programs to provide financial incentives for gastroenterologists to become accredited and perform procedures in their accredited offices. And other major national payers contract with accredited office-based surgery providers in some states in much the same way that they contract with ambulatory surgery centers.

Health plans must first assess their data on high volume outpatient procedures by place of service to determine their potential for savings. Considering just a handful of GI procedure codes is a good place to start, such as determining the relative incidence of the following procedures by place of service (HOPD, ASC, or office):

43239 Upper GI endoscopy, biopsy
45378 Diagnostic colonoscopy
45380 Colonoscopy and biopsy
45385 Lesion removal colonoscopy

In all likelihood, about 95 percent of endoscopic GI procedures will have one of these four procedure codes. With information on these procedures by place of service, health plans can determine potential cost reductions.

Effect on plan, members?

Health plans will no doubt reduce their costs of outpatient surgical procedures by implementing an effective program to encourage specialists to become accredited for office surgery or endoscopy. The savings will range considerably based on the provider agreements that plans have in effect with hospitals and ASCs. An added plus is that members will view office endoscopy more favorably than having the same procedure in an HOPD and will find it more convenient to have their all-important colon cancer screening procedure performed in the less intensive setting of a physician’s office. With lower costs, increased convenience for members, and greater rates of colon cancer screening being done, the overall benefits to plans, members and providers are easy to recognize.

Rock Rockett, PhD, is CEO of Validare, a company that works to improve patient safety and increase savings in office-based surgery settings. He can be reached at or at 888-934-4321.

A few health plans are embarking on programs to pay accredited office-based surgery providers a global fee or an enhanced fee to cover additional costs, says Rock Rockett.

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