Prices and Complications in Hospital-Based and Freestanding Surgery Centers

ABSTRACT

Objectives: To quantify differences in prices paid and procedural complications incurred in hospital outpatient departments (HOPDs) and freestanding ambulatory surgery centers (ASCs).

Study Design: Observational study using deidentified 2019-2020 insurance claims from Blue Cross Blue Shield insurance plans nationally, with information on prices paid and complications incurred for colonoscopy, knee or shoulder arthroscopy, and cataract removal surgery.

Methods: The data include 1,662,183 patients who received a colonoscopy, 53.5% of whom were treated in HOPDs; 259,200 patients who underwent arthroscopy, 61.0% of whom were treated in HOPDs; and 173,664 patients who had cataract removal surgery, 34.7% of whom were treated in HOPDs. Multivariable linear regression methods were used to identify the associations between HOPD and ASC site of care, prices, and complications after adjusting for patient demographics, risk, and geographic market location.

Results: After adjusting for patient characteristics, risk, and geographic market location, prices paid in HOPDs were 54.9% higher than those charged in ASCs for colonoscopy (95% CI, 53.6%-56.1%), 44.4% higher for arthroscopy (95% CI, 43.0%-45.8%), and 44.0% higher for cataract removal surgery (95% CI, 42.9%-45.5%). Adjusted rates of complications were slightly higher in HOPDs than ASCs for colonoscopy over a 90-day interval but similar over the 7- and 30-day intervals. Rates were statistically and clinically similar between the 2 sites of care for arthroscopy and cataract removal.

Conclusions: The higher prices charged in HOPDs for the 3 ambulatory procedures were not balanced by better quality—as measured by rates of procedural complications—compared with procedures performed in nonhospital ASCs.

Am J Manag Care. 2024;30(4):179-184. https://doi.org/10.37765/ajmc.2024.89529

Takeaway Points

Prices are higher but are not balanced by higher quality in hospital-based surgery centers compared with freestanding ambulatory surgery centers.

• Substantial savings, without reductions in quality for patients, are available to employers and insurers if care is obtained from ambulatory surgery centers (ASCs) or from hospital outpatient departments (HOPDs) charging prices at ASC levels.
• However, some HOPDs charge lower prices and incur fewer complications than some ASCs.
• Purchasers should not use narrow-network designs or cost sharing to shift all patients to ASCs without information on facility-specific price and complications. A better strategy to achieve savings for purchasers would be the negotiated reduction of HOPD prices.

Hospital outpatient departments (HOPDs) frequently charge and are paid substantially more for ambulatory procedures than freestanding ambulatory surgical centers (ASCs). Some private insurers and self-insured employers are responding to these price differentials through cost-sharing designs that require patients to pay the extra cost of HOPD care and through narrow-network designs that deny coverage in HOPDs.¹ The Medicare Payment Advisory Commission has advocated the elimination of site-of-care differentials for procedures that can safely be performed in low-acuity settings.²

Implicit in these payer strategies is the assumption that the quality of care in freestanding ASCs is similar to or better than that available in HOPD alternatives. If procedural complications are higher in ASCs, however, a shift in volume would adversely affect patient outcomes. Conversely, if complications and other dimensions of quality are similar across sites of care but prices remain higher in hospital-based centers, payers will continue to incur unnecessarily high costs if they are not able to obtain care at ASC prices, either by shifting patients to ASCs or convincing HOPDs to reduce their prices to ASC levels.

We studied prices and complications for 3 surgical and diagnostic procedures that are commonly performed in both HOPD and freestanding ASC settings: colonoscopy, knee or shoulder arthroscopy, and cataract removal.

METHODS

Data

We obtained 2019-2020 claims data submitted by HOPDs and ASCs to Blue Cross Blue Shield insurance plans using the Axis database maintained by the national Blue Cross Blue Shield Association. The Axis data are limited to commercial enrollees and do not include enrollees in Medicaid and Medicare. We included patients undergoing a colonoscopy, an arthroscopy of the knee or shoulder, or surgical removal of the ocular lens due to cataracts. These are among the most common surgical and diagnostic procedures performed in both hospital-based and freestanding outpatient surgical centers. They also are targets of purchaser strategies to encourage the use of lower-priced ASCs. We limited our sample to patients who were continuously enrolled in their health plan for at least 6 months prior to the index procedure, allowing us to measure preprocedure risk factors in the form of hospital admission or emergency department visit. We also limited our sample to patients with at least 3 months of continuous enrollment after the index procedure so we could measure complications in the postprocedure period. Patients were required to be aged 18 to 64 years.

Procedure Prices

For each procedure, we measured price in terms of the allowed amount on the insurance claim, which included the portion paid by the insurer plus the amount paid by the patient through cost-sharing requirements (eg, coinsurance, co-pay, and deductible). This measures the price that was actually paid to the facility, not the nominal “chargemaster” price. We transformed prices into logarithmic units for statistical analysis to reduce the influence of outlier observations and to facilitate measurement of price differences across HOPDs and ASCs in percentage units.

Procedural Complications

To measure procedural complications, we grouped for each patient all claims submitted within 90 days after the index procedure and then created a dichotomous indicator of whether a complication was experienced within the postprocedure window using International Statistical Classification of Diseases, Tenth Revision (ICD-10) codes included on the insurance claims. This dichotomous indicator (any complication vs no complications) was used in place of more complex metrics due to the low incidence of complications for nonemergency procedures in this population aged 18 to 64 years. Most of these measures of procedural complications have been reported and used in previous studies that examined quality outcomes for outpatient surgery^3,4 and were updated to ICD-10 codes from International Classification of Diseases, Ninth Revision codes and refined with physician expertise.

It is possible that physicians recognize which potential patients have greater periprocedural risk and selectively refer them to HOPDs, given the availability in hospitals of inpatient care in case of major surgical complication. If this is the case, higher prices and more frequent complications in HOPDs could be due to differences in patient risk. Therefore, we risk-adjusted the analysis for variation among patients with the probability of incurring a complication. First, because risk may vary by demographic factors, we included indicators for gender and age (categorized as 18-34, 35-44, 45-54, or 55-64 years). Second, we adjusted for the presence of any hospital emergency department visit or any inpatient admission in the 6 months prior to the index procedure. Assuming that these observed dimensions of patient risk are correlated with unobserved dimensions of risk, we conducted sensitivity tests in the form of multivariable regressions that did not include the inpatient and emergency department risk measures as covariates. In all analyses, claims for individual patients were aggregated to the level of the provider organization performing the procedure (HOPD or ASC) using the Medicare National Provider Identifier.

Statistical Methods

Descriptive statistics for the 3 procedures were calculated separately for HOPD and ASC sites of care, including the price paid, rate of complications, annual number of procedures, percentage of patients with an inpatient admission in the prior 6 months, percentage with an emergency department visit in the prior 6 months, percentage in each age category, and percentage of female patients. For arthroscopy, we calculated the percentage of patients who received shoulder arthroscopy, as distinct from knee arthroscopy.

We calculated differences in mean prices and complication rates between HOPD and ASC sites and assessed the distributions of prices and complications for each site of care. Distributional analyses supplement the comparison of average differences, which may be sensitive to outlier observations. We plotted the distributions of prices and complications separately for ASCs and HOPDs.

We used multivariable linear regression analyses to assess differences between HOPDs and ASCs in procedure prices and complications after adjusting for our measures of procedural volume, patient demographics, percentage of patients with prior inpatient hospitalization, and percentage of patients with a prior emergency department visit. These regressions also adjusted for the geographic location of the facility in terms of its hospital referral region (HRR).⁵ The study facilities were distributed across 305 of the total 306 HRRs in the nation. Separate regressions were conducted for each procedure. The mean price and the rate of complications for the provider were regressed on an indicator of HOPD vs ASC structure, annual procedure volume, the percentages of patients having incurred a prior hospitalization or emergency visit, the percentages of patients who were female and in each of the age categories, and the HRR indicators. The arthroscopy regressions also included a covariate indicating the percentage of procedures for the shoulder, as distinct from the knee. Prices and volumes were measured in logarithmic units. Percentage differences in prices by site of care were calculated from these log-linear regression coefficients using the transformation P = (100 × [exp B – 1]), where P is the percentage association and B is the log-linear regression coefficient.

To assess the robustness of our core model, we ran the regressions excluding the risk variables. We also substituted rates of complications measured over the postprocedure intervals of 7 days and 30 days for colonoscopy and arthroscopy.

RESULTS

Table 1 presents descriptive statistics on the HOPD and ASC sites of care for each of the 3 procedures. HOPDs accounted for 73.1% of the 6824 facilities providing colonoscopy, 69.1% of the 3574 facilities providing arthroscopy, and 51.1% of the 2639 facilities providing cataract removal surgery. HOPDs treated 53.7% of the 1,662,183 patients who underwent a colonoscopy, 61.1% of the 259,200 patients who underwent arthroscopy, and 34.7% of the 173,664 patients who underwent cataract removal.

Mean annual procedure volumes per facility were higher in ASC than in HOPD settings by 134% for colonoscopy, 44% for arthroscopy, and 96% for cataract removal. The percentage of patients with a prior visit to the emergency department was higher in ASCs for all the procedures. However, the percentage of patients with a hospital admission in the 6 months prior to the index procedure was higher in HOPDs for all the procedures. The age and gender composition of the patients was similar across the 2 sites of care, as was the distribution of knee vs shoulder arthroscopy procedures.

The prices paid in HOPDs by Blue Cross Blue Shield plans were higher than those paid in ASCs for all 3 procedures, with a 55.4% higher price for colonoscopy, a 25.3% higher price for arthroscopy, and a 27.0% higher price for cataract removal surgery. Rates of complications within 90 days generally were low for these nonemergency procedures, averaging 0.77% for colonoscopy, 2.07% for arthroscopy, and 0.52% for cataract removal surgery. As presented in the second row of Table 1, complications within 90 days of the index procedures were higher in the HOPD than ASC setting for colonoscopy and very similar for arthroscopy and cataract removal.

The full price distributions across the HOPD and ASC sites are presented in Figure 1, Figure 2, and Figure 3. Although mean prices were higher in HOPDs than in ASCs for each procedure, the distributions overlap considerably. Some HOPDs charged low prices below those charged in many ASCs, whereas some ASCs charged high prices above those charged in many HOPDs. For colonoscopy, 22% of HOPDs charged prices below the median price charged by ASCs and 42% charged prices below the ASC 75th price percentile. For arthroscopy, 33% and 54% of HOPDs charged prices below the ASC median and 75th percentile, respectively. For cataract removal surgery, the corresponding figures are 32% and 52%.

The distributions for complications are presented in eAppendix Figures 1 to 3 (eAppendix available at ajmc.com). The distributions overlap considerably across the sites of care, in part due to the low overall rates of complications. Most facilities, regardless of type, had very low rates, with a few outliers that generated small differences in the averages.

Table 2 presents multivariable regression parameters associating the site of care (HOPD vs ASC) with prices (measured in logarithmic units) and complication rates after adjusting for patient risk factors, demographics, and geographic market. Prices paid for colonoscopy procedures were 54.9% higher in HOPD than in ASC settings after converting from logarithmic units and after adjustment for patient risk factors, demographic characteristics, and geographic region (95% CI, 53.6%-56.1%). These and other percentage differences in prices by site of care were derived from parameters in Table 2 using the transformation P = (100 × [exp B – 1]), where P is the percentage association and B is the log-linear regression coefficient. Rates of complications for colonoscopy were 0.20 percentage points higher in HOPD than in ASC settings (95% CI, 0.12-0.28) after adjustment for other relevant factors. However, in our robustness analyses using the 7-day and 30-day rates of complications for colonoscopy, we found no statistically or clinically significant differences between the sites of care. Facilities performing larger volumes of colonoscopies during the year experienced slightly lower rates of complications. Patients who visited a hospital emergency department and patients who had an inpatient hospital stay during the 6 months prior to the colonoscopy were at significantly higher risk of complications and were charged significantly higher prices than patients at lower risk.

Regression parameters for arthroscopy are presented in the third and fourth columns of Table 2. Prices were 44.4% higher in HOPD than in ASC settings (95% CI, 43.0%-45.8%) after converting the logarithmic units to percentage differences. Rates of complications for arthroscopy were slightly lower in HOPD than in ASC settings after adjusting for patient risk, demographic characteristics, and geographic location, but the difference is not statistically significant. No differences were observed using the 7- and 30-day postprocedure intervals. Facilities performing higher volumes of procedures experienced lower rates of complications but charged prices similar to those in low-volume facilities. An emergency department visit or inpatient admission during the 6 months prior to the arthroscopy was positively associated with price and complications.

Regression parameters for cataract removal surgery are presented in the fifth and sixth columns of Table 2. Consistent with the findings for colonoscopy and arthroscopy, prices were 44.0% higher in HOPD than in ASC settings (95% CI, 42.9%-45.5%) after adjustment. There was no significant association between rate of complications and site of care. Procedure volume was not associated with price or with complication rates for cataract removal surgery. A prior visit to an emergency department was negatively associated with probability of complication but positively associated with price paid. Prior hospitalization was not associated with rates of complications for cataract removal.

We tested the robustness of these findings by conducting regression analyses that excluded the measures of patient risk based on inpatient admission and emergency department visit within 6 months prior to the index procedure under the assumption that these observed risk differences are correlated with unobserved risk differences. Similar results were obtained with all models.

DISCUSSION

This study found that mean prices for colonoscopy, arthroscopy, and cataract removal surgery were substantially higher in HOPDs than in ASCs after adjusting for measures of patient risk, demographics, and geographic region. These findings are consistent with the published literature. Studies based on data from the California Public Employees’ Retirement System reported that HOPDs in that state charge significantly higher prices than ASCs for the 3 procedures studied here.^6-8 Prices paid by a self-insured grocery chain were higher in hospital-based sites of care than in freestanding sites of care for radiological and laboratory tests.^9,10 In addition, 2 studies reported findings of higher prices charged for cancer drugs in hospital-based than in physician-owned infusion clinics.^11,12

Results from this study did not show that rates of complications were lower in HOPD than in ASC settings, as would be the case if the higher hospital spending resulted in higher quality. Adjusted rates of complications were similar in HOPDs and ASCs, with a slightly (0.3%) lower rate in ASCs for colonoscopy.

Limitations

The findings from this study should be interpreted considering the study’s limitations. The study is based on a large data set representative of the population of commercially insured patients but does not contain information on older patients covered by Medicare or low-income patients covered by Medicaid. Our measures of outcomes are limited to procedure-related and general complications experienced within 90 days of the principal procedure, with robustness checks using 7- and 30-day postprocedure intervals. We do not have data on longer-term outcomes, such as cancer identification for colonoscopy, patient mobility for arthroscopy, and improved vision for cataract removal surgery. It is possible that other measures of quality would exhibit different patterns of association between hospital-based and freestanding sites of care. Our risk-adjustment measures were limited to demographic characteristics and to prior hospital admissions and emergency department visits within the 6 months prior to the index procedure. Our sensitivity analyses did not find any influence on these measures of risk on the association between site of care, prices, and complications.

CONCLUSIONS

The large differences in prices charged for ambulatory procedures between hospital-based and freestanding sites of care have stimulated efforts by some private insurers to shift patient volume to lower-cost facilities and by public programs to eliminate site-of-care payment differences. These initiatives assume that the differences in price do not reflect differences in quality. Findings from this study document that for 3 important and commonly performed ambulatory procedures, the mean rates of procedural complications within 90 days were not lower in hospital-based centers than in freestanding centers. Our findings are consistent with those of Carey et al for hip and knee replacement surgery, which showed that costs were higher but that postsurgical complications were lower for patients treated in ASCs compared with HOPDs.¹³

Although these findings do not indicate that the higher prices in hospital-based clinics are balanced by higher quality, neither do they support a universal shift of patients from hospital-based to freestanding surgical centers. There is considerable overlap in the distributions of both price and complications across the sites of care. Some HOPDs charge moderate prices and report few procedural complications, whereas others charge high prices and report numerous complications. Similar variation is observed for ASC sites of care.

The overlap suggests that coverage denials and cost-sharing requirements are blunt tools to improve the efficiency of ambulatory procedures. Rather than mandating the use of ASCs at the expense of HOPDs, payer policies ideally would be based on the price and the quality of care provided in specific facilities. However, measurement of performance at the facility level is expensive and often inconclusive, given small patient volumes. Therefore, rather than focusing on shifting patient volume, payers may be better served by equalizing the prices paid. HOPD facilities seeking high rates of payment could bear the responsibility for documenting a higher-risk patient population or better quality of care and, in the absence of such documentation, accept the same payment as an ASC. Since 2012, the Medicare Payment Advisory Commission has repeatedly advocated the equalization of payment rates across sites of care for these and other nonemergency procedures.² However, private payers lack Medicare’s unilateral power to set reimbursement rates, so it is not evident how they could pressure HOPDs to reduce their rates to ASC levels without the threat to shift patient volume.

The divergence between the prices paid for ambulatory procedures in hospital-based and freestanding surgical centers requires a response by private insurers and governmental programs, but payer strategies must account for differences in quality. Network restrictions and cost-sharing designs based on price alone may fuel a public backlash against efforts to moderate health care spending. There are large and unjustified variations in price and quality across facilities, but the pattern is complex and payer responses must be nuanced.

Author Affiliations: University of California, Berkeley (JCR), Berkeley, CA; Brown University (CMW), Providence, RI; University of California, San Francisco (SSD), San Francisco, CA.

Source of Funding: National Institute for Health Care Management.

Author Disclosures: Dr Whaley has received grant funding from Arnold Ventures, California Health Care Foundation, National Institute on Aging, and Robert Wood Johnson Foundation. The remaining authors report no relationship or financial interest with any entity that would pose a conflict of interest with the subject matter of this article.

Authorship Information: Concept and design (JCR, CMW, SSD); acquisition of data (JCR); analysis and interpretation of data (JCR, CMW, SSD); drafting of the manuscript (JCR, CMW); critical revision of the manuscript for important intellectual content (JCR, CMW, SSD); statistical analysis (JCR, CMW); provision of patients or study materials (JCR); obtaining funding (JCR); administrative, technical, or logistic support (JCR, CMW); and supervision (JCR, SSD).

Address Correspondence to: James C. Robinson, PhD, MPH, University of California, Berkeley, School of Public Health, 5423 Berkeley Way West Hall, Berkeley, CA 94720-7360. Email: james.robinson@berkeley.edu.

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