Outpatient procedures are not always the cheapest

Healthcare Financial Management, July, 2004

It's commonly assumed that charges for a facility's outpatient procedures are significantly less than those for inpatient procedures. But that's not always the case. Hospital CFOs striving to develop and manage a successful pricing strategy can benefit from understanding the impact of the more expensive outpatient procedures.

In the 2002 Medicare Outpatient Limited Data Set, which represents more than 600 million claim lines, the 100 highest average charges for outpatient procedures in facilities throughout the United States cover only 30 CPT[R]/HCPCS codes, with one code--C1785, a pacemaker-related code--showing up 30 times. (a) (A hospital had to report a code at least. 11 times during the year for the charges to be included in this data set.)

Not surprisingly, most of the list consists of cardiology-related procedures. Of the 100 highest average charges, 60 percent are for cardiology related procedures. The highest average charge, in New Jersey, was $73,814 for C1721, a cardioverter defibrillator, dual chamber. Charges from other areas of the country put this code on the list a total of 14 times.

The challenges with respect to setting prices for these procedures intensified in 2003 as CMS began including the devices with the procedures, in many instances eliminating separate billing for the devices. Combining the procedure costs with the device costs makes it more difficult for hospital administrators to see whether their facility is making or losing money on the procedure. Hospital administrators will need to break down all of the individual charges and costs associated with expensive procedures to determine the appropriate pricing for the procedures.

Geographically, the highest average charges were spread across hospitals in 30 states. Twelve of the highest average charges were found in Florida; lo were in California and Ohio; and Texas, Georgia, Michigan, Wisconsin, and New Jersey were strong contributors as well.

100 HIGHEST AVERAGE OUTPATIENT CHARGES--2002 MEDICARE
OUTPATIENT LIMITED DATA SET

Category   Short Definition                Number of Hospitals
                                           Reporting

C1785      Pmkr, dual, rate-resp           30
C1722      AICD, single chamber            14
G0173      Stereo radiosurgery, complete   14
C1721      AICD, dual chamber               9
50590      Fragmenting of kidney stone      7
92980      Insert intracoronary stent       4
C1772      Infusion pump, programmable      4
C1767      Generator, neurostim, imp        4
C1786      Pmkr, single, rate-resp          2
L8614      Cochlear device/system           2
C1813      Prosthesis, penile, inflatab     1
C1816      Receiver/transmitter, neuro      1
33249      Eltrd/insert pace-defib          1
C1895      Lead, AICD, endo dual coil       1
C1720      Brachytx seed, Palladium 103     1
93526      Rt & Lt heart catheters          1
C2616      Brachytx seed, Yttrium-90        1
75671      Artery X-rays, head & neck       1
J1563      IV immune globulin               1
35476      Repair venous blockage           1

(a.) CPT[R] (Current Procedural Terminology) is a registered trademark of the American Medical Association.