Non-hospital-owned ambulatory care providers continue to take revenue from hospitals, as more patients choose urgent care centers and other options over emergency rooms

Thanks to the popularity of urgent care clinics and other non-hospital-based ambulatory care providers, the year-over-year growth in the number of hospital outpatient visits has been on the decline for decades. Dark Daily has covered this trend in many e-briefings over the years. But now, for the first time since 1983, outpatient visits fell below the previous year among more than 6,000 hospitals surveyed by the American Hospital Association (AHA).

This is an important event, because anything that affects a hospital’s revenue also affects that hospital’s medical laboratories and everyone connected to it. The decline, according to the AHA, is primarily due to decreasing visits to hospital emergency rooms. ERs provide significant revenue for hospitals. Fewer ER visits means less clinical laboratory test ordering, fewer image study requests, and may mean lower financial revenues overall.

The AHA released the findings in its “2020 Hospital Statistics Report.” The data show that outpatient visits to hospitals have decreased one year to the next for the first time in 35 years. 

The AHA surveyed 6,146 hospitals located throughout the nation. In 2017, those hospitals recorded a total of 880.5 million outpatient visits. In 2018, those same hospitals delivered 879.6 million outpatient visits, a reduction of 0.09% over the previous year.

That survey result marked the first time since 1983 that there was a decrease in outpatient visits from one year to the next, Modern Healthcare reported. The article goes on to state that the AHA’s report, “highlights the fact that patients are increasingly gravitating toward the countless disruptors that tout more convenient, cheaper options for primary care, urgent care, and even emergency care.”

The graphic above, taken from the American Hospital Association’s “2020 Hospital Statistics Report,” illustrates the decline in hospital outpatient visits since 1983. Besides studying ER visits, the AHA also surveyed hospital-owned ambulatory surgery centers, outpatient clinics, and walk-in clinics. Visits to those outpatient facilities remained stable, according to the AHA, or rose slightly from the previous year. Nevertheless, a decrease in visits to ERs means fewer clinical laboratory test and image study requests. (Graphic copyright: American Hospital Association.)

More Options for Receiving Healthcare Services

One of the main reasons for the decrease in hospital outpatient visits is that patients have more options when seeking care. The rise in the number of urgent care and walk-in clinics has provided healthcare consumers with more convenient, less expensive options than traditional hospital settings.

“We’re pivoting to a new business model in healthcare, with a much more pluralistic delivery system with many, many more consumer options,” Ken Kaufman, Chairman of management consulting firm Kaufman Hall, told Modern Healthcare. “Which, of course, is exactly the same thing that’s happening in other parts of the economy. I think it’s very important that especially the major health systems recognize this and realize they have to compete against it.”

Gap Between Inpatient and Outpatient Revenue Narrows

The AHA’s survey also found that, though there were fewer outpatient visits to emergency rooms, the surveyed hospitals’ net outpatient revenue actually increased by 4.5% from 2017 to 2018, and that the gap between outpatient and inpatient revenue for hospitals continues to narrow.

In 2017, outpatient revenue for the hospitals was $494 billion, while inpatient revenue was $508 billion. That meant that total outpatient revenue was 97% of the new inpatient revenue for 2017. In 2018, that percentage was 95%; however, in 2016, it was 92%.

“I don’t know that I can speculate as to when they will converge, but the trend lines seem to be getting closer,” Aaron Wesolowski, Vice President, Policy Research, Analytics, and Strategy at AHA, told Modern Healthcare.

Though Outpatient Revenues Increased, Hospital Profits Decreased

The AHA survey found that, overall, hospital profits decreased by 5.2% when comparing 2017 to 2018. In 2017, the hospitals reported a combined profit of $88 billion, but only a profit of $83.5 billion for 2018. 

Wesolowski noted that the most likely reasons for the decrease in profits were due to:

  • Continued lower reimbursements from public payers;
  • The shift from inpatient to outpatient care;
  • Increasing labor costs; and
  • Increasing costs for drugs and supplies.

AHA annual hospital surveys also collected aggregate data regarding payments and costs associated with hospital care to beneficiaries of Medicare and Medicaid services. Those surveys found that:

  • Combined underpayments to hospitals totaled $76.6 billion in 2018, which included a shortfall of $56.9 billion for Medicare and $19.7 billion for Medicaid.
  • In 2018, 66% of surveyed hospitals received Medicare payments less than cost and 61% received Medicaid payments less than cost.
  • Hospitals received payment of only 87 cents for every dollar spent caring for Medicare patients in 2018.
  • Hospitals received payment of 89 cents for every dollar spent caring for Medicaid patients in 2018. 

Additionally, according the “AHA Hospital Statistics 2020 Edition,” the total number of admissions for all US hospitals in 2018 was 36,353,946, while total expenses for all US hospitals in the same year totaled an astronomical $1,112,207,387,000.

With more convenient and less expensive options for medical care are becoming increasingly available to consumers, competition for outpatients will continue to increase. In the interest of producing new revenue sources—or just maintaining existing revenues—it would be prudent for clinical laboratory leaders to develop strategies for providing lab testing services to the growing number of outpatient ambulatory healthcare providers that compete with hospital ERs.

—JP Schlingman

Related Information:

U.S. Hospitals See First Decline in Outpatient Visits Since 1983

The Outpatient Shift Continues: Outpatient Revenue now 95% of Inpatient Revenue, New Report Reveals

AHA Hospital Statistics 2020 Edition

Fact Sheet: Underpayment by Medicare and Medicaid

Consumer Trend to Use Walk-In and Urgent Care Clinics Instead of Traditional Primary Care Offices Could Impact Clinical Laboratory Test Ordering/Revenue

Five Reasons Why Retail Clinics Are a “Game-Changing” Threat to Traditional Healthcare Providers That Could Strain Clinical Laboratories and Pathologists