Advisory Board projects a nearly 3% decline in inpatient surgical volumes from 2021 to 2026. While shifts to the outpatient setting are not a new trend, recent payment and regulatory changes have created expanded opportunities in key, high-volume hospital service lines such as orthopedics and spine.

In the face of shrinking surgical volumes, hospitals have two options to achieve continued inpatient surgical growth. One, they could expand services in the few service lines with high inpatient growth expectations such as neurosurgery. Or two, they could expand their catchment area and become a destination site of care.

Out-of-market travel for surgical care isn’t uncommon. Between Q2 2021 and Q1 2022, 22% of inpatient Medicare fee-for-service (FFS) surgical claims were attributed to patients who traveled outside of their region for care.

Propensity for travel is much higher for health systems with national brand recognition. In fact, all of the eight brand name systems Advisory Board analyzed – Cleveland Clinic, Duke Health, Hospital for Special Surgery, Johns Hopkins, Mayo Clinic, MD Anderson, Memorial Sloan Kettering, and Virginia Mason – received the majority of their inpatient surgical volume from patients outside their own hospital referral region.

Out-of-market travel can occur because the service isn’t available locally or because there is an active choice to receive care elsewhere. We found that the services with the highest propensity for travel are ones that are not available at every hospital (e.g., transplant) or delivered only at specialized locations (e.g., burns). On average, the top sub-service lines (SSLs) for travel are low-volume, high-profit services.

By volume, joint replacement and cardiac catheterization account for 32% of claims delivered out-of-market. Approximately 88% of joint replacements are classified as pre-scheduled, elective procedures, making them highly susceptible to out-of-market volume loss or capture due to patient choice. By comparison, just 16% of cardiac catheterization procedures are elective.

To better isolate travel cases likely to be motivated by patient choice, we examined the services making up the out-of-market business for brand-name systems. We found the surgeries that patients travel to brand-name systems for the most were generally more elective than surgeries traveled for overall. Common elective sub-service lines for travel at brand names include head and neck surgery, ENT tracheostomy, fusion, and prostate surgeries.

According to Advisory Board’s Hospital Benchmark Generator, profits from out-of-market travel cases make up 23% of total profits nationally, but at brand-name systems, travel claims make up the vast majority of profits. ​For instance, at Mayo Clinic, three-fourths of profits come from out-of-market patients. While travel patients make up a large percentage of total inpatient surgical claims, this data demonstrates that these claims are also highly profitable for health systems. 

Patients tend to stay close to home, even when traveling for care. The average distance traveled by patients from the 10 regions with the highest propensity for travel was 44 miles.

Even brand-name hospitals attract most out-of-market patients from nearby regions. As shown below, most out-of-market volume for brand-name systems comes from their home state. For brand-name hospitals, the average distance traveled by patients from the top five inbound regions, representing as much as 75% of a brand-name hospital’s claims, was 93 miles.

This finding means the opportunity to attract travel patients is a matter of proximity, not just branding alone. A hospital’s biggest competitors might not be national brand names, but rather the destination centers a few hours away.

Attracting travel patients is a game of winners and losers. But it doesn’t appear that any one state has a leg up when it comes to their ability to attract out-of-market patients. As shown below, most states are “retainers.”

• Retainers: These states lose and gain few patients on a net basis. Attracting in-state patients is the most likely route for expansion.
• Attractors: Providers in these states have a net gain in volume due to travel. Growth depends on the ability to expand market share across a wide service area.
• Losers: Providers in these states have a net loss in volume due to travel. These states should identify the service lines and regions from which they are losing the most patients.