That figure represents risks and opportunities for different stakeholders. For health systems, that revenue could vanish to freestanding competition. For physician groups, ambulatory surgery centers (ASCs), and other third-party outpatient operators, it’s a volume opportunity: they could attract volumes to drive above-population growth. For health plans, it’s a savings opportunity: they could channel volumes to lower-cost sites of care.¹ For suppliers and service providers, it’s a mixed bag: the shift represents potential new business, but from new customers with new needs.

For all stakeholders, it underscores the importance of actively managing site-of-care shifts. Outpatient shift often feels like an exogenous trend — something that happens locally because of sudden regulatory changes or new market entrants. The result is a reactive posture towards shift which results in foregone opportunities or under-preparedness for change.

Volumes shift when regulatory changes align with stakeholder decisions.² As a result, hospital, physician, ASC and other outpatient leaders, health plan leaders, and suppliers all have an opportunity to take ownership of outpatient shift by driving change in their markets.

Historically, health systems have viewed ambulatory shift as a threat. Procedure volumes leaving the hospital represented revenue loss, either as a haircut going to an ASC or as a loss to competitors altogether.

Health systems don’t have to view outpatient shift as a risk. Outpatient shift can be a strategic lever for health system growth by:

1. Enhancing overall health system efficiency by creating dedicated space for less resource-intensive services.

Learn more:

• How LHSC shifted surgery volumes to Ontario’s first high-efficiency ASC
• Why health systems need to embrace site-of-care shifts

2. Spearheading entry into new markets by focusing on differentiated service offerings or competitive pricing

Learn more:

• How AdventHealth approached cardiovascular ASC strategy
• How St. Cloud ENT partnered with an ASC to improve sleep apnea outcomes and grow surgical services

3. Reducing episodic costs to help health systems succeed in value-based care arrangements

Learn more:

• How to Build ASC Referrals

Newly eligible procedures offer an enhanced revenue opportunity for ASC owners to capture high-revenue business in a setting that has a lower cost base. Some of those services, like joint replacement, can shift with relatively low start-up cost. But they’ll still require intense operational efficiency to make high margins at lower-than-hospital reimbursement rates and scale to justify moving blocks of procedures to a new physical location. Others, like percutaneous coronary intervention, require substantial infrastructure investment to enable care.

ASC business has historically offered greater independence from hospitals. Paradoxically, greater shift may require closer partnership between physicians and health systems to fund the capital investments necessary to make shifts successful. In other markets, external funders, including ASC operators or private equity, could enable physicians to move procedures out of the hospital.  

Learn more:

• How Two Orthopedics Programs Shifted Joint Replacements to ASCs

Ambulatory shift is a meaningful savings opportunity for health plans, which could reduce per-procedure spending just by shifting the site of care. Based on our interviews, health plans in some markets have already started to lock in ambulatory rates for rapidly shifting procedures like joint replacement regardless of site, effectively forcing shift out of the hospital setting.

But health plans could go further and work to activate new shifts. For example, they could provide incentives — such as waiving deductibles — for patients to go to lower-cost sites of care. That strategy proved successful for imaging shifts in the last decade when health plans partnered with benefit partners to incentivize use of freestanding imaging centers. They could even partner with physicians directly by engaging in bundled payment arrangements to create predictable revenue for ambulatory surgeries and encourage surgeons to shift cases.

Learn more:

• Site-of-care shifts: The next savings opportunity for health plans?

Revenue flowing out of the hospital to other sites diversifies the customer set for healthcare suppliers, especially device makers and facility planners. In some ways, that complicates customer negotiations. For example, health systems and independent ASCs are likely to have vastly different purchasing systems. They will also have vastly different purchasing needs and decision-makers.

However, it introduces opportunities by creating new niches for disruptors or new product lines. It opens new ways for these companies to serve as partners if they can help customers build and equip new sites or guide customers’ strategic decision-making.

Learn more:

• ASC market outlook for suppliers and service providers
• ASC Purchaser Archetypes

We used our previous Services at risk of shifting from the hospital setting analysis as a starting point. We applied the median hospital outpatient department (HOPD) market share and aggressive shift scenario share to national volumes for each procedure group or subservice line derived from the Market Scenario Planner.

The difference between the two volumes accounted for the potential volumes that could shift from hospital to freestanding settings.

We then applied proprietary per-case revenue benchmarks based on a blend of Medicare and commercial reimbursement rates adjusted for demographic differences for each outpatient grouping to the potential volume shift. That provided the estimated revenue at risk for each procedure group or subservice line.

Then, we aggregated the revenue at risk across all groups to come to a total figure.

In many ways, $50 billion is an underestimate: We’re only looking at shifts from hospitals to freestanding sites, ignoring shifts between outpatient sites or from inpatient to hospital outpatient. In other ways, it’s an overestimate: We’re taking for granted our most aggressive shift scenario which assumes that the entire country will represent the 90^th percentile market for freestanding share. Furthermore, $50 billion assumes the complete loss of hospital outpatient revenue. An ASC capturing revenues from the hospital, given lower reimbursement rates, would not capture the entirety of that value. Similarly, health plans would save the difference between HOPD and ASC rates, and not the full HOPD revenue.

Nevertheless, $50 billion provides a useful anchor to conceptualize the size of the risk and opportunity posed by structural volume shifts.