By Ken Perez, Chief Strategy Officer and Director of Health Policy
The trend away from inpatient to outpatient care has been observed for decades, and it is projected to continue, if not accelerate, in the future.
An analysis by Deloitte of data from American Hospital Association annual surveys and Medicare Cost Reports found that the aggregate outpatient share of total hospital revenue increased from 28% in 1994 to 48% in 2018. This shift quickened between 2011 and 2018, as hospital outpatient revenue grew at a compounded annual rate of 9% versus 6% for inpatient revenue.1
This trend has been driven by a variety of factors: financial incentives, clinical outcomes, changing demographics, and consumer preferences.
The rise of value-based care
Value-based reimbursement models, especially those mandated by the Patient Protection and Affordable Care Act of 2010, such as accountable care organizations, provide strong financial incentives for providers to shift some medical procedures from costly inpatient settings to a less costly outpatient site. In addition, Medicaid and commercial plans have joined Medicare in pressuring health systems to take on value-based contracts.2
Better clinical outcomes
Moreover, outpatient procedures have be proven to be not only less costly, but also result in favorable clinical outcomes. An international multi-specialty analysis of almost 6.5 million elective surgery patients found that both on unadjusted and risk-adjusted bases, 30-day mortality and overall morbidity were less likely in outpatient versus inpatient operations.3
The growth and care of Baby Boomers
Demographic trends are also driving the shift. The 80+ population is projected to grow by 50% in the next decade, and this demographic group will fuel outpatient volume growth, with patients aged 80-84 generating a 65% increase in outpatient care volumes.4
In addition, certain specialties which deliver care primarily or increasingly in outpatient settings are growing. Endocrinology is the fastest-growing specialty, reflecting the popularity of GLP-1 receptor agonists as a treatment for obesity and diabetes. Also, as patients are living longer, more active lives, they are opting for joint replacements. Commercial claims for total hip, knee and shoulder replacements rose almost 20% from 2022 to 2023, and the continuation of this trend will result in greater demand for rehabilitation services.5
Changing consumer preferences
The final and arguably the most significant factor behind the shift to outpatient settings is consumer preferences for convenience and lower out-of-pocket costs, with the COVID-19 pandemic, which steered consumers away from hospital stays, and the adoption of technologies such as digital health apps and virtual health, as contributing factors.
Future outlook
Deloitte’s future of health vision projects by 2040 that most care will be delivered at home, or through virtual, outpatient, and other settings. The firm’s research indicates that many aspects of this vision—including the shift to outpatient and home settings—are already taking place today.6
References
- Gerhardt, W. and Arora, A., “Hospital revenue trends: Outpatient, home, virtual, and other care settings are becoming more common,” Feb. 21, 2020.
- Ibid.
- Madsen, H.J., et al., “Inpatient Versus Outpatient Surgery: A Comparison of Postoperative Mortality and Morbidity in Elective Operations,” World Journal of Surgery, March 2023.
- Steele, K., “Healthcare industry embraces shift to outpatient care sites,” April 11, 2024.
- Ibid.
- Gerhardt, loc. cit.
