Five Strategies to Manage the Cost of Care in Outpatient Settings

This article was originally published in Hospitals & Health Networks, the flagship publication of the American Hospital Association, on May 12, 2015

An organization’s ability to deliver high-quality patient care while effectively managing its financial health has become more critical than ever. As a result, providers are increasingly turning to outpatient care delivery with its lower cost and greater accessibility to patients. Statistics from MedPAC and the American Hospital Association show that the ratio of patients who receive care continues to shift toward the outpatient setting (see Rebecca Vesely’s March 11 H&HN article “The Great Migration”).

However, a comprehensive strategy is needed to manage an organization’s outpatient care portfolio. Without such an approach, providers inadvertently may take on unexpected financial risks, as a shift to outpatient care can increase costs and lead to lower revenue, reducing the benefits of shifting care away from inpatient services.

Strategies for Minimizing Financial Risk

When care is delivered in a traditional hospital setting, patients have a comprehensive bundle of services completed under one roof. Shifting from a “one location/many patients” model to a “one patient/many locations” model means that health care services, once offered centrally, may be delivered in a geographically dispersed area and spread out over a longer period.

Providers should evaluate all costs associated with multiple episodes of care at multiple locations to understand the true clinical and financial value of delivering care in an outpatient setting. They should also factor in these costs when they are developing outpatient strategies.

Below are five strategies that providers can take to maximize the benefits of migrating to outpatient settings:

1. Develop a scheduling algorithm. Just as clinical care plans are developed for hospital-based patients, providers should develop a scheduling algorithm for each category of outpatient care. The critical aspect of the algorithm is to follow a patient from location to location within the organization’s facilities portfolio, over a period of time.

Articulating the specific number of visits associated with a given care path can help organizations to spot outliers, which can lead to both clinical and operational improvements. Providers will be able to identify potential losses in revenue if inconsistencies in a patient’s care path are identified. Typical examples of such losses include radiological and/or physical therapy services which may be completed at a competitor’s location.

Additionally, providers may seek to financially quantify the total cost of care by allocating per visit expenses by facility, then aggregating totals for different patient experiences. Quantifying in this way lets providers compare the cost of delivering care for selected clinical episodes in inpatient and outpatient facilities.

2. Enhance patient engagement. Managing a patient’s progression through the continuum of care may be simpler in an inpatient setting, because providers have familiarity with the mechanics of service delivery, better access to patient data and an incentive to manage length of stay. In such cases, providers, not patients, may be better positioned to manage care delivery for selected patients.

When care is delivered outside the walls of a hospital, patients may be required to manage their health more actively. While they have the incentive to improve their health, many patients may not have the knowledge and skills necessary to ensure they receive the care needed in the time required.

Hospitals can use case managers and care coordinators to help ensure that a patient receives proper care at the appropriate location and that the care is not duplicative. It’s critical to use a comprehensive care team to coordinate care among locations. In addition, implementing systemwide information technology associated with patient care will make these coordination efforts easier and more effective.

3. Ensure proper appointment sequencing. A common challenge related to optimizing outpatient care delivery is not only managing the number of distinct visits, but also the order in which they occur. In a common scenario, a patient arrives for a surgical consult without completing the necessary diagnostic radiological tests.

This scenario creates operational inefficiencies for staffing and physicians. Patients may become frustrated and disenfranchised. Also, complications may arise in the business office regarding reimbursement for the visit. Inefficiencies such as these are costly and common; a proper level of oversight should minimize them.

4. Balance location dispersion with patient convenience. One of the critical challenges in maintaining patient engagement is to match a patient’s clinical requirements and personal preferences with the scheduled openings and locations available. Older patients with cognitive or mobility challenges may prefer to complete all services in one easily accessible location. Other patients will travel wherever necessary to access their preferred provider in the timetable they desire.

The only way to truly understand patient preference is to engage with patients directly through interviews and satisfaction surveys. Such information can be used to create scheduling workflows, which can optimize facility and staff utilization. Better patient engagement leads to better health outcomes.

5. Embrace impending reimbursement models. Providers are well aware that reimbursement models are shifting from transaction- or procedure-based payments to outcomes-based models. Providers can be paid a fixed sum for a patient’s diagnosed medical condition or an annual capitated rate to manage the patient’s overall health.

As a result, payments may not be made for every visit or clinical transaction that occurs in an outpatient facility. Providers, therefore, have an incentive to resolve issues expeditiously, minimizing the transaction costs associated with numerous episodes of care.

Outpatient Portfolio Management

Outpatient services thrive when there is a more patient-centered, decentralized system for care that optimizes the local community’s health care needs with the provider’s capabilities. Unless providers develop a comprehensive strategy to optimize their outpatient portfolio, the impending shifts in reimbursement could transform a low-cost approach for care delivery into a financially burdensome operational model.

Embracing this alternative delivery system by addressing the transitional issues that come with such a shift will position providers better to deliver personalized treatment to patients with optimal outcomes. This approach can have long-term, positive impacts both to patients’ health and an organization’s bottom line.


  1. says

    My sister works at a hospital and has been working in outpatient care. She is always talking about enhancing patient engagement. What are some strategies that hospitals implement to help patients to manage their health more independently? I am very interested in what the patients have to do on their part.

    • says

      Thanks for your message. Patient engagement strategies vary by hospital and by provider. Patient education is step one. Unfortunately, many times patient education comes in the form of papers (or now apps) that patients receive and oftentimes rarely read after their visits.
      Engagement comes, I think, when a patient sees the value in participating in his/her care. They need the personality and curiosity to ask about their condition, and then they need a trusted provider who will take the time to communicate with them. So it’s not just the providers – patients need to take accountability too. There’s a fine line between taking ownership in a responsible way, and trying to “doctor yourself.” Some folks question their care and wind up on the internet clinging to false rumors (like the fact that vaccines cause autism). On the flip side, with the move to value-based reimbursement, and because of our cultural dependence on drugs, I think patients get prescribed way too many medications. There are other activities that could be pursued to make their health better. You know the Crestor ad – “When diet and exercise don’t work, try Crestor?” I’d like to hold patients – not the doctors – more accountable for trying diet and exercise before they get medications. Not sure how that happens, but I have some ideas, which is a separate article altogether! Finally, I think if patients actually understood what they were paying for, as opposed to the morass of insurance that makes it impossible to understand healthcare costs, they might question more. The amount a patient pays for a Crestor prescription is a rate that is blended with zillions of other costs when insurance is negotiated. Who knows what a patient would actually pay for it. Same with a trip to the emergency room, or anything else. If patients knew more about actual costs, they might be more engaged in why they need to pay for certain things and may take positive action to improve their health.
      Best of luck to your sister!

  2. says

    I absolutely am not one to want to take a financial risk. I am usually very stern with what happens with my money. Finding Strategies for minimizing my financial risk is just what I need.

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