The incremental cost of second and third ambulatory procedures

Area of Science:

• Health Economics
• Healthcare Payment Systems
• Ambulatory Surgery

Background:

• Payment systems for ambulatory surgery often use Ambulatory Patient Groups (APGs).
• The discount factor for multiple procedures within an encounter significantly influences financial incentives and payment adequacy.
• Current APG payment systems may use discount factors that do not accurately reflect actual costs.

Purpose of the Study:

• To determine the actual incremental charges for second and subsequent ambulatory procedures.
• To evaluate the adequacy of current discount factors used in APG-based payment systems.
• To provide data for organizations developing or refining APG payment systems.

Main Methods:

• Empirical analysis of ambulatory surgery data from acute general hospitals in Maryland (1995).
• Calculation of incremental charges for second and third APGs as a percentage of the first APG.
• Presentation of APG-adjusted charges stratified by payer to illustrate resource use variations.

Main Results:

• The incremental charge for a second ambulatory procedure was 24% of the charge for a single procedure.
• The incremental charge for a third ambulatory procedure was 16% of the charge for a single procedure.
• These empirical discount factors are substantially lower than those commonly employed in existing APG payment systems.

Conclusions:

• Existing APG payment systems may overestimate the costs of subsequent procedures, potentially leading to inadequate payment rates.
• The findings suggest a need to revise discount factors in APG-based payment systems to better align with actual resource utilization.
• The study provides valuable data for healthcare organizations to develop more accurate and equitable APG payment models and for benchmarking purposes.