Outpatient Surgery: Helping to Contain Health Care Costs

By Grant, Robert B. | Monthly Labor Review, November 1992 | Go to article overview

Outpatient Surgery: Helping to Contain Health Care Costs


Grant, Robert B., Monthly Labor Review


The price of health care increased 109 percent between 1981 and 1991--more than twice the 50-percent rise in the price of all items in the Bureau of Labor Statistics Consumer Price Index(1)--prompting employers to encourage workers to use less expensive health care services. Health insurers have introduced measures to control costs, offering incentives for seeking a second opinion for surgical procedures and requiring approval by an insurer before hospital admissions. These measures allow health care carriers to evaluate an illness or injury of an enrollee before the prospective patient enters the hospital or undergoes surgery. Carriers can then determine in advance which expenses they will cover.

The cost of hospital care has risen 135 percent in the past decade(2); this rise affected health care prices significantly because hospital expenses make up approximately 40 percent of all health costs.(3) Health insurance carriers have responded by encouraging participants to shift their health care use from inpatient hospital services to less expensive outpatient services. For example, carriers often offer financial incentives for choosing outpatient, rather than inpatient, surgery.

Approximately 80 percent of full-time employees participated in an employer-provided health care plan during the 1989-90 period; all participants were covered for inpatient and outpatient surgery. Inpatient surgery costs generally were covered on a percentage of usual, customary, and reasonable charges,(4) and subject to an annual deductible and a lifetime maximum benefit. Health care plans covered costs of outpatient surgery at the same rate as inpatient surgery or at a higher percentage in an effort to encourage the use of outpatient services.

This article examines benefits provided by health care plans for inpatient and outpatient surgery, and discusses the plans' incentives for encouraging outpatient surgery. It also explores some reasons for and against choosing outpatient, rather than inpatient, surgery.

Data are from the 1989 and 1990 BLS Employee Benefits Survey, which provides representative data for 77.9 million full-time employees.(5) The survey includes data on many types of employer-provided benefits, including health care, life insurance, retirement and capital accumulation plans, and paid leave.

Surgical procedures and facilities

Although surgery is traditionally associated with emergency rooms and hospital confinements, many procedures are performed without a hospital confinement. Outpatient surgery, also called "same-day" or ambulatory surgery, can be performed in the hospital, a doctor's office, or a "freestanding" ambulatory surgical center.

Despite the differences among the three locations, all are used routinely to perform same-day surgery. A hospital's outpatient services may be provided in the hospital or at a separate but affiliated facility. In contrast, freestanding surgical facilities are not affiliated with a hospital: they may be part of a chain of surgical centers, or they may be independent. A doctor's office may be in an office building, a hospital, or the physician's house; it is controlled administratively and financially by one or more physicians, regardless of its location.

From the point of view of health insurance companies, surgery is considered outpatient surgery if it takes place in any of these locations. Fees for surgeons and related personnel are approximately the same at each of these sites, although the charge for use of the facility may differ.

All outpatient surgery locations provide not only operating rooms, but also recovery rooms designed for a relatively short recovery instead of an overnight confinement. Differences among outpatient surgery sites are not related to the type or complexity of surgical procedures that can be performed, but are related more to their administration.

Cost containment measures

Outpatient surgery is more attractive to health insurance carriers who bear most of the costs of surgery. …

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