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Research

Outpatient care variation reduction: Is there a worthwhile opportunity?

Overview

Advisory Board has been sizing and researching the multi-million dollar inpatient care variation reduction (CVR) opportunity for years. But, recently, we’ve gotten questions about the opportunity for outpatient CVR.

As researchers, we were curious—and skeptical—about the outpatient CVR opportunity for one main reason. Each individual service provided in the outpatient space costs less compared to the inpatient setting. So, standardizing care requires more effort to generate the same savings as inpatient CVR. That means more time, more energy, and more behavior change to yield similar savings.

Our data analysis supported that hypothesis. There is some cost savings opportunity in the outpatient space, which we outline below. However, achieving the scale necessary to generate similar cost savings as inpatient CVR efforts poses a substantial challenge.

The main takeaway: Focus first on inpatient care variation reduction. There’s a greater bang for your buck.

 

Here's what we did

We started by sizing the direct cost savings opportunity for each hospital outpatient department (HOPD) in the U.S. by measuring variation across physicians on similar outpatient encounter types. Variation captures the differences in the number or types of services provided to the same patient types at a given HOPD. This variation generates differences in direct costs between physicians within the organization. Significant differences in these direct costs would indicate there’s a cost savings opportunity.

We then summed the total direct cost variation across all HOPDs to calculate national outpatient CVR opportunity. This captures the total cost savings opportunity of eliminating internal variation across all organizations. We use the same methodology to calculate inpatient cost savings opportunity, allowing us to compare the results of both analyses directly.

Want more detail on our methodology? Download our in-depth methodology and results at the top-right of the page.

 

 
Two big findings from our analysis
  • 1. The outpatient CVR opportunity is sizeable but hard to capitalize on
  • 2. Certain services that have already shifted from inpatient to outpatient care are top options for outpatient CVR efforts
 

Parting thoughts

While there is a sizeable cost savings opportunity for CVR in the outpatient space, achieving the scale necessary to generate similar cost savings as inpatient CVR poses a substantial challenge. Because of this, most organizations should focus on inpatient CVR.

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