Abstract
Background:
The latest comprehensive diagnosis-specific estimates of hospital professional fees relative to facility fees are from 2004 to 2012.
Objective:
Update professional fee ratio (PFR) estimates to improve cost analysis opportunities with hospital discharge data sources and compare them with previous PFR estimates.
Subjects:
2016–2020 MarketScan inpatient admissions and emergency department (ED) treat and release claims.
Measures:
PFR was calculated as total admission or ED visit payment divided by facility-only payment. This measure can be multiplied by hospital facility costs to yield a total cost estimate.
Research Design:
Generalized linear regression models controlling for selected patient and service characteristics were used to calculate adjusted mean PFR per admission or ED visit by health payer type (commercial or Medicaid) and by selected diagnostic categories representing all clinical diagnoses (Major Diagnostic Category, Diagnostic Related Group, and Clinical Classification Software Revised).
Results:
Mean 2016–2020 PFR was 1.224 for admissions with commercial payers (n = 6.7 million admissions) and 1.178 for Medicaid (n = 4.2 million), indicating professional payments on average increased total payments by 22.4% and 17.8%, respectively, above facility-only payments. This is a 9% and 3% decline in PFR, respectively, compared with 2004 estimates. PFR for ED visits during 2016–2020 was 1.283 for commercial payers (n = 22.2 million visits) and 1.415 for Medicaid (n = 17.7 million). This is a 12% and 5% decline in PFR, respectively, compared with 2004 estimates.
Conclusions:
Professional fees comprise a declining proportion of hospital-based care costs. Adjustments for professional fees are recommended when hospital facility-only financial data are used to estimate hospital care costs.
Keywords: costs and cost analysis, economics, hospital, hospital charges
Hospital discharge data are collected in most U.S. states and commonly used for cost-of-illness analyses despite two notable limitations. The first is that such data sources typically report hospitals’ billed charges rather than payments (or revenue) received. Hospital discharge data are thus different from medical claims data sources, which report payments to hospitals and providers. This limitation can be mitigated by applying cost-to-charge ratios (CCRs) from the Centers for Medicare and Medicaid Services, yielding a reasonable proxy for payments that hospitals receive.1,2 The second limitation is that hospital discharge data sources typically report only facility charges, excluding physician or professional fees.3 Facility charges include, for example, room and board fees, and all other payments to hospitals.4 Professional charges reflect services by physicians and other skilled health care professionals licensed for independent practice, including many clinicians treating patients in hospitals.
Using a large medical claims data source, it was most recently estimated that professional payments in 2012 added an average of 26.4% for commercial payers and 17.7% for Medicaid above facility-only payments for U.S. hospital admissions, and an additional 28.6% for commercial payers and 44.0% for Medicaid above facility-only payments for hospital emergency department (ED) treat and release visits (ED visits).5 Such professional fee ratio (PFR) estimates used in combination with CCR can provide better estimates of total hospital care cost when hospital discharge data are used (ie, hospital facility charge * CCR * PFR = total payment). This study aimed to update PFR estimates to improve cost analysis opportunities with hospital discharge data sources and compare them with previous PFR estimates.
METHODS
This study used publicly available data. We identified admissions and ED visits among a large all-ages convenience sample of individuals with employer-sponsored insurance or Medicaid reported in the 2016–2020 Merative MarketScan Commercial, Medicare Supplemental, and Medicaid databases. MarketScan reports clinical diagnoses and associated payments (charges submitted by providers are not reported) to health care facilities and providers from a selection of large employers and employer-sponsored health plans (Commercial/Medicare Supplemental) or state Medicaid agencies and Medicaid-contracted health plans (Medicaid).
Study outcome measures were associations between PFR and selected patient and service characteristics, adjusted mean PFR for all admissions and ED visits by payer type (Commercial or Medicaid), and adjusted mean PFR by selected diagnostic categories representing all clinical diagnoses: Major Diagnostic Category (MDC; 25 categories), Clinical Classification Software Refined (CCSR; > 500 categories), and Diagnostic Related Group (DRG; > 900 inpatient categories). Dollar values were adjusted to 2020 medical prices.6 PFR was calculated as total admission or ED visit payment divided by facility-only payment as reported in the data source. This measure can be multiplied by facility-only costs for hospital care to yield a total cost estimate. For example, if the admission facility cost in a hospital discharge data source is $1000 and the corresponding estimated PFR for the admission clinical diagnosis is 1.240, the total estimated direct medical cost of the admission can be calculated as $1240.
We combined patients’ inpatient (and preceding ED) and outpatient ED payment records and clinical information for services beginning on the same date. Where > 1 International Classification of Diseases, Tenth Revision, Clinical Modification diagnosis was reported as the admission primary diagnosis (< 0.2% of analyzed admissions), we classified the admission using the first-listed primary diagnosis. We identified the ED visit primary diagnosis based on the first-listed diagnosis to which the facility payment was attributed; ED visits with > 1 set of diagnoses with associated facility payments (< 0.6% of the potential sample) were excluded. We excluded admissions and ED visits with missing or illogical diagnostic information (ie, ICD-9-CM diagnosis codes) or illogical payment values (ie, negative or zero total payments or facility payments or total payments less than facility payments). We excluded outliers with the lowest 1% value of facility payments for the sample per hospitalized day (ie, <$396 per day for Commercial insurance and <$74 per day for Medicaid admissions) or ED visit (ie, <$31 total facility payment for Commercial and <$13 for Medicaid ED visits). Adult (≥ 18 y old) comorbidities among inpatient admissions were identified using HCUP Comorbidity Software7 and child (< 18 y old) comorbidities were identified using the Child Comorbidity Index.8 Surgery was identified by DRG (classified as surgical or medical) for inpatient admissions and Current Procedural Terminology codes (10021–69990) for ED visits.
SAS 9.4 was used for sample selection and Stata 17 was used for regression modeling. Generalized linear regression models with log links controlling for selected patient and service characteristics were used to calculate adjusted mean PFR per admission or ED visit. Models controlled for patient age, sex, race/ethnicity (Medicaid only), health insurance plan type (eg, health maintenance organization), ED services preceding an inpatient admission, number of patient comorbidities (admissions only), whether the admission or ED visit included surgical procedures, length of inpatient stay (admissions only), discharge status (admissions only), U.S. Census region (Commercial only), and DRG (admissions models) or CCSR (ED visit models). Adjusted mean PFR per year or diagnostic classification was calculated as the mean value of the model-predicted PFR for each admission or visit (Stata “margins” program). PFR for clinical classifications with <100 admissions or ED visits was not calculated. Machine-readable PFR estimates by payer type for all analyzed clinical classifications are reported in Supplemental Digital Content 1 (http://links.lww.com/MLR/C695).
RESULTS
Analysis included 6.7 million Commercial admissions, 4.2 million Medicaid payer admissions, 22.2 million Commercial ED visits, and 17.7 million Medicaid payer ED visits (Fig. 1). Higher patient age, non-White race/ethnicity, and longer inpatient stay were associated with lower PFR, as was female sex—except among Medicaid payer ED visits (Supplemental Digital Content 2, http://links.lww.com/MLR/C696). Commercial comprehensive health plans (ie, no incentive for patients to use particular providers) were generally associated with lower PFR. Medicaid health maintenance organization and preferred provider organization plans were associated with higher PFR, and Medicaid point of service with capitation plans had a mixed relationship with PFR (ie, associated with lower PFR for admissions and higher ED visits). Admissions with preceding ED care, a higher number of patient comorbidities, and non-home inpatient discharge destination were associated with higher PFR. ED visits with surgical procedures were associated with higher PFR for Commercial visits but lower PFR for Medicaid payer ED visits. Hospitals in the Northeast were associated with higher PFR for Commercial admissions and ED visits compared with hospitals in the West, lower PFR compared with hospitals in the South, and a mixed relationship (lower for admissions, higher for ED visits) compared with hospitals in the North Central region.
FIGURE 1.
Sample selection for inpatient admissions and ED T&R visits by insurance payer type, 2016–2020. Data source: 2016–2020 Merative MarketScan databases. “a” indicates admissions were excluded if missing patient age, sex, or length of stay; ED visits were excluded if missing patient age or sex. “b” indicates assessed clinical diagnosis values: DRG = 1–999; MDC = 0–25; primary 3-digit ICD-10-CM (used to classify CCSR): A00–Z99. Admissions with more than one DRGs and/or MDCs were excluded. Primary ED visit diagnosis was defined as the diagnosis associated with a facility payment and visits with > 1 primary diagnosis, invalid diagnosis, MDC < 0 or MDC > 25, with an associated facility payment were excluded. “c” indicates admissions were excluded if hospital facility payment $ ≤ 0, total payment $ ≤ 0, or PFR <1 (ie, total payment was less than the component hospital facility payment). Admissions with the lowest 1% of hospital facility payments per inpatient day (ie, total facility payment for admission divided by the length of stay) were excluded. ED visits were excluded if hospital facility payment was $ ≤ 0 or professional payment was $ < 0. Visits with the lowest 1% of hospital facility payments were excluded. CCSR indicates Clinical Classification Software Refined; DRG, Diagnostic Related Group; ED, emergency department; ICD-10-CM, International Classification of Diseases, 10th Revision, Clinical Modification; MDC, major diagnostic category; PFR, professional fee ratio; T&R, treat and release.
Adjusted mean PFR for 2016–2020 admissions was 1.224 for Commercial admissions and 1.178 for Medicaid admissions, indicating professional payments on average increased total payments by 22.4% and 17.8%, respectively, above facility-only payments (Table 1). This is a 9% and 3% decline in average PFR, respectively, compared with 2004 estimates (1.342 and 1.211).5 Adjusted mean PFR for ED visits during 2016–2020 was 1.283 for Commercial and 1.415 for Medicaid visits. This is a 12% and 5% decline in average PFR, respectively, compared with 2004 estimates (1.452 and 1.490).
Table 1.
Professional Fee Ratios by Year and Payer Type, 2004–2020
| PFR Inpatient admissions | PFR Emergency department treat and release visits | |||
|---|---|---|---|---|
| Year | Commercial | Medicaid | Commercial | Medicaid |
| 2004a | 1.342 | 1.211 | 1.452 | 1.490 |
| 2005a | 1.336 | 1.209 | 1.406 | 1.540 |
| 2006a | 1.336 | 1.196 | 1.416 | 1.552 |
| 2007a | 1.334 | 1.158 | 1.457 | 1.531 |
| 2008a | 1.308 | 1.166 | 1.422 | 1.488 |
| 2009a | 1.294 | 1.159 | 1.438 | 1.477 |
| 2010a | 1.284 | 1.154 | 1.371 | 1.453 |
| 2011a | 1.269 | 1.143 | 1.294 | 1.444 |
| 2012a | 1.264 | 1.177 | 1.286 | 1.440 |
| 2016 | 1.227 | 1.165 | 1.300 | 1.397 |
| 2017 | 1.230 | 1.169 | 1.287 | 1.426 |
| 2018 | 1.227 | 1.181 | 1.280 | 1.442 |
| 2019 | 1.216 | 1.190 | 1.269 | 1.410 |
| 2020 | 1.212 | 1.189 | 1.268 | 1.406 |
| 2016–2020 | 1.224 | 1.178 | 1.283 | 1.415 |
Data source: 2016–2020 Merative™ MarketScan® databases.
2004–2012 data reproduced from Peterson et al. (2015). PFR indicates Professional Fee Ratio.
PFR was highest by MDC for admissions with MDC 14 “pregnancy, childbirth, and the puerperium” (Commercial PFR: 1.485; Medicaid: 1.391) and lowest for Commercial admissions with MDC 20 “alcohol or drug use or induced organic mental disorders” (PFR: 1.062) and Medicaid admissions with MDC 17 “myeloproliferative diseases and disorders, poorly differentiated neoplasms” (PFR: 1.090) (Table 2). PFR was highest by MDC for Commercial ED visits with MDC 9 “diseases and disorders of the skin, subcutaneous tissue, and breast” (PFR: 1.367) and Medicaid ED visits with MDC 3 “diseases and disorders of the ear, nose, mouth, and throat” (PFR: 1.496) and lowest for MDC 17 “myeloproliferative diseases and disorders, poorly differentiated neoplasms” (commercial PFR: 1.102; Medicaid PFR: 1.241). PFR was highest by CCSR for Commercial ED visits with CCSR NEO066 “malignant neuroendocrine tumors” (PFR: 1.467) and Medicaid ED visits with CCSR END013 “pituitary disorders” (PFR: 1.789) (Table 3). PFR was highest by DRG for Commercial admissions with DRG 583 “mastectomy for malignancy without complication or comorbidity/major complication or comorbidity (PFR: 1.803) and Medicaid admissions with 785 “cesarean section with sterilization without complication or comorbidity/major complication or comorbidity” (PFR: 1.575) (Table 4).
Table 2.
Professional Fee Ratios by Major Diagnostic Category and Payer Type, 2016–2020
| MDC Code | MDC Description | PFR Inpatient admissionsa | PFR Emergency department treat and release visitsa | ||
|---|---|---|---|---|---|
| Commercial | Medicaid | Commercial | Medicaid | ||
| 1 | Diseases and disorders of the nervous system | 1.171 | 1.151 | 1.261 | 1.430 |
| 2 | Diseases and disorders of the eye | 1.176 | 1.189 | 1.351 | 1.454 |
| 3 | Diseases and disorders of the ear, nose, mouth and throat | 1.189 | 1.161 | 1.326 | 1.496 |
| 4 | Diseases and disorders of the respiratory system | 1.131 | 1.124 | 1.268 | 1.378 |
| 5 | Diseases and disorders of the circulatory system | 1.138 | 1.121 | 1.240 | 1.332 |
| 6 | Diseases and disorders of the digestive system | 1.172 | 1.142 | 1.246 | 1.413 |
| 7 | Diseases and disorders of the hepatobiliary system and pancreas | 1.182 | 1.150 | 1.204 | 1.333 |
| 8 | Diseases and disorders of the musculoskeletal system and connective tissue | 1.208 | 1.153 | 1.313 | 1.366 |
| 9 | Diseases and disorders of the skin, subcutaneous tissue and breast | 1.234 | 1.137 | 1.367 | 1.447 |
| 10 | Endocrine, nutritional and metabolic diseases and disorders | 1.195 | 1.142 | 1.233 | 1.299 |
| 11 | Diseases and disorders of the kidney and urinary tract | 1.154 | 1.123 | 1.254 | 1.389 |
| 12 | Diseases and disorders of the male reproductive system | 1.280 | 1.168 | 1.279 | 1.424 |
| 13 | Diseases and disorders of the female reproductive system | 1.233 | 1.162 | 1.262 | 1.443 |
| 14 | Pregnancy, childbirth and the puerperium | 1.485 | 1.391 | 1.219 | 1.484 |
| 15 | Newborns and other neonates with conditions originating in perinatal period | 1.200 | 1.172 | 1.270 | 1.484 |
| 16 | Diseases and disorders of blood, blood forming organs and immunologic disorders | 1.131 | 1.117 | 1.223 | 1.307 |
| 17 | Myeloproliferative diseases and disorders, poorly differentiated neoplasms | 1.095 | 1.090 | 1.102 | 1.241 |
| 18 | Infectious and parasitic diseases, systemic or unspecified sites | 1.123 | 1.117 | 1.287 | 1.470 |
| 19 | Mental diseases and disorders | 1.128 | 1.132 | 1.285 | 1.393 |
| 20 | Alcohol or drug use or induced organic mental disorders | 1.062 | 1.112 | 1.218 | 1.350 |
| 21 | Injuries, poisonings and toxic effects of drugs | 1.143 | 1.165 | 1.299 | 1.413 |
| 22 | Burns | 1.118 | 1.147 | 1.322 | 1.393 |
| 23 | Factors influencing health status and other contacts with health services | 1.134 | 1.128 | 1.258 | 1.373 |
| 24 | Multiple significant trauma | 1.143 | 1.170 | NA | NA |
| 25 | Human immunodeficiency virus infections | 1.134 | 1.101 | 1.113 | 1.245 |
Data source: 2016–2020 Merative™ MarketScan® databases.
Counts for admissions and visits analyzed to produce these estimates and 95% confidence intervals reported in SDC1. MDC indicates Major Diagnostic Category; NA Not assessed (observations n<100); PFR Professional Fee Ratio.
Table 3.
Top 25 Professional Fee Ratios by Clinical Classifications Software Category and Payer Type for ED treat and release visitsa, 2016–2020
| Commercial | Medicaid | |||||
|---|---|---|---|---|---|---|
| Rank | CCSR code | CCSR description | PFR | CCSR code | CCSR description | PFR |
| 1 | NEO066 | Malignant neuroendocrine tumors | 1.467 | END013 | Pituitary disorders | 1.789 |
| 2 | FAC012 | Other specified encounters and counseling | 1.442 | NVS002 | Encephalitis | 1.714 |
| 3 | MUS034 | Crystal arthropathies (excluding gout) | 1.438 | PNL004 | Neonatal cerebral disorders | 1.708 |
| 4 | NVS005 | Multiple sclerosis | 1.415 | NVS009 | Epilepsy; convulsions | 1.698 |
| 5 | SKN001 | Skin and subcutaneous tissue infections | 1.404 | MBD022 | Hallucinogen-related disorders | 1.687 |
| 6 | EAR005 | Postprocedural or postoperative ear and/or mastoid process complication | 1.392 | PRG027 | Complications specified during the puerperium | 1.660 |
| 7 | DIG002 | Disorders of teeth and gingiva | 1.380 | MAL002 | Digestive congenital anomalies | 1.629 |
| 8 | SKN007 | Other specified and unspecified skin disorders | 1.374 | INJ019 | Burn and corrosion, initial encounter | 1.628 |
| 9 | EAR006 | Other specified and unspecified disorders of the ear | 1.365 | PRG003 | Spontaneous abortion and complications of spontaneous abortion | 1.621 |
| 10 | SKN005 | Contact dermatitis | 1.359 | MBD023 | Inhalant-related disorders | 1.610 |
| 11 | MUS029 | Disorders of jaw | 1.358 | MUS004 | Juvenile arthritis | 1.598 |
| 12 | INF009 | Parasitic, other specified and unspecified infections | 1.358 | GEN022 | Benign ovarian cyst | 1.589 |
| 13 | DIG014 | Hemorrhoids | 1.354 | CIR039 | Other specified diseases of veins and lymphatics | 1.587 |
| 14 | EAR001 | Otitis media | 1.352 | RSP004 | Acute and chronic tonsillitis | 1.578 |
| 15 | SKN002 | Other specified inflammatory condition of skin | 1.352 | MBD008 | Disruptive, impulse-control and conduct disorders | 1.571 |
| 16 | CIR018 | Cardiac arrest and ventricular fibrillation | 1.350 | MAL005 | Congenital malformations of eye, ear, face, neck | 1.563 |
| 17 | INF004 | Fungal infections | 1.348 | MBD007 | Trauma- and stressor-related disorders | 1.563 |
| 18 | RSP007 | Other specified and unspecified upper respiratory disease | 1.340 | MAL001 | Cardiac and circulatory congenital anomalies | 1.551 |
| 19 | CIR035 | Varicose veins of lower extremity | 1.339 | PRG018 | Maternal care related to disorders of the placenta and placental implantation | 1.541 |
| 20 | MUS023 | Acquired deformities (excluding foot) | 1.332 | SKN001 | Skin and subcutaneous tissue infections | 1.539 |
| 21 | EYE001 | Cornea and external disease | 1.331 | MBD014 | Neurodevelopmental disorders | 1.534 |
| 22 | EYE005 | Retinal and vitreous conditions | 1.330 | GEN019 | Endometriosis | 1.533 |
| 23 | SKN006 | Postprocedural or postoperative skin complication | 1.329 | EAR001 | Otitis media | 1.527 |
| 24 | MAL005 | Congenital malformations of eye, ear, face, neck | 1.327 | GEN021 | Menstrual disorders | 1.527 |
| 25 | MUS033 | Gout | 1.327 | MAL003 | Genitourinary congenital anomalies | 1.523 |
Data source: 2016–2020 Merative™ MarketScan® databases.
Counts for admissions and visits analyzed to produce these estimates and 95% confidence intervals reported in SDC1. CCSR indicates Clinical Classification Software Refined; PFR Professional fee ratio.
Table 4.
Top 25 Professional Fee Ratios by Diagnostic Related Group and Payer Type for Inpatient Admissions, 2016–2020
| Rank | Commercial | Medicaid | ||||
|---|---|---|---|---|---|---|
| DRG code | DRG description | PFR | DRG code | DRG description | PFR | |
| 1 | 583 | MASTECTOMY FOR MALIGNANCY WITHOUT CC/MCC | 1.803 | 785 | CESAREAN SECTION WITH STERILIZATION WITHOUT CC/MCC | 1.575 |
| 2 | 582 | MASTECTOMY FOR MALIGNANCY WITH CC/MCC | 1.757 | 798 | VAGINAL DELIVERY WITH STERILIZATION AND/OR D&C WITHOUT CC/MCC | 1.499 |
| 3 | 581 | OTHER SKIN SUBCUTANEOUS TISSUE AND BREAST PROCEDURES WITHOUT CC/MCC | 1.639 | 807 | VAGINAL DELIVERY WITHOUT STERILIZATION OR D&C WITHOUT CC/MCC | 1.477 |
| 4 | 585 | BREAST BIOPSY LOCAL EXCISION AND OTHER BREAST PROCEDURES WITHOUT CC/MCC | 1.600 | 784 | CESAREAN SECTION WITH STERILIZATION WITH CC | 1.475 |
| 5 | 775 | VAGINAL DELIVERY WITHOUT COMPLICATING DIAGNOSES | 1.565 | 806 | VAGINAL DELIVERY WITHOUT STERILIZATION OR D&C WITH CC | 1.449 |
| 6 | 584 | BREAST BIOPSY LOCAL EXCISION AND OTHER BREAST PROCEDURES WITH CC/MCC | 1.556 | 797 | VAGINAL DELIVERY WITH STERILIZATION AND/OR D&C WITH CC | 1.445 |
| 7 | 807 | VAGINAL DELIVERY WITHOUT STERILIZATION OR D&C WITHOUT CC/MCC | 1.533 | 775 | VAGINAL DELIVERY WITHOUT COMPLICATING DIAGNOSES | 1.440 |
| 8 | 774 | VAGINAL DELIVERY WITH COMPLICATING DIAGNOSES | 1.506 | 783 | CESAREAN SECTION WITH STERILIZATION WITH MCC | 1.428 |
| 9 | 806 | VAGINAL DELIVERY WITHOUT STERILIZATION OR D&C WITH CC | 1.499 | 805 | VAGINAL DELIVERY WITHOUT STERILIZATION OR D&C WITH MCC | 1.419 |
| 10 | 767 | VAGINAL DELIVERY WITH STERILIZATION AND/OR D&C | 1.484 | 768 | VAGINAL DELIVERY WITH O.R. PROCEDURES EXCEPT STERILIZATION AND/OR D&C | 1.411 |
| 11 | 30 | SPINAL PROCEDURES WITHOUT CC/MCC | 1.483 | 789 | NEONATES DIED OR TRANSFERRED TO ANOTHER ACUTE CARE FACILITY | 1.401 |
| 12 | 798 | VAGINAL DELIVERY WITH STERILIZATION AND/OR D&C WITHOUT CC/MCC | 1.478 | 774 | VAGINAL DELIVERY WITH COMPLICATING DIAGNOSES | 1.395 |
| 13 | 805 | VAGINAL DELIVERY WITHOUT STERILIZATION OR D&C WITH MCC | 1.475 | 788 | CESAREAN SECTION WITHOUT STERILIZATION WITHOUT CC/MCC | 1.395 |
| 14 | 766 | CESAREAN SECTION WITHOUT CC/MCC | 1.469 | 767 | VAGINAL DELIVERY WITH STERILIZATION AND/OR D&C | 1.394 |
| 15 | 578 | SKIN GRAFT EXCEPT FOR SKIN ULCER OR CELLULITIS WITHOUT CC/MCC | 1.466 | 796 | VAGINAL DELIVERY WITH STERILIZATION AND/OR D&C WITH MCC | 1.377 |
| 16 | 768 | VAGINAL DELIVERY WITH O.R. PROCEDURES EXCEPT STERILIZATION AND/OR D&C | 1.458 | 787 | CESAREAN SECTION WITHOUT STERILIZATION WITH CC | 1.370 |
| 17 | 797 | VAGINAL DELIVERY WITH STERILIZATION AND/OR D&C WITH CC | 1.440 | 998 | PRINCIPAL DIAGNOSIS INVALID AS DISCHARGE DIAGNOSIS | 1.368 |
| 18 | 785 | CESAREAN SECTION WITH STERILIZATION WITHOUT CC/MCC | 1.439 | 766 | CESAREAN SECTION WITHOUT CC/MCC | 1.343 |
| 19 | 473 | CERVICAL SPINAL FUSION WITHOUT CC/MCC | 1.434 | 786 | CESAREAN SECTION WITHOUT STERILIZATION WITH MCC | 1.334 |
| 20 | 577 | SKIN GRAFT EXCEPT FOR SKIN ULCER OR CELLULITIS WITH CC | 1.434 | 534 | FRACTURES OF FEMUR WITHOUT MCC | 1.331 |
| 21 | 472 | CERVICAL SPINAL FUSION WITH CC | 1.429 | 473 | CERVICAL SPINAL FUSION WITHOUT CC/MCC | 1.329 |
| 22 | 765 | CESAREAN SECTION WITH CC/MCC | 1.421 | 999 | UNGROUPABLE | 1.324 |
| 23 | 788 | CESAREAN SECTION WITHOUT STERILIZATION WITHOUT CC/MCC | 1.416 | 765 | CESAREAN SECTION WITH CC/MCC | 1.311 |
| 25 | 998 | PRINCIPAL DIAGNOSIS INVALID AS DISCHARGE DIAGNOSIS | 1.405 | 472 | CERVICAL SPINAL FUSION WITH CC | 1.291 |
| 25 | 784 | CESAREAN SECTION WITH STERILIZATION WITH CC | 1.398 | 455 | COMBINED ANTERIOR AND POSTERIOR SPINAL FUSION WITHOUT CC/MCC | 1.280 |
Data source: 2016–2020 Merative™ MarketScan® databases.
Counts for admissions and visits analyzed to produce these estimates and 95% confidence intervals reported in SDC1. DRG indicates Diagnostic Related Group; PFR Professional fee ratio.
DISCUSSION
In this study, we updated estimates of the amount by which facility-only financial data reported in hospital discharge data sources can underestimate the full cost of medical care patients receive during hospital admissions and ED visits by excluding professional fees. Financial information in this study’s analyzed data source facilitated diagnosis-specific PFR estimates, adjusted for multiple patient and service factors, and the PFR estimates reported here are designed to be directly applied to hospital discharge data sources for cost of illness analysis.
This study’s results suggest that professional fees comprised a declining proportion of hospital-based care costs over approximately the last 2 decades. These results are consistent with our previous PFR investigation of 2004–2012 data years,5 a subsequent similar analysis of 2007–2014 data years by other researchers using a different data source,9 and analyses of specific hospital-based services and diagnoses.10,11 Another report on aggregate health care expenditures using sources such as the National Health Expenditure Accounts has pointed to overall spending increases during the same period for both inpatient and professional services, but these topics were not investigated in the manner presented here; that is, this study examined professional fees specific to hospital-based care.12,13
This study had several limitations. Investigation into why PFRs changed over the study period is beyond the scope of this study. Different hospital prices for similar services, financial incentives to improve physician quality, and efforts to improve hospital price transparency and comparability for consumers and health care payers are the subject of direct investigation in other studies.14–16 MarketScan Commercial data are not nationally representative of the population with employer-sponsored insurance nor Medicare coverage and the MarketScan Medicaid sample included a limited number of states. U.S. Census region is a crude indicator of geographic differences in health care costs; we lacked consistent data to further control for geographic variation, such as urban/rural location. Although our previous 2004–2012 PFR estimates did not include Commercial patients age older than 65 years (ie, those with Medicare supplemental plans), a separate analysis for the present study restricted to age 0–64 patients was not materially different compared with the all-age estimates. This study controlled for observable patient and insurance characteristics, including health plan type, which addressed patients enrolled in managed care plans. However, this study could not control for provider characteristics, such as physician specialty, and hospital facility characteristics, such as ownership, organization, and geographic location, which influence health care costs.2,17–20 Hospitals’ costs vary widely by service type; for example, maternity services—a frequent cause for inpatient admission—are known outliers21; therefore, PFR estimates by clinical classification (comprehensively reported in Supplemental Digital Content 1, http://links.lww.com/MLR/C695) may be most relevant for some health services research questions.
This study estimated PFR per admission and ED visit based on payments that hospitals and physicians received for medical services, whereas hospital charges typically reported in hospital discharge data sources multiplied by CCR provide an estimate of hospitals’ costs to provide services. Both approaches yield recognized estimates of medical costs, but this means that PFR estimates are not precisely complementary to facility cost estimates from hospital discharge data. This issue might be mitigated given that CCR can be a reasonable proxy for price (or payments)-to-charge ratios, which are more directly analogous to the PFR estimates presented here. Despite what might be modest differences in the nature of financial data underlying our PFR estimates versus that underlying hospital discharge data, we propose that our approach offers a reasonable option for improving cost estimates from hospital discharge data by accounting for professional fees.
By comparing hospital-based professional versus facility fees over time, it seems that professional fees comprised a declining proportion of hospital-based care costs during approximately the past 2 decades. Still, adjustments for professional fees remain an important analytic step when hospital facility-only financial data are used to estimate health care costs. The PFR estimates generated in this study offer an opportunity to address the systematic and substantial underestimation of health care service costs using facility-only costs reported in hospital discharge data.
Supplementary Material
Footnotes
The authors declare no conflict of interest.
Supplemental Digital Content is available for this article. Direct URL citations are provided in the HTML and PDF versions of this article on the journal’s website, www.lww-medicalcare.com.
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