Professional Fees for U.S. Hospital Care, 2016-2020

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.

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.