Site of Service Savings Opportunities

By Will Fox

7 August 2014

Most people working in healthcare know that the cost for the same service can vary significantly by setting (e.g. office based vs hospital) and by provider within a setting. The example below illustrates this for a simple surgery with the price doubling in the Ambulatory Surgery Center (ASC) setting and being almost 5 times as much in the hospital setting.

080714 Site of Service

The RVUs are higher if the surgery is performed in a facility setting and the unit price is higher in the hospital vs the ASC, these all impact the total cost at the bottom. This illustration uses the average commercial cost in each setting. If you selectively choose the providers to shift from and to, the savings could be much greater. There are savings opportunities due to shifting from the inpatient setting too. A few leading providers are now doing hip replacements in the outpatient setting!

Milliman research shows that approximately 15% of commercial costs can be eliminated by site of service shifting (assuming no utilization reductions). For Medicare plans the opportunity is only about 5% due to more synchronized fee schedules (e.g. Lab is paid the same in hospital outpatient setting as in office setting), however, that 5% is still around $45 PMPM so the opportunity is significant.

A brief list of the services that we have evaluated the site of service savings opportunities for include:

  • Outpatient Surgeries moving to ASC or Office
  • Drugs (office and outpatient based, not prescriptions)
  • Lab, Imaging, other outpatient services moving to office/free-standing settings
  • Emergency Room (transition to Urgent care)
  • Maternity (use of birthing centers and home births)
  • Inpatient moving to Observation


To learn more about cost savings opportunities for ACOs and payers, join us at our next MedInsight webinar:


Evaluating ACO Performance and Identifying Savings Opportunities

August 19, 2014, 2:00-3:00 PM ET

Accountable care organizations (ACOs) are popping up everywhere and much work is being done to improve outcomes and reduce costs. This informational webinar will focus on sharing actual reports on how to compare ACOs (with drill downs into medical groups, clinics, and PCPs) as well as how to identify and quantify savings opportunities. The session will be helpful to many, including ACOs and payers that are creating analytics to measure performance of medical groups.

Presenter: Will Fox, FSA, MAAA, Milliman Principal & Consulting Actuary

Contact us to learn more about healthcare data analytics