For cardiac catheterization labs, revenue growth has been affected by several factors, including declining payment rates, the shift toward outpatient care and rise of government payers.
Overall, from FY17 to FY18, the median growth rate for outpatient visits increased from 2.3% to 2.4%, while over the same period, inpatient admissions remained flat at 1.2%, reflecting both an increasing tendency among patients to opt for less costly outpatient care and the work of insurers to keep their costs down.
Declining hospital margins are an important contributor to reduced revenue growth for hospitals. These margins are also driven by recent policy changes, such as after the individual mandate of the Affordable Care Act (ACA) was repealed. The ACA had resulted in a declining rate of self-pay and uninsured patients. However, these declines in the rate of self-pay and uninsured patients are now reversing. As the number of uninsured increases, employers continue to move to high- deductible health plans, hospital revenues are increasingly pressured by rising bad debt and lack of cost control.
Medicare margins are also declining. In 2017, the aggregate Medicare margin was a negative 9.9%, according to the Medicare Payment Advisory Commission (MedPAC). And MedPAC projects margins will further decline to a negative 11% in 2019.
Although Medicare has never completely covered the cost of care, the chasm between hospital costs and Medicare payment has continued to widen in recent years. The American Hospital Association has noted that, in 2015, hospitals received 88 cents for every dollar spent caring for Medicare beneficiaries, compared with 90 cents for Medicaid patients. Altogether, underpayments from Medicare and Medicaid were $57.8 billion in 2015.
Attempts to move Medicare from a fee-for-service system to a value-based model pose perhaps the most serious challenge to hospitals and health systems struggling with low Medicare margins. In 2016, a study by McKesson Corporation found that only 26% of hospitals were meeting goals to lower healthcare costs under the new payment models, and only 30% were meeting care-coordination goals. Layoffs and reductions in services have been common coping mechanisms to mitigate the income drop.
There is no better example of the effect of the shift from inpatient to outpatient payment than the cath lab environment, and percutaneous coronary intervention (PCI) in particular. PCI was once primarily conducted, and paid for, as an inpatient procedure, until the Recovery Audit Contractor program began scrutinizing the clinical justification for paying for PCI on an inpatient versus an outpatient procedure basis. CMS created and implemented the “Two-Midnight” rule to pay an inpatient fee only for PCI patients who, through medical necessity, warrant and spend at least two nights in the hospital. This policy has driven the economic shift toward outpatient payment for the procedure, thereby creating the need for acute care hospitals to reduce care variation and providing a strong incentive to consider same-day discharge to decrease their costs.
 Advisory Board, “Hospital finances are finally starting to stabilize, Moody’s finds,” Daily Briefing, April 30, 2019.
 MedPAC, Report to the Congress: Medicare Payment Policy, March 2019.
 Dickson, V., “Slumping Medicare margins put hospitals on precarious cliff,” Modern Healthcare, Nov. 25, 2017.
 McKesson, Journey to value: The state of value-based reimbursement 2016, 2016.