Potential Project Description for 2013-14


Title: To what degree are outpatient clinics cream-skimming hospital’s most profitable patients?
Domain Expert: Ashely Hodgson (Economics)

Hospitals have complained that outpatient clinics are cream-skimming their most profitable patients. Outpatient clinics, generally owned by doctors, are places where doctors preform the most common procedures on low-risk patients. Hospitals claim that this kind of cream skimming puts them at risk for solvency, since they generally need to cross-subsidize the expensive, complex cases with the healthy, low-risk cases. So hospitals fear the recent rapid rise of the outpatient clinic industry. One the other hand, growth in the outpatient clinic industry represents a move toward a more efficient system. By taking up the high-volume procedures only, the doctors can hone their skills at those procedures and can both improve outcomes and reduce costs through the specialization process. Insurers have to answer the question: Do we reimburse outpatient clinics and hospitals differently for the same procedure? If they set the reimbursement for clinics too low, it could slow the growth of the outpatient clinic industry. If they set it too high, the hospitals could suffer financially and potentially close down.

Using data from both hospitals and outpatient clinics in California from 2005 to the present, I would like to come up with a measure of the degree to which cream skimming has occurred and the degree to which hospitals have suffered as a result. If we are able to collect data on the different reimbursement schemes by Medicare, Medical and (some estimate of) private insurers, we might also be able to measure the impact of reimbursement schemes on growth in the outpatient clinic industry.