Healthcare’s Shift to Outpatient Care: Follow the Money

For decades, the hospital sat at the center of U.S. healthcare delivery. Increasingly, it is becoming the place reserved for the patients who actually need to be there.

Advances in clinical technology, payer pressure, value-based reimbursement and changing patient preferences are steadily moving procedures from inpatient hospitals toward hospital outpatient departments (HOPDs), ambulatory surgery centers (ASCs) and, increasingly, the home. Deloitte found that outpatient services represented just 28% of hospital revenue in 1994. By 2018, that figure had reached 48%, while outpatient revenue grew at a 9% CAGR between 2011 and 2018 versus 6% for inpatient care.

The shift matters because moving a procedure does more than change its address. It changes the economics around it. Lower-acuity settings typically carry lower infrastructure and operating costs, while payers and patients can face substantially lower reimbursement and cost sharing. For health systems, meanwhile, the migration threatens historically valuable hospital revenue while creating an entirely new outpatient investment imperative.

The Hospital Is Losing Its Monopoly on Surgery

Few procedures illustrate the transition better than total joint replacements.

In 2018, 78% of total joint replacement episodes analyzed by McKinsey occurred in inpatient settings. Just five years later, that share had collapsed to 9%. Outpatient settings went from 12% to 65%, while ambulatory settings increased from 10% to 26%.

That is a 69 percentage-point migration away from inpatient care in five years.

The transition has been enabled by advances in surgical techniques, anesthesia, patient selection and post-operative care. Importantly, the data suggest that the migration has not simply exchanged lower costs for worse outcomes: McKinsey found declining complication rates between 2018 and 2023 for joint replacements conducted in outpatient and ambulatory settings.

Este sería inmediatamente el segundo gráfico. El primero demuestra la tendencia macro durante décadas; este demuestra la velocidad que puede alcanzar cuando una procedure category se vuelve apta para outpatient.

The implications extend well beyond orthopedics. Deloitte's interviews with health-system executives identified orthopedic and some cardiac procedures among those increasingly moving outside inpatient facilities, while health systems themselves are investing in ASCs, urgent care, imaging, clinics and remote monitoring.

In other words, outpatient migration is increasingly moving from peripheral care into procedures that historically helped underpin hospital economics.

Follow the Money

The financial incentive becomes clearer when comparing what it costs to perform the same episode across settings.

Between 2018 and 2023, the overall medical cost of a total joint replacement episode declined 9%, from approximately $32,000 to $29,000. But underneath that decline was a striking divergence.

Inpatient episode costs increased 38%, from $33,000 to $46,000. Outpatient costs declined from $30,000 to $28,000, while ambulatory costs moved from approximately $25,000 to $24,000.

By 2023, that left an inpatient joint replacement roughly $18,000 more expensive than outpatient care and $22,000 more expensive than an ambulatory episode.

And joint replacements are not an isolated case.

Health Care Cost Institute analyzed 453 procedures eligible to be performed in ASCs and found that reimbursement for procedures conducted in HOPDs was approximately 1.8x higher on average than at ASCs under both employer-sponsored insurance and Medicare FFS.

Commercial reimbursement introduces another layer. For musculoskeletal ASC procedures in 2021, for example, median employer-sponsored insurance reimbursement was $1,984, compared with just $798 under Medicare FFS. Across nearly all categories analyzed, commercial insurers paid ASCs more than Medicare did.

The takeaway is counterintuitive: ASCs can simultaneously be cheaper for payers and attractive businesses for providers. They occupy an economic middle ground where reimbursement can remain attractive—particularly commercially—while avoiding much of the fixed-cost infrastructure associated with hospitals.

ASCs Are Becoming a Real Healthcare Asset Class

The capital is following the patients.

In 2024, approximately 6,400 ASCs treated 3.4 million Medicare FFS beneficiaries, generating around $7.5 billion in Medicare program spending and beneficiary cost sharing. The number of U.S. ASCs grew by more than 2% annually between 2019 and 2024, while ASC surgical procedures per FFS beneficiary increased 3.5% in 2024.

Even more striking is the ownership structure: more than 95% of ASCs are for-profit.

Medicare economics are moving quickly as well. Payments per FFS beneficiary for ASC services grew at an average 9.4% annually between 2019 and 2023, before increasing another 15.9% in 2024.

The opportunity, however, is not simply to build more surgery centers. It is to control the infrastructure capturing care as it leaves the hospital.

Health systems are responding by building or buying outpatient clinics and ASCs, entering JVs with physicians and investing in virtual and home-based capabilities. HCCI also notes growing private equity acquisition activity in ASCs, citing their lower fixed operating costs relative to hospital outpatient departments.

That creates an unusual competitive dynamic: hospitals are being forced to invest in businesses that can cannibalize their own hospital revenue.

The Next Migration

Despite the momentum, outpatient migration still has substantial runway.

HCCI found that most of the 453 ASC-eligible procedures it studied were still predominantly performed in hospital outpatient departments. Eye procedures—particularly cataract surgery—and musculoskeletal procedures were notable exceptions.

That gap represents both opportunity and caution. Not every procedure performed in an HOPD can safely migrate to an ASC; patient complexity and risk matter. But as technology expands what can safely be performed outside hospitals, today's exceptions can become tomorrow's template—as joint replacements have already demonstrated.

The economic potential is significant. HCCI estimated that if employer-sponsored insurance ASC procedures had been reimbursed at average Medicare ASC rates, commercial payers could have saved approximately $9.3 billion in one year, including $3.8 billion from musculoskeletal and $2.8 billion from gastrointestinal procedures. That scenario reflects reimbursement convergence rather than site migration alone, but it illustrates how large the price dispersion remains.

The Investment Case: Own the Migration, Not the Bed

The outpatient shift does not necessarily mean hospitals lose. It means the definition of a successful health system is changing.

McKinsey expects value-based care to shift healthcare profit pools away from acute-care facilities and toward ASCs, physician offices and home settings. Non-acute and outpatient sites are among the provider segments positioned to benefit from that transition.

For payers and risk-bearing providers, lower-cost sites offer an increasingly powerful lever to reduce total cost of care. For physicians, ASCs can provide greater operational control and potentially attractive ownership economics. For PE and strategic investors, fragmented outpatient infrastructure creates consolidation opportunities. And for hospital systems, owning the outpatient network increasingly becomes a defensive strategy: cannibalize your inpatient revenue before somebody else does.

There is also a second-order benefit. Moving lower-acuity surgeries away from hospitals frees expensive operating-room capacity for complex patients who genuinely require inpatient care, potentially allowing systems to grow high-acuity services without equivalent investment in new hospital capacity.

Bottom Line

Healthcare's shift toward outpatient care is no longer primarily a story about convenience. It is becoming a reallocation of healthcare's revenue and profit pools.

The economics explain the direction of travel: joint replacements can cost tens of thousands of dollars less outside inpatient settings; ASC reimbursement remains substantially below HOPDs; and thousands of ASC facilities are already capturing growing Medicare volume.

The investor question, therefore, is no longer whether care will continue moving out of the hospital. It is who owns the destination.

Sources & References

Deloitte. The future of health care spending: Outpatient, virtual health, and home health.
Deloitte Insights — Outpatient and Virtual Health Care Trends

Health Care Cost Institute. Procedure Prices at Ambulatory Surgical Centers Versus Hospital Outpatient Departments in ESI and Medicare FFS.
Health Care Cost Institute — ASC vs. HOPD Procedure Prices

UnitedHealth Group. Site of Service Research Brief.
UnitedHealth Group — Site of Service Research

Medicare Payment Advisory Commission (MedPAC). Report to the Congress: Medicare Payment Policy. March 2026.
MedPAC — March 2026 Report to Congress

McKinsey & Company. Reimagining sustainable healthcare and business models.
McKinsey — Reimagining Sustainable Healthcare and Business Models

McKinsey & Company. What to expect in US healthcare in 2024 and beyond.
McKinsey — What to Expect in US Healthcare