Two numbers that don't fit together at first glance: Medicare pays $6.20 for a routine established patient visit (99211) in a facility setting, versus $14.03 for the identical visit in a physician's office. That's a 55.8% gap. And yet, providers kept moving more of their billing into facility settings over the following decade, even as that gap held steady or widened.

Understanding why requires looking at who actually captures the higher office-setting rate, and who benefits when a practice converts to hospital outpatient status.

The Payment Gap Is Real, Persistent, and Largest at the Low End

Across every E&M code, Medicare pays less per service in facility settings than in office settings. The gap ranges from modest to dramatic depending on code complexity.

For the highest-complexity new patient visit (99205), the facility-to-office differential was -$25.70 in 2013 and narrowed slightly to -$22.58 by 2023. For the most common established patient visit (99214), the gap compressed from -$18.98 to -$14.83 over the same period. These are real dollars per encounter, and at Medicare's volume, they add up fast.

The 99213 code, the workhorse of primary care, generated $4.58 billion in office-setting Medicare payments in 2013 alone, compared to $315.8 million in facility settings. That ratio reflects where most primary care still happens. But the payment differential for 99213 in 2023 was -$12.69 per service (-22.1%), meaning every facility-billed 99213 costs Medicare roughly $13 less than its office equivalent.

From a pure Medicare expenditure standpoint, facility billing looks like a discount. The complication is that facility billing also triggers a separate facility fee paid to the hospital, which doesn't appear in the physician payment data at all. The physician gets less; the hospital system gets more.

Nephrology's Shift Signals a Structural Change

Not every specialty is moving toward facility billing at the same pace. Nephrology stands out: its facility billing share rose from 24.99% in 2013 to 37.59% in 2023, a shift of 12.59 percentage points across 16.8 million total services in 2023. That's the largest migration of any specialty in the data.

Maxillofacial Surgery added 7.9 percentage points (from 7.63% to 15.53%), though its total volume is far smaller. Cardiac Surgery and Neurosurgery each moved 3 to 4 percentage points toward facility settings.

Nephrology's scale makes its shift consequential. At 16.8 million services in 2023, a 12.59-point migration toward facility billing represents millions of encounters that now generate lower physician payments but trigger additional hospital facility fees. For patients, facility billing often means higher cost-sharing, since hospital outpatient copays typically exceed office visit copays under Medicare.

The specialties moving toward facility settings tend to be those with high rates of hospital system acquisition. When a nephrology practice is purchased by a health system and its billing address changes to a hospital outpatient department, the Medicare payment structure changes immediately, without any change in the care delivered.

The 99211 Paradox

The 99211 finding deserves its own attention. This is the lowest-complexity established patient visit, often a nurse visit or a quick check-in. In 2013, facility settings paid $6.20 per service versus $14.03 in office settings, a 55.8% gap. By 2023, those figures were $7.22 and $16.45, and the gap had actually widened to 56.1%.

For the 99214 and 99205 codes, the payment differential compressed over the decade, suggesting some convergence in Medicare's fee schedule. For 99211, it went the other direction. The absolute dollar gap grew from $7.83 to $9.24 per service.

Providers billing 99211 in facility settings are accepting a payment that is less than half what they'd receive in an office setting, and that discount grew larger over ten years. The question the data raises but doesn't answer: if the financial penalty for facility billing 99211 widened, why didn't providers route those visits back to office settings?