Office visits look like a fixed cost. A 30-minute appointment with an established patient, billed under 99214, seems like it should cost the same regardless of who owns the building. It doesn't.

Medicare pays $82.03 for that visit when it happens in a physician's office. The same visit, same code, same duration, billed from a facility setting: $67.20. That's $14.83 less per visit in facility settings — which sounds like good news until you understand what's actually happening.

The gap runs in the wrong direction. Facility settings, which include hospital outpatient departments, cost Medicare less per claim for office visits. But the story isn't about individual claims. It's about what happens when hospitals buy physician practices and reclassify the billing location, and how that shift interacts with the broader payment structure across millions of visits.

The Payment Gap Is Consistent Across Every Visit Type

The $14.83 gap for 99214 isn't an anomaly. Across every standard office visit code, facility payments run lower than office payments by a consistent margin.

The physician fee schedule pays less in facility settings because Medicare assumes the facility is separately billing for overhead. The physician gets a reduced professional fee; the hospital collects a facility fee on top. The combined payment to the hospital system is higher than what an independent physician would receive for the same visit. That's the mechanism that makes hospital acquisition of physician practices financially attractive, and it's invisible in any single-claim view of the data.

For patients, this translates directly to higher cost-sharing. Medicare beneficiaries typically pay 20% of the allowed amount, and facility fees are calculated on a different, often higher base. A patient who sees the same doctor in the same exam room, before and after a hospital acquisition, can face a larger bill without any change in the care they receive.

91 Million Visits, and the Math Gets Serious Fast

In 2023, Medicare processed 91.5 million 99214 services billed from office settings, at an average of $82.03 each. Facility settings accounted for roughly 7.8 million of the same code. The office setting dominates, which is why the aggregate numbers look manageable. But the scale of office-setting volume means even a small shift in billing location has outsized consequences.

If just 1% of those 91.5 million office-billed 99214 visits were reclassified to facility billing, the physician professional fee would drop by $14.83 per visit. The facility fee, billed separately by the hospital, would more than offset that reduction. The net effect on Medicare spending would be an increase, not a decrease, even though the per-claim physician payment looks lower.

The trend data reinforces this concern. Between 2013 and 2022, the facility share of common office visit services actually fell, from 9.64% to 7.82%. But the average facility payment per service rose from $43.46 to $64.76 over the same period, a 49% increase. Office-setting payments rose too, from $56.99 to $72.35. The payment gap between settings has widened even as the facility share contracted.

Where the Differential Becomes Extreme

Office visits are one piece of the picture. For surgical procedures, the facility-to-office payment differential reaches a different order of magnitude entirely.

Cataract removal (HCPCS 66984) in ophthalmology shows a facility average payment of $475.94 versus $206.33 in office settings, a gap of $269.61 and a facility-to-office ratio of 2.31. That means Medicare pays more than twice as much for the same cataract procedure when it's performed in a facility setting. With 14.9 million facility-billed cataract removals in the data, the aggregate spending difference is not marginal.

The cataract example illustrates why the site-of-care payment differential matters beyond office visits. The same structural incentive that makes hospital ownership of physician practices financially rational for health systems applies across a wide range of procedures. Medicare's payment rules, designed to account for facility overhead, effectively subsidize consolidation.

The facility share of common office visit services declined from 9.64% in 2013 to 7.82% in 2022, even as average facility payments rose 49% over the same period. What drove that combination — fewer facility-billed visits but higher payments per visit — is a question the trend data alone can't answer, and it's the right question to be asking.