Specialty Outpatient Facilities, NEC

SIC 8093

Companies in this industry

Industry report:

This grouping covers establishments primarily engaged in outpatient care of a specialized nature with permanent facilities and with medical staff to provide diagnosis, treatment, or both for patients who are ambulatory and do not require inpatient care. Offices and clinics of health practitioners are classified according to their primary health care activity.

Industry Snapshot

Facilities in this category are diverse and include outpatient centers offering alcohol or drug treatment, biofeedback, family planning, mental health services, rehabilitation centers, outpatient surgery, kidney dialysis, lithotripsy (therapy that reduces kidney stones to small pieces so they can be voided), and diagnostic imaging environments. Efforts to cut medical costs starting in the 1980s led to a move away from inpatient treatment that continued through the 1990s and became standard patient care by the first decade of the 2000s, resulting in a number of different outpatient services.

In the early 1990s, these outpatient and office locations were less regulated and utilized third-party reimbursement. Many were owned by physicians or physician groups and were not subject to the same oversight as inpatient procedures. This changed in the mid-1990s with the introduction of government legislation to reduce abuses by physicians referring patients to self-owned laboratory services. The Stark Amendment created a list of 11 designated services to which physician owners could not refer Medicare or Medicaid patients. A combination of the regulations of the amendment with pressure from managed care companies caused many physicians to sell their interests in facilities, resulting in many publicly owned companies entering this specialized marketplace and offering multiple services at a lower cost.

At the beginning of the 2010s, one research firm estimated that there were nearly 24,000 firms categorized as specialty outpatient facilities, not elsewhere classified, boasting more than $29.5 billion in revenues with a workforce of approximately 400,000. The largest sector within the industry included 6,694 rehabilitation centers offering outpatient treatment, representing 28 percent of the industry. Staffed by 102,308 medical professionals, these facilities reported $6.3 billion in annual revenues. Mental health outpatient clinics represented 6,402 facilities, for 27 percent of the market. Mental health care professionals totaled 125,871, generating approximately $6.4 billion annually.

Organization and Structure

Drug and Alcohol Treatment.
This industry was originally built on inpatient care. In a cost-cutting environment, reimbursement requests for substance abuse treatment were subjected to greater scrutiny by insurance companies. More co-payments were required, and lifetime caps were set on reimbursement. Outpatient care was less costly as well, and treatment methodologies changed as a result of all these factors. In the early twenty-first century, patients were typically treated for only a brief period in a hospital before moving to outpatient centers, where treatment typically lasted four weeks.

Increased regard for civil liberties also decreased compulsory inpatient treatment. In addition, community-based support groups became an integral part of drug and alcohol abuse treatment, enabling drug abuse patients to avoid hospitalization. Another factor discouraging the use of inpatient facilities for substance abuse was the increasing number of young people with alcohol abuse problems who were seeking treatment. These clients typically had fewer medical problems related to their addiction and were less in need of hospitalization to treat such related problems.

Psychiatric Outpatient Care.
Insurance companies and other third-party payers also started to take a harder look at claims for inpatient psychiatric care, prompting hospitals and other health care providers to set up less expensive outpatient facilities. At the end of the first decade 2000s, around two-thirds of psychiatric centers provided outpatient services. According to the National Association of Psychiatric Health Systems (NAPHS), in 2007 there were an average of 33,731 outpatient visits to NAPHS-member hospitals, clinics, and psychiatric units.

Family Planning Clinics.
The Title X Family Planning program (Public Law 91-572), enacted in 1970 as Title X of the Public Health Service Act, is the federal grant program that provides individuals with comprehensive family planning and related preventive health services. Title X funds are intended to provide individuals with access to contraceptive services, supplies, and information, By law, priority is given to individuals with low incomes. Title X is administered within the Office of Public Health and Science, Office of Population Affairs by the Office of Family Planning.

According to the Office of Public Health and Science, in fiscal year 2007, Title X funds totaled approximately $283 million for family planning activities. In fiscal year 2006, Title X funds were awarded to 88 grantees who provided family-planning services to approximately 5 million individuals through a network of more than 4,400 local organizations, which included state and local health departments, hospitals, university health centers, clinics, community health centers, and other public and private nonprofit agencies. There was at least one family planning clinic that received Title X funds in approximately 75 percent of all U.S. counties.

Free-standing family planning centers practice measures designed to assist pregnant women (and families) in making decisions regarding their condition. They also provide screening services to contraceptive clients, since the services are required for prescribing birth control pills. Almost all such establishments provide pelvic examinations, blood pressure tests, PAP smears, and breast examinations. These clinics have a unique history and are at the center of a controversial ethical debate. Abortions are one of the services provided by these clinics since the Supreme Court's Roe v. Wade decision t legalized abortion in the United States. Since that decision, debate has raged about the practice. Although these centers must often adjust to regulations depending on the prevailing attitudes in Washington, they may continue to perform abortions legally as long as Roe v. Wade stands.

Planned Parenthood Federation of America, formerly the Planned Parenthood Association, was one of the leading family-planning networks, and is credited with bringing organized family planning to the United States. It was founded in 1921 and had centers throughout the United States. Many Planned Parenthood affiliates also offered services such as colposcopy (examination of the vagina and cervix) and HIV testing.

Financial strains on family planning facilities increased in the first decade of the 2000s. There was less public funding, while at the same time, expenses were increasing. New contraceptive methods, such as the contraceptive implant, were expensive, and to meet these expenses many agencies had to raise fees. Clinics faced long-term economic insecurity because their funding depends on Congressional and presidential control in Washington, D.C.

Prospective Payment System.
In the 1980s, a movement away from retrospective payment for inpatient care began. When Medicare was initiated in 1965, it reimbursed hospitals and physicians based on bills submitted after treatment. In 1983, however, that type of payment for hospital inpatient treatment was replaced with the Prospective Payment System. For the first time, hospitals were rewarded for holding down costs, and hospital administrators knew before treatment how much a hospital would be reimbursed for illness at rates determined by geographic region, as well as by specific procedures and medical problems.

Under this system, each medical problem is classified by a specialized group of health professionals into a Diagnostic Related Group (DRG). If a hospital spends less than is allotted under prospective payment, it makes a profit, but if it spends more, the hospital must make up the difference. As a result, many believe that doctors admitted fewer patients and referred more to outpatient settings not subject to peer review or prospective payment. The incidence of outpatient treatment rose dramatically following introduction of the Prospective Payment System.

Nevertheless, there have been problems with treating the mentally ill as outpatients. During the 1980s, in an effort to cut costs, several states deinstitutionalized mental patients and made plans for them to continue their treatment as outpatients. New York hospitals, for instance, made elaborate plans for treatment of mentally ill patients after their release, but those plans were not implemented. According to a 1993 study of the New York State Commission on the Quality of Care for the Mentally Disabled, 40 percent of the discharged mental patients whose cases were reviewed ended up being rehospitalized within six months of their discharge because they were unable to make their way through the complicated government and health care bureaucracies they needed to help them. The released patients were rehospitalized at an average cost of $30,750. Nine of ten patients had abused drugs or alcohol and received no services for the mental illness or addiction.

Hospital Outpatient Treatment.
Anxious to preserve their traditional centrality in health care, hospitals established health care networks with a variety of outpatient services in addition to traditional inpatient care. The Berlin Memorial Hospital in central Wisconsin, for example, linked women's health clinics in three separate towns with anesthesiology centers, internal medicine centers, an extended-care facility, and a nursing home. Information systems in such cases are integrated for ease of handling by insurers and participating physicians. The effort of hospitals nationwide to assume a more important role for outpatient centers was part of the overall trend advancing outpatient care.

According to the Substance Abuse and Mental Health Services Administration, at the end of the first decade of the 2000s, based on the number of discharges reported, over half of drug and alcohol treatment (52 percent) was outpatient. Another 23 percent of discharges were from detoxification programs; 10 percent, short-term residential treatment; 8 percent, long-term residential treatment; 5 percent, medication-assisted detoxification or therapy; and less than 1 percent, hospital-based treatment. Of those discharges, 47 percent completed treatment, 25 percent dropped out, 13 percent were transferred to another facility, and 15 percent stopped treatment for other reasons, such as being incarcerated or being terminated by the facility. Outpatient medication-assisted treatment had the longest median length of stay at 180 days. Outpatient treatment median length of stay was 120 days, and intensive outpatient treatment tended to take approximately 70 days.

Psychiatric outpatient care continued to receive attention at the end of the first decade of the 2000s as inpatient care shifted to community-based services. About two-thirds of public funding for mental health was for inpatient care in the 1980s, but by the end of the first decade of the 2000s inpatient facilities were receiving just one-third of funding, with the remainder being funneled to outpatient, community-based care. In some cases, patients and community groups were forcing communities to improve services available in the community in accordance with the American Disabilities Act. However, a side effect of so many mentally ill patients being treated on an outpatient basis was an increased number of emergency room admittances for psychiatric disorders.

Current Conditions

Despite the trend for outpatient services, the NAPHS reported that inpatient admissions at member facilities increased almost 5 percent between 2008 and 2009, and the average hospital occupancy rate was up 2 percent in 2009 to 70 percent. There were smaller increases in the use of Title X family planning services during the early 2010s. According to Office of Family Planning annual report, in 2010 Title X-funded sites served more than 5.2 million people, an increase of less than 1 percent from 2009. However, the number of people served at these sites had increased 18 percent between 1999 and 2010. Total revenues for Title X facilities reached nearly $1.3 billion in 2010; 48 percent of revenues came from payment for services; 30 percent from state, local, and other grants; and 22 percent from federal grants.

As a Title X-funded program, Planned Parenthood operated 840 sites that received 22 million visits from clients in 2010. According to the organization's annual report, 38 percent of services were for sexually transmitted disease testing, 33.5 percent for contraception services, 14.5 percent for cancer screening, 10.5 percent for other women's health services, and 3 percent for abortions. Revenue was just over $1 billion, with 46 percent originating from government grants, 31 percent from nongovernment funds, 21 percent from private contributions, and 2 percent from other sources.

The National Survey of Substance Abuse Treatment Services reported 13,339 centers (58 percent nonprofit, 42 percent for-profit). Eighty percent of the facilities were outpatient-based centers. These facilities treated a total of 1.7 million clients in 2010, 90 percent of whom were treated as outpatients.


Accelerated growth was reported for employment for miscellaneous outpatient services from the 1980s through the 1990s. This growth proved to be immune to recessionary pressures, due in part to the large increase of middle-aged and elderly in the population. An aging population typically brings an increased incidence of disease and need for outpatient services. In 2010 with a record 40.3 million Americans over the age of 65 (13 percent), which was expected to increase through the 2010s.

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