It's a step in the right direction, but new payment system falls short, leaders say

No, the sky isn't falling; at least that's the response of most ambulatory surgery center (ASC) leaders who have examined the first major overhaul of Medicare payments to surgery centers since the mid-1980s.

While praising the Centers for Medicare & Medicaid Services for changing its approach to ASC reimbursement, industry leaders say that the new Medicare payment system has fallen short in several areas.

First, the good news about the system, which is that orthopedic procedures will see significantly higher reimbursement rates than currently. Also, for those who will experience payment rate decreases, the changes will be phased in over four years. (See graphic.)

The bad news? Payment for gastrointestinal (GI) and pain cases is decreasing dramatically. "We're very pleased for softening the impact on GI and pain specialty surgery centers that the four-year transition will provide them," says Craig Jeffries, Esq., executive director of the American Association of Ambulatory Surgery Centers (AAASC). However, "the underlying payment rate is still simply too low a base to avoid an impact on beneficiary access to those essential diagnostic colonoscopy procedures."

Also, in a mix of good and bad news, CMS increased the percentage that ASCs will receive of the hospital outpatient department (HOPD) rate from the proposed 62% to 67%. However, this rule only sets the methodology, according to representatives of the Federated Ambulatory Surgery Association (FASA). The exact percentage can be determined only when final 2008 HOPD rates are set, according to FASA. Based upon the proposed 2008 HOPD rates, ASC rates would be 65% of HOPD rates, the association says. In comparison, ASCs were paid approximately 86.5% of the HOPD rate in 2003, according to FASA.

"The impact of the 65% conversion factor is still woefully below a rate necessary to sustain access for Medicare beneficiaries to the lower-cost, high-quality environment available in the ASC," Jeffries says.

Limiting rates for cases in doc offices

CMS finalized its proposal limiting ASC reimbursement for procedures added to the ASC list that are performed in physician offices more than 50% of the time to that paid to physicians for the office practice expense. (This limit does not apply to procedures already on the list as of Jan. 1, 2008.)

FASA president Kathy Bryant describes this part of the payment plan as "appalling." Physicians may decide an ASC is the most appropriate setting for a specific case because of the extra nursing and safeguards available there, when compared to a physician office, Bryant says. "For Medicare to say, 'It's fine; do it there, but we'll still pay you as if you were a doctor's office,' doesn't make a lot of sense to me." Bryant also points out that hospitals still will be paid the normal full rate for such procedures. "If it's safe to be done in an office, and you don't want to pay more than the office rate, why aren't you applying that to everybody?" she asks.

In other changes, the final rule adds 790 procedures to the ASC list for services provided on or after Jan. 1, 2008. The procedures include laparoscopic cholecystectomy, lithotripsy, fluoroscopy, and several spinal procedures.

Also, CMS changed its criteria for procedures on the ASC list by including all surgical procedures except those that are excluded for a specific reason. However, CMS is using a narrower approach than the one promoted by ASCs. The agency will exclude a procedure from the ASC list if the procedure:

  • poses a significant safety risk to the beneficiary;
  • would result in the beneficiary typically requiring active medical monitoring and care at midnight following the procedure;
  • is on the inpatient only list;
  • directly involves major blood vessels;
  • requires major or prolonged invasion of body cavities;
  • generally results in extensive blood loss;
  • is emergent in nature;
  • is life-threatening in nature;
  • commonly requires systemic thrombolytic therapy;
  • can only be reported using an unlisted surgical procedure code.

As a result of using these criteria, CMS is excluding many procedures that can safely be performed in an ASC, industry leaders maintain. In comments to CMS on the proposed rule, FASA supported reimbursing ASCs for all procedures that do not require an overnight stay or pose a significant safety risk.

"CMS' restrictions on procedures that can be done in the ASC unfortunately focus on safety rather than selection," Jeffries says. The experience of ASCs indicate that there is no safety issue as it relates to the procedures that can be done in the ASC, he says. "The issue is selection of patient cases, and here again the experience of ASCs has been outstanding," Jeffries says. "Unfortunately, CMS has not provided the physician and the beneficiary with the decision-making authority that they should have to be allowed to provide access to a broader range of procedures in the ASC."

The American Hospital Association also has expressed concerns about the final rule. Concerning the criteria for which procedures are performed in an ASC, "We're concerned they didn't adopt our recommendations for improved safety measures," says Roslyne Schulman, senior associate director for policy development at the American Hospital Association (AHA) in Washington, DC. "In fact, we believe they reduced the safety measures."

The AHA had recommended criteria that included expected blood loss and the need for an overnight stay. "Also, we are concerned that they didn't put quality reporting provisions into place," Schulman says.

Implants will be reimbursed

In other changes, the final rule provides for full payments for implants and other devices for Medicare beneficiaries. (For information on how annual updates will be handled, see story.)

In setting the final payment rule, CMS officials say they assumed that about 25% of the HOPD volume of new ASC surgical procedures would move from hospitals to ASCs during the first two years of the revised ASC payment system. They assumed that 15% of the volume of new ASC surgical procedures that now are provided in physicians' offices would move to ASCs during the first four years of the revised payment system.

However, FASA predicts that some procedures performed in ASCs will be forced back into the hospitals.

It's difficult to say what will happen, Schulman says. "There's no way to crystal ball this," she says. "We'll just have to wait and see."

While some services are going up dramatically, others are decreasing significantly, Schulman says. "It's a mixed bag," she says. "It's hard to say where physicians will be referring patients." However, Schulman expects to see physicians directing the least complex and the least ill patients to the ASC. "That will leave hospital OPDs with a far more complex patient population, with multiple comorbidities and sicker with an increased cost of providing services to them," she says.

For more information on ambulatory surgery center issues, contact:


  • Dana Burley, Centers for Medicare & Medicaid Services. Phone: (410) 786-0378.

The text of the ambulatory surgery center final revised payment system rule is available at

To access a payment calculator that includes the local wage index for surgery center rates, go to The formula doesn't apply to device-intensive procedures, which are cases that have high costs for implants.

The American Association of Ambulatory Surgery Centers (AAASC) has created a 2008 Medicare ASC payment system discussion group. Go to