ASC payments to be cut to hospitals’ level

Decision is one year earlier than expected

Beginning Jan. 1, 2007, ambulatory surgery center (ASC) payments that are higher than hospital outpatient department (HOPD) payments for the same procedures will be reduced to the hospital rate, based on the budget reconciliation bill awaiting final Congressional approval at press time. This change will affect 280 procedures and amounts to $300 million over five years, according to the American Hospital Association, which says it is quoting Congressional Budget Office figures.

Procedures that will have their reimbursement reduced include dilate esophagus (43450), biopsy of prostate (21393), and sigmoidoscopy and biopsy (45331), according to the American Association of Ambulatory Surgery Centers (AAASC). (See list of some of top procedures by volume and percent change. To see the entire list of procedures, go to No change in payment occurs for the 2,267 procedures paid more in the HOPD than in the ASC, according to the Federated Ambulatory Surgery Association (FASA).

Officials with the ambulatory surgery center associations, including FASA, were quick to voice their negative reactions. "FASA finds it distressing that Congress adopted an almost 3-year-old recommendation without revisiting the issue," says Kathy Bryant, executive vice president.

When the Medicare Payment Advisory Commission (MedPAC) first proposed this system in 2003, ASCs responded with an aggressive campaign designed to show that reducing these procedures only made sense if also addressing the extremely low rates for other procedures, Bryant says. In 2003, Congress was convinced and instead required the Centers for Medicare & Medicaid Services (CMS) to develop a new payment system that would address issues across all procedures, she says. "Then out of the blue, this provision was added to the reconciliation bill," Bryant says. "Even ASC supporters in Congress were not consulted in advance." 

The cap on ASC rates is notable for two reasons, says Craig Jeffries, Esq., AAASC executive director. "First, it underscores the vulnerability of the ASC industry to U.S. budget-driven changes in ASC payment," he explains. "And second, it reinforces that as an industry and as an organization, we have a great deal of work to do to improve our political strength that will help insulate us from arbitrary, last-minute actions by Congress."

AAASC already was aware that as of January 2008, CMS’ new payment system would not pay ASC higher rates than hospitals for the same procedures. Congress’ decision to make this change a year earlier is disappointing and will have at least a nominally adverse impact on most ASCs, AAAASC officials said in a release posted on the association’s web site.

The change is part of the Deficit Reduction Budget Reconciliation Conference Report. There will be no changes for the procedures paid more in the HOPD than in the ASC. HOPD payments are expected to change in 2007, so some of the ASC procedures may not be affected, according to FASA. The newly passed bill also freezes physician fees in 2006. Current law would have reduced payment by 4.4%.

Moratorium extended for surgical hospitals

In other news, House-Senate conferees rejected part of the report that would have banned physician-owned specialty hospitals, including surgical hospitals. Instead, the conferees agreed that CMS should extend the moratorium for up to eight months to allow the agency to evaluate issues involving specialty hospitals and take action to address those issues.

At press time, the specialty hospital language was expected to be final, says Molly Gutierrez, executive director of the American Surgical Hospital Association. "The language that has been drafted and that we’ve seen thus far is a small victory for existing specialty hospitals," Gutierrez says. "Obviously we’re discouraged/concerned about the continued moratorium, but we believe CMS will look at specialty hospitals as was addressed in the legislation and determine the industry is valuable as it is."

According to the American Surgical Hospital Association, CMS is to develop a strategic plan regarding specialty hospitals focusing on the following topics:

— proportionality of investment return (making sure that return on investment is not directly determined by the number of surgeries an investor brings to the facility);

— bona fide investment;

— annual disclosure of investment information;

— provision of Medicaid services;

— provision of charity care;

— a method of appropriately enforcing such strategic plan.

CMS is to issue an interim report to Congress in three months and must file a report describing its recommendations for a specialty hospital strategic plan within six months.

According to the American Surgical Hospital Association, this agreement is an expansion of an effort already initiated by CMS administrator Mark McClellan. The expectation is that CMS will implement any required action or seek additional legislative authority within the first six months of 2006, according to the association. "Therefore, our battle is not yet over! In fact, we are simply experiencing a half-time’ break," association officials said in a release posted on its web site.

A representative of the American Hospital Association (AHA) praised the bill. "It acknowledges Congress’ concern about physician-owned limited-service hospitals that are not known for providing uncompensated care for indigent populations," says Don May, vice president for policy for the AHA in Washington, DC. "They’re not known for being on the bus route, for being easy to get to for poor populations, and they put the entire health care system, in the communities that they’re in, in a precarious situation."

CMS is conducting an analysis of these facilities, May says. "Are some of these even so-called hospitals? Or are they ASCs with two beds and one inpatient a week?" he asks.

Gutierrez notes that surgical hospitals are well established and "going strong" as actual hospitals with many inpatient procedures. "They do inpatient procedures and follow hospitals’ licensure requirements," she says.