Hoping for 70%+ of HOPD rate

The federal government can meet its budget neutrality requirements for the ambulatory surgery center (ASC) payment system and still pay ASCs 73% of the rate paid to hospital outpatient departments (HOPD), according to the Federated Ambulatory Surgery Association (FASA).

The proposed plan for the revised ASC payment system calls for paying ASCs 62% of the HOPD rate. In FASA's comments on the proposed rule, the association pointed out several ways that the proposal differs from the policies used to pay hospitals for outpatient surgery. For example, the Centers for Medicare & Medicaid Services (CMS) proposes that ASC and HOPD rates be increased to account for inflation using different update factors. ASCs payment updates would use the consumer price index. (CPI). FASA argues in its comments that this measure will not address the cost increases that ASCs face. "ASCs and hospitals face the same rising costs to provide services, such as nursing services and medical devices," FASA said in a prepared statement. "FASA believes the same policies should be used unless there is a compelling reason for a different policy."

FASA also recommends that the procedures covered in the ASC be expanded beyond those in the proposal.

"We hope that the FASA recommendations will be implemented; however, I understand the mandate to save money," says Mike Pankey, RN, MBA, administrator of the Ambulatory Surgery Center of Spartanburg (SC). "I hope the final regulation will cover direct costs with a small profit and that yearly updates occur."

Expect several changes in the final rule, scheduled to be published in spring 2007 and implemented Jan. 1, 2008, says Craig Jeffries, executive director of the American Association of Ambulatory Surgery Centers in Johnson City, TN. "I'm optimistic that CMS will provide a much better broader recognition of procedures performed in the HOPD environment that can and will be done in ASC environment," Jeffries says. For example, he hopes that laparoscopic cholecystectomy will be included as a covered procedure in the final rule.

Also, Jeffries expects that CMS will move closer to parity between the HOPD payment mechanism and the ASC payment mechanism on technical issues such as the basis for rate updates. CMS received 2,713 comments on the proposed rule.

Even as the date for a final payment rule creep closer, outpatient surgery leaders still support legislation that was previously introduced as the Ambulatory Surgical Center Medicare Payment Modernization Act and is expected to be reintroduced in the new Congress. That legislation would pay ASCs 75% of the hospital rate, apply the same policies as in hospital outpatient departments, and provide transition rules, according to FASA.

Caryl A. Serbin, RN, BSN, LHRM, president of Surgery Consultants of America in Fort Myers, FL, says "I know we had all hoped for 75% of [the Medicare hospital rate]. I don't think we're going to see that number." Serbin personally hopes for 72% of the hospital rate. "That would make me happy," Serbin says. Jeffries feels confident that CMS will decide upon an amount between 70% and 75% of the HOPD rate.

However, the proposed 62% reimbursement rate isn't necessarily bad news, says Eric Zimmerman, JD, MBA, partner with McDermott Will in Washington, DC. "Under the revised payment system, ASCs will in every instance be cheaper — and considerably cheaper — to the Medicare program than the hospital setting," Zimmerman points out. "While ASCs certainly would prefer higher payments, the payment relationship will make ASCs far more competitive and appealing both to policymakers and consumers."

The American Hospital Association (AHA) supports the lower payment for ASCs. "The reality is the sicker patients end up going to the hospital outpatient department, more comorbidity goes to the outpatient department, and most uninsured and Medicaid go to the hospital outpatient department," says Ellen Pryga, director of policy at the AHA in Washington, DC. "That needs to be reflected in whatever the payment mechanisms or formula is that's adopted."

While ASC managers wait on the final payment rule, what should managers be doing? Take time to understand the proposed changes and evaluate their impact on your revenues, Zimmerman suggests. "Then ASCs should take steps to adjust accordingly, whether that means adding or dropping specialties, adding or dropping service lines, moving some procedures into the ASC, and moving others out," he says. "Additionally, ASC owners should involve themselves in the regulatory and legislative process, and seek to impact these expected changes."

There's going to be winners and losers among different specialties, so single specialty centers need to be on alert, Serbin warns. "Multispecialty centers may lose money on one and gain on others, but if you are single specialty, and they just use a handful of codes, you essentially are more at risk."


The Hospital Outpatient Prospective Payment System Fact Sheet is available on the Centers for Medicare & Medicaid Services Medicare Learning Network (MLN) at www.cms.hhs.gov. This fact sheet provides general information about the hospital payment system and ambulatory payment classifications, and it explains how payment rates are set.