A recent analysis of Medicare payment data reveals ambulatory surgery centers (ASCs) reduced Medicare costs by $28.7 billion from 2011 to 2018.1

The estimated savings occurred because ASCs performed procedures that otherwise would have been handled in hospital outpatient departments (HOPDs) — and at a higher cost. KNG Health Consulting, which conducted the analysis in conjunction with the Ambulatory Surgery Center Association (ASCA), estimates ASCs could reduce program costs by another $73.4 billion from 2019 to 2028.

ASCA CEO William Prentice, JD, spoke with Same-Day Surgery (SDS) in greater detail about the report. The transcript has been lightly edited for length and clarity:

SDS: How did KNG arrive at the $28.7 billion figure?

Prentice: The analysts looked at real claims paid by Medicare to ASCs and HOPDs from 2011 to 2018. From these claims, they were able to determine an average payment amount for every procedure code for each year.

They considered the difference between the HOPD average payment and the ASC average payment to be a procedure-specific amount that the program saved whenever that procedure was performed in an ASC rather than an HOPD during the year.

They then multiplied the ASC volume for each procedure in a given year by its savings amount to get total savings for each procedure for the year. For example, if a cataract removal was, on average, paid $100 in a hospital and $50 in an ASC, then each time a cataract removal was performed in an ASC, Medicare would save $50. If ASCs performed 100 cataract removals in a year, the program savings would be $5,000 that year. (Editor’s Note: These numbers are just examples, and do not reflect actual costs.)

After doing that calculation for every procedure paid by Medicare and adding all the savings in each year, the analysts reported total savings for years 2011 through 2018 of $28.7 billion.

SDS: How is the projection of another $73.8 billion in savings, between 2019 and 2028, determined?

Prentice: Since that number is a future projection, the analysts could not rely on real claims or volume data. Instead, they looked at each procedure, how much the procedure volume grew or decreased from 2011 to 2018, and applied that trend forward for the next 10 years.

They used 2018 payment amounts as a baseline, and updated payments for each year using amounts CMS is expected to use. Then, the savings were calculated in essentially the same way as [the 2011 to 2018 figure]: The difference in HOPD payments and ASC payments was multiplied by the projected ASC volume for every procedure in every year. All those savings were combined to determine total savings.

Notably, the analysts also accounted for changes in the Medicare population based on census data and the Medicare Trustees report.

SDS: What kind of shift in total knee arthroplasties (TKA) from the HOPD to the ASC setting is expected between now and 2028?

Prentice: Since 2020 is the first year ASCs could perform TKAs for Medicare beneficiaries, we have no data yet on ASC volume and likely won’t for a couple years. Therefore, this shift was somewhat difficult to project.

For guidance, the analysts consulted subject matter experts that included orthopedic surgeons, payment specialists, and third-party administrators. Ultimately, they decided to model the shift in TKA on the shift that occurred in partial knee arthroplasty (PKA), and make conservative assumptions to protect against overestimating savings.

TKA has been payable in HOPDs since 2018, so there are baseline data for that year. PKA saw 30% annual growth rate in the outpatient setting overall. The analysts considered a scenario that depicts that continued growth rate, but also considered scenarios with much lower growth rates.

Using PKA as a guide, the analysts projected ASCs would do roughly 13% of outpatient TKAs in 2020, growing to roughly 18% in 2028. That means that even in the most ambitious projections of TKA migration to the outpatient setting in the next 10 years, we don’t expect ASCs to perform even one in five of those outpatient cases by 2028.

SDS: The report indicates cataract surgeries and colonoscopies contributed to most of the savings between 2011 and 2018. How much are each of those procedures’ share of the savings?

Prentice: A cataract code (66984) accounted for 27.1% of savings between 2011 and 2018. The colonoscopy code (45380) accounted for 5.2% of the total savings. Total savings across all procedures from 2011 to 2018 were $28,684,154,658. Total 66984 savings from 2011 to 2018 were $7,783,966,656. Total 43580 savings from 2011 to 2018 were $1,486,231,872.

SDS: Why do you predict that five specialty areas (eye, cardiovascular, nervous system, digestive system, and musculoskeletal surgery) will save more Medicare money by 2028?

Prentice: The savings numbers predicted in this analysis are based solely on growth rates seen in volume from 2011 to 2018. Other than the standalone TKA analysis, the total savings numbers don’t take any new policies that could be adopted into account and even ignore recent policy changes that allow cardiac catheterization procedures to be performed in ASCs.

CMS has shown a willingness in recent years to expand the types of procedures that ASCs can perform, as increasingly complex procedures are shown to be clinically safe with the right patient selection protocols. Medicare’s proposed payment rule released in August this year contains a proposal that would change the ASC exclusionary criteria ... ASCA supported this proposal, but we do not know yet if it will be finalized.2

To be clear, the numbers in this analysis do not incorporate these policy considerations. Therefore, if anything, specialties like nervous system, cardiovascular, and musculoskeletal surgery are likely to deliver even more savings than we project.

SDS: Based on this analysis, how should ASCs and HOPDs prepare for the future?

Prentice: ASCs are so widely varied in size and specialty that it’s impossible to make universal recommendations. Having clinically sound patient selection protocols that help appropriate patients have the procedures they need in ASCs is the best path forward for every center.

For those centers interested in performing some of the more complex surgical procedures that have and will become payable in the ASC setting for Medicare beneficiaries, putting together facility-specific policies and procedures will take dedicated time and effort. ASCs remain a small component of Medicare’s outpatient spend, and HOPDs are still expected to see increases in patient volume.

REFERENCES

  1. Ambulatory Surgery Center Association. Reducing Medicare Costs by Migrating Volume from Hospital Outpatient Departments. October 2020.
  2. Ambulatory Surgery Center Association. 2021 proposed Medicare payment rule released. Aug. 4, 2020.