MedPAC urges payment cuts for surgery centers

Impact could be devastating for some, FASA says

In a report to be submitted this month to Congress, the Medicare Payment Advisory Commission (MedPAC) will recommend that ambulatory surgery centers (ASCs) receive no inflation update for 2004 Medicare payments and that no surgical procedures be paid more in an ASC than a hospital outpatient department.

If the ASC reimbursement cuts are approved by Congress, the change would reduce payments for a few hundred of the 2,300 procedures that Medicare reimburses in ASCs.

Many of these procedures are high-volume procedures and are most likely to be performed in single-specialty ASCs, which could result in a devastating impact for those centers, according to Kathy Bryant, executive director of the Federated Ambulatory Surgery Association (FASA) in Alexandria, VA.

In making the recommendation, MedPAC staff said that because Wall Street is investing in the industry and contributing to its growth, Medicare payments must be more than adequate and can be cut. "This is ludicrous logic and certainly not based upon a considered judgment about Medicare reimbursement in ASCs," she says. "This appears to say if an industry can be successful, Medicare must be paying too much."

Bryant says FASA plans to fight the recommendations, and she says their chances of winning are excellent. However, other sources point out that Congress frequently approves MedPAC’s recommendations. Bryant says the recommendations should not be approved for the following additional reasons:

  • Congress established a system for reimbursing ASCs, and the Centers for Medicare & Medicaid Services (CMS) is "woefully behind" in implementing it, she says. For example, at press time, updates to the procedure list were years behind. "Rather than cutting a few procedures, the entire system should be looked at," she says. Time taken to implement this proposal will put CMS even further behind in implementing other priorities, including a new cost survey, Bryant says.
  • The payments under the hospital outpatient system are fluctuating widely and should not be the standard for reimbursing other providers, Bryant maintains. How many and which procedures are affected would vary every year, she says. "Adding to the complications is that the two systems do not have rates go into affect at the same time, so ASC payment rates might have to be adjusted twice per year," Bryant says. "Given the problems that already occur with carriers, this seems impossible."
  • If approved, the recommendations would make reimbursing ASCs "incredibly complicated" because in addition to the nine groups, there may be several additional rates due to a cap at the hospital level, she says.
  • Medicare clearly pays below appropriate reimbursement, she maintains. In addition, "discouraging ASCs from treating Medicare patients is bad policy and, in the long run, will cost Medicare far more than the few dollars we are talking about here," Bryant maintains.

While hospitals are paid more than ASCs for many procedures, American Hospital Association (AHA) officials claim there is disparity in payment rates for certain procedures from ASCs to hospital outpatient, says Ashley Thompson, MHA, senior associate director of policy development at the AHA.

"We want to make sure they aren’t incentives built in the system for patients to be seen in one setting over another," Thompson says. "We prefer that it be based on clinical considerations rather than financial considerations." Hospitals typically incur greater costs in treating outpatients, maintains Thompson, who points to requirements such as Emergency Medical Treatment and Labor Act regulations and the large percentage of Medicare and Medicaid patients.

However, AHA officials aren’t certain that lowering the ASC payments to match hospital outpatient rates is the right answer. "Overall, hospitals are only getting 83 cents on the dollar for the care they provide to seniors," she says. "That system is really underfunded."

In its March report, MedPAC will recommend that hospital outpatient departments receive Medicare payment updates in 2004 equal to the market-basket rate -0.9 percentage point.