Providers work to delay implementation of APCs

Proposed rule needs to include latest data

Providers have begun the push to delay the implementation of the proposed surgical ambulatory payment classifications (APCs) for ambulatory surgery centers (ASCs) and hospital-based outpatient facilities.

The proposed rule would replace the current eight ASC payment groups with 105 groups, or APCs. The Health Care Financing Administration (HCFA) also wants to adopt APCs as its outpatient prospective payment system (PPS) for hospital-based outpatient surgery services.

HCFA postponed the deadline for comments on the proposed ASC rule, published in the Federal Register June 12, 1998, and the hospital notice, published in the Sept. 8 Federal Register, three times before finally closing the books on July 30.

"We still feel the proposed rule is fundamentally flawed and are strongly urging HCFA to withdraw it for the time being," says Lynn Shapiro, JD, an attorney with the Washington, DC, office of Epstein, Becker, & Green, which represents AmSurg, a single specialty surgical center company that owns 52 ASCs nationwide.

Kathy Bryant, JD, executive director of the Federated Ambulatory Surgery Association in Alexandria, VA, says, "We have met with HCFA officials and let them know we feel delaying the final rule until our concerns are adequately addressed is reasonable and in everyone’s best interest."

Money’s tight because of BBA requirements

HCFA’s resources already are stretched thin by a long list of official "to-do" items legislated by the Balanced Budget Act of 1997 — and the APCs are not part of this list. Providers are urging the agency to focus on the statutorily mandated projects it has to finish by legislatively specified dates. Then HCFA can come back to the APC update after it and industry groups have been able to meet and work out their differences, provider groups are suggesting.

"We feel this is an alternative that is workable. And we have communicated that idea to key people on Capitol Hill, as well as HCFA," notes Bryant.

The providers want HCFA to delay implementation of the new APCs while it forms an outside advisory committee to evaluate revising the proposed rule in light of the latest data from the agency’s 1999 ASC facility survey.

David Schweer, manager of business development at Washoe Health System in Reno, NV, says, "Personally, I’d be happy if that happened — surprised, but happy."

Basic complaints about the current proposed rule include:

-APCs won’t be budget neutral.

Most groups dispute HCFA’s original claim that its proposed APC rates are effectively budget neutral, saving less than 2% over the five years. HCFA now estimates the average hospital would lose 5.7% in Medicare outpatient reimbursement the first year, according to the June 30 Federal Register.

However, a study done by The Lewin Group, a Fairfax, VA-based health care economic consulting group, indicates the proposed payment rates would cut overall Medicare ASC outlays by closer to 10%, says Paul Rohlf, MD, president of the San Diego-based American Association of Ambulatory Surgical Centers (AAASC).

Hardest hit would be "single-specialty facilities specializing in ophthalmology, digestive gastrointestinal, and urology that would probably see reductions in their Medicare reimbursement ranging between 15% and 25%," predicts Rohlf.

In response to such concerns, Sen. Jim Jeffords (R-VT) and Rep. Mark Foley (R-FL) have introduced bills (S 1263 and HR 2241) that would limit reductions in reimbursement to 5% the first year, 10% the second year, and 15% the third year.

- It was based on flawed data.

"HCFA’s rate-setting methodology is fraught with problems and inconsistencies which clearly prohibit it from making an accurate impact analysis," argues Shapiro. Organizations including the American Gastroenterological Association in Bethesda, MD, complain that the 1994 ASC Cost Survey that HCFA based its proposed ASC rates on was flawed because significant segments of the ASC industry were excluded from the survey’s sample.

In turn, the sample does not constitute a truly representative sample of ASCs in operation — and the data it did collect do not reflect today’s cost of providing ASC facility services, the groups say.

- It wasn’t based on actual costs.

Providers also argue HCFA is required by law to use "actual costs" when setting payment rates for ASC codes. Yet HCFA’s own Federal Register notice stated it had to extrapolate a large number of fees because HCFA lacked sufficient cost data for 42% of all ambulatory surgical codes.

- Rates are biased toward less reimbursement.

AAASC leaders also think the new rates are biased toward lower payments. In fact, The Lewin Group, which was commissioned by AAASC to analyze the APC rates, found a 65% greater chance there would be a reduction in the proposed payment for codes in extrapolated APCs than for those HCFA had adequate actual data available. Meanwhile, there seemed to be a bias toward unusually high rate increases for low-volume procedures.

- There are problems with the hospital outpatient proposal.

The American Hospital Association (AHA) in Chicago also has numerous problems with the data used and the way rates are formulated, fearing they may provide an unfair incentive to perform procedures in ASC settings.

Schweer agrees. In comments submitted to HCFA, he said, "HCFA’s decision to loosen the criteria for determining which surgical procedures can be performed in an ASC, as well as the reduction in payments the revised rate-setting methodology will have on various high-volume procedures, will create an inappropriate incentive to shift some procedures from hospital outpatient departments to ASCs."

To help prevent that from happening, the AHA wants HCFA to reinstate its previous standard requiring covered surgical services be limited to those that do not generally need more than four hours of recovery or convalescent time.

The AHA also wants HCFA to delay implementation until the agency can ensure that all systems are in place for the change. "We believe that HCFA should not implement the outpatient PPS unless all systems — claims processing software and Medicare summary notices — are ready, tested, and installed by the intermediaries well in advance of the proposed start date," the AHA said in a letter to HCFA.

A spokesperson for HCFA, who asked to remain anonymous under agency policy, says, "At this time, I am not aware of any plans to delay implementation of the new proposed rates for ambulatory surgery centers. However, one reason we ask for outside comments is because a proposed rule is just that, a proposal. In turn, we are taking a look at all the comments."

Roslyne Schulman, senior associate director for policy development at the AHA’s Washington, DC, office, says, "Right now it looks like it will be summer 2000 before the PPS is in place."