PROPOSAL FOR A REVISED PAYMENT SYSTEM FOR SERVICES PROVIDED IN AMBULATORY SURGICAL CENTERS

PROPOSAL FOR A REVISED PAYMENT SYSTEM FOR SERVICES PROVIDED IN AMBULATORY SURGICAL CENTERS

Overview:

On August 8, 2006, the Centers for Medicare and Medicaid Services issued the Outpatient Prospective Payment System (OPPS) and Ambulatory Surgery Center (ASC) proposed rule.  The proposed rule is intended to encourage quality, efficient care in the most appropriate outpatient setting given the rapid spending growth for services and the large variations in the use of services and to take needed steps to more logically align   payment rates across payment systems to eliminate payment incentives favoring one care setting over another.  This Fact Sheet outlines the proposed creation of a revised payment methodology for services performed in ASCs.  If adopted, CMS would plan to implement the revised system in 2008.

Key ASC Policies in the Proposed Rule

Expanded List of ASC Procedures

CMS is proposing to expand access to procedures in the ASC setting over the next two years.   The proposed rule would add 14 procedures to the list of surgeries for which Medicare would make a facility payment to ASCs effective January 1, 2007. 

Beginning in 2008, with the implementation of the revised ASC payment system described below, CMS is proposing a more significant expansion of the approved list of procedures that can be safely performed in an ASC.  Under this proposal, all surgical procedures, other than those that pose a significant safety risk or generally require an overnight stay, would be included in the approved list.  Some of these revised ASC approved procedures may be commonly performed in a physician’s office, and CMS does not want to create inappropriate incentives for procedures to migrate from the most efficient setting for providing high quality care.  Therefore, CMS is also proposing that the payment to an ASC for procedures commonly performed in physicians’ offices would not exceed the physician office payment rate.

Revised ASC payment system beginning January 1, 2008

The Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (Medicare Modernization Act or MMA) requires CMS to revise the ASC payment system no later than January 1, 2008.  Consistent with the goals of quality, efficiency, and rational alignment of payment rates across payment systems, CMS is proposing to revise the ASC payment system using OPPS relative payment weights as a guide.  The revised ASC payment rates would be based on the ambulatory payment classifications (APCs) used to group procedures under the OPPS, but payments in the ASC setting would be lower than the payment for the corresponding procedure in the hospital outpatient department for the same procedure, recognizing the lower costs associated with performing procedures in the ASC setting.  For CY 2008, CMS currently estimates that the revised ASC rates would be 62 percent of the corresponding OPPS payment rates.  However, given the significant payment changes for some procedures under the revised payment system, CMS is proposing a two year transition from the current ASC payment rates to the new payment rates.

The expanded list of ASC services together with the improved payment accuracy under the revised payment system should encourage the selection of the most appropriate setting for the delivery of high quality, efficient care for patients undergoing surgical procedures.

Other Provisions in the Proposed 2007 ASC Rule

The proposed rule would also:

• implement a requirement of the Deficit Reduction Act of 2005 (DRA) that would cap the CY 2007 payment rate to an ASC for a surgical procedure at the OPPS rate for the same procedure. 

• propose changes to the application and approval process for establishing revised classes of new technology intraocular lenses (NTIOLs) furnished during or subsequent to cataract surgery performed at an ASC. 

CMS estimates that the revised payment system would be budget neutral in CY 2008, meaning it would neither increase nor decrease aggregate Medicare program expenditures for ASC facility services in CY 2008.

ASC payment rates under the revised system for the expanded list of approved surgical procedures would range from $3.68 to $16,146.03, reflecting 221 groups of surgical procedures under the revised system.  By greatly increasing the number of payment groups from the nine in the current fee schedule, the proposal markedly increases the similarity of resource use within each payment group.  In contrast, the current 9 payment rates are based on a 1986 survey of ASC costs and range from $333 to $1339.

A more detailed summary of the proposed changes to the ASC payment system is attached as Appendix A.

APPENDIX A

PROPOSED REVISED PAYMENT METHODOLOGY FOR ASCS IN 2008

• ASC payment groups would increase from the current 9 clinically disparate payment groups to the 221 Ambulatory Procedure Classification groups (APCs) used under the OPPS for these surgical services.  APCs are homogeneous both in terms of clinical characteristics and resource use.

• ASC payment rates under the revised system for the expanded list of approved surgical procedures would range from $3.68 to $16,146.03, compared with a range of $333 to $1339 under the current payment structure.

• Under both the OPPS system and the revised ASC system, payment weights are assigned to each procedure and then multiplied by a conversion factor in order to compute national payment amounts.  Payment weights represent the relative resource uses of procedures. Procedures with higher resource use have higher weights and procedures with lower resource use have lower weights.

• The ASC payment weight for a procedure under the revised ASC payment system would in general be set equal to the OPPS payment weight for the APC containing that procedure.

• The conversion factor for ASC services would be less than for OPPS services, because of the greater efficiencies typical of ASCs and the generally lower costs incurred by ASCs. (For example, unlike hospitals, ASCs do not have to satisfy EMTALA requirements, do not run emergency departments, and do not have to be open 24 hours a day, seven days a week.)  Due to the statutory ASC budget neutrality requirement, CMS estimates the CY 2008 ASC conversion factor would be 62 percent of the estimated CY 2008 OPPS conversion factor.  We currently estimate the CY 2008 ASC CF to be $39.688.

• For CY 2008 only, we propose to phase in the new ASC payment rates as a blended payment amount equal to 50 percent of the applicable CY 2007 payment rate plus 50 percent of the applicable CY 2008 payment rate.    Beginning in CY 2009, we would fully implement ASC payment rates calculated under the proposed methodology for the revised payment system.

• Beginning in CY 2008, payment for office-based surgical procedures would be limited to the lesser of the Medicare Physician Fee Schedule nonfacility practice expense payment or the otherwise applicable ASC rate.  Office-based procedures that are on the ASC list as of January 1, 2007 would be exempt from the payment limitation.

• CMS would continue to adjust national ASC payment amounts to reflect geographic wage differences using the IPPS wage index.

• Beneficiaries would continue to pay a 20 percent coinsurance on ASC facility services.

Annual Update Process for the Revised ASC Payment System

• The statute requires a zero percent ASC update through CY 2009.  Beginning in 2010, we propose that the ASC conversion factor be updated by the CPI.-U (consumer price index for urban consumers).

• We propose to adopt the revised OPPS weights each year.  However, in order to ensure that changes in OPPS weights do not cause increases or decreases in ASC revenues from year to year, we propose to scale the ASC weights so that changes in the OPPS weights do not result in an overall increase or decrease in ASC expenditures.  Without scaling, changes in the OPPS weights could cause an increase or decrease in ASC expenditures due to differences in the mix of services provided by hospital outpatient departments and ASCs.

Proposed CY 2007 Expansion of the ASC List

• The statute requires us to review and update the ASC list at least every two years.   The last revision of the ASC list was published in the Federal Register May 4, 2005, and was effective in July 2005. 

• This proposed rule would add 14 procedures to the list of surgeries for which Medicare would make a facility payment to ASCs effective January 1, 2007. 

• Proposed additions include transcatheter placement of intravascular stents and thoracic and lumbar percutaneous vertebroplasties.

Proposed CY 2008 Expansion of the ASC List

• With the expected improved payment accuracy of the revised ASC payment system, we are proposing to significantly expand the list of surgical procedures for which ASCs may receive a facility fee by excluding from payment only those procedures that pose a significant safety risk or require an overnight stay.

• We would continue to identify those procedures listed by the AMA within the surgical range of CPT as surgical procedures.  We also propose to include within the scope of surgical procedures such services that are described by HCPCS alphanumeric codes (Level II HCPCS codes) or CPT Category III codes that directly crosswalk to or clinically resemble procedures in the CPT surgical range.

• The proposed list expansion includes an additional 750 procedures, two-thirds of which are procedures that are currently performed predominantly (more than 50 percent of total volume) in physicians’ offices. 

Proposed CY 2007 Changes to the New Technology Intraocular Lens (NTIOL) Application and Approval Process

• This rule includes proposed changes to the application and approval process for establishing new classes of NTIOLs furnished during or subsequent to cataract surgery performed at an ASC. 

• Currently, there is one active NTIOL class approved for certain IOLs that reduce spherical aberration.

• CMS proposes to announce the applicants for NTIOL status, request comments, and announce its determinations through notice and comment in the Federal Register.   We propose to incorporate the solicitation and determination process for such requests into the OPPS/ASC annual update regulations.

• We propose to continue the current $50 add-on payment that approved NTIOLs would receive over a 5 year period beginning with the effective date of an active NTIOL class.