Medicare fee reduction for ASCs
Doc group says new ASC rate would be ‘death blow’
By Jennifer Lubell
Modern Physician
August 20, 2007
Ambulatory surgery centers (ASCs) are trying to figure out how they’ll cope with a new Medicare payment system that threatens to drastically reduce their reimbursement rates.
The CMS last month issued a series of regulations to revise the payment system for ASCs, setting a new compensation rate of 65% of what hospital outpatient departments get paid under Medicare. While some centers may seek to benefit under the rule, others—particularly single-specialty ASCs, whose payments are expected to drop dramatically—will be left with some tough decisions on whether to keep their Medicare patient base or to close their doors altogether.
The new payment rate was included in the annual proposed rulemaking for the hospital outpatient prospective payment system, or OPPS, whose final rulemaking is usually issued in November and goes into effect the following calendar year.
The CMS’ procedures bring the total number of covered surgical procedures under the revised payment system to about 3,300. The agency stipulates that ASCs will get paid for any procedure that is determined by the CMS not to pose a safety risk to Medicare beneficiaries, and will not require an overnight stay.
“The system we are announcing today will promote the goals of quality and efficiency in care furnished to people with Medicare in ambulatory surgery centers,” said Leslie Norwalk, who resigned last month as the CMS’ acting administrator, in a written statement. The revised system will also take a “major step forward” toward eliminating financial incentives for choosing one care setting over another, she said.
(David Johnson, M.D., president of the American College of Gastroenterology) and others in the industry dispute that fact. If anything, the rule “will force Medicare patients to migrate back into the more expensive hospital outpatient setting, ultimately costing the federal government more,” he says.
Comment:
By Don McCanne, MD
Why should Medicare pay higher prices for procedures done in a hospital outpatient setting than it does for procedures done in an efficient, free-standing ambulatory surgery center (ASC)? This is our tax money. Shouldn’t we be receiving a better value?
It is important to understand that the extra payment to hospitals is not wasted. That extra buffer helps to fund charity care, money-losing services such as emergency centers, and other essential hospital services that may not be directly reimbursed. The hospital balance sheet does require the input from profit centers to balance the losses that are inevitable in other services. Hospitals cannot remain solvent if they allow profitable services to be outsourced while continuing to provide only services that result in losses. Thus the taxpayers are receiving value for the Medicare fees being paid to hospitals for ambulatory services.
What about the fees paid to ASCs? Although they are already lower than the fees paid to hospitals, they are much higher than their actual costs since the ASCs do not have to pay for all of the ancillary services and money-losing services that hospitals must provide. Also, since ASCs do not provide charity services, they don’t have to make up those losses with higher fees. CMS has determined, through the outpatient prospective payment system (OPPS), that profits are excessive, and that they can and should be reduced. Thus the lower fees will provide greater taxpayer value.
In a way, this is poetic justice. The ASCs were established primarily to dramatically enhance the fees paid to procedure-oriented physicians. By building and owning these centers, the physicians would receive not only their high, procedure-oriented professional fees, but they would also share in the generous profits of the free-standing ASCs. The profits were further enhanced by cream-skimming the profitable patients and dumping the others on the hospitals. (The fees for each paying patient that displaces a charity patient primarily go directly to the profit line, because fixed costs remain the same.) Though the prices of the procedures have been lower, the total costs to the taxpayer actually have been higher than they should have been because we still had to support the losses in our hospitals. It was only appropriate that the OPPS be used to improve taxpayer value in purchasing these services.
A previous Quote of the Day message on the book, “Medicare Prospective Payment and the Shaping of U.S. Health Care,” by Rick Mayes, Ph.D. and Robert A. Berenson, M.D., explained how Medicare is far more effective than the private insurance industry in setting fees that are based on legitimate costs and fair profits. The experience with ASCs provides us with yet one more example of why we should replace our fragmented, dysfunctional system of financing health care with a single public system that serves all of us well - the patients (affordable access), the providers (fair profits), and the taxpayers (value purchasing).