CPI-U and Secondary Rescaling CMS Policies that Impact ASC Payments BY KARA NEWBURY

Beginning January 1, 2008, the Centers for Medicare & Medicaid Services (CMS) began paying ASCs for the facil-

ity services they provide to Medicare beneficiaries using a system that is linked primarily to the Hospital Out- patient Department (HOPD) payment system, also known as the Hospital Outpatient Prospective Payment Sys- tem (OPPS). Covered services include nursing, recovery care, anesthetics, drugs and other supplies. The profes- sional fees for physician services and anesthesia were kept separate and are paid under the physician fee schedule. The rate-setting process CMS uses

to determine ASC payments is sophis- ticated, and many policies included in that process have been causing a grow- ing disparity in payments between ASCs and HOPDs over the past several years. ASCA has been and will continue advo- cating for changes in those policies to turn the tide and encourage more outpa- tient surgery procedures to migrate to the lower-cost, high-quality ASC setting.

CPI-U as ASC Update Factor The OPPS update is based on the Inpa- tient Hospital Market Basket (HMB), which comprises data that reflects the cost of items and services necessary to furnish an outpatient surgical proce- dure and has historically been higher than the Consumer Price Index for All Urban Consumers (CPI-U), the update factor used for ASCs. The CPI-U is not a suitable inflation index to update ASC payments because it does not accurately represent the costs borne by facilities to furnish surgical proce- dures. The CPI is an index that mea- sures the average change over time in the price of consumer goods, which are “goods and services that people buy for day-to-day living.” The CPI-U

Since the current ASC payment system was implemented, the rescaling adjustment has decreased the relative weights on ASC surgical procedures each year.”

—Kara Newbury, ASCA

represents the buying habits of the res- idents of the urban or metropolitan areas in the US, not the ever-increasing costs of operating a health care facility. While ASCs were being reim-

bursed at approximately 85 percent of the HOPD payment rate in 2003, in 2017, ASC rates for the highest vol- ume codes are reimbursed, on average, at less than 50 percent of HOPD pay- ment rates for the first time. The ASC payment system is one of the last CMS payment systems to be tied to the CPI-U, the others being the Ambulance Fee Schedule, Clinical Lab Fee Schedule (which will begin using market-based rates in 2018 pursuant to Section 216 of the Protecting Access to Medicare Act of 2014), and Durable Medical Equipment (much of which is now subject to competitive bidding and, therefore, not inflated using CPI or any other measure), Prosthetics, Orthot- ics and Supplies. All payment systems other

than 26 ASC FOCUS JUNE/JULY 2017 | those referenced above,

use indices derived from the basket of goods purchased by those providers. CMS acknowledges year after year in the OPPS/ASC payment rule that it is not statutorily required to adopt any particular update mechanism, so it continually goes to the default, since the CPI–U must be used in the absence of any update implemented by the Secretary of the US Depart- ment of Health and Human Services (HHS). New HHS Secretary Tom Price, MD, has experience working in the ASC setting, and ASCA will advocate strongly that he uses his stat- utory authority to make this change and adopt the same update factor for both the ASC and OPPS payments.

Secondary Rescaling CMS calculates the ASC payment weights using the national OPPS rel- ative weights—except for office-based payment rates which are determined by the physician’s fee schedule—and then uniformly scales the ASC rela- tive payment weights for each upcom- ing year to maintain budget neutrality. While the additional scaling factor that CMS applies to the ASC weights is intended to maintain budget neu- trality within the payment system, this scaling is instead contributing to increasingly larger payment differen- tials between ASC and HOPD pay- ments without evidence of growing differences in capital and operating costs in the two settings. In the final rule establishing the

ASC payment system used today (72 Fed. Reg. 42532, August 2, 2007), CMS suggested that the scaling of the relative weights is a design element that will protect ASCs from changes in the OPPS relative weights that could sig- nificantly decrease payments for cer- tain procedures. The trend in the OPPS relative weights, however, suggests that

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