REGULATORY REVIEW


ASC Payment Rates Factors CMS considers when determining surgery center fees BY KARA NEWBURY


Chances are you already know that the Centers for Medicare and Medic- aid Services (CMS) ties ASC reimbursement rates


to its hospital outpatient department (HOPD) rates. Do you also know what goes into setting the HOPD rates, how ASC rates differ from HOPD rates and who advises CMS on how this pay- ment system should look?


Background


CMS introduced the system that it uses to set ASC payment rates today on Jan- uary 1, 2008, in accordance with the Medicare Prescription Drug, Improve- ment, and Modernization Act (MMA) of 2003. At that time, Medicare began paying for facility services provided in ASCs—such as nursing, recovery care, anesthetics, drugs and other supplies— using a system that is linked primarily to the HOPDs’ payment system, also known as the Hospital Outpatient Pro- spective Payment System (OPPS). The professional fees for physician ser- vices and anesthesia were kept sepa- rate and are paid under the physician fee schedule.


Setting the Payment Rates Medicare pays ASCs a predetermined rate for all covered procedures. Each summer, Medicare proposes ASC pay- ment rates for the coming year. It final- izes those rates in the fall. The rate-setting process is sophis-


ticated but, at a very basic level, starts with hospital cost reporting. Hospitals supply CMS with outpatient hospital cost data and both the OPPS and the ASC payment systems use this cost data as a starting point to set payment rates. CMS compiles the cost data and tries to take out anomalies to derive


plies are consistently higher than the increases in the prices of consumer goods. Due in large part to the use of the different update factors, today ASCs are reimbursed approximately 53 percent of what HOPDs receive for providing the same surgical services.


accurate average costs in the HOPD setting for the Healthcare Common Procedure Coding System (HCPCS) codes for which CMS reimburses. ASC payment rates are lower than those of HOPDs because CMS uses different update factors to anticipate annual cost changes. For HOPDs, CMS uses the hospital market basket to update payments. The hospital mar- ket basket is a measure of the cost of goods and services, such as medical supplies, equipment, personnel costs, and other overhead expenses required to run a health care facility. Unfortu- nately, CMS continues to update ASCs based on the Consumer Price Index for All Urban Consumers (CPI-U), a mea- sure that examines the changes in the price of a basket of goods and services, such as milk, bread and gasoline, pur- chased by consumers. The increases in costs of medical equipment and sup-


Impact of Local Wage Index CMS adjusts the national payment rate for ASCs according to the hospital wage index, a set of numbers that is updated annually to reflect varied labor costs in all regions of the country. This data is provided to CMS by the hospitals. The agency indicated again in the 2015 final ASC payment rule that it is appropri- ate to use the hospital wage index to account for geographic variations in labor costs for ASCs because the labor costs are similar in hospitals and ASCs and the inpatient hospital wage index is also used by other Medicare payment systems. Based on the results of a sur- vey conducted by the US Government Accountability Office, CMS deter- mined that labor accounts for approx- imately half of an ASC’s costs. That is why CMS adjusts 50 percent of the national ASC reimbursement rate (the labor portion) by the hospital wage index but does not adjust the remain- ing 50 percent (the non-labor portion). An ASC’s actual reimbursement rates can be much higher or lower than the national rate depending on the cost of labor in its community.


Multiple Procedure Discounting ASC payment rates for individual pro- cedures are adjusted downward when multiple procedures are performed during the same patient encounter. The ASC receives full payment for the pro- cedure with the highest payment rate and payments for the other procedures


ASC FOCUS APRIL 2016 21


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