than $1 billion in annual savings. By 2028, five specialties—eye and ocular adnexa, cardiovascular, nervous sys- tem, digestive system and musculo- skeletal surgery—are each projected to save Medicare more than $1 billion per year. Total knee arthroplasty (TKA) was not considered in the past or future savings estimates since it was just made eligible for ASC reimburse- ment in 2020. Total joint procedures, however, are among the most dis- cussed complex procedures that might migrate toward outpatient sites of ser- vice in the coming years. To examine this, KNG generated a savings projec- tion modeled on the volume patterns observed in partial knee arthroplasty (PKA) between 2012 and 2018. The projection carefully considered sce- narios in which total knee procedures move to outpatient sites of service more slowly than PKA and assumed a low ASC share of outpatient total knee procedures (13 percent in 2020, grow- ing to roughly 18 percent in 2028). Despite these conservative assump- tions, KNG concludes that total knee replacements

performed Discussion

The findings of this analysis make it clear that ASCs provide consid- erable savings to the Medicare pro- gram, even as the types of pro- cedures performed in ASCs have remained relatively stagnant over the past decade. Absent any major policy changes, ASCs are already expected to provide more than $10 billion in annual savings to Medicare by 2027. Policymakers can further offset the expected growth in Part B payments to hospitals by prioritizing payment pol- icies that encourage the migration of procedures to the lower-cost ASC set- ting. The growing disparity between reimbursement rates for HOPDs and ASCs, however, creates a financial


could save Medicare as much as $2.95 billion in the period 2020 to 2028.

have access to the quality care that ASCs offer.” One example of a payment pol-

icy that would encourage migration of procedures to the ASC setting is the factor used to update payments for inflation every year. Until 2019, ASC payments were updated using the Consumer Price Index for All Urban

Consumers (CPI-U), even

disincentive to perform cases in the lower-cost setting at the expense of patients, taxpayers and the Medicare program. Whereas ASCs were once paid approximately 85 percent of the HOPD rate, they are currently paid on average one-half of what hospitals are paid for the same procedures. “This study provides data that Medicare officials and everyone committed to reducing the cost of healthcare need to consider,” says ASCA Chief Executive Officer Bill Prentice. “With a few policy changes to encourage the migration of more procedures into the ASC setting, Medicare savings could accelerate, and more Medicare patients would


Visit ASCA’s website every week to stay up to date on the latest government affairs news affecting the ASC industry. Every week, ASCA’s Government Affairs Update newsletter is posted online for ASCA members to read. The weekly newsletter tracks and analyzes the latest legislative and regulatory developments concerning ASCs. GovtAffairsUpdate

though CPI-U considers very few healthcare goods in its inflation cal- culation. Annual payments for hos- pitals are updated using the hospi- tal market basket (HMB), an index that incorporates goods and services directly tied to the performance of outpatient surgeries such as medi- cal instruments and hospital wages. In 2018, CMS instituted a five-year trial period—2019 to 2023—dur- ing which ASC payments will be updated using the HMB rather than CPI-U, but there is no guarantee that the change will be permanent. In fact, the KNG future savings projection assumes that ASC payments move back to annual inflation updates based on the CPI-U after 2023. Any policy that further widens the dis- parity between ASC and HOPD payments will cause the Medicare program to incur costs by disincen- tivizing procedures to migrate to the lower-cost setting. CMS should permanently update ASC payments using the HMB to ensure that ASC reimbursements do not continue to fall relative to HOPDs.

More information about the study, the methodology used to conduct the analysis and the analysts’ findings is available in the full report Reducing Medicare Costs by Migrating Volume from Hospital Outpatient Departments to Ambulatory Surgery Centers avail- able at reducing-medicare-costs.

Alex Taira is ASCA’s regulatory policy and research manager. Write him at

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