Payment Disparities Persist, but ASCs Gain Some Ground under Medicare’s Proposed 2015 Payment Rule

By Kara Newbury, Assistant Director, Health Policy, Ambulatory Surgery Center Association

The Centers for Medicare and Medicaid Services (CMS) released the Calendar Year (CY) 2015 Hospital Outpatient Prospective Payment System (OPPS) and Ambulatory Surgical Center (ASC) Payment System Policy Changes and Payment Rates on July 3, 2014. The 2015 ASC payment proposal accommodates some important requests made by ASCA and the ASC community, but the disparity in payments between hospital outpatient departments (HOPDs) and ASCs continues to grow under the proposal. There are also some proposals that fall under the OPPS portion of the rule that could eventually impact ASCs.

CPI-U vs Hospital Market Basket

CMS is proposing an effective payment update of 1.2% for ASCs and an effective payment update of 2.1% for HOPDs. The disparity is due in large part to the different update factors used for each site of service. Facility fees for HOPDs are updated annually based on the hospital market basket, which measures the inflation of medical costs such as equipment, supplies and staffing. ASC facility fees, on the other hand, are updated based on the Consumer Price Index for all Urban Consumers (CPI-U), which measures the cost of consumer goods such as bread, milk and gasoline, is unrelated to changes in medical costs, and is historically lower than the hospital market basket.

The result is that under the proposal, the rates paid to ASCs and HOPDs will continue the troubling trend of diverging in 2015. While Medicare paid hospitals only 16% more, on average, than it paid ASCs in 2003, today HOPDs receive 81% more than ASCs for the same services. If this proposal is finalized, in 2015, HOPDs would be paid 85 percent more than ASCs for the same procedures. There is no health or fiscal policy in place to justify this increasing inequity, and ASCA fears this increasing gap may discourage ASCs from participating in the Medicare program.

Procedure List

On the positive side, CMS proposes to add 10 new spine procedures to the ASC list of payable procedures for 2015, determining that these procedures are safe and effective when performed in the ASC setting after a presentation given by a spine surgeon and ASC administrator earlier this year. These codes are:

ASCA appreciates CMS’ willingness to recognize that these spine procedures have been done safely and effectively in the ASC setting for years, and that Medicare patients should also be allowed to have these procedures performed at our high quality, lower-cost setting. The large disparity in payments between HOPDs and ASCs, however, may make it economically unfeasible for ASCs to expand the number of Medicare beneficiaries who have access to these procedures in ASCs. In addition, under the proposed rule there are still 349 codes that are not payable in the ASC setting but are payable when performed in HOPDs. Particularly for those codes being performed in high volumes in HOPDs, indicating they are safe to be performed on the Medicare population in outpatient settings, ASCA will advocate movement to the ASC payable list.

Device-Intensive Policy Change

CMS also makes a positive change to its device-intensive policy in the proposed rule, proposing to define ASC device-intensive procedures as those procedures that are assigned to any Ambulatory Payment Classification (APC) (not only an APC formerly designated device-dependent) with a device offset percentage greater than 40 percent based on the standard OPPS APC rate setting methodology. The previous threshold was 50 percent, and ASCA has advocated strongly for a lower threshold.

There are more than 150 codes for procedures currently considered device intensive that are performed in high volumes in the HOPD setting but are not typically performed in ASCs at all because while the cost of the device is greater than 50 percent of the cost of the procedure in the ASC setting, it does not meet the 50 percent threshold in the HOPD setting. These procedures do not qualify for device pass through payments. In ASCA’s comment letter in response to the 2014 proposed rule, ASCA recommended that CMS establish a threshold at 30 percent of the OPPS rate, which is equivalent to 50 percent of the ASC rate. Medicare could realize substantial savings if the ASC payment were adequate to cover the cost of expensive implants and supplies.

OPPS Comprehensive APC Policy

Although the OPPS is named such because it is supposed to be a prospective payment system, it is currently closer to a fee-for-service system, such as the one seen in the physician fee schedule. To make the OPPS more consistent with a prospective payment system, CMS adopted a Comprehensive-APC policy in the CY 2014 OPPS/ASC final rule but delayed implementation of this policy until CY 2015 to allow for more public comment. This policy would expand the categories of related items and services packaged into a single payment for a comprehensive primary service under the OPPS. In the OPPS rule, CMS created Comprehensive-APCs to prospectively provide a single payment for the entire hospital stay for high cost device dependent services in 29 device dependent APCs.

According to the CMS fact sheet on the CY 2015 OPPS/ASC proposed rule, the agency is proposing “additional Comprehensive-APCs, including some lower cost device dependent APCs that were not proposed in 2014, and two new APCs for other procedures and technologies that are either largely device dependent or represent single session services with multiple components.” CMS also proposes to restructure and consolidate some of the current device dependent APCs with similar costs using 2013 claims data. After all of the restructuring, there are 28 Comprehensive APCs proposed in the 2015 rule as compared to the 29 that were finalized last year. CMS is not proposing to use these Comprehensive APCs for ASC payments, which means that certain procedures would still be separately payable in the ASC setting in 2015 but not the HOPD setting. It is unclear at this point the extent to which the Comprehensive APC policy will impact ASCs, but it is something that the ASC community is planning to pay close attention to in 2015.

Expanded Packaging of Codes

CMS currently pays HOPDs and ASCs separately for services that are integral to a primary service. For CY 2015, CMS is proposing to conditionally package ancillary services assigned to APCs with a geometric mean cost of $100 or less (prior to applying the conditional packaging status indicator to the services within these APCs), as a criterion to establish an initial set of conditionally packaged ancillary service APCs. Conditional packaging means that if these ancillary services are furnished by themselves, CMS will continue to make separate payment for the service.

Quality Reporting for ASCs

Citing operational difficulties involved in reporting the measure, CMS is proposing to make ASC-11: Improvement in Patient’s Visual Function within 90 Days Following Cataract Surgery, a voluntary measure in the ASC Quality Reporting (ASCQR) Program. ASC-11 is a physician-level measure that does not speak to the quality of the ASC, and ASCA worked closely with a coalition of representatives from the American Academy of Ophthalmology, the American Society of Cataract and Refractive Surgery and the Outpatient Ophthalmic Surgery Society to advocate against its inclusion in the ASCQR Program. This coalition, along with hospital associations, was able to get this measure delayed after sending a letter to CMS Administrator Marilyn Tavenner in spring explaining that ASC-11 is inappropriate as a facility measure.

CMS is proposing to add a new measure, ASC-12: Facility Seven-Day Risk-Standardized Hospital Visit Rate after Outpatient Colonoscopy, which will affect payment in CY 2017, with data collection beginning in CY 2015. This measure will be a claims-based measure that has also been proposed for addition in the HOPD quality reporting program.

Off-Campus Provider-Based Departments

CMS is proposing to begin collecting data on services that are furnished in what the agency refers to as “off-campus provider-based departments” beginning in 2015. This would require hospitals and physicians to report a modifier on both hospital and physician claims for those services furnished in a hospital-owned facility that is not located on the hospital grounds. CMS may be seeking this information to better determine the costs of HOPDs that are attached to inpatient hospitals as compared to those that are off-campus. While not directly applicable to ASCs, this proposal is one to watch as it might impact site neutrality discussions in the future.

CMS is accepting comments on its proposed rule until September 2. ASCA will be providing an online tool, sample language and talking points to make that process easy. Please check here in early August to submit your comments.

CMS will respond to comments in a final rule scheduled to be released on or around November 1, 2014.

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