Issues in the New ASC Payment System

Background:

In January 2008, CMS implemented a new payment structure for ambulatory surgical centers (ASCs).  The new rates are tied to the payments in the hospital outpatient department (HOPD).  ASC rates will be 65% of the HOPD payment and will be phased in over a four-year period.  CMS will begin inflation updates for ASC payments in 2010.  Payments for many GI endoscopic procedures could decline significantly, according to CMS.  The update will be the consumer price index for urban areas (CPI-U), although the agency has discretion to choose another way to update payments. 

Issue 1

ASGE believes that the update should be the market basket used for the hospital outpatient department because the costs of providing services in both settings are very similar. The hospital market basket measures changes in the cost of hospital labor, supplies, equipment, and overhead and is a better measure of ASC cost inflation than CPI, which measures changes in the cost of goods and services purchased by urban consumers.  ASC’s must compete in the same labor market for personnel and pay competitive salaries.  Moreover, the identical medical supplies and equipment purchased by ASCs are also purchased by hospitals.  Finally, ASCs and hospitals both need to maintain liability insurance.  Thus, the changes in the cost of the market basket of goods and services from one year to the next experienced by hospitals would apply to ASCs as well.  In contrast, there is no reason to believe that an index which measures the changes in the costs of housing, food, clothing and shelter experienced by consumers applies to ASCs.  ASGE asks that Congress direct CMS to adopt the hospital market basket as the basis for the annual update for ASC payments.

Issue 2

Medicare will reduce its ASC payments for GI endoscopy significantly when the new fees are fully implemented in 2011.  The new rates are often below the costs of performing these procedures, including screening for cancer.  Many practices will lose money on every Medicare patient in the ASC.  Many GI endoscopy centers are single specialty facilities and have no way to make up for the lost revenue. The inevitable result is that GI ASCs will have to move Medicare patients to the hospital, which will increase costs for beneficiaries and Medicare overall.

Although commenters on the proposed rule raised many concerns to CMS, few were addressed in the final rule and it is very clear that CMS has not fully evaluated the impact of the new system on access to care and cost of care.  Congress needs to delay the transition for one year and instruct CMS to carefully consider all of these issues and take corrective action to ensure that there is no disruption of services in ASCs or increase in payment burdens for beneficiaries and Medicare hospital outpatient department payments.