Overview of New Payment System

Overview of the ASC Payment System

Much like the previous Medicare payment system, the current system pays ASCs a facility fee intended to cover the costs associated with providing a surgical procedure. Instead of being called groupers as the classifications used for ASC payment were known, these payment groups are now known as ambulatory payment classifications, or APCs. Medicare uses the same APCs for ASCs as are used for HOPDs. Of course, because ASCs provide only surgical services and hospitals provide many other types of outpatient procedures, such as emergency room services, hospitals have more APCs than ASCs. Each CPT® code that an ASC can use is now assigned to an APC, and each APC has a specific payment rate. Although CMS uses APCs to determine the rates that are paid, CMS reports the payment rates by CPT code. Thus, there is no need for ASCs to ascertain which APC a particular procedure is in. ASCs continue to bill Medicare using a CMS-1500 claim form and use CPT codes to describe procedures performed.

The rate paid to HOPDs for each APC is based upon the APC's relative weight, which is a measure that CMS uses to rank the costs of performing procedures in one APC as compared to those in other APCs, and a uniform conversion factor that applies to all APCs. CMS determines the relative weight for each APC using hospital cost reports. The relative weight is multiplied by a uniform dollar conversion factor to get the national HOPD payment rate.

The relative weights used for calculating ASC payments for each APC is the same as the relative weights used for HOPDs. The process for calculating the ASC payment rate is also the same for ASCs and HOPDs, except a different conversion factor is used.

LOCAL ADJUSTMENTS

The nationally determined ASC rates are adjusted to reflect differences in local costs using local wage indexes. 50% of the national rate is adjusted by the local wage index.

EXCEPTIONS TO 65%

Device Intensive Procedures

Under the current Medicare system, there are two exceptions to the general rule that ASC rates are based on 65% of the HOPD rate. One exception results in ASCs being paid more than 65% of the HOPD rate for procedures that require the use of a device that costs more than 50% of the total APC reimbursement. For these procedures, known as device-intensive procedures, the ASC are paid the same amount as an HOPD for the device and only the remainder of the APC reimbursement is discounted to 65% of the HOPD rate.

PAYMENTS FOR ANCILLARY SERVICES, DEVICES AND DRUGS AND BIOLOGICS

Under the current ASC payment system, in addition to APC payments for surgical procedures, in some cases, ASCs are able to receive additional payments for radiology, devices and drugs or biologics used in a procedure.

Radiology

ASCs are able to receive payment for radiology services if (1) the service would be separately payable in an HOPD, (2) the service is required for successful performance of a procedure and (3) the service is performed immediately preceding, during or immediately following a surgical procedure in the ASC. ASCs are either paid at a rate determined using the usual ASC methodology or the physician office practice expense. The limitation that this only applies if hospitals are paid separately is a significant one. For example, because fluoroscopy is not paid separately in HOPDs, ASCs are not paid separately either.

New Technology Pass-Through Payments

As in the past, separate payment is not made for most devices or supplies, including screws and anchors used in orthopedic procedures, regardless of the cost of these devices and supplies. The one exception to this rule is for devices with "pass-through status." CMS applies pass-through status to certain new technology that costs significantly more than the previous technology used in the same procedure. For these devices, an additional payment is made so that Medicare beneficiaries can have access to this new technology. CMS applies the same rules for additional payment for new technology to ASCs as it applies to hospitals. Medicare contractors, who were previously called Medicare carriers, set the prices for these devices.

New Technology Intraocular Lenses (IOLs)

Medicare continues to pay ASCs an additional payment for new technology IOLs (NTIOL). Rather than pay an additional $50 for all NTIOLs, CMS establishes the additional amount paid for each NTIOL individually. The payment for the regular IOLs is included in the APC payment.

Prosthetics and Durable Medical Equipment

Payment for prosthetics and durable medical equipment depends on whether those devices are implantable or not. For implantable prosthetics and durable medical equipment, payment beyond the base payment rate is provided. The costs of these items are included in the calculation of the reimbursement rate for the relevant APCs. Only ASCs qualified as Medicare suppliers are reimbursed for prosthetics and other durable medical equipment that is not implanted.

Drugs and Biologics

In general, CMS applies the same policy to drugs and biologics in ASCs as it applies to HOPDs. When HOPDs are paid separately for a drug or biologic, ASCs are also paid separately. This policy also applies to the costs associated with acquiring corneal tissue. ASCs are also paid separately for brachytherapy sources. The rate for drugs and biologics is the same for ASCs and HOPDs.

MULTIPLE PROCEDURE ADJUSTMENTS

ASCs continue to be paid 100% for the primary procedure, which is defined as the procedure with the highest reimbursement rate, and 50% for each additional procedure. This policy applies even when some of the procedures are in the same APC. For certain procedures not subject to multiple procedure discounting, ASCs are paid 100% of the procedure rate even when those procedures are done in the same surgical session as another procedure. This ASC policy is consistent with the multiple procedure policy used in HOPDs.

TRANSITIONING INTO THE NEW PAYMENT SYSTEM

In its final rule, CMS established a four-year transition to the new rates for procedures currently on the ASC list, a process that gives individual ASCs more time to adjust to the new payment system than an immediate transition to the full system would have provided. 2008 Medicare ASC payments are a blended rate based on 75% of the 2007 ASC rate and 25% of the amount Medicare would have paid in 2008 if the transition had not been adopted. In 2009, the ASC rate will be based 50% on the 2007 rate and 50% on what the 2009 rate would be if the transition had not been adopted. In 2010, the payment will be made based on 25% and 75% of those respective payment rates, and in 2011, the transition will be complete. The chart below shows how this works.

ANNUAL UPDATES

ASC payments will be adjusted each year to reflect changes in technology and resources used in performing procedures. CMS makes such adjustments as a regular part of the annual rule making process for HOPDs. To make this adjustment in ASC payments, CMS will begin by recalculating the relative weights for HOPDs. These relative weights will be adjusted again to insure that changes are budget neutral in the ASC setting. As a result, each year the relative values of some procedures will go up and some will go down.

There will be no annual inflation update for 2009. This does not mean that 2009 rates will equal 2008 rates. The annual changes in procedures' relative values may cause some rates to go up and some rates to go down. Also, because of the four-year phase-in, the 2009 rates will be different.

In 2010 and beyond, the ASC conversion factor will increase by an amount equal to the consumer price index for urban consumers. FASA and AAASC had argued that the inflation update for ASCs should be the same as the update for hospitals — the hospital market basket — but CMS rejected this argument and left the ASC annual update as it is under the prior system, thus proving the importance of advancing ASC legislation in Congress.