Proposed Medicare rules will change how ASCs are paid

The changes will take effect in 2007 and 2008.

Issue: October 1, 2006

ByAllison W. Shuren, JD, MSN

The Centers for Medicare and Medicaid Services in August proposed changes to the methodology Medicare currently uses to determine payment for ASC facility services. This long-anticipated proposal is included as part of the annual rulemaking for the Hospital Outpatient Prospective Payment System, or OPSS.

Currently, ASC payment rates are established on the basis of CMS’ estimate of a fee, which takes into account the costs incurred by ASCs generally in providing facility services in connection with a particular procedure. ASC payments under the new system, which will be effective as of Jan. 1, 2008, will be based on the payments rates established under the OPPS. Specifically, ASCs will be paid approximately 62% of what a hospital outpatient department is paid for performing the same procedure. The rule also makes some necessary regulatory changes to ensure clarity between the ASC payment rules applicable for calendar year 2007 from those that would take effect in 2008. The proposals are summarized below.

Proposed changes affecting ASCs for 2007

Alan E. Reider

Allison Weber-Shuren

As mentioned, ASC payment rates are based loosely on overhead costs per procedure. Effective January 2007, however, for any procedure for which the ASC payment exceeds the reimbursement amount under the hospital OPPS for the same procedure, the OPPS payment amount will be substituted for the ASC standard overhead amount.

This payment cap was mandated by a law passed by Congress in 2006 and will apply to services performed before Jan. 1, 2008. Assuming that the proposed OPPS payment rates become final, the reimbursement for 274 procedures effectively will be cut as of Jan. 1, 2007. The payment for some services will be cut by as much as 68% (Table 1).

CMS is proposing to add 14 procedures to the ASC list for 2007. The agency rejected a request to add 19 other procedures to the ASC list because these procedures are provided predominantly in the physician office setting. These procedures include 67028, 67105, 67110, 67145, 67210, 67221 and 67228. CMS refused to add another 14 procedures to the ASC list for 2007 because they do not meet the criteria for inclusion on the list due to issues such as lengthy recovery periods or excessive blood loss. No services in this category are ophthalmic procedures.

Proposed ASC payment system effective Jan. 1, 2008

Procedures included in the ASC benefit. Beginning Jan. 1, 2008, CMS proposes to expand greatly the services covered under the ASC benefit. Significantly, surgical procedures will be considered to be covered unless the service is specifically excluded from coverage. Under the revised system, a service must fall within the scope of surgical procedures described by CPT codes 10000 to 69999 to receive payment.

CMS also proposes to include in the ASC benefit the scope of surgical procedures that are described by HCPCS alphanumeric codes (Level II HCPS codes) or CPT Category III codes, which cross-reference to procedures in the CPT surgical code range. CMS will continue to exclude from the ASC benefit procedures billed under unlisted surgical codes. CMS is proposing not to make separate payment for CPT codes in the surgical range that are “packaged” under the hospital OPPS.

The new rules would modify the current criteria used for determining whether a procedure should be excluded from coverage. Under the new criteria, CMS will consider only whether the procedure can be safely performed in an ASC and whether the procedure requires an overnight stay. The following categories of procedures will be excluded from payment under the ASC benefit:

procedures that are determined to present a safety risk when performed in an ASC;
procedures that include services contained on the current OPPS inpatient list;
procedures that the CY 2005 Part B Extract Summary data indicate are performed at least 80% of the time in the hospital inpatient setting; and
procedures that involve major blood vessels, prolonged or extensive invasion of body cavities, extensive blood loss, or are emergent or life-threatening in nature.

Finally, CMS will include in the ASC benefit most procedures that are primarily provided in the physician office setting. CMS is requesting comment, however, on which office-based procedures should be excluded because they require so few resources so as not to qualify as surgical procedures. CMS specifically seeks comments on whether a payment threshold should apply to procedures typically performed in the office setting, under which a procedure would not be included in the ASC benefit (ie, exclusion of procedures reimbursed at less than $100 or $200).

Proposed rate setting methodology. Today, the ASC payment system is based on nine standard payment categories, ranging from $333 to $1,339. Medicare makes a separate payment to ASCs for implantable prosthetic devices and implantable durable medical equipment (DME) that are surgically inserted in an ASC. Under the revised system, CMS would base payments to ASCs on the payment weight for the Ambulatory Procedure Classification group (APC) used under the hospital OPPS that contains the procedure at issue. Specifically, CMS will utilize the APC groups and the APC relative payment weights as the basis for ASC relative payment weights. The OPPS payment weights will be multiplied by an ASC conversion factor to determine the ASC payment rate for a specific procedure.

CMS predicts that the conversion factor for ASCs will be 62% of the conversion factor under OPPS. CMS predicts that the budget neutral ASC conversion factor for calendar year 2008 will be $39.688. Thus, payments to ASCs under the revised payment system will range from $3.68 to $16,146.03, reflecting a total of 221 payment groups (up from the current nine payment groups).

Under the new system, CMS proposes to continue packaging into the ASC payment, payment for drugs, biologicals, contrast agents, anesthesia materials and imaging services. Of concern to many, however, is CMS’ proposal to cease making separate payments for implantable prosthetic devices and implantable DME that are surgically inserted in an ASC. To help ensure adequate payment for some of these implanted devices, CMS is proposing to exempt from multiple procedure discounting some procedures that include the implantation of devices. CMS will not package in the facility fee payment for a physician’s professional services, laboratory, X-ray or diagnostic procedures (other than those directly related to the performance of the surgical procedure), non-implantable prosthetic devices, ambulance services, leg, arm and neck braces, artificial limbs and DME for use in a patient’s home.

Phase-in and updates to revised ASC payment rates. CMS proposes to phase in the above revisions to the ASC payment system in 2008 by blending the payment amount equal to 50% of the applicable calendar year 2007 payment rate plus 50% of the applicable calendar year 2008 payment rate. In calendar year 2009, CMS will fully implement ASC payment rates calculated under the revised ASC payment system.

Thereafter, CMS is proposing to update the ASC relative payment weights each year beginning in calendar year 2009 using the OPPS national payment weights for that calendar year. For office-based procedures, practice expense payments will be used under the physician fee schedule for that calendar year. CMS, however, will scale the ASC weights to ensure there are no increases or decreases to overall ASC expenditures due to adjustments to OPPS weights. In other words, the ASC relative weights must be budget neutral.

Changes to the NTIOL review process. CMS is proposing to update and streamline the process for determining whether an IOL qualifies for status as a new technology IOL (NTIOL) and receive the related payment adjustment. First, CMS will eliminate the separate notice and comment periods that have been associated with requests for NTIOL status. Instead, CMS would fully integrate all NTIOL notices into the annual notice and comment rulemaking for updating the ASC payment rates. Thus, CMS would announce a list of all requests to establish a new NTIOL class accepted for review during the calendar year in which the proposal is published.

After the notice, CMS would accept comment for 30 days. CMS would then announce a list of determinations based on the application and public comment in the final ASC payment rule. CMS also would notify the industry of the deadline for submitting requests for review during the following year.

Interestingly, CMS noted that it had not received any applications this year for NTIOL status by the April 28, 2006, deadline.

Finally, CMS explains in detail the information that must be submitted for a request to be considered complete, as well as the clinical criteria it will apply to judge whether a particular IOL is deserving of NTIOL status.

The rule is published in the Federal Register. Comments regarding the ASC payment proposals are due Nov. 6. A copy of the entire rule may be obtained at the Government Printing Office Web site at http://a257.g.akamaitech.net/7/257/2422/01jan20061800/edocket.access.gpo.gov/2006/pdf/06-6846.pdf.

For more information:

Allison Weber Shuren, MSN, JD, can be reached at Arent Fox PLLC, 1050 Connecticut Ave. NW, Washington, DC 20036-5339; 202-775-5712; fax: 202-857-6395; e-mail: shuren.allison@arentfox.com.