Payment Rates for Ambulatory Surgery Centers Are Higher Than Intended by HCFA

GAO examined the methodology used by the Health Care Financing Administration (HCFA) for establishing the standard overhead amounts to be paid to ambulatory surgery centers (ASC) and compared the cost to Medicare for surgery performed in ambulatory versus inpatient settings.

The Omnibus Reconciliation Act of 1980 authorized payments under Medicare to ASC to cover their operating costs. The payment amounts, called standard overhead amounts, were to be based on HCFA estimates of the costs generally incurred by ASC in furnishing services in connection with ambulatory surgery. Also, the standard overhead amounts were to be set at a level that would ensure that the Medicare costs of services in ASC would be substantially less than the costs of the surgeries if performed on a hospital inpatient basis. GAO found that HCFA set standard overhead amounts for ambulatory surgery that appear to save Medicare program dollars. However, in computing the standard overhead amounts, HCFA did not adjust charge data by the cost-to-charge ratio as intended. As a result, the standard overhead amounts are 10-percent higher than intended. GAO believes that better data should now be available than the limited information HCFA had when it established ASC payment rates. HCFA should begin the process of reevaluating the rates.

Recommendations

Our recommendations from this work are listed below with a Contact for more information. Status will change from "In process" to "Open," "Closed - implemented," or "Closed - not implemented" based on our follow up work.

Director: Janet L. Shikles Team: General Accounting Office: Human Resources Division Phone: (202) 512-7119