Medicare
Payment for Ambulatory Surgical Centers Should Be Based on the Hospital Outpatient Payment System Gao ID: GAO-07-86 November 30, 2006Medicare pays for surgical procedures performed at ambulatory surgical centers (ASC) and hospital outpatient departments through different payment systems. Although they perform a similar set of procedures, no comparison of ASC and hospital outpatient per-procedure costs has been conducted. The Medicare Prescription Drug, Improvement, and Modernization Act of 2003 directed GAO to compare the relative costs of procedures furnished in ASCs to the relative costs of those procedures furnished in hospital outpatient departments, in particular, how accurately the payment groups used in the hospital outpatient prospective payment system (OPPS) reflect the relative costs of procedures performed in ASCs. To do this, GAO collected data from ASCs through a survey. GAO also obtained hospital outpatient data from the Centers for Medicare & Medicaid Services (CMS).
GAO determined that the payment groups in the OPPS, known as ambulatory payment classification (APC) groups, accurately reflect the relative cost of procedures performed in ASCs. GAO calculated the ratio between each procedure's ASC median cost, as determined by GAO's survey, and the median cost of each procedure's corresponding APC group under the OPPS, referred to as the ASC-to-APC cost ratio. GAO also compared the OPPS median costs of those same procedures with the median costs of their APC groups, referred to as the OPPS-to-APC cost ratio. GAO's analysis of the ASC-to-APC and OPPS-to-APC cost ratios showed that 45 percent of all procedures in the analysis fell within a 0.10 point range of the ASC-to-APC median cost ratio, and 33 percent of procedures fell within a 0.10 point range of the OPPS-to-APC median cost ratio. These similar patterns of distribution around the median show that the APC groups reflect the relative costs of procedures provided by ASCs as well as they reflect the relative costs of procedures provided in hospital outpatient departments and can be used as the basis for the ASC payment system. GAO's analysis also identified differences in the cost of procedures in the two settings. The median cost ratio among all ASC procedures was 0.39 and when weighted by Medicare claims volume was 0.84. The median cost ratio for OPPS procedures was 1.04. Thus, the cost of procedures in ASCs is substantially lower than the corresponding cost in hospital outpatient departments.
RecommendationsOur 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: Team: Phone:GAO-07-86, Medicare: Payment for Ambulatory Surgical Centers Should Be Based on the Hospital Outpatient Payment System
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entitled 'Medicare: Payment for Ambulatory Surgical Centers Should Be
Based on the Hospital Outpatient Payment System' which was released on
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Report to Congressional Committees:
United States Government Accountability Office:
GAO:
November 2006:
Medicare:
Payment for Ambulatory Surgical Centers Should Be Based on the Hospital
Outpatient Payment System:
Medicare Payment for Ambulatory Surgical Centers:
GAO-07-86:
GAO Highlights:
Highlights of GAO-07-86, a report to congressional committees
Why GAO Did This Study:
Medicare pays for surgical procedures performed at ambulatory surgical
centers (ASC) and hospital outpatient departments through different
payment systems. Although they perform a similar set of procedures, no
comparison of ASC and hospital outpatient per-procedure costs has been
conducted. The Medicare Prescription Drug, Improvement, and
Modernization Act of 2003 directed GAO to compare the relative costs of
procedures furnished in ASCs to the relative costs of those procedures
furnished in hospital outpatient departments, in particular, how
accurately the payment groups used in the hospital outpatient
prospective payment system (OPPS) reflect the relative costs of
procedures performed in ASCs. To do this, GAO collected data from ASCs
through a survey. GAO also obtained hospital outpatient data from the
Centers for Medicare & Medicaid Services (CMS).
What GAO Found:
GAO determined that the payment groups in the OPPS, known as ambulatory
payment classification (APC) groups, accurately reflect the relative
cost of procedures performed in ASCs. GAO calculated the ratio between
each procedure‘s ASC median cost, as determined by GAO‘s survey, and
the median cost of each procedure‘s corresponding APC group under the
OPPS, referred to as the ASC-to-APC cost ratio. GAO also compared the
OPPS median costs of those same procedures with the median costs of
their APC groups, referred to as the OPPS-to-APC cost ratio. GAO‘s
analysis of the ASC-to-APC and OPPS-to-APC cost ratios showed that 45
percent of all procedures in the analysis fell within a 0.10 point
range of the ASC-to-APC median cost ratio, and 33 percent of procedures
fell within a 0.10 point range of the OPPS-to-APC median cost ratio.
These similar patterns of distribution around the median show that the
APC groups reflect the relative costs of procedures provided by ASCs as
well as they reflect the relative costs of procedures provided in
hospital outpatient departments and can be used as the basis for the
ASC payment system. GAO‘s analysis also identified differences in the
cost of procedures in the two settings. The median cost ratio among all
ASC procedures was 0.39 and when weighted by Medicare claims volume was
0.84. The median cost ratio for OPPS procedures was 1.04. Thus, the
cost of procedures in ASCs is substantially lower than the
corresponding cost in hospital outpatient departments.
Figure: ASC Procedure Median Cost to APC Median Cost Ratios,
Distributed by Percentage in 0.05 Increments, 2004:
[See PDF for Image]
Source: GAO analysis of ASC survey and Medicare data.
[End of Figure]
Figure: OPPS Procedure Median Cost to APC Median Cost Ratios,
Distributed by Percentage in 0.05 Increments, 2004:
[See PDF for Image]
Source: GAO analysis of Medicare data.
[End of Figure]
What GAO Recommends:
The Administrator of CMS should implement a payment system for
procedures performed in ASCs based on the OPPS, taking into account the
lower relative costs of procedures performed in ASCs compared to
hospital outpatient departments. CMS stated that GAO‘s recommendation
is consistent with its August 2006 proposed revisions to the ASC
payment system.
[Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-07-86].
To view the full product, including the scope and methodology, click on
the link above. For more information, contact Kathleen King at (202)
512-7119 or kingk@gao.gov.
[End of Section]
Contents:
Letter:
Background:
Results in Brief:
Many Additional Billed Services Were Similar; Few Resulted in
Additional Payments to ASCs or Hospital Outpatient Departments:
APC Groups Accurately Reflect ASC Procedure Costs:
Conclusions:
Recommendation for Executive Action:
Agency and External Reviewer Comments and Our Evaluation:
Appendix I: Analysis of the Proportion of Labor-Related Costs for
Ambulatory Surgical Centers:
Appendix II: Scope and Methodology:
Appendix III: Additional Procedures Billed with the Top 20 ASC
Procedures, 2003:
Appendix IV: Comments from the Centers for Medicare & Medicaid
Services:
Appendix V: GAO Contact and Staff Acknowledgments:
Figures:
Figure 1: ASC Procedure Median Cost to APC Median Cost Ratios,
Distributed by Percentage in 0.05 Increments, 2004:
Figure 2: OPPS Procedure Median Cost to APC Median Cost Ratios,
Distributed by Percentage in 0.05 Increments, 2004:
Figure 3: ASC Per-Procedure Cost Calculations from ASC Survey:
Abbreviations:
AAASC: American Association of Ambulatory Surgery Centers:
APC: ambulatory payment classification:
ASC: ambulatory surgical center:
CMS: Centers for Medicare & Medicaid Services:
GI: gastrointestinal:
MMA: Medicare Prescription Drug, Improvement, and Modernization Act of
2003:
NCH: National Claims History:
ORA: Omnibus Reconciliation Act of 1980:
OPPS: outpatient prospective payment system:
United States Government Accountability Office:
Washington, DC 20548:
November 30, 2006:
The Honorable Charles E. Grassley:
Chairman:
The Honorable Max Baucus:
Ranking Minority Member:
Committee on Finance:
United States Senate:
The Honorable Joe Barton:
Chairman:
The Honorable John D. Dingell:
Ranking Minority Member:
Committee on Energy and Commerce:
House of Representatives:
The Honorable William M. Thomas:
Chairman:
The Honorable Charles B. Rangel:
Ranking Minority Member:
Committee on Ways and Means:
House of Representatives:
In 1982, Medicare began paying ambulatory surgical centers (ASC) to
perform certain surgical procedures on an outpatient basis. ASCs were
established as an alternative to hospital inpatient care, which was
considered a more costly setting. Medicare's initial ASC payment rates
were based on ASC cost and charge data from 1979 and 1980. The Centers
for Medicare & Medicaid Services (CMS), the agency that administers
Medicare, was required by law to review the ASC payment rates
periodically and adjust them as appropriate.[Footnote 1] CMS last
revised the ASC payment rates in 1990 using ASC data on costs and
charges that CMS collected in 1986.[Footnote 2] Since the payment rates
were last revised, there has been substantial growth in both the number
of ASC facilities and procedures they perform, as well as changes in
medical practice and technology. In 2004, there were approximately
4,100 Medicare-participating ASCs, a number that has grown
substantially since 2000 when there were about 2,900 Medicare-
participating ASCs. In 2004, ASCs received approximately $2.5 billion
in total Medicare payments, a 79 percent increase since 2000 when
Medicare payments to ASCs totaled approximately $1.4 billion.
While the ASC setting was originally intended to be an alternative to
hospital inpatient care, the procedures performed in ASCs are now
frequently performed in the hospital outpatient setting. Medicare pays
ASCs and hospital outpatient departments through different payment
systems. While procedures performed in ASCs are placed into payment
groups based on similar costs, hospital outpatient department
procedures are placed into payment groups, known as ambulatory payment
classification (APC) groups, based on both cost and clinical
similarity. Unlike the ASC payment system, the payment rates for
hospital outpatient departments are revised annually based on cost and
charge data included in reports hospitals are required to submit to CMS
each year.
Although ASCs and hospital outpatient departments perform a similar set
of procedures, no comparison between the Medicare ASC payment system
and the Medicare hospital outpatient department payment system, known
as the outpatient prospective payment system (OPPS), has been
conducted. The Medicare Prescription Drug, Improvement, and
Modernization Act of 2003 (MMA) directed us to conduct a study that
compares the relative costs of procedures performed in ASCs to the
relative costs of procedures performed in hospital outpatient
departments.[Footnote 3] As discussed with the committees of
jurisdiction, we compared (1) additional services billed with
procedures performed in ASCs with those billed with procedures
performed in hospital outpatient departments and whether there were any
Medicare payments associated with those services and (2) the relative
costs of procedures when performed in ASCs to the relative costs of
those procedures when performed in hospital outpatient departments, in
particular, how accurately the APC groups used in the OPPS reflect the
relative costs of procedures performed in the ASC setting. In addition,
we examined the proportion of ASCs' costs that are labor-related; this
information is provided in appendix I.
To compare the delivery of additional services provided with procedures
performed in ASCs and hospital outpatient departments, we identified
all additional services frequently provided in each setting with one of
the top 20 procedures based on highest Medicare ASC claims
volume,[Footnote 4] which, as a group, represented approximately 75
percent of all Medicare ASC claims volume in 2003.[Footnote 5] Using
Medicare claims data for 2003, we identified beneficiaries receiving
one of the top 20 procedures performed in either an ASC or hospital
outpatient department, then identified any other claims for those
beneficiaries submitted by ASCs, hospital outpatient departments,
durable medical equipment suppliers, and other Medicare part B
providers. We identified claims for the beneficiaries on the day the
procedure was performed and the day after.[Footnote 6] We created a
list that included all additional services that were billed at least 10
percent of the time with each of the top 20 procedures when they were
performed in ASCs. We created a similar list of additional services for
each of the top 20 procedures when they were performed in hospital
outpatient departments. We then compared the lists to determine if the
additional services provided by ASCs and hospital outpatient
departments with each of those procedures were similar. To compare the
Medicare payments for additional services provided with procedures
performed in ASCs and hospital outpatient departments, we identified
whether any additional services included in our analysis resulted in an
additional payment.
To compare the costs of procedures performed in ASCs and hospital
outpatient departments, we first compiled information on ASCs' costs
and procedures performed. We conducted a survey of 600 ASCs to obtain
2004 cost and procedure data. We received responses from 397 ASC
facilities, and through our data reliability testing, determined that
data from 290 responding facilities were sufficiently reliable for our
purposes.
To allocate ASCs' costs among the individual procedures they perform,
we first separated ASCs' direct and indirect costs. We then allocated
each ASC's direct costs among procedures it performed using a relative
weight scale we constructed with data from CMS, supplemented by
information from medical specialty societies and clinicians who work
for CMS. The relative weight scale captures the general variation in
costs associated with performing the different procedures. We allocated
each ASC's indirect costs equally across all procedures it performed.
For each procedure, we summed the direct and indirect costs for each
ASC and arrayed the total cost for each of the ASCs performing that
procedure. To obtain a per-procedure cost across all ASCs, we then
identified the median cost for each procedure from the array.
To compare per-procedure costs for ASCs and hospital outpatient
departments, we first obtained from CMS the list of APC groups included
in the OPPS and the procedures assigned to each APC group. We also
obtained from CMS the OPPS median cost of each procedure and the median
cost of each APC group. We then calculated a ratio between the median
cost for each procedure performed at an ASC, as determined by the
survey, and the median cost of each procedure's corresponding APC group
under the OPPS. For the same procedures, we also calculated a ratio
between the median cost of each procedure under the OPPS and the median
cost of the procedure's APC group, using the data obtained from CMS. To
evaluate the difference in procedure costs between the two settings, we
compared the ASC-to-APC and OPPS-to-APC cost ratios. To assess how well
the relative costs of procedures in the OPPS, defined by their
assignment to APC groups, reflect the relative costs of procedures in
the ASC setting, we evaluated the distribution of the ASC-to-APC and
OPPS-to-APC cost ratios.
We also conducted interviews with CMS officials and representatives
from ASC industry organizations, specifically, the American Association
of Ambulatory Surgery Centers (AAASC) and FASA, as well as physician
specialty societies, and individual ASCs. For details on our methods,
see appendix II. We performed our work from April 2004 through October
2006 in accordance with generally accepted government auditing
standards.
Background:
There are some similarities in how Medicare pays ASCs and hospital
outpatient departments for the procedures they perform. However, the
methods used by CMS to calculate the payment rates in each system, as
well as the mechanisms used to revise the Medicare payment rates,
differ.
Structure of the ASC Payment System:
In 1980, legislation was enacted that enabled ASCs to bill Medicare for
certain surgical procedures provided to Medicare
beneficiaries.[Footnote 7] Under the ASC payment system, Medicare pays
a predetermined, and generally all-inclusive, amount per procedure to
the facility. The approximately 2,500 surgical procedures that ASCs may
bill for under Medicare are assigned to one of nine payment groups that
contain procedures with similar costs, but not necessarily clinical
similarities. All procedures assigned to one payment group are paid at
the same rate. Under the Medicare payment system, when more than one
procedure is performed at the same time, the ASC receives a payment for
each of the procedures. However, the procedure that has the highest
payment rate receives 100 percent of the applicable payment, and each
additional procedure receives 50 percent of the applicable payment.
The Medicare payment for a procedure performed at an ASC is intended to
cover the direct costs for a procedure, such as nursing and technician
services, drugs, medical and surgical supplies and equipment,
anesthesia materials, and diagnostic services (including imaging
services), and the indirect costs associated with the procedure,
including use of the facility and related administrative services. The
ASC payment for a procedure does not include payment for implantable
devices or prosthetics related to the procedure; ASCs may bill
separately for those items. In addition, the payment to the ASC does
not include payment for professional services associated with the
procedure; the physician who performs the procedure and the
anesthesiologist or anesthetist bill Medicare directly for their
services. Finally, the ASC payment does not include payment for certain
other services that are not directly related to performing the
procedure and do not occur during the time that the procedure takes
place, such as some laboratory, X-ray, and other diagnostic tests.
Because these additional services are not ASC procedures, they may be
performed by another provider. In those cases, Medicare makes payments
to those providers for the additional services. For example, a
laboratory service needed to evaluate a tissue sample removed during an
ASC procedure is not included in the ASC payment. The provider that
evaluated the tissue sample would bill and receive payment from
Medicare for that service. Because ASCs receive one inclusive payment
for the procedure performed and its associated services, such as drugs,
they generally include on their Medicare claim only the procedure
performed.
Structure of the OPPS:
In 1997, legislation was enacted that required the implementation of a
prospective payment system for hospital outpatient
departments;[Footnote 8] the OPPS was implemented in August 2000.
Although ASCs perform only procedures, hospital outpatient departments
provide a much broader array of services, including diagnostic
services, such as X-rays and laboratory tests, and emergency room and
clinic visits. Each of the approximately 5,500 services, including
procedures, that hospital outpatient departments perform is assigned to
one of over 800 APC groups with other services with clinical and cost
similarities for payment under the OPPS. All services assigned to one
APC group are paid the same rate. Similar to ASCs, when hospitals
perform multiple procedures at the same time, they receive 100 percent
of the applicable payment for the procedure that has the highest
payment rate, and 50 percent of the applicable payment for each
additional procedure, subject to certain exceptions.
Like payments to ASCs, payment for a procedure under the OPPS is
intended to cover the costs of the use of the facility, nursing and
technician services, most drugs, medical and surgical supplies and
equipment, anesthesia materials, and administrative costs. Medicare
payment to a hospital for a procedure does not include professional
services for physicians or other nonphysician practitioners. These
services are paid for separately by Medicare. However, there are some
differences between ASC and OPPS payments for procedures. Under the
OPPS, hospital outpatient departments generally may not bill separately
for implantable devices related to the procedure, but they may bill
separately for additional services that are directly related to the
procedure, such as certain drugs and diagnostic services, including X-
rays.[Footnote 9] Hospital outpatient departments also may bill
separately for additional services that are not directly related to the
procedure and do not occur during the procedure, such as laboratory
services to evaluate a tissue sample. Because they provide a broader
array of services, and because CMS has encouraged hospitals to report
all services provided during a procedure on their Medicare claims for
rate-setting purposes, hospital claims may provide more detail about
the services delivered during a procedure than ASC claims do.
History of the ASC System Rate Setting:
CMS set the initial 1982 ASC payment rates based on cost and charge
data from 40 ASCs. At that time, there were about 125 ASCs in
operation. Procedures were placed into four payment groups, and all
procedures in a group were paid the same rate. When the ASC payment
system was first established, federal law required CMS to review the
payment rates periodically.[Footnote 10] In 1986, CMS conducted an ASC
survey to gather cost and charge data. In 1990, using these data, CMS
revised the payment rates and increased the number of payment groups to
eight. A ninth payment group was established in 1991. These groups are
still in use, although some procedures have been added to or deleted
from the ASC-approved list.
Although payments have not been revised using ASC cost data since 1990,
the payment rates have been periodically updated for inflation. In
1994, Congress required that CMS conduct a survey of ASC costs no later
than January 1, 1995, and thereafter every 5 years, to revise ASC
payment rates.[Footnote 11] CMS conducted a survey in 1994 to collect
ASC cost data. In 1998, CMS proposed revising ASC payment rates based
on the 1994 survey data and assigned procedures performed at ASCs into
payment groups that were comparable to the payment groups it was
developing for the same procedures under the OPPS.[Footnote 12]
However, CMS did not implement the proposal, and, as a result, the ASC
payment system was not revised using the 1994 data. In 2003, MMA
eliminated the requirement to conduct ASC surveys every 5 years and
required CMS to implement a revised ASC payment system no later than
January 1, 2008.[Footnote 13] During the course of our work, in August
2006, CMS published a proposed rule that would revise the ASC payment
system effective January 1, 2008.[Footnote 14] In this proposed rule,
CMS bases the revised ASC payment rates on the OPPS APC groups.
However, the payment rates would be lower for ASCs.
History of OPPS Rate Setting:
The initial OPPS payment rates, implemented in August 2000, were based
on hospitals' 1996 costs. To determine the OPPS payment rates, CMS
first calculates each hospital's cost for each service by multiplying
the charge for that service by a cost-to-charge ratio computed from the
hospital's most recently reported data.[Footnote 15] After calculating
the cost of each service for each hospital, the services are grouped by
their APC assignment, and a median cost for each APC group is
calculated from the median costs of all services assigned to it. Using
the median cost, CMS assigns each APC group a weight based on its
median cost relative to the median cost of all other APCs. To obtain a
payment rate for each APC group, CMS multiplies the relative weight by
a factor that converts it to a dollar amount. Beginning in 2002, as
required by law, the APC group payment rates have been revised annually
based on the latest charge and cost data.[Footnote 16] In addition, the
payment rates for services paid under the OPPS receive an annual
inflation update.
Results in Brief:
For the top 20 procedures, we found many similarities in the additional
services billed with procedures performed by ASCs and hospital
outpatient departments.[Footnote 17] Of the additional services billed
in either setting with a top 20 procedure, few are paid separately by
Medicare in one setting but not the other. Hospital outpatient
departments received payment for some of the additional services, such
as X-rays, they billed with the procedures, while in the ASC setting,
other providers billed Medicare for these services and received payment
for them. This is a result of the differences in the structure of the
two payment systems; that is, while ASCs may bill Medicare only for
procedures, hospitals may bill for a broader array of services.
The APC groups in the OPPS accurately reflect the relative costs of
procedures performed at ASCs. We compared each procedure's ASC median
cost to the median cost of the APC group in which it would be placed,
which we refer to as the ASC-to-APC cost ratio. We repeated this
analysis by comparing the costs of those same procedures under the OPPS
with the median costs of their APC groups, which we refer to as the
OPPS-to-APC cost ratio. Our analysis of the cost ratios showed that the
ASC-to-APC cost ratios were more tightly distributed around their
median cost ratio than were the OPPS-to-APC cost ratios; that is, more
of them were closer to their respective median. Specifically, 45
percent of all procedures in our analysis fell within a 0.10 point
range of the ASC-to-APC median cost ratio, and 33 percent of procedures
fell within a 0.10 point range of the OPPS-to-APC median cost ratio.
These similar patterns show that the APC groups reflect the relative
costs of procedures provided by ASCs as well as they reflect the
relative costs of procedures provided in the hospital outpatient
department setting and can be used as the basis for an ASC payment
system. While our analysis demonstrated that the APC groups accurately
reflect the relative cost of procedures performed in ASCs, it also
showed that procedures in the ASC setting had substantially lower costs
than those same procedures in the hospital outpatient department
setting. The median cost ratio among all ASC procedures was 0.39. The
median cost ratio among all OPPS procedures was 1.04.
We recommend that the Administrator of CMS implement a payment system
for procedures performed in ASCs based on the OPPS, taking into account
the lower relative costs of procedures in ASCs compared to hospital
outpatient departments. In commenting on a draft of this report, CMS
stated that our recommendation is consistent with its August 2006
proposed revisions to the ASC payment system. Representatives of AAASC
and FASA, who reviewed a draft of this report, provided comments, which
we incorporated where appropriate.
Many Additional Billed Services Were Similar; Few Resulted in
Additional Payments to ASCs or Hospital Outpatient Departments:
We found many similarities in the additional services provided by ASCs
and hospital outpatient departments with the top 20 procedures. Of the
additional services billed with a procedure, few resulted in an
additional payment in one setting but not the other. Hospitals were
paid for some of the related additional services they billed with the
procedures. In the ASC setting, other providers billed Medicare for
these services and received payment for them.
Many Additional Services Billed in Each Setting Were Similar:
In our analysis of Medicare claims, we found many similarities in the
additional services billed in the ASC or hospital outpatient department
setting with the top 20 procedures. The similar additional services are
illustrated in the following four categories of services: additional
procedures, laboratory services, radiology services, and anesthesia
services.
First, one or more additional procedures was billed with a procedure
performed in either the ASC or hospital outpatient department setting
for 14 of the top 20 procedures. The proportion of time each additional
procedure was billed in each setting was similar. For example, when a
hammertoe repair procedure was performed, our analysis indicated that
another procedure to correct a bunion was billed 11 percent of the time
in the ASC setting, and in the hospital outpatient setting, the
procedure to correct a bunion was billed 13 percent of the time.
Similarly, when a diagnostic colonoscopy was performed, an upper
gastrointestinal (GI) endoscopy was billed 11 percent of the time in
the ASC setting, and in the hospital setting, the upper GI endoscopy
was billed 12 percent of the time. For 11 of these 14 procedures, the
proportion of time each additional procedure was billed differed by
less than 10 percentage points between the two settings. For the 3
remaining procedures, the percentage of time that an additional
procedure was billed did not vary by more than 25 percentage points
between the two settings. See appendix III for a complete list of the
additional procedures billed and the proportion of time they were
billed in each setting.
Second, laboratory services were billed with 10 of the top 20
procedures in the hospital outpatient department setting and 7 of the
top 20 procedures in the ASC setting. While these services were almost
always billed by the hospital in the outpatient setting, they were
typically not billed by the ASCs. These laboratory services were
present in our analysis in the ASC setting because they were performed
and billed by another Medicare part B provider.
Third, four different radiology services were billed with 8 of the top
20 procedures. Radiology services were billed with 5 procedures in the
ASC setting and with 8 procedures in the hospital outpatient department
setting. The radiology services generally were included on the hospital
outpatient department bills but rarely were included on the ASC bills.
Similar to laboratory services, hospital outpatient departments billed
for radiology services that they performed in addition to the
procedures. When radiology services were billed with procedures in the
ASC setting, these services generally were performed and billed by
another part B provider.
Fourth, anesthesia services were billed with 17 of the top 20
procedures in either the ASC or hospital outpatient settings and with
14 procedures in both settings. In virtually every case in the ASC
setting, and most cases in the hospital outpatient department setting,
these services were billed by another part B provider.
According to our analysis, ASCs did not generally include any services
other than the procedures they performed on their bills. However, in
the hospital outpatient setting, some additional services were included
on the hospitals' bills. We believe this is a result of the structure
of the two payment systems. As ASCs generally receive payment from
Medicare only for procedures, they typically include only those
procedures on their bills. In contrast, hospital outpatient
departments' bills often include many of the individual items or
services they provide as a part of a procedure because CMS has
encouraged them to do so, whether the items or services are included in
the OPPS payment or paid separately.
Additional Services Resulted in Few Additional Payments to ASCs or
Hospital Outpatient Departments:
With the exception of additional procedures, there were few separate
payments that could be made for additional services provided with the
top 20 procedures because most of the services in our analysis were
included in the Medicare payment to the ASC or hospital. Under both the
Medicare ASC and OPPS payment systems, when more than one procedure is
performed at the same time, the facility receives 100 percent of the
applicable payment for the procedure that has the highest payment rate
and 50 percent of the applicable payment for each additional procedure.
As this policy is applicable to both settings, for those instances in
our analysis when an additional procedure was performed with one of the
top 20 procedures in either setting, the ASC or hospital outpatient
department received 100 percent of the payment for the procedure with
the highest payment rate and 50 percent of the payment for each lesser
paid procedure.
Individual drugs were billed by hospital outpatient departments for
most of the top 20 procedures, although they were not present on the
claims from ASCs, likely because ASCs generally cannot receive separate
Medicare payments for individual drugs. However, none of the individual
drugs billed by the hospital outpatient departments in our analysis
resulted in an additional payment to the hospitals. In each case, the
cost of the particular drug was included in the Medicare payment for
the procedure.
In the case of the laboratory services billed with procedures in the
ASC and hospital outpatient department settings, those services were
not costs included in the payment for the procedure in either setting
and were paid separately in each case. For both settings, the payment
was made to the provider that performed the service. In the case of the
hospital outpatient department setting, the payment was generally made
to the hospital, while, for procedures performed at ASCs, payment was
made to another provider who performed the service.
Of the four radiology services in our analysis, three were similar to
the laboratory services in that they are not included in the cost of
the procedure and are separately paid services under Medicare.
Therefore, when hospitals provided these services, they received
payment for them. In the ASC setting, these services were typically
billed by a provider other than the ASC, and the provider received
payment for them. The fourth radiology service is included in the
payment for the procedure with which it was associated. Therefore, no
separate payment was made to either ASCs or hospital outpatient
departments. With regard to anesthesia services, most services were
billed by and paid to a provider other than an ASC or hospital.
APC Groups Accurately Reflect ASC Procedure Costs:
As a group, the costs of procedures performed in ASCs have a relatively
consistent relationship with the costs of the APC groups to which they
would be assigned under the OPPS. That is, the APC groups accurately
reflect the relative costs of procedures performed in ASCs. We found
that the ASC-to-APC cost ratios were more tightly distributed around
their median cost ratio than the OPPS-to-APC cost ratios were around
their median cost ratio. Specifically, 45 percent of all procedures in
our analysis fell within 0.10 points of the ASC-to-APC median cost
ratio, and 33 percent of procedures fell within 0.10 points of the OPPS-
to-APC median cost ratio. However, the costs of procedures in ASCs are
substantially lower than costs for the same procedures in the hospital
outpatient setting.
APC Groups Accurately Reflect the Relative Costs of ASC Procedures:
The APC groups reflect the relative costs of procedures provided by
ASCs as well as they reflect the relative costs of procedures provided
in the hospital outpatient department setting. In our analysis, we
listed the procedures performed at ASCs and calculated the ratio of the
cost of each procedure to the cost of the APC group to which it would
have been assigned, referred to as the ASC-to-APC cost ratio. We then
calculated similar cost ratios for the same procedures exclusively
within the OPPS. To determine an OPPS-to-APC cost ratio, we divided
individual procedures' median costs, as calculated by CMS for the OPPS,
by the median cost of their APC group. Our analysis of the cost ratios
showed that the ASC-to-APC cost ratios were more tightly distributed
around their median than were the OPPS-to-APC cost ratios; that is,
there were more of them closer to the median. Specifically, 45 percent
of procedures performed in ASCs fell within a 0.10 point range of the
ASC-to-APC median cost ratio, and 33 percent of those procedures fell
within a 0.10 point range of the OPPS-to-APC median cost ratio in the
hospital outpatient department setting (see figs. 1 and 2). Therefore,
there is less variation in the ASC setting between individual
procedures' costs and the costs of their assigned APC groups than there
is in the hospital outpatient department setting. From this outcome, we
determined that the OPPS APC groups could be used to pay for procedures
in ASCs.
Figure 1: ASC Procedure Median Cost to APC Median Cost Ratios,
Distributed by Percentage in 0.05 Increments, 2004:
[See PDF for image]
Source: GAO analysis of ASC survey and Medicare data.
[End of figure]
Figure 2: OPPS Procedure Median Cost to APC Median Cost Ratios,
Distributed by Percentage in 0.05 Increments, 2004:
[See PDF for image]
Source: GAO analysis of Medicare data.
[End of figure]
ASC Procedures' Median Costs Are Generally Lower Than Those for OPPS
Procedures:
The median costs of procedures performed in ASCs were generally lower
than the median costs of their corresponding APC group under the
OPPS.[Footnote 18] Among all procedures in our analysis, the median ASC-
to-APC cost ratio was 0.39.[Footnote 19] The ASC-to-APC cost ratios
ranged from 0.02 to 3.34. When weighted by Medicare volume based on
2004 claims data, the median ASC-to-APC cost ratio was 0.84. We
determined that the median OPPS-to-APC cost ratio was 1.04. This
analysis shows that when compared to the median cost of the same APC
group, procedures performed in ASCs had substantially lower costs than
when those same procedures were performed in hospital outpatient
departments.
Conclusions:
Generally, there are many similarities between the additional services
provided in ASCs and hospital outpatient departments with one of the
top 20 procedures, and few resulted in an additional Medicare payment
to ASCs or hospital outpatient departments. Although costs for
individual procedures vary, in general, the median costs for procedures
are lower in ASCs, relative to the median costs of their APC groups,
than the median costs for the same procedures in the hospital
outpatient department setting. The APC groups in the OPPS reflect the
relative costs of procedures performed in ASCs in the same way that
they reflect the relative costs of the same procedures when they are
performed in hospital outpatient departments. Therefore, the APC groups
could be applied to procedures performed in ASCs, and the OPPS could be
used as the basis for an ASC payment system, eliminating the need for
ASC surveys and providing for an annual revision of the ASC payment
groups.
Recommendation for Executive Action:
We recommend that the Administrator of CMS implement a payment system
for procedures performed in ASCs based on the OPPS. The Administrator
should take into account the lower relative costs of procedures
performed in ASCs compared to hospital outpatient departments in
determining ASC payment rates.
Agency and External Reviewer Comments and Our Evaluation:
We received written comments on a draft of this report from CMS (see
app. IV). We also received oral comments from external reviewers
representing two ASC industry organizations, AAASC and FASA.
CMS Comments:
In commenting on a draft of this report, CMS stated that our
recommendation is consistent with its August 2006 proposed revisions to
the ASC payment system.
Industry Comments and Our Evaluation:
Industry representatives who reviewed a draft of this report did not
agree or disagree with our recommendation for executive action. They
did, however, provide several comments on the draft report. The
industry representatives noted that we did not analyze the survey
results to examine differences in per-procedure costs among single-
specialty and multi-specialty ASCs. Regarding this comment, we
initially considered developing our survey sample stratified by ASC
specialty type. However, because accurate data identifying ASCs'
specialties do not exist, we were unable to stratify our survey sample
by specialty type.
The industry representatives asked us to provide more explanation in
our scope and methodology regarding our development of a relative
weight scale for Medicare ASC-approved procedures to capture the
general variation in resources associated with performing different
procedures. We expanded the discussion of how we developed the relative
weight scale in our methodology section.
Reviewers also made technical comments, which we incorporated where
appropriate.
We are sending a copy of this report to the Administrator of CMS and
appropriate congressional committees. The report is available at no
charge on GAO's Web site at [Hyperlink, http://www.gao.gov]. We will
also make copies available to others on request.
If you or your staff members have any questions about this report,
please contact me at (202) 512-7119 or kingk@gao.gov. Contact points
for our Offices of Congressional Relations and Public Affairs may be
found on the last page of this report. GAO staff members who made
significant contributions to this report are listed in appendix V.
Signed by:
Kathleen King:
Director, Health Care:
[End of section]
Appendix I: Analysis of the Proportion of Labor-Related Costs for
Ambulatory Surgical Centers:
The Medicare payment rates for ambulatory surgical centers (ASC), along
with those of other facilities, are adjusted to account for the
variation in labor costs across the country. To calculate payment rates
for individual ASCs, the Centers for Medicare & Medicaid Services (CMS)
calculates the share of total costs that are labor-related and then
adjusts ASCs' labor-related share of costs based on a wage index
calculated for specific geographic areas across the country. The wage
index reflects how the average wage for health care personnel in each
geographic area compares to the national average health care personnel
wage. The geographic areas are intended to represent the separate labor
markets in which health care facilities compete for employees.
In setting the initial ASC payment rates for 1982, CMS determined from
the first survey of ASCs that one-third of their costs were labor-
related. The labor-related costs included employee salaries and fringe
benefits, contractual personnel, and owners' compensation for duties
performed for the facility. To determine the payment rates for each
individual ASC, CMS multiplied one-third of the payment rate for each
procedure--the labor-related portion--by the local area wage index.
Each ASC received the base payment rate for two-thirds of the payment
rate--the nonlabor-related portion--for each procedure. The sum of the
labor-related and nonlabor-related portions equaled each ASC's payment
rate for each procedure.
In 1990, when CMS revised the payment system based on a 1986 ASC
survey, CMS found ASCs' average labor-related share of costs to be
34.45 percent and used this percentage as the labor-related portion of
the payment rate. In a 1998 proposed rule, CMS noted that ASCs' share
of labor-related costs as calculated from the 1994 ASC cost survey had
increased to an average of 37.66 percent, slightly higher than the
percentage calculated from the 1986 survey. However, CMS did not
implement the 1998 proposal. Currently, the labor-related proportion of
costs from CMS's 1986 survey, 34.45 percent, is used for calculating
ASC payment rates.
Using 2004 cost data we received from 290 ASCs that responded to our
survey request for information, we determined that the mean labor-
related proportion of costs was 50 percent, and the range of the labor-
related costs for the middle 50 percent of our ASC facilities was 43
percent to 57 percent of total costs.
[End of section]
Appendix II: Scope and Methodology:
To compare the delivery of procedures between ASCs and hospital
outpatient departments, we analyzed Medicare claims data from 2003. To
compare the relative costs of procedures performed in ASCs and hospital
outpatient departments, we collected cost and procedure data from 2004
from a sample of Medicare-participating ASCs. We also interviewed
officials at CMS and representatives from ASC industry organizations,
specifically, the American Association of Ambulatory Surgery Centers
(AAASC) and FASA, physician specialty societies, and nine ASCs.
Analysis of Additional Services:
To compare the delivery of additional services provided with procedures
performed in ASCs and hospital outpatient departments, we identified
all additional services frequently billed in each setting when one of
the top 20 procedures with the highest Medicare ASC claims volume is
performed. These procedures represented approximately 75 percent of all
Medicare ASC claims in 2003. Using Medicare claims data for 2003, we
identified beneficiaries receiving one of the top 20 procedures in
either an ASC or hospital outpatient department, then identified any
other claims for those beneficiaries from ASCs, hospital outpatient
departments, durable medical equipment suppliers, and other Medicare
part B providers. We identified claims for the beneficiaries on the day
the procedure was performed and the day after.[Footnote 20] We created
a list that included all additional services that were billed at least
10 percent of the time with each of the top 20 procedures when they
were performed in ASCs. We created a similar list of additional
services for each of the top 20 procedures when they were performed in
hospital outpatient departments. We then compared the lists for each of
the top 20 procedures between the two settings to determine whether
there were similarities in the additional services that were billed to
Medicare. To compare the Medicare payments for procedures performed in
ASCs and hospital outpatient departments, we identified whether any
additional services included in our analysis resulted in an additional
payment.
We used Medicare claims data from the National Claims History (NCH)
files. These data, which are used by the Medicare program to make
payments to health care providers, are closely monitored by both CMS
and the Medicare contractors that process, review, and pay claims for
Medicare services. The data are subject to various internal controls,
including checks and edits performed by the contractors before claims
are submitted to CMS for payment approval. Although we did not review
these internal controls, we did assess the reliability of the NCH data.
First, we reviewed all existing information about the data, including
the data dictionary and file layouts. We also interviewed experts at
CMS who regularly use the data for evaluation and analysis. We found
the data to be sufficiently reliable for the purposes of this report.
Comparison of Per-Procedure Costs:
To compare the relative costs of procedures performed in ASCs and
hospital outpatient departments, we first compiled information on ASCs'
costs and procedures performed. Because there were no recent existing
data on ASC costs, we surveyed 600 ASCs, randomly selected from all
ASCs, to obtain their 2004 cost and procedure data. We received
response data from 397 ASC facilities. We assessed the reliability of
these data through several means. We identified incomplete and
inconsistent survey responses within individual surveys and placed
follow-up calls to respondents to complete or verify their responses.
To ensure that survey response data were accurately transferred to
electronic files for our analytic purposes, two analysts independently
entered all survey responses. Any discrepancies between the two sets of
entered responses were resolved. We performed electronic testing for
errors in accuracy and completeness, including an analysis of costs per
procedure. As a result of our data reliability testing, we determined
that data from 290 responding facilities were sufficiently reliable for
our purposes. Our nonresponse analysis showed that there was no
geographic bias among the facilities responding to our survey. The
responding facilities performed more Medicare services than the average
for all ASCs in our sample.
To allocate ASCs' total costs among the individual procedures they
perform, we developed a method to allocate the portion of an ASC's
costs accounted for by each procedure. We constructed a relative weight
scale for Medicare ASC-approved procedures that captures the general
variation in resources associated with performing different procedures.
The resources we used were the clinical staff time, surgical supplies,
and surgical equipment used during the procedures. We used cost and
quantity data on these resources from information CMS had collected for
the purpose of setting the practice expense component of physician
payment rates. For procedures for which CMS had no data on the
resources used, we used information we collected from medical specialty
societies and physicians who work for CMS. We summed the costs of the
resources for each procedure and created a relative weight scale by
dividing the total cost of each procedure by the average cost across
all of the procedures. We assessed the reliability of these data
through several means. We compared electronic CMS data with the
original document sources for a large sample of records, performed
electronic testing for errors in accuracy and completeness, and
reviewed data for reasonableness. Based on these efforts, we determined
that data were sufficiently reliable for our purposes.
To calculate per-procedure costs with the data from the surveyed ASC
facilities, we first deducted costs that Medicare considers
unallowable, such as advertising and entertainment costs. (See fig. 3
for our per-procedure cost calculation methodology.) We also deducted
costs for services that Medicare pays for separately, such as physician
and nonphysician practitioner services. We then separated each
facility's total costs into its direct and indirect costs. We defined
direct costs as those associated with the clinical staff, equipment,
and supplies used during the procedure. Indirect costs included all
remaining costs, such as support and administrative staff, building
expenses, and outside services purchased. To allocate each facility's
direct costs across the procedures it performed, we applied our
relative weight scale. We allocated indirect costs equally across all
procedures performed by the facility. For each procedure performed by a
responding ASC facility, we summed its allocated direct and indirect
costs to determine a total cost for the procedure. To obtain a per-
procedure cost across all ASCs, we arrayed the calculated costs for all
ASCs performing that procedure and identified the median cost.
Figure 3: ASC Per-Procedure Cost Calculations from ASC Survey:
[See PDF for image]
Source: GAO.
[End of figure]
To compare per-procedure costs for ASCs and hospital outpatient
departments, we first obtained from CMS the list of ambulatory payment
classification (APC) groups used for the outpatient prospective payment
system (OPPS) and the procedures assigned to each APC group. We also
obtained from CMS the OPPS median cost of each procedure and the median
cost of each APC group. We then calculated a ratio between each
procedure's ASC median cost, as determined by the survey, and the
median cost of each procedure's corresponding APC group under the OPPS,
referred to as the ASC-to-APC cost ratio. We also calculated a ratio
between each ASC procedure's median cost under the OPPS and the median
cost of the procedure's APC group, using the data obtained from CMS,
referred to as the OPPS-to-APC cost ratio. To evaluate the difference
in procedure costs between the two settings, we compared the ASC-to-APC
and OPPS-to-APC cost ratios. To assess how well the relative costs of
procedures in the OPPS, defined by their assignment to APC groups,
reflect the relative costs of procedures in the ASC setting, we
evaluated the distribution of the ASC-to-APC and OPPS-to-APC cost
ratios.
Analysis of Labor-Related Costs:
To calculate the percentage of labor-related costs among our sample
ASCs, for each ASC, we divided total labor costs by total costs, after
deducting costs not covered by Medicare's facility payment. We then
determined the range of the percentage of labor-related costs among all
of our ASCs and between the 25th percentile and the 75th percentile, as
well as the mean and median percentage of labor-related costs.
We performed our work from April 2004 through October 2006 in
accordance with generally accepted government auditing standards.
[End of section]
Appendix III: Additional Procedures Billed with the Top 20 ASC
Procedures, 2003:
Medicare ASC procedure volume ranking: 1;
Procedure: Cataract surgery with intraocular lens insertion, one stage;
Additional procedure: None;
Times additional procedure was performed with procedure (percentage):
ASC: N/A;
Times additional procedure was performed with procedure (percentage):
Hospital outpatient department: N/A.
Medicare ASC procedure volume ranking: 2;
Procedure: Colonoscopy, with diagnosis;
Additional procedure: Upper gastrointestinal (GI) endoscopy, with
biopsy;
Times additional procedure was performed with procedure (percentage):
ASC: 11;
Times additional procedure was performed with procedure (percentage):
Hospital outpatient department: 12.
Medicare ASC procedure volume ranking: 3;
Procedure: After cataract laser surgery;
Additional procedure: None;
Times additional procedure was performed with procedure (percentage):
ASC: N/A;
Times additional procedure was performed with procedure (percentage):
Hospital outpatient department: N/A.
Medicare ASC procedure volume ranking: 4;
Procedure: Upper GI endoscopy, with biopsy;
Additional procedure: Colonoscopy, with diagnosis;
Times additional procedure was performed with procedure (percentage):
ASC: 12;
Times additional procedure was performed with procedure (percentage):
Hospital outpatient department: 14.
Medicare ASC procedure volume ranking: 5;
Procedure: Colonoscopy, with lesion removal, snare technique;
Additional procedure: Upper GI endoscopy, with biopsy;
Times additional procedure was performed with procedure (percentage):
ASC: 10;
Times additional procedure was performed with procedure (percentage):
Hospital outpatient department: 10.
Medicare ASC procedure volume ranking: 5;
Procedure: Colonoscopy, with lesion removal, snare technique;
Additional procedure: Colonoscopy, with biopsy;
Times additional procedure was performed with procedure (percentage):
ASC: 14;
Times additional procedure was performed with procedure (percentage):
Hospital outpatient department: 22.
Medicare ASC procedure volume ranking: 5;
Procedure: Colonoscopy, with lesion removal, snare technique;
Additional procedure: Colonoscopy, with lesion removal;
Times additional procedure was performed with procedure (percentage):
ASC: 10;
Times additional procedure was performed with procedure (percentage):
Hospital outpatient department: 14.
Medicare ASC procedure volume ranking: 6;
Procedure: Spine injection, lumbar, sacral;
Additional procedure: None;
Times additional procedure was performed with procedure (percentage):
ASC: N/A;
Times additional procedure was performed with procedure (percentage):
Hospital outpatient department: N/A.
Medicare ASC procedure volume ranking: 7;
Procedure: Colonoscopy, with biopsy;
Additional procedure: Upper GI endoscopy, with biopsy;
Times additional procedure was performed with procedure (percentage):
ASC: 12;
Times additional procedure was performed with procedure (percentage):
Hospital outpatient department: 14.
Medicare ASC procedure volume ranking: 7;
Procedure: Colonoscopy, with biopsy;
Additional procedure: Colonoscopy, with lesion removal;
Times additional procedure was performed with procedure (percentage):
ASC: 18;
Times additional procedure was performed with procedure (percentage):
Hospital outpatient department: 21.
Medicare ASC procedure volume ranking: 8;
Procedure: Colonoscopy, with lesion removal;
Additional procedure: Upper GI endoscopy, with biopsy;
Times additional procedure was performed with procedure (percentage):
ASC: 10;
Times additional procedure was performed with procedure (percentage):
Hospital outpatient department: 10.
Medicare ASC procedure volume ranking: 8;
Procedure: Colonoscopy, with lesion removal;
Additional procedure: Colonoscopy, with biopsy;
Times additional procedure was performed with procedure (percentage):
ASC: 11;
Times additional procedure was performed with procedure (percentage):
Hospital outpatient department: 15.
Medicare ASC procedure volume ranking: 8;
Procedure: Colonoscopy, with lesion removal;
Additional procedure: Colonoscopy, with lesion removal, snare
technique;
Times additional procedure was performed with procedure (percentage):
ASC: 23;
Times additional procedure was performed with procedure (percentage):
Hospital outpatient department: 32.
Medicare ASC procedure volume ranking: 9;
Procedure: Paravertebral injection, lumbar, sacral, add-on;
Additional procedure: Spine injection, lumbar, sacral;
Times additional procedure was performed with procedure (percentage):
ASC: 13;
Times additional procedure was performed with procedure (percentage):
Hospital outpatient department: 12.
Medicare ASC procedure volume ranking: 9;
Procedure: Paravertebral injection, lumbar, sacral, add-on;
Additional procedure: Paravertebral injection, lumbar, sacral, single
level;
Times additional procedure was performed with procedure (percentage):
ASC:99;
Times additional procedure was performed with procedure (percentage):
Hospital outpatient department: 99.
Medicare ASC procedure volume ranking: 10;
Procedure: Injection foramen epidural, lumbar, sacral, single level;
Additional procedure: Injection foramen epidural, lumbar, sacral, add-
on;
Times additional procedure was performed with procedure (percentage):
ASC: 39;
Times additional procedure was performed with procedure (percentage):
Hospital outpatient department: 36.
Medicare ASC procedure volume ranking: 11;
Procedure: Upper GI endoscopy, with diagnosis;
Additional procedure: Dilate esophagus;
Times additional procedure was performed with procedure (percentage):
ASC: 12;
Times additional procedure was performed with procedure (percentage):
Hospital outpatient department: 9.
Medicare ASC procedure volume ranking: 11;
Procedure: Upper GI endoscopy, with diagnosis;
Additional procedure: Colonoscopy, with diagnosis;
Times additional procedure was performed with procedure (percentage):
ASC: 17;
Times additional procedure was performed with procedure (percentage):
Hospital outpatient department: 19.
Medicare ASC procedure volume ranking: 12;
Procedure: Cystoscopy;
Additional procedure: None;
Times additional procedure was performed with procedure (percentage):
ASC: N/A;
Times additional procedure was performed with procedure (percentage):
Hospital outpatient department: N/A.
Medicare ASC procedure volume ranking: 13;
Procedure: Colon cancer screening, not high-risk individual;
Additional procedure: Colonoscopy, with diagnosis;
Times additional procedure was performed with procedure (percentage):
ASC: 21;
Times additional procedure was performed with procedure (percentage):
Hospital outpatient department: 38.
Medicare ASC procedure volume ranking: 14;
Procedure: Paravertebral injection, lumbar, sacral, single level;
Additional procedure: Spine injection, lumbar, sacral;
Times additional procedure was performed with procedure (percentage):
ASC: 14;
Times additional procedure was performed with procedure (percentage):
Hospital outpatient department: 13.
Medicare ASC procedure volume ranking: 14;
Procedure: Paravertebral injection, lumbar, sacral, single level;
Additional procedure: Paravertebral injection, lumbar, sacral, add-on;
Times additional procedure was performed with procedure (percentage):
ASC: 86;
Times additional procedure was performed with procedure (percentage):
Hospital outpatient department: 79.
Medicare ASC procedure volume ranking: 15;
Procedure: Colorectal screening for high-risk individual;
Additional procedure: Colonoscopy, with diagnosis;
Times additional procedure was performed with procedure (percentage):
ASC: 24;
Times additional procedure was performed with procedure (percentage):
Hospital outpatient department: 49.
Medicare ASC procedure volume ranking: 16;
Procedure: Carpal tunnel surgery; Additional procedure: None;
Times additional procedure was performed with procedure (percentage):
ASC: N/A;
Times additional procedure was performed with procedure (percentage):
Hospital outpatient department: N/A.
Medicare ASC procedure volume ranking: 17;
Procedure: Repair of hammertoe;
Additional procedure: Release of foot contracture;
Times additional procedure was performed with procedure (percentage):
ASC: 16;
Times additional procedure was performed with procedure (percentage):
Hospital outpatient department: 15.
Medicare ASC procedure volume ranking: 17;
Procedure: Repair of hammertoe;
Additional procedure: Correction of bunion;
Times additional procedure was performed with procedure (percentage):
ASC: 11;
Times additional procedure was performed with procedure (percentage):
Hospital outpatient department: 13.
Medicare ASC procedure volume ranking: 17;
Procedure: Repair of hammertoe;
Additional procedure: Correction of bunion with metatarsal osteotomy;
Times additional procedure was performed with procedure (percentage):
ASC: 18;
Times additional procedure was performed with procedure (percentage):
Hospital outpatient department: 20.
Medicare ASC procedure volume ranking: 18;
Procedure: Injection foramen epidural, lumbar, sacral, add-on;
Additional procedure: Injection foramen epidural, lumbar, sacral,
single level;
Times additional procedure was performed with procedure (percentage):
ASC: 99;
Times additional procedure was performed with procedure (percentage):
Hospital outpatient department: 99.
Medicare ASC procedure volume ranking: 19;
Procedure: Upper GI endoscopy, with insertion of guide wire;
Additional procedure: Upper GI endoscopy, with biopsy;
Times additional procedure was performed with procedure (percentage):
ASC: 50;
Times additional procedure was performed with procedure (percentage):
Hospital outpatient department: 39.
Medicare ASC procedure volume ranking: 20;
Procedure: Spinal injection, cervical or thoracic;
Additional procedure: None;
Times additional procedure was performed with procedure (percentage):
ASC: N/A;
Times additional procedure was performed with procedure (percentage):
Hospital outpatient department: N/A.
Source: GAO analysis of CMS data.
Note: N/A = not applicable.
[End of table]
[End of section]
Appendix IV: Comments from the Centers for Medicare & Medicaid
Services:
Department Of Health & Human Services:
Centers for Medicare & Medicaid services:
Administrator:
Washington, DC 20201:
Date: Oct 24 2006:
To: Kathleen M. King:
Director, Health Care Government Accountability Office:
From: Leslie V. Norwalk, Acting Administrator:
Subject: Government Accountability Office's Draft Report: "Medicare:
Payment for Ambulatory Surgical Centers Should Be Based on the Hospital
Outpatient Payment System" (GAO-07-86):
Thank you for the opportunity to review and comment on the Government
Accountability Office's (GAO) draft report entitled, "MEDICARE: Payment
for Ambulatory S surgical Centers Should Be Based on the Hospital
Outpatient Payment System."
Our goal in reforming the ambulatory surgical center (ASC) payment
system is :o help Medicare beneficiaries receive the outpatient care
they need in the most appropriate setting by eliminating payment
differences that inappropriately favor one outpatient setting over
another°r and that may add to Medicare costs. The Medicare Prescription
Drug, Improvement, and Modernization Act of 2003 (MMA) requires the
Secretary to implement a revised payment system I or surgical services
furnished in ASCs no later than January 1, 2008, taking into account
the recommendation of this GAO report, The MMA also requires that the
revised payment system in its first year of implementation result in
the same aggregate amount of expenditures as the current system.
GAO Recommendation:
The Administrator of the Centers for Medicare & Medicaid Services (CMS)
implement a payment system for procedures performed in ASCs based on
the outpatient prospective payment system (OPPS). The Administrator
should take into account the lower relative c cost of procedures
performed in ASCs compared to hospital outpatient departments in
determining ASC payment rates.
CMS Response:
Consistent with the recommendation and the MMA requirements, on August
8, CMS proposed a revised ASC payment system based on the OPPS that
would provide for more appropriate payment for the broad range of
services that ASCs can provide. The proposed revisions more closely
align payments in the ASC and OPPS payment systems, to encourage the
most efficient and appropriate choices of outpatient settings for
ambulatory surgical procedures.
We thank GAO for their analysis and are pleased that the recommendation
is consistent with our proposed revisions to the ASC payment system for
calendar year 2008.
[End of section]
Appendix V: GAO Contact and Staff Acknowledgments:
GAO Contact:
Kathleen King, (202) 512-7119 or kingk@gao.gov:
Acknowledgments:
In addition to the contact named above, key contributors to this report
were Nancy A. Edwards, Assistant Director; Kevin Dietz; Beth Cameron
Feldpush; Marc Feuerberg; and Nora Hoban.
FOOTNOTES
[1] Omnibus Reconciliation Act of 1980 (ORA), Pub. L. No. 96-499, §
934(b), 94 Stat. 2599, 2637 (codified, as amended, at 42 U.S.C. §
1395l(i)).
[2] ASC payment rates have been periodically updated for inflation.
[3] MMA, Pub. L. No. 108-173, § 626(d), 117 Stat. 2066, 2319-2320
(codified at 42 U.S.C. § 1395l note).
[4] For the remainder of the report, we refer to these as the top 20
procedures.
[5] For Medicare payment purposes, the bills that providers submit for
payment are referred to as claims.
[6] We included services delivered the day after a procedure to allow
for the inclusion of services, such as laboratory services, that may
not be provided immediately following the procedure.
[7] ORA, Pub. L. No. 96-499, § 934, 94 Stat. 2599, 2637-2639 (codified,
as amended, at 42 U.S.C. § 1395l(i)).
[8] Balanced Budget Act of 1997, Pub. L. No. 105-33, § 4523, 111 Stat.
251, 445-450 (codified, as amended, at 42 U.S.C. § 1395l(t)).
[9] There are a limited number of implantable devices that are
considered new technology devices for which the hospital outpatient
department may bill and receive separate payment.
[10] ORA, Pub. L. No. 96-499, § 934(b), 94 Stat. 2599, 2637 (codified,
as amended, at 42 U.S.C. § 1395l(i)). Congress later changed this
requirement to an annual review and update of ASC payment rates.
Omnibus Budget Reconciliation Act of 1986, Pub. L. No. 99-509, §
9343(b), 100 Stat. 1874, 2040 (codified, as amended, at 42 U.S.C. §
1395l(i)).
[11] Social Security Act Amendments of 1994, Pub. L. No. 103-432, §
141, 108 Stat. 4398, 4424-4426 (codified, as amended, at 42 U.S.C. §
1395l(i)).
[12] 63 Fed. Reg. 32,290, 32,307-308 (June 12, 1998).
[13] MMA, Pub. L. No. 108-173, § 626(b), 117 Stat. 2066, 2319
(codified, as amended, at 42 U.S.C. § 1395l(i)).
[14] 71 Fed. Reg. 49,505 (Aug. 23, 2006).
[15] Hospitals set charges for their services that are generally above
the costs of the services. A cost-to-charge ratio is a calculation that
describes the cost and charge relationship for services provided in a
specific hospital.
[16] The Medicare, Medicaid, and SCHIP Balanced Budget Refinement Act
of 1999, Pub. L. No. 106-113, App. F, § 201(h), 113 Stat. 1501A-321,
1501A-340 (codified, as amended, at 42 U.S.C. § 1395l(t)).
[17] In our analysis, we included only those services billed with a
procedure at least 10 percent of the time in either the ASC or hospital
outpatient department setting.
[18] APCs' median costs are determined from the costs of all of the
services included within the APC.
[19] If the median cost of an ASC procedure and the median cost of its
respective APC group were equal, the cost ratio would be 1.00.
[20] We included services delivered the day after a procedure to allow
for the inclusion of services, such as laboratory services, that may
not be provided immediately following the procedure.
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