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Surgery centers battle proposed Medicare cuts

Lack of data makes judging payment adequacy difficult.

By Markian Hawryluk, amednews staff. Jan. 20, 2003.

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Washington -- Ambulatory surgical centers may be victims of their own success. Booming growth in the number of ASCs has prompted a congressional advisory panel to recommend restraining Medicare payments to the centers in future years.

The Medicare Payment Advisory Commission has drafted recommendations for Congress to freeze ASC Medicare payment in fiscal 2004 and to cap ASC rates at the hospital outpatient payment levels for the same services. Surgery center groups have said the cuts are unwarranted and that MedPAC has no evidence that payments exceed costs.

Most ASCs are not as sophisticated in tracking their costs as hospitals. Although the Centers for Medicare & Medicaid Services surveyed ASCs on their costs in 1994, the agency had to extrapolate data for about 60% of the codes. Many of the centers did not collect data in the way needed to respond to the CMS survey.

The agency itself questioned the accuracy of the data and never implemented new rates based on the survey. Current ASC rates are still based on 1986 cost data.

That has left MedPAC with little hard evidence on which to judge the adequacy of today's payment rates.

"Because the last survey of ASC costs was conducted in 1994, we have no recent data on costs," said MedPAC analyst Ariel Winter. "Thus, we would look at market factors in judging payment adequacy."

Those factors include the number of new centers entering the market, growth in the volume of services provided and ASCs' access to capital. All those factors suggest healthy payment rates. Total Medicare payments doubled from $800 million in 1996 to $1.6 billion in 2001, and the number of Medicare-certified ASCs has doubled since 1991.

"These market factors lead us to conclude that Medicare payments to ASCs are more than adequate and that a reduction in the current rate might be warranted," Winter said.

Surgery centers disagree

ASC groups counter that the number of centers and the volume of services they provide have grown for all the right reasons. ASCs give greater flexibility in scheduling procedures and have saved Medicare billions of dollars, said Kathy Bryant, executive director of the Federated Ambulatory Surgery Assn. Advances in anesthetics and technology have expanded the types of services that can be done safely in ASCs, contributing to the volume growth, she said.

"Assuming that growth in an industry is somehow inherently bad makes little sense," Bryant said.

The American Assn. of Ambulatory Surgical Centers also questioned MedPAC's reasoning. The group said staff presentations had misled commissioners regarding the level of updates ASCs have received over the years. ASCs have received about 1% updates or less from 1997 to 2002, and only in 2003 have they received a true inflation update, said AAASC's legal counsel, Eric Zimmerman.

"I think everybody agrees that these rates are outdated and more current rates are desirable," Zimmerman said. "But that presupposes that CMS can actually collect the data and turn it into rates that are credible and that everybody has confidence in."

Nevertheless, the commissioners are expected to vote on a recommendation in January to eliminate the 1.8% update they would otherwise recommend for ASCs in fiscal 2004. It still would be up to Congress whether to accept the recommendation.

MedPAC also may opt to recommend that Congress prohibit ASC rates from exceeding hospital outpatient rates for the same services. MedPAC Commissioner Glenn Hackbarth said that because hospital-based outpatient departments face increased regulation and a riskier case load, they merit higher payment levels than freestanding ASCs.

Payments for eight of the 10 most common procedures performed in surgery centers in 2001 were higher in ASCs than in hospital outpatient departments. Based on 2001 reimbursement rates and volumes, the cap on payment would reduce Medicare ASC spending by about 7%.

Surgery center representatives do not believe it is reasonable. Bryant said hospitals receive additional payments for radiology services and new technology pass-throughs that are not available to ASCs.

FASA says a new survey, pending approval by the Bush administration, will better gauge current costs.

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