Medicare could save $1.1 billion if it changed its reimbursement rules to standardize payments for outpatient services, according to a report from the Office of the Inspector General of HHS.
Outpatient hospital rates are higher than ambulatory surgery center rates for the same service in some 66% of cases, the report concludes.
The OIG recommends that CMS ask Congress for the authority to set consistent payment rates.
"In the absence of a compelling reason for a payment differential, the amount Medicare pays for a procedure should be based on the service, not the setting," says HHS Inspector General Janet Rehnquist in a statement.
Her office estimates that lowering higher hospital outpatient reimbursement rates to ASC levels could save $1 billion a year. Another $100 million in savings could come from lowering some ASC rates that are higher than outpatient hospital payments.
Hospitals likely would be hardest hit if Congress allows the reimbursement-rule change. Medicare paid hospitals $17.7 billion for outpatient services in 2001 while ASCs were paid $1.6 billion.
"It's unfortunate they would make such drastic recommendations without looking at the full implications of those changes," says Don May, vice president for policy at the American Hospital Association. "There are real compelling reasons why hospitals should be paid more. We're there 24 hours a day, seven days a week, 365 days a year. The outpatient center is where the emergency room is, where you have trauma care, burn units, stand-by capacity and services to protect the community that would be at risk if outpatient hospital payments were further reduced."
May says that with current Medicare payments to hospitals covering only 83% of costs, almost all hospitals are losing money providing outpatient care to Medicare patients.
For their part, representatives of ASCs aren't entirely convinced the recommendation will be much better for surgery centers.
"If the impact of the report is to further erode the interests of freestanding surgery centers to provide access to Medicare beneficiaries, it will only exacerbate the access situation occurring already in physician practice areas with doctors no longer taking new Medicare patients," says Craig Jeffries, executive director of the American Association for Ambulatory Surgery Centers.
"Fortunately, this may be a catalyst for the hospital and the ASC sectors to work together to address a misperception by the OIG on the nature and scope of services provided in each of those alternate settings," Jeffries says. "It certainly is a catalyst for further discussion between AAASC and CMS regarding a responsible transition to new, re-based rates for surgery centers."
The OIG conclusions were based on a study of 453 of about 2,500 procedure codes for outpatient services that could be performed in either type of facility. Those codes are used for about 95% of the volume billed in 1999.
Changes in payments for eye procedures would account for about half of the estimated savings, or $466 million. More than $330 million of that would be saved on cataract surgeries that insert an intraocular lens, a procedure for which Medicare pays outpatient hospital departments about $1,333 compared to $949 paid to ASCs.
Adjusting charges for endoscopies would reap another $233 million in savings, the report says.