Killing them softly with their regs. Thats the effect that the CMS new Medicare payment system will have on many physician-owned ambulatory surgery centers. Under the system, which takes effect in fiscal 2008, Medicare will pay free-standing ASCs 65% of what it pays hospital-operated ASCs. Thats compared with 83% under the old system. But the drop to 65% will be phased in over four years through fiscal 2011, as reporter Jennifer Lubell notes in this issues feature story. Thats like losing all your money slowly during a four-day trip to Las Vegas rather than in one bad session at the craps table your first night in town.
Were not sure whats worse, and many physician ASC owners probably are feeling the same way. The government justifies the payment gap because hospitals incur higher overhead costs in operating their ASCs than do free-standing ASCs, many of which are run by physicians.
That may be true but not to the extent of justifying being paid 35% less. The consequences for many free-standing ASCs and patients will be dire. If theyre unable to adjust to the pay decline over the four-year phase-in, either by lowering their operating costs or increasing their revenue from other sources, some will close. Others will stop seeing Medicare patients altogether.
In either case, those Medicare patients will have no choice but to use their local hospital for outpatient surgery. That will drive up patient volume at those higher-cost facilities, and Medicare expenditures on ASC services will increase rather than decreasethe exact problem that the new payment system was supposed to fix. The good news is, the physician lobby will have four years to fight the slide to 65% rather than four months.