Story updated at 11:35 a.m. EDT
HHS' Office of Inspector General is using a congressionally mandated report to repeat its call for Medicare to pay hospitals the same as it pays ambulatory surgery centers for procedures on low-risk patients.
But the CMS and hospital trade groups think the OIG is on the wrong track. Even the national association representing ASCs is wary.
The policy change could save $15 billion over six years, the OIG estimates, but would require legislation allowing the CMS to cut the rates for low-risk surgeries without having to increase other payment rates to make the policy change budget-neutral as required by law.
The recommendation is by far the biggest-ticket item in the OIG's annual list of the top 25 recommendations that HHS has not carried out. Medicare beneficiaries would save between $2 billion and $4 billion in reduced copayments if Medicare changed the policy, the OIG said. The agency's Compendium of Unimplemented Recommendations (PDF) was published Tuesday.
The OIG first made the recommendation regarding payment rates for low-risk surgeries in April 2014. The CMS, however, declined to take the idea to Congress, noting in a written response to the OIG that President Barack Obama did not seek such legislation in his budget request.
The CMS also said the idea "may raise circularity concerns" because ASC rates are based on a conversion factor from the outpatient prospective payment system for hospitals.
Lowering those outpatient rates, that is, could affect the surgical center rates and create a kind of downward spiral.
Finally, the CMS said, the inspector general's report failed to offer clinical criteria to distinguish which patients could be treated in ASCs rather than hospital outpatient settings.
The proposal has drawn the ire of hospitals.
Community hospitals have argued that smaller surgical facilities that specialize in same-day surgeries are “cherry-picking” the easiest, most profitable procedures that larger hospitals depend on to balance out the money they lose operating emergency departments and other expensive programs and staying open 24/7.
“If we want the clinical capabilities of hospitals in this country you can't pay an ASC or doctor's office rate,” said Erik Rasmussen, the American Hospital Association's vice president for legislative affairs. “You can't expect to have hospital-level care and pay two-thirds or one-third of what those payments are.”
Hospitals already have, on average, a negative 12.4% margin for outpatient surgeries, Rasmussen said, citing the most recent figures from the Medicare Payment Advisory Commission.
Steven Speil, executive vice president for health finance and policy with the Federation of American Hospitals, called the recommendation a “short-sighted” proposal that would have “devastating” consequences for hospitals and their patients.
“The proposal ignores fundamental functional and cost structure differences between hospitals and ASCs and could undermine the ability of hospitals to provide essential community services,” Speil said.
Ambulatory Surgery Center Association CEO William Prentice didn't exactly praise the proposal.
“Clearly, ASCs can save the Medicare program billions of dollars through better payment policies,” Prentice said in a statement. “With regard to the OIG site-neutral recommendation, the devil is in the details. Determining the correct reimbursement across settings that can assure both quality and access will require time and attention.”
Prentice said the CMS should focus on ending the disparity between the rates that is caused by the CMS using different measures of inflation to update payment rates each year, an issue he said would be addressed in legislation that will be introduced in Congress soon.
Now, on average, Medicare reimburses ASCs at 55% of the amount paid to hospital outpatient departments, according to the ambulatory association.
In 2008, Congress expanded the number of services covered by Medicare at ambulatory centers.
The OIG acknowledges that not all procedures can be performed in an ambulatory setting because of risks to certain patients. But the report cites federal data indicating that 68% of hospital patients age 65 and older in 2010 were considered to either have no-risk medical profiles or to be at low-risk for procedures performed in an ambulatory setting.
The OIG said the CMS is in the best position to resolve the barriers the agency described in its response. The CMS also has the authority to develop legislative proposals and has done so in the past with regard to OIG recommendations.
“Considering the potential savings identified in our report, we maintain that CMS should take the necessary steps to implement our recommendations,” the April OIG report concluded.
Among other recommendations in the report, OIG urges the CMS to review the claims of clinicians whose Medicare payments exceed a certain amount to help identify possible improper payments. About 2% of clinicians, the report notes, were responsible for nearly 25% of all Part B payments between 2008 and 2011.
Follow Lisa Schencker on Twitter: @lschencker
