OIG report

Ambulatory surgical centers save Medicare, beneficiaries billions.

By Adele Merestein

In April, 2014, the U.S. Department of Health and Human Services Office of the Inspector General (OIG) released Report A-05-12-00020 entitled “Medicare and Beneficiaries Could Save Billions If CMS Reduces Hospital Outpatient Department Payment Rates For Ambulatory Surgical Center-Approved Procedures To Ambulatory Surgical Center Payment Rates” (“Report”)—a Report title which is self-explanatory.

In 1982, Medicare began covering services provided in ambulatory surgical center (ASC) because the Centers for Medicare & Medicaid Services (CMS) recognized that some surgical services provided on an inpatient basis could be safely performed in less intensive and less costly settings, such as ASCs and outpatient departments. ASC prospective payment system (ASCPPS) rates are frequently lower than outpatient prospective payment system (OPPS) rates, resulting in savings for Medicare.

Both the OPPS and ASCPPS must be budget neutral. Congress incorporated budget neutrality into these payment systems to ensure that total Medicare payments would not increase or decrease because of fluctuations within the systems themselves, other than the yearly adjustment for inflation.

Findings of the OIG
In a study commissioned by Congress, the OIG assessed the impact on total Medicare expenditures of providing surgical services in an ambulatory surgical center (ASC) as compared with an outpatient department. Since Medicare ASC rates generally are lower than hospital outpatient department rates for the same procedures, Medicare saves when surgical procedures that do not pose significant risk to patients are performed in an ASC instead of in an outpatient setting. The review subject of the Report quantifies these savings. The OIG found:

1. During CY 2007 through 2011, Medicare saved $7 billion for surgical procedures performed in ASCs instead of in other outpatient settings. It stands to save $12 billion for CY 2012 through 2017.

2. Medicare could potentially save up to an additional $15 billion for CY 2012 through 2017, if CMS reduces outpatient department payment rates to ASC payment levels for ASC-approved procedures performed in outpatient departments on no-risk to low-risk beneficiaries. The OIG consulted with the Agency for Healthcare Research and Quality to obtain patient risk statistics and used the risk profiles to estimate the potential additional savings possible if payment rates for ASC procedures performed in outpatient departments are lowered to ASC rates.

3. Benef iciaries have saved and could cont inue to save bi l lions of dollars attributable to reduced cost sharing amounts.


The OIG made the fol lowing recommendations to CMS:
1. CMS should draft and submit for review a legislative proposal that would exempt the reduced expenditures attributable to reduced OPPS payment rates, from budget neutrality adjustments. This would be necessary because both the OPPS and the ASCPPS are required by statute to be budget neutral to insulate both payment systems from Medicare payment fluctuations.

2. If a budget neutrality exemption for the reduced expenditures is secured, CMS should reduce OPPS payment rates for ASC-approved procedures performed in outpatient departments on beneficiaries with no-risk or low-risk clinical needs.

3. CMS should “develop and implement a payment strategy” providing for the continued standard OPPS payment rate for beneficiaries whose clinical needs require their ASC-approved procedures to be performed in an outpatient department for safety and quality reasons. CMS had an opportunity to review a draft report and did not concur with the OIG’s recommendations noting, first, that such a legislative initiative to change the payment system is not currently included in the President’s budget. Further, CMS was concerned that the recommended changes introduced a “circularity” problem insofar as most ASC payment rates are based on the OPPS payment rates that the OIG is recommending that CMS reduce.

Finally, CMS was concerned that the OIG did not provide specific clinical criteria to distinguish patient risk levels. The OIG countered that CMS could propose budget neutrality legislation for future legislative initiatives and that, historically, it has done so based on OIG recommendations. As to CMS’s concerns on circularity and the absence of specific patient risk criteria, the OIG effectively responded that CMS should “take the necessary steps” to implement OIG’s recommendations, regardless.

The Report can be found at https://oig. hhs.gov/oas/reports/region5/51200020.pdf.

Adele Merestein is an attorney with Hall Render Killian Heath & Lyman in Indianapolis.