Archive July 2019 XX, No. 7

Legal Update: Leveling the Payment Field for Surgery

Narrowing the reimbursement disparities between ASCs and HOPDs.

William Prentice

BIO

DIFFERENT INFLATION MEASURES
DIFFERENT INFLATION MEASURES For years, CMS has determined reimbursement rates for hospital outpatient departments and ASCs using 2 different measures of inflation, resulting in significant cost differentials.

Ambulatory surgery center payment rates as a percentage of the hospital outpatient department rates have steadily declined over the years. In 2003, procedures performed in an ASC setting cost Medicare 85% of the amount paid to HOPDs. That figure dropped to 55% in 2014 and today stands at 50%. It's important to note that ASC payments have not declined during this time. What has declined is, on average, the percentage of HOPD payments the ASC payments represent.

The No. 1 reason for the widening cost differentials? CMS uses separate inflationary measures to determine reimbursement rates for HOPDs and ASCs. For years, the Ambulatory Surgery Center Association (ASCA) has been asking Congress and CMS to update ASCs using the same inflation factors they used for HOPDs. And that finally happened this year — one of several recent successes in our efforts to level the reimbursement playing field between ASCs and hospitals.

1Same inflationary measures
Historically, CMS used an economic measure known as Consumer Price Index for All Urban Consumers (CPI-U) to update ASCs for inflation each year, but updated HOPDs using a different measure, the Hospital Market Basket. The differences between CPI-U and Hospital Market Basket are profound.

  • CPI-U. A broad measure that looks at the things we buy — heating oil and home prices, milk and bread, for example — and has very little to do with health care.
  • Hospital Market Basket. Looks at the costs of goods and services used in health care and reflects what the inflation in those have been.

As a result, most years — because medical inflation outpaces overall inflation — the gap between the inflationary rate that the hospitals received and what the ASCs got was getting larger and larger.

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