Medicare Reimbursement Changes for ASCs

Here is a nice summary of recent changes to ASC reimbursement by Medicare authored by Don Barbo, dbarbo@hsskgroup.com:

Favorable changes:

1. Expansion of approved procedures from approximately 2,500 to approx 3,300

2. Linking of ASC procedures to the hospital fee schedule and paying ASC's approximately 62% of the hospital APC rate

3. Expansion of "grouper" categories from 9 to 221

Unfavorable changes:

1. Discontinuing reimbursing for any implantables (prosthetic devices & durable medical equipment) surgically inserted at the ASC

2. Office-based procedures: reimbursement for procedures that could be performed in a physician office setting instead of an ASC will be limited to the lower of the physician fee schedule or the revised ASC fee schedule. Procedures on the CMS list as of 1/1/07 would be exempt from this list. However, nearly 360 procedures could be subject to the payment cap.

Timing of changes:

1. Transition: the revised ASC payment system would be phased in beginning in 2008, using a pymt formula of 50% of the new 2008 pymt and 50% of the 2007 payment (based on the current system). In 2009, all payments would be based on the new payment system.

2. Payment Cap: the Deficit Reduction Act of 2005 imposed a payment cap for ASCs which would limit the reimbursement paid to the ASC at the Hospital outpatient department rate for a similar procedure. This could affect approximately 280 procedures. This will be implemented 1/1/07.

Take aways:

As is generally the case with Medicare changes, there are some favorable changes, which will be offset by some negative changes. Some specialties (depending on their procedure mix) will be winners while others will be losers.

The final rule won't be published until the Spring of 2007 and lots of changes could occur between now and then. We've all seen scheduled Medicare declines in physician reimbursement of almost 4% somehow become 2% increases once industry feedback and politicians get busy. So trying to definitely lock in the exact impact will be impossible. You will be chasing a moving target.

Also, alot of these changes have been discussed over the last several months (if not years) so I think its fair to say that the industry players have factored these contemplated changes into their risk rates, and will continue to do so, as should be reflected in more current transactions.

Clients need to be aware of the proposed changes and how they may be impacted, particularly if they are considering new start-ups.