OIG: CMS Could Save $15B by Reducing Outpatient Payment Rates to ASC Levels

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By James Swann  

April 17 --The Centers for Medicare & Medicaid Services could save $15 billion between 2012 and 2017 by reducing hospital outpatient payment rates for ambulatory surgical center (ASC)-approved procedures to ASC payment rates, which are frequently lower, according to a report from the Department of Health and Human Services Office of Inspector General released April 17.

The report, “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” (A-05-12-00020), also said Medicare beneficiaries “could potentially save an additional $2 billion to $4 billion during CYs 2012 through 2017 if CMS reduces outpatient department payment rates for ASC-approved procedures to ASC payment levels.”

The OIG said the reduction in outpatient payment rates would apply to procedures performed on low-risk or no-risk patients.

However, the savings would be negated unless legislative changes were made allowing the CMS to set the payment rates in a non-budget neutral fashion.

Under budget neutrality requirements in Section 1833(t)(9)(B) of the Social Security Act, any decreases in payment rates for some procedures must be offset by higher rates for other procedures.

Hospital outpatient payment rates are determined by the Outpatient Prospective Payment System (OPPS), while ASC rates are determined by the ASC Prospective Payment System (ASCPPS), which was implemented in Jan. 1, 2008.

“With certain exceptions, the calendar year (CY) 2008 ASC payment rates were about 67 percent of the corresponding OPPS payment rates, which reflects the lower cost of furnishing services in the ASC setting,” the OIG said.

Rate Differential

The OIG said the CMS already saved $7 billion between 2007 and 2011 due to the payment rate differential between outpatient procedures and procedures performed at ASCs,

It said the CMS could save $12 billion between 2012 and 2017 simply “because the ASC rates are frequently lower than outpatient department rates for outpatient surgical procedures performed at ASCs.”

Correspondingly, Medicare beneficiaries also saved $2 billion between 2007 and 2011 because of the rate differential, the report said.

The OIG said the CMS would not have to make any changes to payment rates to achieve the savings predicated solely on the payment rate differential, whereas the additional savings from lowering the outpatient payment rates would need to be accompanies by the legislative change to the budget neutrality requirements.

While the OIG report based its additional savings calculations on the CMS lowering outpatient payment rates for ASC-approved procedures to ASC levels, “CMS could lower rates to any level it deemed reasonable.”

OIG Recommendations

The OIG recommended that the CMS ask Congress to exempt lowering the outpatient payment rate from meeting budget neutrality requirements.

If Congress did exempt the reduced payment rates from budget neutrality requirements, the OIG said the CMS should reduce the outpatient payment rate for ASC-approved procedures on patients with little to no-clinical risks.

The OIG said the CMS should also create a payment methodology that would maintain the non-reduced outpatient payment rate “for ASC-approved procedures that must be provided in an outpatient department because of a beneficiary's individual clinical needs.”

The CMS didn't agree with any of the OIG's recommendations and said that legislation requesting a budget neutrality exemption is not in President Obama's current budget proposal.

The CMS also said the report “suggests no specific clinical criteria to distinguish patients that can be adequate ly treated in an ASC relative to the hospital outpatient setting that would be needed to act on these recommendations.”

In response to the CMS comments, the OIG it continues “to recommend that CMS draft, and submit for review, a legislative proposal that would exempt the reduced expenditures as a result of lower OPPS payment rates from budget neutrality adjustments for consideration for inclusion in future budget and legislative agendas.”

To contact the reporter on this story: James Swann in Washington at jswann1@bna.com

To contact the editor responsible for this story: Ward Pimley at wpimley@bna.com

The OIG report is at http://oig.hhs.gov/oas/reports/region5/51200020.pdf.

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