Kathy Bryant's Year in Review

Two big changes confronted ASCs on January 1, 2008. Medicare began paying ASCs based on a new payment system that varied greatly from its predecessor, and the new ASC Association, formed through the merger of the two previous national ASC Associations, began advocating for ASCs in Washington, D.C., and in forums across the country. As 2008 draws to a close, a review of the year is warranted.

Medicare payment system
The question many people are asking is how did ASCs actually fare under the new Medicare payment system. What did this massive change really mean to ASCs? The obvious answer is that it depends on the case mix of your ASC. Although the new rates resulted in decreases in payment for nine of the 10 highest volume ASC procedures, the impact on specific ASCs depended upon their case mix. The impact was somewhat muted by the use of a four-year phase-in period, but, nonetheless, gastroenterology payments will decrease by 5 percent in 2008. ASCs with high percentages of procedures with increasing payments could offset the decreases in gastroenterology and pain management. But it is hard to see how a system that resulted in decreases in payment rates for nine of the ten highest volume procedures would have an overall positive impact on the industry.

To determine whether ASCs are providing Medicare beneficiaries with more services in areas where the payments are increasing and whether ASCs are moving away from areas where large cuts were made, we will need to wait until Medicare volume data reports for 2008 are available.

One bit of evidence suggesting that this new payment system is pushing things in the wrong direction is the increase in ASCs that are becoming hospital outpatient departments (HOPD). Since the details of the new system were announced, calls to the ASC Association inquiring about becoming an HOPD have increased. With each visit I make to a state, I hear about an ASC that has been sold to a hospital. Of course, Medicare is not the only factor, but there is increasing interest in these transactions since the new payment system was announced. Seeing payments drop from more than 86 percent of HOPD payments in 2003 to 63 percent in 2008, and to a proposed 59 percent in 2009, many fear that their ASCs will not be viable in the long run. The real loser when this happens is not ASCs but the patients who lose access to ASCs and who have to pay more for their care. In the long run, we will all pay more if competition disintegrates or disappears entirely.

The Congressionally imposed six-year freeze on ASC payment rates has kept ASC payment rates artificially low. Had ASC payments been tied to hospitals in 2003, the year before the freeze began, ASCs would have received more than 80 percent of hospital payments. In 2008, because of five years of frozen ASC rates, while HOPD rates increased annually, the budget neutral rate was only 65 percent. In the absence of this freeze, Medicare still would have saved money on ASC services, and there would have been only moderate cuts in gastroenterology and pain management rather than the huge reductions occurring now.

Medicare recently proposed ASC payment rates and policies for 2009. The current proposal results in payments that are lower than was expected, primarily because of something called secondary rescaling. This occurs when CMS uses relative weights that are 2.47 percent less than those used for determining HOPD payments to calculate ASC payments. Combined with the fact that HOPDs are getting a 3 percent inflation update and ASCs are receiving none, this results in ASC payments dropping from 63 percent of HOPD rates to 59 percent.

The ASC Association has been aggressively fighting these cuts. We have had meetings with CMS, the Office of Management and Budget and the White House. We have shared concerns regarding these changes and ways ASCs can help Medicare achieve its goals by providing cost-effective and high quality care. We shared our willingness to document this through quality reporting. Our allies in Congress have also been sharing their concerns with the direction that CMS is moving. As we go to press, we don’t know whether we will succeed or fail in this endeavor.

Conditions for Coverage
Medicare’s proposed changes to the Conditions for Coverage for ASCs may be finalized by the end of this year. The CMS staff is attempting to finalize these changes as part of the final payment rule for 2009. A major concern with this proposed rule is its proposal to change the definition of “ASC” in a way that would prohibit ASCs from providing care that requires an overnight stay. Under current definitions, ASCs can provide overnight care, if allowed by state law, to patients other than Medicare patients. CMS has proffered no explanation for this sudden proposed abandonment of this decades-old definition. The ASC Association has aggressively fought this proposed change during meetings with political and career staff at CMS, staff at the Office of Management and Budget and White House staff. In addition, we have worked with members of Congress who have sent letters to CMS on our behalf. State ASC associations have also joined us in fighting the change in Medicare’s definition of an ASC.

Other changes in the Conditions for Coverage would add three new conditions affecting patients’ rights, infection control and patient admission assessment and discharge, and would more than double the number of standards for Medicare-certified ASCs. Although the proposal introduces a huge increase in requirements, many of the changes reflect what good quality ASCs are already doing. Unfortunately, the specificity of the proposed requirements is likely to require most ASCs to make at least some changes in policies or documentation, some of which will serve no purpose other than to add to the bureaucracy involved. As a result, ASCs should be vigilant for the announcement of the final regulations and review them quickly with an eye toward the changes they need to make to comply. A copy of the proposed changes is available at www.ascassociation.org/redlinecfc.pdf. Because the exact nature of any changes that may be required are still unknown, ASCs should wait until the final regulation is released before making changes.

The ASC Association is arguing that ASCs should have 120 days to implement the new changes in standards. It is unknown whether or not CMS will allow this.

Quality reporting
Although ASCs and others had expected CMS to begin an ASC quality reporting system in 2009, CMS did not propose such a system in the proposed rule for 2009 payments. Instead, CMS said, “While we believe that promoting high quality care in the ASC setting through quality reporting is highly desirable and fully in line with our efforts under other payment systems, we believed that the transition to the revised payment system in (calendar year) 2008 posed such a significant challenge to ASCs that it would be most appropriate to allow some experience with the revised payment system before introducing other new requirements.”

The Ambulatory Surgery Foundation and the ASC Association have worked to assure that ASCs were prepared to begin quality reporting in 2009. Through a leadership role in the ASC Quality Collaboration, the Foundation assisted in developing appropriate ASC quality measures and a system for reporting such data to CMS. The ASC Association examined the use of measures identified by the ASC Quality Collaboration in ASCs through its Outcomes Monitoring Project and, ultimately, tested how well ASCs were doing with the measures. This exercise demonstrated that ASCs are already collecting quality data. Both the ASC Association and the ASC Quality Collaboration have met with government officials to promote the adoption of quality measures and a reporting system that will provide meaningful information to patients without overburdening ASCs.

ASC Association advocacy
With increasing advocacy in the nation’s capital, the ASC industry was able to put its ideas about what a new Medicare payment system ought to incorporate into a concrete proposal embodied in legislation. Introduced by Representatives Kendrick Meek (D-FL) and Wally Herger (R-CA), and Senator Mike Crapo (R-ID), this legislation defined a payment system that would provide reasonable payments to ASCs while saving the Medicare program and its beneficiaries money. The legislation also would expand Medicare beneficiaries’ access to ASCs. By the end of the 110th Congress, this legislation had a total of 70 members of Congress demonstrating support of the provisions. ASCs have never had a standalone piece of legislation like this before, much less this kind of support in Congress.

Although this legislation was like thousands of other bills that weren’t enacted in this Congress, this legislation advanced our cause. As CMS put together a proposal for Medicare’s new ASC payment system, it reviewed this legislation as one way of determining ASC payments. It took some concepts from this legislation and adopted the idea that the ASC system should be based upon the HOPD system. Unfortunately, CMS did not adopt the entire package, so most of the problems with the ASC payment system used by CMS today are occurring because CMS failed to follow the legislation’s blueprint more closely and, instead, introduced convoluted payment mechanisms such as using different relative weights and inflation updates for ASCs and HOPDs.

The legislation has also supported ASCs by focusing Congressional attention on ASCs in a way it has not before and creating a cadre of members of Congress who are now recognized leaders on ASC issues. In 2003, when Congress enacted the six-year freeze on ASC rates, there were no specific members of Congress on the lookout for what was happening to ASCs. Thus, the six-year freeze was slipped into a piece of legislation and enacted without objection from Congressional insiders. Although ASCs have no ironclad assurances that future legislation will not negatively impact ASCs, what is clear is that ASCs now have highly regarded, outspoken advocates on Capitol Hill who will stand up and fight for the industry. This is a huge step forward for ASCs.

These leaders are also sharing their thoughts with CMS. This past year, several members of Congress have weighed in with the current White House administration on proposed changes to the payment system and Medicare’s Conditions for Coverage. These leaders are critical to advancing our cause in the next Congress and the next administration. The bottom line is that the ASC industry has a good foundation upon which to build a solid future.

-- Kathy Bryant is the president of the ASC Association and leads the activities of the nation's largest ASC membership association. Ms. Bryant also serves as president of the Ambulatory Surgery Foundation. Learn more about the ASC Association at www.ascassociation.org.