Landmark ASC Reform Legislation is Introduced

On Oct. 7, 2005, Wally Herger (R-CA), a Congress member from California’s second district, introduced legislation, the Ambulatory Surgical Center Payment Modernization Act, to establish a new ASC payment system and to reform the mechanism that the Centers for Medicare and Medicaid Services (CMS) uses to determine what procedures the agency reimburses ambulatory surgery centers (ASCs) for providing. The legislation was developed in concert with a broad coalition of members of the ASC community.

Orthopedic surgeon John Duggan, MD, president of the American Association of Ambulatory Surgery Centers (AAASC), remarks, “Our organization enthusiastically supports HR 4042 and applauds Congressman Herger for his efforts to ensure that Medicare beneficiaries are afforded access to the highest quality healthcare in the affordable ASC environment. The nation’s 4,200 ASCs are currently subject to payment and coverage rules that were established a quarter-century ago and that, for the most part, have never been updated. The result has been that Medicare beneficiaries have been unable to choose the ASC for hundreds of services that are currently available to non-Medicare patients in the ASC.”

HR 4042 mandates that CMS develop and implement a new payment system for ASCs by 2008, linking reimbursement to ASCs to 75 percent of the payment that hospital outpatient departments (HOPDs) would receive by Medicare for the same services provided to program beneficiaries. The bill also adopts a recommendation of the Medicare Payment Advisory Commission (MedPAC) that ASCs should be permitted to perform and receive facility payment for all outpatient surgical services, except for those procedures that require an overnight stay, or that the Department of Health and Human Services Secretary, Mike Leavitt, designates as posing a substantial risk to patient safety when furnished in an ASC. Special rules exist to avoid disruptive cuts in payments.

“This legislation is a win/win for the Medicare patient and the Medicare program,” Duggan adds. “It appropriately expands the array of services that are available to the beneficiary in the surgery center. For every surgical procedure performed in an ASC, the patient incurs a lower co-payment and the Medicare program spends less than if the procedure were furnished in the hospital. The ASC community looks forward to working with Representative Herger and his colleagues in the House and Senate to ensure passage of this important legislation this year.”

According to Kathy Bryant, executive vice president of the Federated Ambulatory Surgery Association (FASA), “introduction of this legislation is just the beginning of the process through which we expect to enact substantive ASC reform. Over the next few weeks, we will ask you to contact your representatives and senators and request that they add their names as cosponsors to the legislation. We can achieve victory only if we mount an aggressive grassroots campaign.”

According to FASA, HOPDs and ASCs should be paid comparable rates for procedures that are appropriately performed in both environments. The proposed legislation mandates that, by Jan. 1, 2008, CMS reimburse ASCs on the basis of a uniform percentage of the rates paid to HOPDs for the same service. The legislation proposes that: ASCs shall be paid 75 percent of the HOPD fee schedule amount for each covered service; ASCs will receive pass-through payments made to HOPDs for the additional costs of innovative medical devices, drugs, and biologicals and other additional payments HOPDs receive, except outliers, direct medical education payments; by being paid on the basis of the hospital system, ASCs will receive the same annual updates and other relevant adjustments as HOPDs; the beneficiary’s co-payment for services furnished in the ASCs will be 20 percent of the Medicare payment amount, as provided under current law. (In contrast, HOPD co-payment obligations vary and can exceed 40 percent.)

In order to ensure continuity in the delivery of care by ASCs to Medicare beneficiaries and stability within the ASC industry, the new payment system will be phased in over a four-year period, generally applying a blend of existing ASC and HOPD rates. Special payment rules exist to avoid disruptive cuts in payments.

The Moran Company recently documented that, in 2005, Medicare spent $1.1 billion less for surgical services furnished in ASCs than had such services been performed in HOPDs. The proposed legislation, incorporating appropriate payment policies and coverage rules, could reduce program and beneficiary costs by millions of dollars per year, according to FASA. The organizations adds that under an arbitrary process established a quarter-century ago, Medicare beneficiaries are denied access to care in the ASC for hundreds of procedures otherwise available to non-Medicare patients. As recommended by MedPAC, the proposed legislation would enhance beneficiary access to safe and cost-effective surgical care in the ASC.

On Sept. 19, 2005, the first day of the AAASC's Washington Leadership Conference, Sen. Mike Crapo (R-ID) announced that he would introduce in the Senate a similar ASC reform bill as companion legislation to Herger’s measure.  According to the AAASC, the timing of these announcements by the Senate and House sponsors could not have been more propitious. On Sept. 20, more than 50 representatives of ASCs from 19 states (including delegations from 10 state ASC associations) marched on Capitol Hill and met with almost 100 offices of lawmakers, urging them to sign on as cosponsors to the legislation. Prior to journeying to Capitol Hill, AAASC showcased the lobbying resources AAASC utilizes in Washington, D.C., briefing delegates on all aspects of their Congressional visits. Paul Lee, president of Strategic Health Care, provided a comprehensive assessment of the legislative climate and budget environment, emphasizing the challenge of mounting a campaign for ASC reform when Congress is simultaneously facing budget pressures emanating from the Iraq War and Hurricane Katrina. Eric Zimmerman, a partner with McDermott, Will & Emery, and  Marian Lowe, director of policy for Strategic Health Care (and a former MedPAC executive), briefed participants on recent MedPAC activities and the pending study by the Government Accountability Office (GAO) of the correlation between hospital and ASC costs and payments. Mike Romansky, a senior partner with Strategic Health Care, provided delegates with a summary and analysis of the industry’s ASC reform legislation, a strategy for securing enactment of this bill, and tactics for conveying a strong pro-ASC message to legislators.