Medicare Could Save Billions if CMS Reduces Hospital Outpatient Payment Rates to ASC Rates

Medicare saved almost $7 billion and beneficiaries saved an additional $2 billion during calendar years (CYs) 2007 through 2011 because of the differential between ambulatory surgical center (ASC) and outpatient department payment rates, the Department of Health and Human Services Office of Inspector General (OIG) said in an April 17 report.

The report further found Medicare could potentially save $12 billion to as much as $15 billion for CYs 2012 through 2017 if the Centers for Medicare & Medicaid Services (CMS) reduces outpatient department payment rates for ASC-approved procedures to ASC payment levels for procedures performed on beneficiaries with low-risk and no-risk clinical needs. stacks of money

Beneficiaries could potentially save an additional $3 billion through CY 2017 due to the payment rate difference and could save as much as $2 billion to $4 billion more during those six years if CMS reduces outpatient department payment rates for ASC-approved procedures to ASC payment levels, OIG said.

To that end, OIG said CMS should seek legislation that would exempt the reduced expenditures as a result of lower Outpatient Prospective Payment System (OPPS) payment rates from budget neutrality adjustments for ASC-approved procedures.

If Congress passes the budget-neutrality exemption for the reduced expenditures, OIG then recommends CMS reduce OPPS payment rates for ASC-approved procedures on beneficiaries with no-risk or low-risk clinical needs in outpatient departments; and develop and implement a payment strategy in which outpatient departments would continue to receive the standard OPPS payment rate for ASC-approved procedures that must be provided in an outpatient department because of a beneficiary’s individual clinical needs.

CMS did not concur with the recommendations, arguing that the proposed changes “may raise circularity concerns with respect to the rate calculation process” because most ASC payment rates are based on the OPPS payment rates that OIG recommended CMS reduce and OIG did not provide specific clinical criteria to distinguish patients’ risk levels.

OIG responded that “[a]s part of the process for developing the President’s Budget, CMS identifies program vulnerabilities and offers solutions for addressing them.” OIG noted “CMS has the authority to develop legislative proposals for Medicare and has historically addressed some OIG recommendations to seek legislative change by developing legislative proposals for possible inclusion in the President’s budget and legislative program.”

In addition, OIG acknowledged it did not provide specific clinical criteria to distinguish patients’ risk levels and, depending on the method used to implement its recommendations, circularity concerns could arise. “However, that does not prevent implementation of our recommendations,” OIG said, noting “CMS is in the best position to determine how to assess a patient’s risk and to develop a payment strategy that would reduce OPPS payments for no- and low-risk patients without disrupting the current payment methodologies.”

“Considering the potential savings identified in our report, we maintain that CMS should take the necessary steps to implement our recommendations,” OIG said.

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