Trends in ASC Reimbursement

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Trends in ASC Reimbursement

• Gregory Cunniff
• Chief Financial Officer

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Welcome to the Evolution of ASC Reimbursement

• To summarize the trend
• Youve come a long way baby!
• And the best is yet to comeif youre ready
• Enjoy the meeting!

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In the beginning

• Medicare approved ASC reimbursement for 200
  procedures in1982.
• Medicare pays a predetermined and inclusive
  amount per procedure to the facility (and
  remember this for later, not the prospective
  system based on a cost to charge ratio like
  HOPDs).
• Procedures in ONE payment group are ALL paid the
  same rate
• Initial reimbursement was based on ASC cost and
  charge data from 1979 and 1980 from 40 ASCs.
• The Grouper Methodology was born!!
• 1982 4 groups
• 1990 revised cost data and the DHHS increased
  to 8 groups
• 1991 added a 9th group to carve-out certain
  procedures
• 2008 220 payment groups.

1GAO-07-86 Medicare Payment for Ambulatory
Surgical Centers, 11-30-06. 2Omnibus
Reconciliation Act of 1980 (ORA), Pub. L. No.
96-499, 934(b), 94 Stat. 2599, 2637 (codified, as
amended, at 42, U.S.C. 13951(i)).
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The Origin of the Trend

• The then known as the MMA directed the GAO to
  perform a comparative study of costs of
  procedures performed in ASCs versus outpatient
  departments of the hospital to establish the base
  rates.
• The previously known as DHHS last revised ASC
  payment rates in 1990 using cost to charge data
  (remember this too) was collected in 1986.
• The now known as CMS, after certain arm
  twisting and legislation known as the DRA, was
  required to institute a new payment system in
  2008.
• Do you realize CMS has changed its NAME more
  often than ASC rates?

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The Trend of ASC Reimbursement
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The New ASC System

• The proposed rule was issued in August 2006
  followed by the comment period
• Its purpose
• Revising the payment system for services
  furnished to people with Medicare in ASCs to
  better align payments for similar services
  furnished in a HOPD or a physicians office (on
  a prospective basis)

3Department of Health Human Services, July 16,
2007 CMS Revised Payment Structure For
Ambulatory Surgical Centers And Proposed Policy
And Payment Changes For Hospital Outpatient And
ASC Services
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The New ASC System

• The 2006 proposal
• Establish ASC rates at 62 of 2007 HOPD rates
• Two year transition period
• Add 740 new procedures for ASCs beginning in CY
  2008
• Budget neutral. In DC, this jargon means no
  net effect on gross Medicare payments
• 450 of the new codes are mostly office procedures
  (remember this)

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The New ASC System

• The Final Methodology for 2008
• Amended the August 2006 language
• Rates set at 65 of 2008 HOPD rates
• The Transition Period was extended to FOUR years
• The FINAL rates are expected by December 2007
  when the HOPD rates are final Key Items
  waiting
• Set Inflation Update for HOPD
• The final rates
• The final approved procedure list

3Department of Health Human Services, July 16,
2007 CMS Revised Payment Structure For
Ambulatory Surgical Centers And Proposed Policy
And Payment Changes For Hospital Outpatient And
ASC Services
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The New ASC System other items to note

• ASC payments will be adjusted each year
  (prospectively) to reflect changes in technology
  and resources used in performing procedures.
• No annual inflation update for 2009 (back to
  62?)
• Beginning in 2010 the ASC conversion factor will
  be adjusted for inflation based on the Consumer
  Price Index for urban consumers not the
  healthcare market basket.
• Newly added procedures will be paid at 65 of
  OPPS, unless capped at physician office
  rateRECALL most likely 450 of the 790
  procedures will be capped in 2008. Very likely
  many others will be capped in the coming years.
  RVUs!

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The New ASC System other items to note

• Radiology is reimbursedPlease bill your
  Fluro!!!!
• RECALL the Cost to Charge ratio. If you dont
  bill it, they dont know you need it!!!
  Some/Most and NOW Medicare will reimburse for
  fluoroscopy.
• Another oneDid you know you can bill for
  injections for control of pain post-op provided
  it is done specifically for pain mgt and not
  anesthesia?
• Drugs Biologicals
• Devices Technology pass-throughs under OPPS
  system.
• Implants are now included within the facility
  fee.

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The New ASC System The Winners

• Orthopedics
• ENT
• General Surgery
• Gynecology

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The New ASC System The Losers

• GI
• Pain Management

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The New ASC System You win some, you lose some

• Urology wins cystoscopies lose.
• Ophthalmology wins yags lose
• Podiatry wins plantar fasciotomies lose

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The Winners and Losers Ophthalmology
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The Winners and Losers Orthopedics
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The Winners and Losers Pain Management
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The Winners and Losers Gastroenterology
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The Winners and Losers - ENT
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The Winners and Losers General Surgery
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The Winners and Losers Gynecology
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The Winners and Losers Podiatry
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The Winners and Losers Urology
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The New ASC System Whats the take away?

• The new system offers ASCs many new procedure
  opportunities and pitfalls do your homework.
• The TREND for reimbursement ASCs are indexed
  and track HOPDs (sort of).
• Three reasons this system is great for ASCs
• Baby-boomers
• Technology
• Cost-savings

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What About the Commercial Payors?

• Groupings based off Medicare provided the
  commercial payors a means to save money.
• It was easy to base reimbursement on a
  percentage of Medicares rates.
• The private market knew many surgeries did not
  fit in the Medicare ASC system (ortho for
  example), thus carve-outs were born so that
  further savings would be realized.
• Payors forced the Medicare grouper system and
  drove centers toward another trend -- dropping
  contracts and going Out-of-Network

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What Drives Commercial Payors?

• Commercial payers are typically public companies.
• Public companies are motivated to be more
  efficient.
• Thus, ASCs solved two issues facing payers
• Physician Compensation
• Facility fee reimbursement

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Commercial Payors In the beginning

• Most large commercial payors utilized a grouper
  system based off Medicare groupers.
• Some followed the Medicare groupings closer than
  others.
• Carve out procedures were not just necessary.
  Carve-outs became a necessity.

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Commercial Payers - Carve-outs

• Carve-outs were a necessity as Medicare groupings
  could not account for the new procedures which
  could be performed in an ASC.
• But how many cases can you really carve-out?

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Commercial Payers Implants and Disposables

• Medical equipment technology improves every day.
• Physicians have never met a drug or device rep
  they didnt like (marketing 101)
• But how many implants and disposables can you
  carve-out?
• What about over-utilization?

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Commercial Payers The Recent Trend

• Those payers with large market share forced
  compression Did HMOs drive any volume?
• Large payers with small market share leased
  others networks Silent PPOs.
• Constant compression forced ASCs to abandon
  contracts and go Out-of-Network
• Commercial payers created their own grouping
  systems to re-capture providers.
• Commercial payers began aggregating implants
  within their facility fee.

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ASC Technology used to be SOOOO behind the
times!

• ASCs are the provider of choice because we
  provide a superior quality experience (for
  doctors, patients and payors) at a superior
  price.
• Patient accounting systems used to be pretty
  simple.
• Technology has improved and demands for flexible
  systems are crucial.
• Contract Management Scott? Remember we spoke
  about this 15 years ago?
• (My hair should not be this grey)

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So what is the Trend?

• Commercial payers are typically public
  companies.
• Public companies are motivated to be more
  efficient.
• Carve-outs, Implants and Disposables are an
  administrative nightmare for ASCs, Payers and
  Doctors.
• ASCs will have to HELP solve three issues facing
  payers
• Dont tell my docs how to practice
• Aggregating implants within reimbursement
• Aggregating disposables within reimbursement and
• Insert shameless plug here.

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Shameless Plug.

• Advancing information systems to be able to
  handle the changing landscape of healthcare
  information and reimbursement.
• Companies like Source Medical can get you there
• Patient Accounting
• Contract Management
• Materials Management
• Third party affiliations

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What trends do I see

• Are surgical hospitals really a threat to good
  healthcare?
• Further use of scope technology
  laparoscopes/endoscopes/etc.
• Semi-invasive techniques becoming more prevalent
• Spines
• Total joints
• General, GYN, ENT, name your specialty
• Case rates
• EMRs

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What You Have to Know (and Prepare For) Now!

• Prepare for the new CMS methodology
• Learn what opportunities your ASC may have
• Understand and study your ASCs contracts
• Understand the contract methodology
• Know your costs, and Trend them