There are times when the maxim, "When it rains it pours," is just too apt to avoid. On Tuesday, August 8, 2006, Centers for Medicare & Medicaid Services (CMS) issued two long-awaited rules and reports which will have significant impact on outpatient surgery ventures in which physicians invest and use.

The industry at-large is in the midst of digesting the Outpatient Prospective Payment System (OPPS), the ASC Proposed Rule, and the CMS Final Report to Congress on specialty hospitals. The next several months will require focused attention by participants in outpatient ventures to understand the effects which these pronouncements will have on their existing or contemplated ASC or specialty hospital projects. In addition, since the Proposed Rule is still subject to comment and revision, action will also be required to ensure that the final ASC rule is as fair as possible for ASCs.

The Proposed Rule

It has long been a given that the current Medicare ASC reimbursement methodology is over-simplistic and outdated. CMS addresses this problem within the Proposed Rule by proposing a structure which will replace the current nine payment groups with the 221 Ambulatory Procedure Classification (APC) groups used under the OPPS system. This methodology is scheduled to be fully implemented by 2008, and is part of a general effort by CMS to more uniformly address free-standing ASCs and hospital outpatient departments.

A positive result of this uniform treatment is that CMS proposes to add many more procedures to the Medicare ASC Eligible List. As proposed, the rule would, in 2008, allow any surgical procedures which can be performed in an ASC without creating a significant safety risk or requiring an overnight stay to be included on the ASC Eligible List. This will mean that more than 3,300 procedures will be paid for by Medicare if performed in an ASC. Fourteen new procedures will be added to the list in the near term.

Other impacts of the Proposed Rule may not be as positive as the ASC industry had hoped. Under the Proposed Rule, ASCs will be compensated at the rate of 62 percent of the amount which a hospital would receive for performing the same procedure. The Ambulatory Surgical Center Medicare Payment Modernization Act under consideration in Congress "pegs" the ASC reimbursement level at 75 percent of hospital receipts. In addition, the rate of reimbursement for 274 current procedures will be cut effective 2007.

Specialty Hospitals

In its Report, CMS appears to be recognizing that specialty hospitals, which consist of facilities providing primarily cardiac care, orthopedic care, or surgery, are becoming a permanent part of the healthcare landscape. CMS’s strategic plan for addressing specialty hospitals includes:

  • Referring reimbursement systems to reduce certain perceived incentives for "cherry picking" cases
  • Clarifying how specialty hospitals must handle the emergency patients who come to their facility even though they will not be required to offer emergency rooms
  • Requiring disclosure of physician investment
  • Monitoring physician investment methods in specialty hospitals to determine whether they violate the antikickback statute. Significantly, CMS noted that it has not discovered any instances of improper investment.

In summary, there is both much to learn and much to do. Every existing or proposed ASC or specialty hospital project will be impacted by the contents of the Proposed Rule or the Report. In the case of the Proposed Rule, CMS will be accepting comments on ways in which the rule should be changed. Readers should consider providing such comments. In the coming weeks and months, readers will be deluged with information regarding these provisions. Attendance at a program focused upon outpatient ventures and the details surrounding them would be time well spent.

This article is presented for informational purposes only and is not intended to constitute legal advice.