GAO report is out — but with ASC system proposed, does it matter?
Agency: ASC cost is 84% of HOPD, when weighted by Medicare claims
It was mostly good news in a long-awaited report from the General Accounting Office (GAO) analyzing costs at ambulatory surgery centers (ASCs).1
In the report, GAO looked at the difference in costs between the hospital outpatient departments (HOPDs) and the ASC settings. The median cost ratio among all ASC procedures was 0.39, but it rose to 0.84 when weighted by Medicare claims volumes.
"Unfortunately, GAO provides a distorted picture of the cost of performing procedures in the ASC and HOPD," says Marian Lowe, vice president of federal health policy for Strategic Health Care, a firm that provides marketing, communications, and business development consulting in Washington, DC.
The 0.39 estimation leads to GAO's "unreasonable assertion" that ASCs can perform a procedure for less than 40% of what it costs a hospital to do the identical service, she says. "In their analysis that accounted for the procedures actually performed in an ASC — the weighted cost — GAO found that ASCs were performing procedures at 84% of a hospital's cost for the same service," Lowe says. "Eighty-four percent is in line with what we expected to see."
Craig Jeffries, Esq., executive director of the American Association of Ambulatory Surgery Centers, reports being pleased with the weighted average in the 84 range. That number is significant because it presents a "public policy target" that is higher than the 75% of the HOPD payment rate that ASC associations have been seeking through legislation and the 73% figure that the associations suggested in comments to the Centers for Medicare & Medicaid Services (CMS), based on the agency's budget neutrality formula, he says. The 84% is considerably higher than the 62% figure that CMS included in its proposed ASC payment system, he points out. "Clearly this will be utilized by Congress in their oversight function of CMS' implementation of the final rule on ASC payment," Jeffries says. The final rule is expected to be published in spring 2007.
Anything that addresses the 62% figure is beneficial; however, the 62% figure already has been proposed by CMS, which in many ways makes the GAO findings "insignificant," says Kathy Bryant, president of FASA. CMS is required to implement a budget-neutral system, so agency officials didn't examine costs, she points out.
The final conclusion of the GAO report is that the ASC payment system should be based on the outpatient prospective payment system (OPPS), and it should take into account the lower relative costs of procedures performed in ASCs. "Overall, we were pleased that GAO agrees that system of payment should be based on HOPD system that CMS proposed and that we've advocated for four years," Jeffries says.
The report also compared additional services billed with procedures performed in ASCs with those billed with procedures performed in HOPD and examined whether there were any Medicare payments associated with those services. These additional services include additional procedures, laboratory services, radiology, and anesthesia services.
The agency found that few of these services result in an additional payment in one setting but not the other. "This suggests that hospital patients are not significantly sicker than ASCs, or at least it didn't cost more to treat them," Bryant says. "It's an interesting conclusion that may be broader than just Medicare."
The GAO findings seem to be supported by a recent report from the Medicare Payment Advisory Commission (MedPAC), which looked at three services — cataract surgery, colonoscopy, and MRI of the head, neck, and brain — and determined "no single setting had consistently higher rates of [patient] characteristics that might increase the cost of the procedure."2
Bryant finds some vindication in that report. "Hospitals' strategy has been to argue that direct competition wasn't relevant, that we're really providing different care," she says. "All of these reports are saying, we're really providing similar care."
The report will be useful to MedPAC, Jeffries predicts. "Specifically, it will inform MedPAC staff on an earlier conclusion that they had drawn that there was a higher acuity level for patients in a hospital outpatient department than in an ASC, at least for ophthalmic and [gastrointestinal] procedures, which are highest volume for Medicare patients."
The MedPAC report also said rates of adverse outcomes were very low in all settings. There's never been any reports to suggest ASCs were doing procedures that weren't safe, Bryant says. Still, "any time a government body is providing information that shows, in fact, the complication rate is very low, I think it helps us," she says.
Lowe says the MedPAC report is further testament that ASCs are a safe and appropriate alternative to the hospital for outpatient surgical services. "Coupled with the GAO report and the new Medicare payment system, we can assure patients that the care they receive in an ASC is of equal quality, but less cost, than in a hospital outpatient department," she says. (Editor's note: The American Hospital Association did not respond to requests to provide sources for an interview.)
References
- General Accounting Office. Medicare — Payment for Ambulatory Surgical Centers Should be Based on the Hospital Outpatient Payment System (GAO-07-86). Washington, DC; 2006. Web: www.gao.gov/new.items/d0786.pdf.
- Medicare Payment Advisory Commission. Further Analyses of Medicare Procedures Provided in Multiple Ambulatory Settings. Washington, DC; 2006. Web: www.medpac.gov.
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