Medicare ASC Payment to Increase 0.2% in January 2011

The Centers for Medicare and Medicaid Services (CMS) released the 2011 Final Payment Rule for ambulatory surgery centers (ASCs) and hospital outpatient departments. ASCs will receive a 0.2 percent increase across the board – that is after taking into account the inflationary increase due to theupdate factor and a decrease resulting from the productivity adjustment mandated by health care reform.

View 2011 CMS rates by selected procedures.

While the 0.2 percent increase is an improvement over the zero percent change that had been proposed, AmSurg and the Ambulatory Surgery Center Advocacy Committee (ASCAC) are disappointed that CMS will continue to use the Consumer Price Index (CPI-U) for all urban consumers instead of the Hospital Market Basket Index as the basis of the ASC inflation updates.

AmSurg along with the ASCAC will continue to vigorously protest the CPI-U.

AmSurg and the ASCAC’s previous strides to secure the Hospital Market Basket:

Breakdown of ASC issues in 2011 Final Payment Rule
CMS’s 2011 Final Payment Rule includes several other important ASC issues that AmSurg will be evaluating. In the interim, below is a brief overview of a few key points.

1. Inflation Update: CMS estimates the change in CPI-U for 2011 will be 1.5 percent. The change in the hospital market basket is projected to be 2.6 percent, but the reform law requires it to be reduced by 0.25 percentage points – leaving the hospital outpatient department update at 2.35 percent. CMS highlighted in the final rule that many commenters suggested that the agency move to a different index. However, CMS said they were not convinced that they have sufficient information needed to implement the change in 2011.

2. Productivity Adjustment: As required by the health reform law, ASC rates will be reduced by a measure of economy-wide productivity gains (a 10-year rolling average calculated by the Bureau of Labor Statistics). In the final rule, CMS updated their estimate of productivity and will apply a reduction of 1.3 percentage points in 2011, instead of the 1.6 percentage point reduction that had been proposed – meaning the ASC update will effectively be 0.2 percent. This is inconsistent with MedPAC’s recommended update of 0.6 percent.

Also in the final rule, CMS responded to concerns about the transparency of their process and recalculated the productivity adjustment. The revised adjustment is lower by 0.3 percentage points.

3. Conversion Factor: After taking into account the update and productivity adjustments, CMS further adjusts the conversion factor to account for budget neutrality in the recalibration of the wage index. Taking this slight reduction and the 0.2 percent increase based on the ASC update factor, the ASC conversion factor rises from the $41.873 CY 2010 ASC conversion factor to $41.939 for CY 2011.

4. Scaling of ASC Relative Weights: Each year, CMS applies a secondary budget neutrality calculation to the ASC relative weights to ensure that changes to the Ambulatory Payment Classification’s relative weights, which are used to determine hospital outpatient department rates, do not result in an increase or decrease in ASC payments. The final rule establishes a 0.9238 scaling factor, which is more favorable to ASC rates (CMS had proposed the factor to be 0.9090). Although the final rule was better than the proposed, the 2011 factor is still significantly worse than the 2010 factor of 0.9567.

5. Wage Index: CMS continues to use the pre-floor, pre-reclassified wage index to adjust ASC payments for geographic differences in the relative cost of labor. The differences in some markets starting in 2011 will be particularly pronounced because of a policy in the health reform law that sets the hospital wage index for inpatient and outpatient services in so-called “frontier states” at 1.0 percent. The states affected by the frontier wage index policy include Montana, Wyoming, North Dakota, South Dakota and Nevada. In the final rule, CMS recognizes this inherent divergence in the rates but suggests that the law prevents CMS from extending the policy to ASCs.

6. Quality Reporting: In spite of the clear imperatives in the health reform law to increase transparency and improve the value of care across the health care system, CMS does not plan to even propose a voluntary quality reporting system for ASCs until the CY2012 proposed rule.

We were encouraged by the inclusion in this year’s proposed rule of a set of measures for consideration. CMS received positive feedback on the measures and agreed to consider several concerns about measure specification and reporting burdens that were raised. They also agreed to consider the specifications for six measures that the ASC Quality Collaboration collects data now.

The final rule set an expectation that electronic health records would be part of future quality reporting. However, they agreed to evaluate methods of quality reporting which would not require an EHR; acknowledging that many ASCs have not yet purchased or implemented EHR systems.

7. Waiver of Beneficiary Cost-sharing for Certain Services: The health reform law waives the deductible and coinsurance for certain preventive services that are paid under the ASC payment system and have been recommended by the United States Preventive Services Task Force with a grade of A or B for any indication or population. This will affect several HCPCS codes for colonoscopies beginning in January 2011.