On April 16, 2014, the OIG released a report concluding that between CYs 2007 through 2011, Medicare has saved nearly $7 billion by covering surgical procedures in ASCs. In addition to the savings that would continue to accrue under the current payment structure for CYs 2012 through 2017, the OIG also found that the program could save an additional $15 billion if CMS cut hospital outpatient department rates to the same rates as ASC rates for surgical procedures performed on beneficiaries with "low-risk and no-risk clinical needs" for CYs 2012 through 2017. 

Many surgical procedures are covered by Medicare in either an ASC or a hospital outpatient department. In general, Medicare pays less for surgical procedures performed in an ASC than it does for the same procedures in a hospital outpatient department. The report, titled Medicare and Medicaid Beneficiaries Could Save Billions if CMS Reduces Hospital Outpatient Department Payment Rates for Ambulatory Surgical Center-Approved Procedures to Ambulatory Surgical Center Payment Rates (OIG Report), sought to examine how much Medicare has saved through ASCs and how much the program could save if payment rates for procedures performed in hospital outpatient departments were reduced to ASC payment rates.

The OIG used the Agency for Healthcare Research and Quality (AHRQ) statistics to determine that approximately 68 percent of Medicare hospital patients 65 and older having short-stay surgeries are either low risk (meaning that they have one AHRQ-identified risk factor) or no-risk (meaning that do not have any of the AHRQ-identified risk factors). The OIG also estimated that beneficiaries could save billions through lower cost-sharing if hospital outpatient department rates were reduced to ASC rates. Accordingly, the OIG recommended that CMS seek Congressional legislation that would permit the agency to lower hospital outpatient rates, because currently hospital outpatient rates and ASC payment rates are required to remain budget neutral. If successful, the OIG recommends that CMS lower the hospital outpatient rates for procedures that may be performed in an ASC setting for beneficiaries with "no-risk or low-risk clinical needs."

Notably, CMS does not concur with the OIG's recommendations. In its letter to the OIG at Appendix F of the OIG Report, CMS offers several reasons why the agency should not heed the OIG's recommendation: the legislation is not in President Obama's budget; rate-setting would be circular because ASC payment rates are based on OPPS payment rates; and the OIG failed to provide any specific clinical criteria to establish those patients who can be safely treated in ASCs rather than in a hospital outpatient department. The OIG disputes CMS's response in the OIG Report by reiterating its position that CMS is in a position to seek legislation and arguing that CMS is the agency in the best position to develop a non-circular payment strategy and assess patient risk levels for services performed in different settings.

A copy of the OIG Report is available here.

Reporter, Kate Stern, Atlanta, +1 404 572 4661, kstern@kslaw.com.