Representatives for both hospitals and ambulatory surgery centers found reasons to dislike the Medicare reimbursement levels proposed by the CMS in its recently released rule for 2011.

The July 2 rulemaking will set payments for outpatient services and ambulatory surgery centers next year, proposing a 2.15% increase for hospital outpatient departments and no increase for ASCs. While the hospital lobby wants more information on the methodology that the CMS used to justify payment increases to some cancer hospitals, surgery centers claim that skimpy inflation updates are slowing growth in their industry and a new payment system for ASCs is warranted.

Some of the changes result from the Patient Protection and Affordable Care Act, including some new provisions the American Hospital Association will be tracking closely. In particular, the reform law had charged the CMS with studying 11 cancer hospitals across the country to see if their outpatient costs were higher than the costs incurred by other hospitals.

In finding this to be the case, the agency is proposing extra payments for 11 cancer hospitals that are exempt from the inpatient prospective payment rule and whose outpatient payments are already rather low, said Don May, AHA's vice president for policy. The flip side is other hospitals will experience some reductions in payment to meet the budget-neutrality requirement for these changes.

“While we're definitely supportive of cancer hospitals, we need to look at the CMS' methodology” in conducting this study, and how this proposed adjustment will affect other hospitals, May said. It's estimated that this budget-neutral adjustment will decrease payments across all other hospitals by 0.7% next year, a significant sum, he said.

Some hospitals question the fairness of this adjustment. “From what I have been able to determine” from the outpatient prospective payment rule, said John Johnson, CEO of 12-bed Gothenburg (Neb.) Memorial Hospital, “it appears that CMS is making another attempt to meet the personal needs of one group of hospitals and that as we have seen in the past, is probably politically motivated.”

“Cancer is a dreaded disease and is a safe route because the support will never be questioned,” he said. The CMS declined to comment on the proposed change in reimbursement for the 11 cancer hospitals.

Ongoing revision to a policy on the physician supervision of hospital outpatient therapeutic services is another issue the AHA is aggressively tracking. A new requirement in the 2009 outpatient rule called for physicians to be physically present in the outpatient department of a hospital at all times when outpatient services were provided. The CMS has since relaxed these provisions, allowing practitioners who aren't physicians to take on these supervisory roles, and in the 2011 rulemaking it said that “general supervision” would be allowed for certain outpatient services. The AHA, however, maintains the CMS should be taking an even broader approach. Even with these more flexible changes, hospitals remain vulnerable to retroactive enforcement liability under this requirement, said Roslyne Schulman, the AHA's senior associate director for policy development.

Ambulatory surgery centers, in the meantime, are experiencing another year of flat updates. With the exception of 2010, when ASCs received a 1.2% increase, the industry's Medicare payments have remained flat for more than six years, said Andrew Hayek, president and CEO of Surgical Care Affiliates, Birmingham, Ala., and chairman of the ASC Advisory Committee of the Ambulatory Surgery Center Association. The 2010 bump was temporary, however next year the ASCs will again receive no increase, Hayek said. “What this is leading to is a declining rate of growth in the number of surgery centers.”

ASCs experienced their slowest rate of growth in history in the past year, and the industry expects to see no growth, with more surgery centers closing down, in light of the 2011 update, Hayek said.

Because of the lack of payment updates for surgery centers, the gap between what a hospital is paid and a surgery center is paid for the same surgical procedure is growing, he said. Surgery centers used to get paid 85% of what a hospital outpatient department gets paid for a procedure, but the CMS in recent years has taken actions to cut that (July 23, 2007, p. 6). As a result, ASCs are currently getting paid 58% of the hospital outpatient rate for procedures, a figure that's expected to drop to 55% in 2011, Hayek said.

Surgery centers in some cases face no other choice but to shut down or convert to a hospital license, a process in which a hospital buys out the center, he said. Patients are left with no choice but to seek care in a hospital where Medicare will pay 75% more. This is antithetical to healthcare reform and the concept of lowering costs, he said.