Updated: November 7, 2024
Private health insurance companies and government-sponsored health plans, like Medicare and Medicaid, are pushing physicians and patients towards Ambulatory Surgical Centers (ASCs) because procedures performed in ASCs are generally significantly cheaper than those done in hospital outpatient departments (HOPDs), allowing payers to reduce overall healthcare costs while still maintaining quality care for patients.
Why Payers (and Patients) Prefer ASCs:
- Cost Reduction: ASCs typically have lower overhead costs than hospitals, allowing them to offer procedures at a lower price. This can help commercial payers reduce their overall healthcare spending.
- Efficiency and Shorter Wait Times: ASCs are often more efficient than hospitals, with shorter wait times for procedures. This can improve patient satisfaction and reduce the overall cost of care.
- Specialty Focus: ASCs typically specialize in a limited number of procedures, allowing them to develop expertise and efficiencies in those areas. This can lead to better outcomes for patients and lower costs for payers.
- Patient Preference: Many patients prefer the convenience and shorter recovery times associated with ASCs. This can influence the decisions of commercial payers when developing their provider networks.
- Patient Outcomes. A study published in the Journal of Health Economics in 2018 found that patients undergoing procedures in an ASC were “less likely to be admitted to a hospital or visit an emergency room a short time after outpatient surgery,” leading researchers to conclude that there is “no evidence that patients of any risk level … are made worse off by treatment in ASCs.”
- Learn more about regulations, Medicare certification, reimbursement challenges, and compliance ownership models for ambulatory surgery centers in Texas.
Commercial Payers Revamping Policies to Promote ASCs
Ambulatory surgical centers are increasingly favored by payers, leading to a migration to this model by providers and investors.
Here is a sample of payer policies adopted in recent years:
In 2022, Blue Cross and Blue Shield of Texas (BCBSTX) increased the maximum allowable standard fee schedule reimbursement for nearly 1,500 outpatient surgery services when performed at in-network Ambulatory Surgery Centers.
“This initiative creates an opportunity to increase your reimbursement by 15 to 50 percent on each qualifying procedure while allowing patients to receive the same quality of care they would get in a hospital but at a significantly lower cost,” BCBSTX told providers. “While this opportunity maximizes the benefit for the patient, it also aligns incentives for eligible physicians to provide care in the most cost-effective manner.”
In 2019, United Healthcare adopted a policy requiring members to receive surgical procedures in an ambulatory surgical center unless a HOPD is medically necessary, or an ASC is not geographically accessible.
In 2022 and again in 2023, Aetna expanded the list of procedures that can be provided without precertification if performed in an ASC.
CMS Expanding ASC Covered-Procedures List; Aligning Payment Rates with HOPDs
One analysis of Medicare claims data showed that ASCs reduced Medicare costs by $28.7 billion from 2011 through 2018 and projected that ASCs could reduce Medicare costs by an additional $73.4 billion from 2019 to 2028.
What is the Centers for Medicare & Medicaid Services (CMS) doing to incentivize a shift to the less costly ASC option?
- In 2022, CMS adopted a nomination process to allow an external party to nominate a surgical procedure to be added to the ASC-covered procedures list.
- In 2023, CMS expanded the number of procedures that Medicare would pay for when performed in an ambulatory surgical center, including 26 dental codes and 11 surgical codes.
- In 2019, CMS aligned the conversion factor used to calculate reimbursement rates for ASC services with the conversion factor for HOPDs for a five-year interim period. In 2023, CMS extended the interim period for an additional two years through the end of 2025. Accordingly, using the hospital market basket update, CMS finalized an update factor to the ASC payment rates for 2025 of 2.9 percent. The update applies to ASCs meeting relevant quality reporting requirements.
While Medicare has temporarily aligned the conversion factors for ASCs with HOPDs, compensation disparities between ASCs and hospital outpatient departments persist. According to the Ambulatory Surgery Center Association, Medicare rates for ASCs average 50 percent of the reimbursement amount HOPDs receive for the same services. For example, Medicare may pay an HOPD $1,048 for an outpatient colonoscopy, while an ASC would receive $652 for the same procedure.
The Push for Site-Neutral Payments
Medicare uses two payment methods for outpatient procedures based on the service's location:
- Procedures performed at HOPDs are paid through Medicare's Hospital Outpatient Prospective Payment System (OPPS)
- ASC services are paid through the Medicare Physician Fee Schedule
There is increasing bipartisan interest in Congress to align Medicare payments for outpatient services regardless of the setting, known as “site-neutral” payments. If Medicare adopted a site-neutral payment policy, the same medical service would be reimbursed at the same amount regardless of where it is performed (e.g., hospital outpatient department vs. ASC).
The policy is controversial, however:
- Hospitals generally oppose it, arguing that their higher overhead costs justify a higher price.
- Insurers and Medicare generally support it as a cost-control measure.
Site-neutral payment policies have been proposed numerous times in Congress, although none have been enacted. Most recently, on November 1, 2024, U.S. Senators Bill Cassidy, M.D. (R-LA) and Maggie Hassan (D-NH) released a legislative framework to address site-neutral Medicare payment reform. The plan was written as a policy paper and not a legislative text, and it is unlikely to pass as written.
Most ASC leaders agree that more action is needed.
Outpatient Surgery, ASC Joint Ventures On The Rise
Health systems, physician groups, and private equity firms are paying attention to the shift in payer policies and investing in ASCs across the country.
One study estimated that the volume of outpatient surgical procedures performed at ASCs will increase 21 percent over the next 10 years. Another recent survey found that 60 percent of the surveyed health system executives were considering an ASC joint venture.
Texas has continued to be a prime location for the expansion of outpatient surgery centers, with at least 11 new facilities opening or under construction this year, including eyecare and orthopedic care centers.
If you have questions about establishing or investing in an ambulatory surgical center, or require representation in matters of contract disputes or healthcare fraud investigations, call or contact us online to speak with a lawyer.
