ASCs vs. HOPDs: 12 insights on the federal reimbursement gap

Insurers and patients continue to put pressure on hospitals and health systems to shift certain procedures and services away from hospital outpatient departments to ASCs, where cost savings can be significant.

Twelve insights on the ASC and HOPD reimbursement gap, according to reports from the Ambulatory Surgery Center Association and Regent Surgical Health, among other sources.

1. The cost differential is partly attributed to how CMS uses different measures of inflation to update each payment system. For HOPDs, CMS uses the hospital market basket, which measures the cost of medical expenses. For ASCs, the agency uses the Consumer Price Index-Urban, which measures the cost of products such as milk and bread, arriving at an inflation rate that historically is lower than the hospital market basket.

2. As healthcare inflation has outpaced general inflation in the U.S. in recent years, HOPD prices are far higher than ASC prices and continue to increase faster than ASC prices.

3. CMS uses the Hospital Outpatient Prospective Payment System to reimburse physicians for surgeries performed at a hospital outpatient department and the Medicare Physician Fee Schedule for surgeries done at an ASC.

4. On average, CMS reimburses ASCs at 53 percent of the rate it reimburses HOPDs for the same procedure, according to a 2018 report from ASC management company Regent Surgical Health.

5. ASCs perform more than 7 million procedures a year for Medicare beneficiaries.

6. More than $2.3 billion a year is generated in savings when patients have certain preventive and surgical procedures at ASCs instead of HOPDs.

7. For example, according to CMS' procedure price lookup tool, the agency pays ASCs $3,134 to repair of a shoulder rotator cuff using an endoscope and HOPDs $5,677 for the same procedure.

8. CMS payment rates are publicly available and commercial payer rates are not (but commercial payers typically base their payment rates on Medicare rates). As a result, less is known about the cost differential and associated savings between ASCs and HOPDs for employers and patients covered by commercial payers.

9. U.S. healthcare costs are reduced by more than $38 billion a year because of the availability of ASCs as an appropriate setting for outpatient procedures, according to a 2018 report conducted by Healthcare Bluebook and HealthSmart. More than $5 billion of the cost reduction accrues to the patient through lower deductible and coinsurance payments. 

10. Between 2007 and 2011, the payment gap between services provided at ASCs rather than HOPDs decreased CMS' costs by more than $7 billion, according to the Ambulatory Surgery Center Association.

11. Many ASC leaders see CMS' planned expansion of its site-neutral pay policy as a way to level the playing field between ASCs and HOPDs. The American Hospital Association and other hospitals have spent the last few years fighting Medicare and the Department of Health and Human Services in court over the expansion of the policy, which "closed the gap between the inpatient and the hospital outpatient reimbursement rates, effectively eliminating any monetary incentive to perform a total knee replacement as an inpatient case," according to Matt Reigle, associate principal of ECG Management Consultants.

12. The AHA and other hospitals sued CMS in 2019 to block the policy, and a federal judge initially agreed that the agency overstepped its authority with the policy. But in June 2021, after an appellate court reversed the decision, the Supreme Court refused to hear the case from hospital stakeholders, upholding site-neutral pay cuts.

"In a traditional sense, ASCs receive a smaller reimbursement for the same service that can be performed at an HOPD. However, the site-of-service differential is narrowing greatly. "Andrew Lovewell, administrator of the Surgical Center at Columbia (Mo.) Orthopaedic Group told Becker's. "With a proposal to eliminate the inpatient-only list and allow more procedures to become available for ASCs to perform them, I foresee a bright future in the ASC space."

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