If CMS Lowered HOPD Rates, What Could ASCs Expect?

The OIG's recommendation earlier this year that certain Medicare hospital outpatient department rates be lowered to ASC rates was met with significant resistance from both parties, and for good reason. While ASCs have lobbied to eliminate the growing disparity in HOPD and ASC rates, the potential fallout from such a drastically opposite change could be catastrophic for both HOPDs and ASCs alike.

But what would the lay of the land look like, if the OIG's HOPD rate-reduction were to come to pass?

"There has been a lot of discussion from the Medicare Payment Advisory Commission on site neutral payments," says Nicholas Janiga, ASA, director at HealthCare Appraisers. "It could alter the way in which transactions are completed. Right now it's easy for hospitals to justify an acquisition of an ASC if they will collect more on a per-case level for the same services, post acquisition."

Lowered HOPD rates could both make hospitals more disciplined about any ASC acquisition decisions and potentially allow for more hospital-ASC joint ventures with freestanding ASCs.

The shift in rates might also cause a change in which specialties are performed in HOPDs versus freestanding ASCs. Mr. Janiga cites the MedPAC 2013 pain management and ophthalmology policy proposals. "Pain management isn't overly expensive from a capital expenditures standpoint, but certain ophthalmology cases require a considerable amount of OR equipment," he says. "As a result, there has been a shift in ophthalmology to outside of the HOPD, to now being done more heavily in freestanding facilities."

Ambulatory Surgery Center Association CEO William Prentice says that a rate-lowering shift would be felt throughout the healthcare industry, by physician groups, ASCs, hospitals and others; however, the extent of the impact would depend on the final rate.

At the time of the OIG report's release, ASCA expressed concerns that reducing HOPD rates to ASC rates was not a sustainable payment solution. A blend between HOPD and ASC rates, however, could be both favorable to ASCs and money-saving for the healthcare system at large, says Mr. Prentice.

In any site-neutral payment case, the payments might not stay site-neutral for long. As the situation currently stands, ASC and HOPD payment algorithms are updated using different inflation factors. After a first year of site-neutral payments, without updated inflation factors, ASCs and HOPDs would again receive different Medicare payment rates.

While CMS has stated it has no plans to pursue site-neutral payments, Mr. Prentice says Congress could raise the issue again, depending on the state of the budget. "We're still seeing a lot of interest on Capitol Hill in looking for savings in the Medicare system. Of course, any site neutral policy implementation would be dependent upon Congress needing to pay for something else. With elections coming up later this year, it's unlikely that Congress will get much done," he says.

"For policymakers, site-neutral payments are on the table, but the future appears dim. There are lots of details to be worked out. To make site-neutral payments work so they don't reduce access to care, you need to use a scalpel, not sledge hammer," he adds. "The important message is that there are so many different nuances to the way site-neutral payments could be implemented, the devil is clearly in the details when it comes to whether it would impact ASCs and access to care in general."

Mr. Janiga agrees. "At this point, site-neutral payments are just a recommendation. The adoption of a site-neutral payment methodology is very uncertain at this point," he adds.

More Articles on Transactions and Valuations:
14 ASC Industry Transactions in 2014 so Far
5 Key ASC Companies Report Increased Q1 Earnings

4 Recent Joint Venture ASC Plans, Openings & Expansions

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