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OIG Finds Lowering HOPD Payment Rates to ASC Level for ASC-Approved Procedures Could Save Medicare and Beneficiaries Billions of Dollars

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On April 17, the HHS Office of Inspector General (OIG) released a report evaluating the impact on total Medicare expenditures of the payment differential between hospital outpatient departments (HOPDs) and ambulatory surgical centers (ASCs).

Medicare ASC payment rates are typically lower than those paid for similar services conducted in the HOPD setting because their payment rates are derived as a percentage of the HOPD payment rates under the Outpatient Prospective Payment System (OPPS). OIG reviewed payments to determine Medicare savings as a result of performing services in the ASC rather than in the HOPD and potential savings if HOPD payments are reduced to the same level as in the ASC.

OIG found that Medicare saved almost $7 billion between 2007 and 2011 as a result of procedures being performed in ASCs rather than HOPDs, while projecting to save an additional $12 billion from 2012 to 2017. OIG also projects that if CMS reduces HOPD payment rates for ASC-approved procedures performed on no- or low-risk beneficiaries to ASC payment levels, Medicare could save $15 billion from 2012 through 2017. Through reduced cost sharing, OIG estimates that beneficiaries have saved about $2 billion from 2007 to 2011 and will save an additional $3 billion from 2012 to 2017. Beneficiaries would save an additional $2 to $4 billion from 2012 to 2017 if CMS reduces the HOPD payment rates for ASC-approved procedures to ASC payment levels.

OIG recommended CMS seek legislation to exempt the reduced expenditures as a result of lower HOPD payments from budget neutrality adjustments. If Congress passes the budget-neutrality exemption, OIG would recommend CMS reduce OPPS payment rates for ASC-approved procedures performed on no- or low-risk beneficiaries in the HOPD and implement a payment strategy that will allow outpatient departments to continue to receive the standard OPPS payment rate for ASC-approved procedures that must be provided in the HOPD based on individual beneficiary clinical needs. CMS disagreed with OIG’s recommendations, raising concerns around circularity since most ASC payment rates are based on a percentage of OPPS payment rates.

While CMS is unlikely to implement these payment level changes between HOPDs and ASCs based on CMS’ methodological concerns and the legislative requirement needed, payment equalization has been a focus in other settings of care and was explored recently in the CY 2014 Physician Fee Schedule (PFS) proposed rule. MedPAC has also previously studied payment equalization between HOPDs and the physician office to determine efficiencies between those settings of care.

The CY 2015 OPPS and ASC proposed rule is expected in early to mid-July.

View OIG’s full report.

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