The latest final rule from CMS imposes new regulatory burdens on ASCs and revises the amount of Medicare payment ASCs will receive for furnishing services to program beneficiaries. 

On October 30, 2008, the Centers for Medicare and Medicaid Services (CMS) posted a long anticipated final rule substantially revising the Medicare ambulatory surgery center (ASC) Conditions for Coverage (CfCs) and updating 2009 payment rates. Once implemented, these changes will impose significant new regulatory burdens on ASCs and revise the amount of Medicare payment ASCs will receive for furnishing services to program beneficiaries.

Conditions for Coverage


Under current Medicare regulations, an ASC seeking Medicare or Medicaid reimbursement for surgical services furnished to program beneficiaries must meet various environmental and operational requirements, and satisfy a Medicare certification survey demonstrating that it meets the requirements. These requirements are set forth in federal regulations at Title 42, Part 416.

The current ASC CfCs were originally established in 1982. In August 2007, CMS published a proposal to overhaul the CfCs for the first time in 26 years. As proposed, the changes would not only have added substantial new regulatory burdens to ASCs, but also simultaneously curtailed the range of services that can be furnished by ASCs, including for private pay patients.

To be sure, the final rule that was published last week makes many important and potentially challenging changes. However, CMS retreated on a number of the more controversial and onerous changes.

Overnight Stays

Perhaps the most controversial and widely opposed proposal involved redefining “ASC” in a manner that would have limited the range of services that could be offered by ASCs, including for private pay patients. Specifically, CMS proposed to alter the definition of an ASC to mean “any distinct entity that operates exclusively for the purpose of providing surgical services to patients not requiring an overnight stay following the surgical services….” CMS further proposed defining “overnight stay” to mean “the patient’s recovery requires active monitoring by qualified medical personnel, regardless of whether it is provided in the ASC, beyond 11:59 pm of the day on which the surgical procedure was performed.”

These changes were particularly challenging for ASCs. First, CMS would define “overnight stay” as anything beyond 11:59 pm, which is a change from the current definition of anything exceeding 24 hours. Second, CMS would prohibit ASCs from furnishing procedures that require “active monitoring by qualified medical personnel, regardless of whether it is provided in the ASC,” which again departs from current policy that allows a facility to transfer non-Medicare patients to non-hospital settings (e.g., skilled nursing facilities, recovery care centers) for extended recovery. Finally, the proposed restrictions would apply to all patients regardless of payment source.

After consideration of the public comments, CMS revised the proposed definition of “ASC” to retain much of the current flexibility towards patient discharge schedules. In the final rule, CMS defines an “ASC” as a “distinct entity that operates exclusively for the purpose of providing surgical services to patients not requiring hospitalization and in which the expected duration of services would not exceed 24 hours following admission.” Consequently, subject to any applicable state law restrictions, Medicare patients may stay at an ASC for 23 hours, 59 minutes starting at the time of admission without constituting an overnight stay. Non-Medicare patients seemingly could be allowed to recover longer in a setting other than the ASC or a hospital. Thus, while more lenient than the proposed definition, this new definition restricts ASCs more than the current standard.

Beginning in 2009, the new standard will be used to evaluate an ASC’s compliance with Medicare’s CfC for purposes of qualifying for or maintaining enrollment in the Medicare program. Surveyors will examine ASC patient records to ensure that ASCs do not as a matter of routine recover patients for more than 24 hours. However, ASCs that occasionally recover patients longer for unexpected reasons will not be subject to sanction, disenrollment, or withheld payment. CMS acknowledges that, in rare instances, a Medicare patient may be required to stay in the ASC beyond 24 hours due to an unexpected result from a surgery.

Radiologic services

CMS proposed to revise the radiology services standard to require that an ASC meet the CfC applicable to suppliers of portable X-ray services, which would have required, among other things, that radiology services be supervised by a licensed doctor of medicine or osteopathy who is board-certified by a specialty that provides advanced training and experience in the use of X-rays for diagnostic purposes. Further, all operators of X-ray equipment would be required to complete a formal training program in X-ray technology of not less than 24 months in an approved school or have earned a bachelor’s or associate’s degree in radiologic technology from an accredited college or university.

CMS pulled back on this proposal as well. Under the revised standard, ASCs furnishing radiologic services must meet the hospital conditions of participation for radiologic services specified in §482.26, which are far more appropriate and less burdensome for ASCs. Unlike the portable X-ray conditions, the hospital conditions allow more flexible supervision, personnel, and documentation requirements.

Patient Admissions, Assessments and Discharge

CMS also aggravated the ASC community with seemingly cumbersome new rules governing patient admission, assessment and discharge. However, here too, CMS tempered many of the more controversial proposals. For example, rather than requiring that the ASC ensure that the surgeon conducts a “thorough assessment” of the patient’s post-surgical condition—including an assessment of all body systems—CMS will require that a physician or other qualified practitioner conduct an assessment appropriate to the nature and scope of the procedure performed and the specific medical condition of the individual patient. Similarly, rather than requiring that ASCs ensure that each patient has a safe transition home—which would have implied that ASCs ensure that patients have adequate transportation, and actually make it home safely—ASCs now must merely ensure that “all patients are discharged in the company of a responsible adult, except those patients exempted by the attending physician.”

Payment System Updates


Earlier this year, CMS began implementing a vastly different methodology for reimbursing ASCs for services furnished to Medicare beneficiaries. Please see the following On the Subject - Ambulatory Surgery Center Payment Changes Finalized - The new payment system, which is conceptually and practically linked to Medicare’s hospital outpatient prospective payment system (OPPS) profoundly altered how much Medicare pays surgery centers. The notice published last week announces updates to that payment system for the first time since it became effective on January 1, 2008. The updates announced last week apply to services furnished during 2009.

Payment Rates

Beginning in 2008, CMS uses the hospital OPPS as the baseline for establishing payment rates for surgical services. However, because of statutory budget constraints, CMS does not pay ASCs on par with hospitals. Instead, ASC facility payments are made at discounted hospital OPPS rates.

During 2008, subject to transition year rules and other adjustments, ASCs generally are paid approximately 65 percent of what comparably situated hospitals are paid for the same service. For 2009, that relationship deteriorates further for ASCs. The 2009 ASC conversion factor will be $41.393, while the hospital conversion factor will be $66.059. While the conversion factor relationship is 62.6 percent, CMS applies other reductions to the relative payment weights to maintain budget neutrality. Consequently, in 2009, subject to transition year rules and other adjustments, ASCs generally will be paid only 61 percent of hospital reimbursement for the same services.

Procedures that were approved for payment in the ASC setting prior to 2008 may be paid more or less than 61 percent of OPPS rates. Calendar year 2009 will mark the second of four years in which CMS will transition to the revised ASC payment system. During 2009, payment rates for procedures for which Medicare payment was available to an ASC prior to 2008 will be based on a 50/50 blend of 2007 and 2009 payment rates. For example, during 2009, a diagnostic colonoscopy (CPT Code 45378), a commonly performed ASC procedure, will be paid to ASCs at approximately $399, whereas a hospital will be paid $594 (national unadjusted rates). For this procedure, an ASC will be paid approximately 67 percent of the hospital payment amount. Similarly, during 2009, Medicare will pay an ASC approximately $901 for a knee arthroscopy (CPT Code 29881), 46 percent of the approximately $1,943 that a hospital will be paid.

The percentage relationship between ASC and hospital payment rates will continue to fluctuate from year-to-year as CMS annually recalculates the conversion factors and applies budget neutrality and inflation adjustments.

Office-Based Designation

Procedures that are performed more than 50 percent of the time in a physician’s office setting are designated as “office-based” and subject to further payment reductions. Specifically, payments for procedures meeting this criterion are capped at the lesser of the discounted ASC payment amount or the non-facility practice expense amount paid under the Medicare Physician Fee Schedule (MPFS). The cap applies only to those procedures newly added to the list beginning in 2008. During 2008, approximately 350 procedures are subject to the office-based payment cap, and are paid at MPFS amounts. For 2009, CMS has added eight procedures to the list of those designated as office-based. CMS annually reviews and classifies procedures for designation as office-based services.

Covered Surgical Procedures

The payment rates discussed above apply only to those services that have been designated as covered by Medicare when furnished in the ASC setting. Nearly 3,500 procedures are currently approved for payment in the ASC setting. For 2009, CMS will add 14 new procedures (see Table 43 of the final rule) to the list of covered services.

The final rule is presently available on the CMS website at It will be published in the Federal Register on November 19, 2008.