In a recent report, the HHS Office of Inspector General (OIG) recommended that CMS limit Medicare hospital outpatient prospective payment system (OPPS) payments for procedures that can be safely performed in an ambulatory surgical center (ASC), given that ASC payments are typically lower than the corresponding OPPS payments. According to the OIG, Medicare would save as much as $15 billion for CYs 2012 through 2017 if CMS reduces OPPS rates to ASC payment levels for ASC-approved procedures performed on beneficiaries with low-risk or no-risk medical profiles (which the Agency for Healthcare Research and Quality estimates represents 68% of hospital patients 65 and older); beneficiaries would realize additional out-of-pocket savings. The OIG observes that its proposal would require legislative changes to current budget neutrality rules to prevent resulting savings from being redistributed in the form of higher payments for other procedures. Under the OIG proposal, outpatient departments would continue to receive the standard OPPS payment rate for ASC-approved procedures that must be provided in an outpatient department because of a beneficiary’s individual clinical needs.

CMS disagreed with the OIG’s recommendations, which are not binding on the agency. CMS noted that because most ASC rates are based on OPPS rates, the OIG’s recommendations may raise “circularity” concerns with the respect to the rate calculation process. Moreover, CMS observes that the OIG suggests no specific clinical criteria to distinguish patients that can be adequately treated in an ASC relative to the hospital outpatient setting, which would be needed to act on these recommendations. The OIG stands by its recommendations, however, and urges CMS to take the necessary steps to implement them.

The OIG prepared its report, “Medicare and Beneficiaries Could Save Billions If CMS Reduces Hospital Outpatient Department Payment Rates for Ambulatory Surgical Center-Approved Procedures to Ambulatory Surgical Center Payment Rates," in response to a congressional request.