Calculating ASC surgical procedure payment

Rate-Setting Policies 

Generally, there are two primary elements in the total cost of performing a surgical procedure:

• The cost of the physician’s professional services for the performing the procedure; and

• The cost of services furnished by the facility where the procedure is performed (for example, surgical supplies and equipment and nursing services).

For ASC covered surgical procedures, the professional fee is paid to the physician; payments for facility costs are paid to the ASC.

Prior to the revised ASC payment system implemented January 1, 2008, the ASC payment rate was a standard overhead amount based on CMS’s estimate of a fair fee and the costs incurred by the ASCs providing the procedure. To estimate this cost, the CMS surveyed audit costs incurred by a sample of ASCs. There is an annual adjustment for inflation based on the percentage increase in the consumer price index for urban consumers in years when the ASC payment rates are not updated by a survey or otherwise. Over a number of years, there have been statutory requirements reducing or eliminating the inflation adjustment on a year by year basis. For example, the statute requires that the CPI adjustment factor be zero percent in FY 2005, the last quarter of CY 2005, and each CY from 2006 through 2009.

Beginning January 1, 2008, the revised ASC payment system includes the following features:
ASC payment rates for most services are based on a percentage of the hospital outpatient prospective payment system (OPPS) rates. Unless statutorily prohibited, there is annual adjustment of the payment rates for inflation based on the CPI-U. The update for inflation begins with the CY 2010 ASC payment rates when the statutory requirement for a zero update no longer applies.

In general, the Medicare program pays ASCs 80 percent of the lesser of the actual charge or the ASC facility payment rate for the covered services performed. The beneficiary pays 20 percent of the lesser of the submitted charge or the ASC facility payment rate for the covered services performed. An exception to this is screening flexible sigmoidoscopy and screening colonoscopy where Medicare pays 75 percent and the beneficiary pays 25 percent.

Beginning with the implementation of the 2008 revised payment system, the labor related adjustments to the ASC payment rates are based on the Core-Based Statistical Area (CBSA) methodology. Payment rates for most services are geographically adjusted using the pre-reclassification wage index values that CMS uses to pay non-acute providers. The adjustment for geographic wage variation will be made based on a 50 percent labor related share.
Detailed information on both the OPPS and ASC payment methodologies is available in the hospital outpatient and ASC final rules.