When performing outpatient procedures, many orthopedic surgeons operate in either an ambulatory surgery center (ASC) or a hospital-based outpatient department (HOPD). Although some of the workflows and services offered may appear similar between the two, the background operations are substantially different from business and regulatory perspectives. An HOPD is owned by and typically attached to a hospital, whereas an ASC is considered a standalone facility.
The difference between an ASC and HOPD specifically refers to the regulations that apply to the center; therefore, a “freestanding” surgery center can still be classified as an HOPD if it is within a 35-mile radius of the hospital and falls under the same financial and administrative contracts. Similarly, a facility can be operated by a hospital and still maintain ASC status if it is an independent entity financially and administratively with its own Medicare agreement. Furthermore, ASCs must comply with the ASC Covered Procedures List, which is aimed at ensuring that procedures with the appropriate level of risk are performed in these freestanding centers.
Payment Overview and Research
In general, ASCs command lower rates than their HOPD counterparts. Using Medicare as an example, when outpatient surgeries shift from an HOPD setting to a freestanding ASC, the Medicare payment methodology changes from the Outpatient Prospective Payment System (OPPS) to the ASC fee schedule.
This shift is impactful because, although the ASC fee schedule is linked to OPPS payments, the inputs and adjustments to the calculation are not the same. Medicare rates, a diagnostic colonoscopy (CPT® code 45378) would have an allowable payment rate of $709.98 in an HOPD setting, while the same procedure would have an allowable payment rate of $369.84 in a freestanding ASC (about 52 percent of the HOPD rate).
Differences in Methodology Lead to Different Payment
Three main factors contribute to the differences in payment between ASCs and HOPDs:
1. Relative weight:
The relative weight is the numerical value associated with the service provided, as defined by the Centers for Medicare & Medicaid Services (CMS). This value is multiplied by the conversion factor to determine the national Medicare allowable rate. The relative weight is lower in the freestanding ASC setting due to OPPS’s proportional adjustments to relative weight to maintain budget neutrality. This methodology resulted in a 10.1 percent reduction to the ASC relative weight (when compared with the HOPD relative weight) for 2018.
2. Conversion factor:
The ASC conversion factor is now based on the hospital market basket, whereas previously it was based on the Consumer Price Index. The change to the hospital market basket promotes site neutrality between hospitals and ASCs and encourages the migration of services from the hospital setting to the lower-cost ASC setting. Thus, the ASC conversation factor is $46.55 for 2019, and the OPPS conversion factor, also based on the hospital market basket, is $79.49 for 2019. As such, the ASC conversion factor is about 59 percent of the OPPS conversion factor ($46.55 / $79.49 = 59 percent).
3. Wage index adjustment:
Once the national Medicare allowable rate (allowable rate) is determined, it is further adjusted by the geographical wage index of each individual HOPD/ASC. The geographical wage index for each HOPD/ASC is determined by calculating the ratio of the average hourly wage for its labor market (typically its county) to the national average hourly wage. This geographical wage index adjustment varies for HOPD payments and freestanding ASC payments.
For freestanding ASCs, the 50percent of the allowable rate is adjusted. For HOPDs, the 60percent of the allowable rate is adjusted. This difference in methodology and weighting (as it relates to the labor portion of the payment) can have a positive or negative impact on ASC payment rates when compared with the OPPS rates, depending on the applied wage index.
Total Costs for Four Eye Procedures
The total cost is the “Medicare-approved amount.” In Original Medicare, Medicare generally pays 80 percent of this amount and the patient pays 20 percent.
66984: Extracapsular cataract removal with insertion of intraocular lens prosthesis, one stage procedure
67028: Injection of the drug into the eye
66821: Removal of recurring cataract in lens capsule using laser
66982: Extracapsular cataract removal with insertion of intraocular lens prosthesis, complex
As a result of the transitions, solutions such as comanagement agreements have been developed to allow physicians some leadership in the management of HOPDs without the financial risks associated with ownership of ASCs. Current efforts to equalize payments between ASCs and HOPDs, along with the addition of several key procedures to the ASC Covered Procedures List, will likely impact the ASC and HOPD market. The changes, as well as a shift toward value-based care, will play important roles in the future of systems that support outpatient orthopedic procedures.