When you assess many of the most common pain management procedure codes, the new Medicare ASC payment system isn't nearly as unkind to the specialty as those early reports of gloom and doom led you to believe.

Yes, at the start ASCs will take a modest hit in payments for some procedures. But depending on volume and payor mix, pain management ASCs will be fine. The transition to Medicare payment based on the inclusive Hospital Outpatient Prospective Payment System will only increase the demand for ASC-based treatment of acute pain associated with the more complex procedures allowed. Positive impacts of the new payment system will come from increases in covered procedures as well as types of payment ASCs haven't seen before from Medicare.

Working with new payment indicators
The payment indicators stipulated by CMS guide the four-year transition (completed by the beginning of 2011) to the new OPPS-based system for all ASC services. Of the 16 CMS-specified methods and timings for application of the revised payments, single-specialty pain management ASCs need only work with a few of the following changes:

• The old groupers which classified procedures receiving facility fees have been replaced by Ambulatory Procedure Classification (APC). The assigned values will be transitioned over the four-year phase-in of the new payment system. These changes, which began Jan. 1, will graduate from 75 percent of the past ASC grouper rate and 25 percent of OPPS this year, to 50-50 in 2009, then 25-75 in 2010. By January 2011, fees will be based on 65 percent of the full OPPS rate.
• New procedure codes that were exclusive to hospital-based facilities and not considered appropriate to office-based facilities are already being paid, since Jan. 1, at 65 percent of the HOPD rate. Codes added include kyphoplasty, sciatic nerve continuous nerve infusion and femoral nerve blocks. Formerly, a surgeon got a higher differential from Medicare and the ASC received nothing for such procedures, which made it most difficult for the ASC to recoup the difference from physicians.
• Payments for such device-intensive procedures as neurostimulators and drug-infusion pumps now fully cover the devices' costs, even while reimbursements for some of the related procedures are moving toward 65 percent of the HOPD rate.
• New codes for facility fees are available for services once considered office-based and which didn't qualify for a facility fee. These services were and will continue to be paid at a higher professional fee if performed in their own office setting (called the site-of-service differential). This enhanced fee differs from that paid to a surgeon in a facility setting simply because the facility is incurring the practice expense. With this elimination, ASCs will have direct payment — and avoid the appearance of subsidizing the use of the ASC. The newly assigned transitional value (different from the site-of-service differential) is now applied to ASCs as the facility fee.

Clarifying reimbursement
Considering only Medicare reimbursement at the prorated 65 percent of HOPD rates for the pre-2008 groupers, with many basic facility fees reduced between 24 percent and 35 percent, leads one to a dim financial forecast for ASCs. However, the perspective brightens, even with the basic values for some codes decreasing, when you consider some of the other changes:

• when used along with qualifying procedures, provision of some of the more expensive drugs that now yields additional fees; and
• a significant number of codes qualify for new or actually higher payments than before.

Gaining improved reimbursement under new fees, a large joint injection [20610] under the old 2007 system only allowed an ASC the office-based site-of-service differential amount as anticipated compensation — a disappointing $21.22, which was particularly discouraging because nothing could be added for the cost of the drug administered. Under the OPPS system, the ASC is now being paid a basic facility fee that is higher than the 2007 site-of-service differential and is able to recover a separate payment for some of the more expensive drugs, such as Synvisc for a knee injection. Another example: use of Baclofen Clonidine J0735 to fill an implanted infusion pump during the initial implantation now draws an additional payment.

Codes that had been practice-based now are valued at identifiable rates. The increase over 2007 site-of-service differential values for procedures ranges from 23 percent to 128 percent; also, importantly, the collection of those payments will improve by virtue of direct payment to the ASC. Though the professional parties involved may have recognized the appropriateness of paying for use of a facility, such money had been difficult for ASCs to collect from the operating surgeon who received the amounts as part of global professional fees. Delays caused political and cash flow problems for ASCs. The new system makes clear the exact fee CMS will pay directly to the ASC. It also eliminates both the uncomfortable task of trying to extract payment from the surgeon's professional fees and that accounting step.

New advantages
Under the HOPD-based system, ASCs performing neurolytic procedures (such as chemical neurolytic blocks, cryoablative techniques, radiofrequency lesioning and neurosurgical procedures) will fare better as the new payment system covers the costs of more expensive needles, probes and grounding pads, which the old system did not.

You should also reconsider implantables. Formerly, payment for stimulators and pumps often involved extended negotiation and compromise; these devices are now included in the Ambulatory Payment Classification, with typically favorable offsets by a "device intensive percentage."

For any ASC performing pain procedures, the overall effect of the transition to an HOPD rate is highly dependent on the specific procedures performed and their payor mix. We examined annualized procedure data for four unrelated pain management groups across the country without assuming or applying any escalation of fees for inflation adjustments. The four, varying in applicable state regulations and in volumes of managed care, are located in Florida (mostly Medicare), Georgia (with some license requirements), Pennsylvania (which is heavily managed care and whose regulators now insist that only ASCs perform pain management) and Texas (where the workers' compensation is one of the most predictable and favorable for pain). These projections include:

• Increases in 2008 over 2007 CMS payments for ASC pain management procedures will average slightly more than 2.5 percent. Payments will then decrease annually through the transition to a purely OPPS system in 2011.
• When the transition period reaches the full OPPS rates, the net effect will be a weighted average reduction in payment of a little less than 6 percent — quite different from the 35 percent or greater losses some predicted.
• Should HOPD rates be able to continue to increase a modest 3.5 percent to 4 percent annually for each year of the transition (except in 2009, when such an increase is prohibited), ASCs will realize a net increase in weighted average payment of about 5.3 percent over 2007 payments for the four years. This is true for all procedures, not just the office-based.

Despite transitioning into an HOPD-based payment system, an active pain management ASC will continue to be a first-rate investment for owner-surgeons as well as other joint ventures. Profitability has been and will remain directly related to adequate patient volume to keep staff productive and equipment busy given a normal procedure mix. For pain management, such a mix usually includes offering epidurals, facet joint injections, neurolytics, percutaneous discectomy and lysis of adhesions and/or implantables. Under those circumstances, you can compensate for a 5.3 percent loss from Medicare by an annual procedure volume increase of less than 2.5 percent. This reach fits the capability of most groups. With billing of other payors, considering CMS is frequently the lowest payor, the volume increase to overcome the projected per-procedure reduction should be less than 2.5 percent.

Contemplating diversification
For those thinking of diversifying their facilities as a way of bettering the bottom line, the advantage of multiple specialties includes shared overhead by more owners (where allowed by state regulations), the potential to increase resale value, long-term flexibility and the opportunity to help reach full-facility utilization, if this is desirable. The challenges of multiple specialties include possible state restrictions on adding another specialty, such as no longer being exempt from a certificate of need as a facility may have been with a single specialty.

If a new specialty uses a higher level of anesthesia, state and federal design requirements could affect the physical environment by requiring:

• A larger operating room. A class B procedure room, which limits procedures to those accompanied by only moderate sedation, requires 250 square feet. A class C operating room for general anesthesia cases requires 400 square feet.
• Higher levels of medical gases.
• A new essential electrical system, upgrading from one usually based on a battery-powered backup to a full hospital-grade generator-based system.

Different specialties also vary significantly in their use of time and resources. The facility fee versus the cost and time per case needs careful scrutiny. Pain management physicians can typically treat as many as four patients per hour. One procedure from a higher classification may actually bring in less reimbursement for that same time period. Also consider whether your staff and facility are equipped to handle a different pace. Considerations beyond the reimbursement are major medical equipment purchases, drugs and supplies needed per case, anesthesia type and coverage, staffing (use of RN or X-ray technologist) and time allotment for the use of the OR and PACU.

Convinced?
In response to those doubting the value of pain management in an ASC setting, we have shown the error of their ways. When working smarter, not harder, the news from Medicare is far from unbearable. Remember, in change lies opportunity.