The changes to the Medicare ASC payment system are now in effect. So it's time to dig in and minimize any negative financial impact they might have on your new or existing facility. If you study the changes, you'll find the news isn't all bad. There are opportunities to grow your business with procedures and specialties offering increased reimbursements under the new system. To do this, however, you'll need to educate your staff, physicians and investors, and plan your budget accordingly. Here are some pointers.

Why the change?
Under the new payment system, ASCs will be reimbursed for a surgical procedure if CMS determines that it "does not pose a significant safety risk to Medicare patients when performed in an ASC and that is not expected to require an overnight stay." This new payment system adds about 819 procedures not previously covered, resulting in about 3,390 surgical procedures now covered.

The new ASC payment system rates are based on ambulatory payment classifications (APCs), which have been used for hospital outpatient procedures for several years. ASCs will be paid at 65 percent of what hospitals are paid. There are two rationales for this. On the one hand, the GAO reported that procedures performed in ASCs are generally less costly to Medicare and that procedure costs in ASCs are 84 percent of those in hospitals. On the other hand, CMS reasons that reimbursing ASCs at 65 percent of what hospitals are paid will result in comparable reimbursement to what ASCs have been receiving under the grouper system. This concept works out better for multi-specialty than single-specialty facilities. GI, pain management and ophthalmology single-specialty facilities face significant negative financial impact from the change.

Look internally
The gap between the real cost and the reimbursement rate leaves ASCs scrambling to make up the 19 percent difference. Here are 10 things you need to look at in your facility:

• Get serious about collecting. If your facility makes a habit of telling patients to leave their checkbooks at home and that you'll bill them, now is the time to change this policy and start collecting co-pays and deductibles up front.
• Perform a fee schedule analysis. Make appropriate revisions to your fees. Be sure that none of the fees you charge is less than what Medicare reimburses for that procedure under the new payment system.
• Analyze workflow. Benchmarking and case costing are more important than ever.
• Analyze your costs of implants and supplies. Look for ways to standardize these inventories and be more efficient.
• Revisit relationships with suppliers and equipment companies. Consider joining a GPO or evaluate your current membership for opportunities for more favorable arrangements (see "Shop Around Before You Join the Club" on page 88).
• Look at your contracts with other payors. Find out how they plan to reimburse you based on the changes (see sidebar below). Negotiate carve-outs on your more expensive implants and radiology services, as Medicare is paying better for these.
• Audit yourself. After you begin receiving payments under the new system, audit them to be sure you're being paid correctly and on time.
• Analyze your facility. How many ORs or procedure rooms are you currently using on a regular basis? If you can decrease the number of rooms used for procedures involving low-paying specialties, you can decrease your costs. Or you can increase the volume of cases performed.
• Assess your workforce. Reassigning staff, using on-call staff and, in some cases, cutting hours can help cut costs. Cross-training staff is very important — both among the clinical staff and in the business office.
• Play the changes. Understand that some procedures within a specialty negatively impacted by these changes, such as ophthalmology, offer opportunities for diversification. For example, retina surgery will have increased reimbursement and offers some new opportunities for the ASC that is just doing cataracts. Laser surgery procedures are low-cost procedures for a facility and can be accomplished in a short period of time.

What else?
Here are a few other notable nuances of the new payment system:

• Claim filing. Under the new payment system, you'll continue to bill claims filed to Medicare on CMS-1500 claim forms. There are, however, a few changes. For example, the use of the -SG modifier on CPT codes will be discontinued in 2008. Medicare doesn't want to see unlisted CPT codes on claims. Head off these cases at the time of scheduling. Also, Medicare now wants you to bill bilateral procedures with two CPT codes (two line items) with no -50 or -RT/-LT modifiers.
• Differences in payment. The new Medicare ASC payment system is based on OPPS (the hospital outpatient payment system) and uses OPPS relative payment weights for ambulatory payment classifications as a guideline. Remember, the new APC list does add some new procedures not previously on the Medicare grouper list. Those procedures that weren't on the Medicare grouper list are now paid at the full 2008 APC allowable amount. Those procedures that were on the Medicare grouper list are paid at a "blended" rate, with a transition amount for the next three years.
• Newly added procedures. The 819 procedures that are new to the ASC procedure list will be reimbursed to ASCs under the "fully implemented" rate (no phase-in or transition period) as of Jan. 1 and will immediately be paid at the APC rate for ASCs. Only those procedures that were previously covered in 2007 under the grouper system will have payments phased in. For the first time, brachytherapy for prostate cancer is covered. Medicare provides separate payment to ASCs for the brachytherapy sources implanted with needles or applicators for prostate cancer and for subsequent application of the radiation source.
• What's included now? You can bill for services and items that Medicare considers "directly related and required to perform the procedure," such as use of the OR, the nursing staff, supplies and devices.
• Phase-in period. CMS is phasing in the new payment system over a four-year period for those procedures currently on the grouper list. It should be fully implemented by 2011. There will also be annual updates in the relative weights of procedures and the conversion factors used to determine reimbursement for procedures. These updates will be tied to the updates hospitals receive through OPPS and MPFS. CMS says it will account for geographic wage variations in individual ASC payments by applying a wage index to 50 percent of the ASC payment.
• Payment adjustments. ASC payments will be adjusted each year based on changes in the technology and the resources used in performing procedures. Changes are meant to stay budget-neutral, thus payments for some procedures will increase and some will decrease. There will be no inflation update for the year 2009. However, beginning in 2010, the ASC conversion factor, which influences the fee update each year, will increase based on the federal government's Consumer Price Index for urban consumers.
• Excluded procedures. Many procedures are still excluded, including those that pose a significant safety risk to the patient; might result in an overnight stay; are on the list of covered inpatient-only procedures; directly involve major blood vessels; require major or prolonged invasion of body cavities; generally result in extensive blood loss; are emergent or life-threatening in nature; commonly require systemic thrombolytic therapy; or can only be reported using an unlisted surgical procedure code. Pay attention to this last one. Have your scheduler alert you if a complicated procedure, which must be billed with unlisted CPT codes, is requested to be performed in your facility on a Medicare patient. You may want to decline the case and divert it to a hospital. These criteria could cause CMS to exclude many procedures that can generally be performed safely in an ASC facility.
• Impact by specialty. Ophthalmology, GI and pain management have been hurt by the new system. For example, rates for several common GI procedures will decrease by 17 percent over the next four years. In ophthalmology, a YAG laser eye procedure is now covered at $288.20 compared to $313.50 last year. In pain management, epidural steroid injections are now reimbursed at $322.77, about $10 less per procedure than last year.

At the same time, general surgery, podiatry, gynecology, urology, orthopedics and ENT have been helped. For example, a laparoscopic cholecystectomy performed in an ASC is reimbursable (at $1,909.37) for the first time. The payment for a bunionectomy has increased by 36 percent to $691.30. Plus, some radiology is now covered as long as it's necessary for the success of the procedure and it's performed just before, during or after the procedure. Fluoroscopy, however, is still not covered.

• Implants and devices. While Medicare doesn't cover all implants, it reimburses some when billed as a separate line item with a CPT or HCPCS code. It reimburses other implants as part of the surgical CPT code itself. Medicare takes into account the average cost of an implant and builds that cost into what it reimburses. You don't need to break out the implants you bill on these procedures. This primarily affects orthopedics and increases reimbursement for many procedures.

In a bit of good news, procedures in which the cost of the device is equal to or exceeds 50 percent of the medical cost of the APC amount are separately reimbursed under the new system. Also, Medicare will continue to allow the extra $50 currently paid for new technology intraocular lenses (NTIOL) used in cataract procedures. However, the process for selecting NTIOLs is being reformed and CMS will set the amount of additional reimbursement.

The cost of acquiring donor corneal tissue is reimbursed the same under the new payment system. Unfortunately, some implantable devices, such as stents and mesh, which were not covered under the grouper system, still won't be covered.

• Time-based procedures. Medicare's criteria for time-based procedures under the new payment system is that the case is not to exceed 90 minutes or 4 hours of recovery (PACU) time. Ninety minutes of anesthesia is no longer an appropriate criteria to go by under the new payment system. Finally, Medicare considers midnight to be the defining measure of an overnight stay under the new payment system.

What's next?
The ASC industry has evolved greatly over the last several years, often while performing a sometimes-awkward dance with the federal government. This won't change, and more challenges remain ahead. Unfortunately in Congress, the House Ways and Means Committee has physician ownership on its radar screen to possibly add to the list of Stark violations. In the future, successful ASC ventures will be those capable of living with change.