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Calm Before the Storm
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Publish Date: October 10, 2007   |  Tags:   News

Calm Before the Storm
Bracing for Medicare's Upcoming Changes
Remember 2003? That year changed everything for the ambulatory surgery community, as ASCs - and their Medicare payments - were scrutinized by the government.

By all comparisons, 2004 was a quieter year with few significant actions affecting ASC payment or regulation. Like the proverbial calm before the storm, however, the stability of 2004 might have foreshadowed a tempest of change in 2005 and 2006. Here are the major issues you'll need to be aware of in the coming months and what they might mean for your facilities.

  • ASC lists. In November, CMS proposed an update to its list of surgical procedures covered by Medicare when performed in ASC settings. For ASCs, it was a mixed bag. It extended facility fee reimbursement to 25 procedures but deleted 100 from the list, including cystoscopy; prostate biopsy; a dozen lesion removal, repair and reconstruction procedures; and four nasal/sinus endoscopy codes. The move met with strong protest from ASCs and at least 30 doctor organizations, including the American Medical Association. Deleting so many procedures amounts to the government's making arbitrary decisions about the best site of care for a given condition, say the groups.

"The AMA believes the physician, who has firsthand knowledge of the patient's medical history and attendant risk, should have the ability to make an informed decision on a case-by-case basis about the most appropriate surgical environment for Medicare patients," AMA Executive Vice President and CEO Michael D. Maves, MD, wrote in a Jan. 25 letter to CMS. The AMA recommended that the agency drop the deletion proposal altogether.

CMS is expected to publish a final rule this month; it will likely take effect in July. If it does, some ASCs, particularly those specializing in urology, might have a tough go.

  • Rate rebasing. CMS may stir more mischief later this year with a proposal to rebase ASC rates. The Medicare Modernization Act (MMA) required CMS to implement revised ASC rates by January 2008. To meet that timetable, the agency would have to publish a proposal for industry comment by late 2005 or early 2006 at the latest.

2003: A Look Back

As you may remember, 2003 was a turbulent time for the ASC community. The Medicare Payment Advisory Commission set the tone early when it recommended that Congress eliminate inflation adjustments to ASC payment rates and cut rates to hospital payment levels where ASC rates were higher.

The U.S. Department of Health and Human Services' Office of the Inspector General delivered the next blow when it made a similar recommendation to Congress.

The American Hospital Association soon joined the fray, calling on Congress and the Centers for Medicare and Medicaid Services (CMS) to limit physician ownership in niche providers. While most of the association's venom was directed toward specialty hospitals, it had plenty left over for ASCs, and asked Congress to revisit protections allowing physician ownership of them.

In December, Congress capped the year with passage of the Medicare Modernization Act (MMA), which froze ASC rates through 2009 and required CMS to implement revised rates by January 2008.

- Eric Zimmerman

Observers have expected the CMS proposal to derive ASC rates from hospital outpatient cost and reimbursement data. But the MMA required the Government Accountability Office to offer recommendations on the process, and they may have other ideas. The GAO is expected to field a survey this month to gather ASC procedure cost data and develop its recommendations, which are expected to be published toward the end of the year.

  • Spending cuts. The timing of the GAO and CMS recommendations couldn't be worse. President Bush and Congress have made it clear the deficit is on the front burner for 2005. Given the current administration and legislature, this means spending cuts. Medicare spending will be on the block, and congressional budget committees will be turning over every stone to squeeze savings out of the system. ASCs will not be exempt from scrutiny. If CMS and GAO recommend Medicare reimbursement changes for ASCs just as Congress is scrambling for Medicare savings, the budget committees may be all too willing to pick and choose recommendations that maximize thrift.
  • Physician ownership. Worse still, Congress might turn its attention to physician ownership of ASCs. The MMA imposed an 18-month ban on physician referrals to specialty hospitals in which the physician has a financial interest. The moratorium expires in June, and the hospital community has made extending - perhaps even expanding - the moratorium its top lobbying priority this year.

In that light, Congress will almost certainly take some kind of action on physician ownership of specialty hospitals this year. The critical question for ASCs is how expansive that action will be. Once physician ownership is on the table, anything can happen, and new limits on ASCs are possible.

The road ahead
The ASC community will no doubt have its hands full as it fights a two-front war to preserve Medicare reimbursement and physician ownership. Their success in those defensive efforts will determine whether the ASC community continues to remember 2003 or 2005 as the year that changed its world.

- Eric Zimmerman

Mr. Zimmerman (writeMail("[email protected]")) is a partner in the health law department of McDermott Will & Emery's Washington office.

The English Outpatient
Transplanting the U.S. Model of Ambulatory Surgery to the U.K.
In April 2002, the British government, under Prime Minister Tony Blair, increased its investment in the National Health Service, the government-sponsored, tax-funded medical program that covers all British citizens and dominates the healthcare marketplace.

The investment aimed to modernize the NHS by focusing on the needs of patients, who often have little say in the service's decisions, adding treatment capacity and reducing the amount of time they have to wait for treatment.

"Historically, for elective care, there have been tremendous waiting lists, and a tremendous undercapacity," says Christian Ellison, vice president of international operations for Health Inventures and a NHS observer. "It's not unheard of for patients to wait 12 or 18 months for a hip replacement ? or perhaps be sent to France for surgery, where they have the hospital capacity."

One way the investment is modernizing the NHS is through the creation of treatment centers - clinics run by the NHS or private investors that offer pre-booked day surgery and diagnostic procedures in such high-demand areas as ophthalmology and orthopedics.

The concept may sound familiar - a lot like American ASCs, in fact - but in the United Kingdom, it's a revolutionary idea in healthcare. And it's taking off.

"Outpatient surgery is one of the areas that's in tremendous demand over here," says Mr. Ellison, who also manages Ascent Health, a London-based subsidiary of Health Inventures and one of the independent-sector companies contracted by the NHS to build a treatment center system. "As in the U.S., the medical consumer is becoming more and more informed."

Over the past two decades, a lack of funding and a conservative medical establishment have prevented the NHS from exploring widespread outpatient treatment, says Mr. Ellison.

In the past two years, however, 29 government-run treatment centers have seen more than 106,000 patients. Seventeen more NHS centers and 34 privately run centers are scheduled to be open by the end of this year.

Ascent Health, whose parent company runs 35 surgery centers in the United States, is providing medical management intelligence to a consortium of private investors.

In building, equipping and staffing the new treatment centers, private companies are taking a larger financial risk than the NHS. As a result, the government contract they've been awarded guarantees that the NHS will refer a defined volume of cases - and revenue - to them each year for the next five years.

"It's not like in the States, where you can just compete for business," says Mr. Ellison.

Not yet, anyway. Mr. Ellison and other observers are waiting eagerly to see whether the new outpatient facilities will in time stimulate competition between established hospitals and privately funded clinics, as in the still-evolving U.S. market, and change the way healthcare is delivered in the U.K.

"I think that most of the independent sector investors are hoping to be in this for the long term, as providers," says Mr. Ellison, "and not just as some sort of short-term investment."

- David Bernard

Bill's Aim: No More Forced OT for Nurses
If passed, the Safe Nursing and Patient Care Act of 2005 would strictly limit mandatory overtime among nurses. The bill would:

  • Prohibit facilities that receive Medicare funding from requiring an RN or LPN to work beyond an agreed to, predetermined, regularly scheduled shift. In no instance could a nurse be required to work more than 12 hours in a 24-hour period or for more than 80 hours in a two-week period.
  • Include nondiscrimination protections for nurses who refuse overtime and for nurses who provide information and/or cooperate with investigations about the use of overtime.
  • Include an exception in the case of a declared national, state or local emergency. Such an emergency would be in response to a disaster, not to a staffing deficiency resulting from management practices.
  • Provide for a study by the U.S. Department of Health and Human Services on the maximum number of hours that may be worked by a nurse without compromising patient safety.

The American Nurses Association has warned that mandatory overtime is dangerous for patients and nurses, and the practice is exacerbating a growing nursing shortage that is expected to worsen dramatically over the next 10 years.

- Dan O'Connor

More intensive staffing on cataract cases can reduce pre-procedure, post-procedure, procedure, turnover and discharge times, suggests a study by the Accreditation Association for Ambulatory Health Care Institute for Quality Improvement (AAAHC Institute).

From May 2004 through September 2004, the AAAHC Institute collected real-time data from 71 surgical facilities that volunteered to participate in the study. The annual cataract extraction volume of participating organizations ranged from 200 procedures to 8,777 procedures. Here are a few of the study's key findings:

  • Organizations experiencing the shortest pre-procedure times had pre-op teams that reviewed procedures with patients well before the procedure, so the time devoted to the admission process was greatly reduced.
  • The median actual procedure time was 14 minutes. Organizations with the shortest procedure times attributed the abbreviated time to standardized instruments, procedures, supplies and equipment.
  • More than half (47) of the facilities studied reported that they use more than one OR per surgeon.
  • More than two-thirds of the facilities studied standardize instrumentation for all their physicians who perform cataract surgery. Research has shown that when instruments are the same across practitioners, facilities save money.

- Dan O'Connor

State Roundup
Finally, some good tax news for providers in New Jersey, the land of the 3.5 percent tax on ASCs' gross revenues and the 6 percent tax on cosmetic surgery procedures. A New Jersey bill that would regulate and tax the state's one-OR surgical facilities may not ever reach a vote, says the bill's sponsor. Assemblywoman Loretta Weinberg says she has decided not to schedule further action on the bill, which has seen significant changes since she introduced it last year.

"It was not my original intent, what this bill evolved into," says Ms. Weinberg. "If I don't request that the bill is posted, it won't be."

Assembly Bill 335 would require physicians who maintain a single operating room as part of a practice to be licensed by the Department of Health and Senior Services. The facilities would then be subject to the state's 3.5 percent tax on ambulatory surgery centers.

They are presently exempt from such regulation due to their supervision by the Board of Medical Examiners.

"Single-room ORs in the state of New Jersey have always been seen as an extension of the physician's practice," says Marsha Silberman, co-president of the New Jersey Association of Ambulatory Surgery Centers, which opposes the bill.

Before it was amended in committee, the bill sought to regulate "unaffiliated physicians" performing outpatient surgery in their offices without hospital privileges or other accreditation.

- David Bernard

New in Glaucoma
A recently developed laser procedure is joining medication and surgery as a treatment against glaucoma.

Endoscopic cyclophotocoagulation (ECP), which emerged in the late 1990s, uses a minimally invasive incision and laser energy to slow the eye disease. ECP is most often performed at the same time as cataract surgery, after the cataract has been removed from the eye. No additional incisions are required. The ECP probe uses tiny, optical fibers to illuminate, view and treat the ciliary body with laser energy. Approximately 20 to 40 laser applications will be administered.

The effect of the surgery may wear off over time, but the majority of patients have their pressure reduced and many can eliminate their need for glaucoma medications. However, this procedure and other glaucoma surgical procedures don't restore lost vision. "It's a very elegant technology. It has a definite niche," says Andrew Iwach, MD, associate clinical professor of ophthalmology at the University of California, San Francisco.

With ECP, a 1mm to 2mm incision in the peripheral cornea allows in an endoscopic light source, camera and laser. The laser treats the ciliary body, which produces the fluid.

The process takes 10 minutes to 20 minutes per eye. Five years of clinical findings have shown it effective in slowing glaucoma's progress and preserving remaining eyesight with few complications.

An ongoing debate, however, questions whether ECP is any better than external laser treatment, which doesn't require an incision but is slightly less precise.

Dr. Iwach notes that ECP by itself may create an unnecessary incision, but complements other open eye surgeries.

"If you're in there already, doing cataract surgery, this is a very nice match," he says.

Since long-term follow up studies are not yet available, he also warned ophthalmologists to consider carefully the procedure's place among other treatments.

- David Bernard