Beginning Jan. 1, Medicare will no longer pay ASCs a higher facility fee than hospitals receive for the same procedure. Here's what you need to know about the congressionally mandated reduction in ASC payment rates for 274 procedures.

Not higher than the hospital rate
The Deficit Reduction Act of 2005 requires CMS to reduce payments to ambulatory surgical centers for any procedure that the ASC is paid more than the hospital outpatient department. For example, CPT code 45331, sigmoidoscopy and biopsy, is reimbursed at a group 1 rate in the ASC ($333) and at $295.48 in the hospital. The upcoming cuts span all specialties, but ophthalmology (69 percent of total reductions) and urology (16 percent) will be hardest hit. See "Steepest Reductions" on page 38 for the hardest hit procedures based on volume.

Two notes that could somewhat diminish the cut's impact:

• Many of the affected procedures are in group 1, meaning that most of the CPT codes are paid less than $333 when performed in a hospital.
• These cutbacks precede by one year a completely overhauled ASC payment system that, among other things, proposes to abolish the nine clinically disparate payment groups through which ASCs are currently paid and to let ASCs do 750 more procedures (see "Is That All There Is?" September, page 36).

Planning for the cuts
So what should your facility do to prepare for the cuts in store? Here are a few starting points:

• Review the entire list of reductions. Compare your facility's list of procedures performed and their volume to the codes that will be reduced. Once you're able to review the codes and the new reimbursements side by side, you can complete the analysis by comparing reimbursement to the cost of the procedures. Your analysis could be formatted like this:
• Assess feasibility of continuing these procedures. Since the changes are coming and there's no negotiating with Medicare, your ASC must take a hard look at whether you can afford to continue to perform these procedures after Jan.1 as you do today. Perhaps you could find ways to reduce your case costs. Or maybe your surgeons could improve their efficiency. One thing to note: If the new reimbursement doesn't come close to covering the cost of the case in the ASC, then it would stand to reason that it wouldn't come close to covering the cost in the HOPD. This is a point to drive home to CMS.

• Tighten the belt. Two places to start reviewing the cost of these procedures are with physicians and vendors. Examine the physician's preferences for the case and use the new reimbursement as an opportunity to press for standard surgical packs or to discuss alternate supplies and drugs. You may have met with some resistance in the past on these issues. Showing the physician the pending cuts as well as the costs associated with performing these procedures might change his perception. The other possible source for increasing your revenue from these procedures is your supply and drug vendors. The vendor may realize that without its help in reducing your overall case costs on these procedures, it could lose your business. Given that, the vendor might be inclined to cut your costs. Even if the cut comes in something non-specific to the case, like gloves, the across-the-board savings might help neutralize the damage to the revenue on the procedures you're reviewing.
• Fend off private payers. What if your managed care payers decide that what's good for Medicare is good for them and they attempt to lower your rates? Prepare for this discussion with your ASC's volume and per-procedure cost data. While you don't expect the payer to make up for the loss of revenue imposed by the Deficit Reduction Act, you're certainly not going to agree to a cut for your payer's patients. Another tactic to take would be demonstrating that the volume of the procedure for that payer is so negligible that the time spent to redo the contract reimbursement and to ensure all systems are upgraded isn't worthwhile. Before using this or any other tactic in your payer negotiations, be sure you're armed with data - you can be certain that they will be. Know your costs, volume per payer and reimbursement as well as your contract terms on renegotiation and your ASC's strategic vision as it relates to contracting with different managed care organizations.

Here's what not to do
Don't let Jan. 1 come and go without having taken a good look at what these cuts mean to your business. It would be a very unhappy day to be sitting at a February board meeting, having to explain a loss of revenue for January that was due to these cuts, without being able to prove that you had taken a proactive, multi-faceted approach to counteracting the cuts. That proactive approach needs to start now.