[Federal Register Volume 60, Number 186 (Tuesday, September 26, 1995)]
[Notices]
[Pages 49619-49622]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-23742]
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DEPARTMENT OF HEALTH AND HUMAN SERVICES
Health Care Financing Administration
[BPD-824-N]
Medicare Program; Update of Ambulatory Surgical Center (ASC)
Payment Rates Effective for Services On or After October 1, 1995
AGENCY: Health Care Financing Administration (HCFA), HHS.
ACTION: Notice.
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SUMMARY: This notice implements section 1833(i)(2)(C) of the Social
Security Act, which mandates an automatic inflation adjustment to
Medicare payment amounts for ambulatory surgical center (ASC) facility
services during the years when the payment amounts are not updated
based on a survey of the actual audited costs incurred by ASCs.
EFFECTIVE DATE: The payment rates contained in this notice are
effective for services furnished on or after October 1, 1995.
Copies: To order copies of the Federal Register containing this
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FOR FURTHER INFORMATION CONTACT: Joan Haile Sanow, (410) 786-5723.
SUPPLEMENTARY INFORMATION:
I. Background and Legislative Authority
Section 1832(a)(2)(F)(i) of the Social Security Act (the Act)
provides that benefits under the Medicare Supplementary Medical
Insurance program (Part B) include services furnished in connection
with those surgical procedures that, under section 1833(i)(1)(A) of the
Act, are specified by the Secretary and are performed on an inpatient
basis in a hospital but that also can be performed safely on an
ambulatory basis in an ambulatory surgical center (ASC), in a rural
primary care hospital, or in a hospital outpatient department. To
participate in the Medicare program as an ASC, a facility must meet the
standards specified under section 1832(a)(2)(F)(i) of the Act and 42
CFR 416.25, which set forth basic requirements for ASCs.
Generally, there are two elements in the total charge for a
surgical procedure: A charge for the physician's professional services
for performing the procedure, and a charge for the facility's services
(for example, use of an operating room). Section 1833(i)(2)(A) of the
Act authorizes the Secretary to pay ASCs a prospectively determined
rate for facility services associated with covered surgical procedures.
ASC facility services are subject to the usual Medicare Part B
deductible and coinsurance requirements. Therefore, participating ASCs
are paid 80 percent of the prospectively determined rate for facility
services, adjusted for regional wage variations. This rate is intended
to represent our estimate of a fair payment that takes into account the
costs incurred by ASCs generally in providing the services that are
furnished in connection with performing the procedure. Currently, this
rate is a standard overhead amount that does not include physician fees
and other medical items and services (for example, durable medical
equipment for use in the patient's home) for which separate payment may
be authorized under other provisions of the Medicare program.
We have grouped procedures into nine groups for purposes of ASC
payment rates. The ASC facility payment for all procedures in each
group is established at a single rate
[[Page 49620]]
adjusted for geographic variation. The rate is a standard overhead
amount that covers the cost of services such as nursing, supplies,
equipment, and use of the facility. (For an indepth discussion of the
methodology and rate-setting procedures, see our Federal Register
notice published on February 8, 1990, entitled ``Medicare Program;
Revision of Ambulatory Surgical Center Payment Rate Methodology'' (55
FR 4526).)
Statutory Provisions
Section 1833(i)(2)(A) of the Act requires the Secretary to review
and update standard overhead amounts annually. Section
1833(i)(2)(A)(ii) requires that the ASC facility payment rates result
in substantially lower Medicare expenditures than would have been paid
if the same procedure had been performed on an inpatient basis in a
hospital. Section 1833(i)(2)(A)(iii) requires that payment for
insertion of an intraocular lens (IOL) include an allowance for the IOL
that is reasonable and related to the cost of acquiring the class of
lens involved.
Under section 1833(i)(3)(A), the aggregate payment to hospital
outpatient departments for covered ASC procedures is equal to the
lesser of the following two amounts:
The amount paid for the same services that would be paid
to the hospital under section 1833(a)(2)(B) (that is, the lower of the
hospital's reasonable costs or customary charges less deductibles and
coinsurance); or
The amount determined under section 1833(i)(3)(B)(i) based
on a blend of the lower of the hospital's reasonable costs or customary
charges, less deductibles and coinsurance, and the amount that would be
paid to a free-standing ASC in the same area for the same procedures.
Under section 1833(i)(3)(B)(i), the blend amount for a cost
reporting period is the sum of the hospital cost proportion and the ASC
cost proportion. Under section 1833(i)(3)(B)(ii), the hospital cost
proportion and the ASC cost proportion for portions of cost reporting
periods beginning on or after January 1, 1991 are 42 and 58 percent,
respectively.
We published our last update of ASC payment rates in the Federal
Register on October 1, 1992 (57 FR 45544). Statutory provisions enacted
after October 1, 1992 that affect ASCs include the Omnibus Budget
Reconciliation Act of 1993 (OBRA 1993) (Pub. L. 103-66), enacted on
August 10, 1993. Section 13531 prohibited the Secretary from providing
for any inflation update in the payment amounts for ASCs determined
under section 1833(i)(2)(A) and (B) of the Act for fiscal years (FYs)
1994 and 1995. Section 13533 of OBRA 1993 reduced the amount of payment
for an IOL inserted during or subsequent to cataract surgery in an ASC
on or after January 1, 1994, and before January 1, 1999, to $150.
Section 141(a)(1) of the Social Security Act Amendments of 1994
(SSAA 1994) (Pub. L. 103-432), enacted on October 31, 1994, amended
section 1833(i)(2)(A)(i) of the Act to require that, for the purpose of
estimating ASC payment amounts, the Secretary survey not later than
January 1, 1995, and every 5 years thereafter, the actual audited costs
incurred by ASCs, based upon a representative sample of procedures and
facilities.
Section 141(a)(2) of SSAA 1994 added section 1833(i)(2)(C) to the
Act to provide that, beginning with FY 1996, there be an automatic
application of an inflation adjustment during a fiscal year when the
Secretary does not update ASC rates based on survey data of actual
audited costs. Section 1833(i)(2)(C) of the Act provides that ASC
payment rates be increased by the percentage increase in the consumer
price index for urban consumers (CPI-U), as estimated by the Secretary
for the 12-month period ending with the midpoint of the year involved,
if the Secretary has not updated rates during a fiscal year, beginning
with FY 1996.
Section 141(a)(3) of SSAA 1994 amended section 1833(i)(1) of the
Act to require the Secretary to consult with appropriate trade and
professional organizations in specifying Medicare-covered ASC
procedures and facility payment amounts. Section 141(b) of SSAA 1994
requires the Secretary to establish a process for reviewing the
appropriateness of the payment amount provided under section
1833(i)(2)(A)(iii) of the Act for IOLs with respect to a class of new-
technology IOLs.
ASC Survey
Regulations set forth at Sec. 416.140 (``Surveys'') require us to
survey a randomly selected sample of participating ASCs no more often
than once a year to collect data for analysis or reevaluation of
payment rates. In addition, section 1833(i)(2)(A)(i) of the Act
requires that, for the purpose of estimating ASC payment amounts, the
Secretary survey not later than January 1, 1995, and every 5 years
thereafter, the actual audited costs incurred by ASCs, based upon a
representative sample of procedures and facilities.
In July 1992, we mailed Form HCFA-452A, Medicare Ambulatory
Surgical Center Payment Rate Survey (Part I), to the nearly 1,400 ASCs
that were on file as being certified by Medicare at the end of 1991.
Part I data provided baseline information for selecting a sample of 320
ASCs to complete Form HCFA-452B, Medicare Ambulatory Surgical Center
Payment Rate Survey (Part II). The sample was randomly selected and is
representative of ASCs nationally in terms of facility age,
utilization, and surgical specialty.
Part II of the ASC survey asked for data on costs incurred by the
facility that are directly related to performing certain surgical
procedures, such as cataract extraction with IOL insertion, as well as
information on facility overhead and personnel costs. We updated charge
data for all Medicare-covered procedures performed at the facility. We
audited 100 randomly selected Part II surveys between November 1994 and
February 1995.
Because we are still reviewing data from Part II of the 1994
Medicare Ambulatory Surgical Center Payment Rate Survey, we are not
adjusting ASC payment rates in FY 1996 to reflect these data.
II. Analysis of and Responses to the Public Comments
We published our last ASC payment rate update notice on October 1,
1992 (57 FR 45544). In response to that notice, we received one public
comment. Because section 13531 of OBRA 1993 prohibited the Secretary
from providing for any inflation update for FYs 1994 and 1995, we did
not publish update notices for those years, and, consequently, the
public comment on the October 1, 1992 notice and our response have not
been published. A summary of that comment and our response will be
contained in a proposed rule updating the ASC payment methodology that
we expect to publish in the Federal Register next year. Because the
public comment relates to the wage index, we believe the comment and
our response fit more appropriately in that document, which will
contain a discussion of the wage index used to adjust ASC payment rates
for geographic wage differences. We did not make any changes as a
result of our consideration of the public comment.
III. Provisions of This Notice
During years when the Secretary has not otherwise updated ASC rates
based on a survey of actual audited costs, section 1833(i)(2) of the
Act requires automatic application of an inflation adjustment. That
inflation adjustment must be the percentage increase in the CPI-U as
estimated by the Secretary for the 12-month period ending with the
[[Page 49621]]
midpoint of the year involved. (The CPI-U is a general index that
reflects prices paid for a representative market basket of goods and
services.)
Based on estimates prepared by Data Resources, Inc./McGraw Hill,
the forecast rate of increase in the CPI-U for the fiscal year that
ends March 31, 1996 is 3.2 percent. Increasing the ASC payment rates
currently in effect by 3.2 percent results in the following schedule of
rates that are payable for facility services furnished on or after
October 1, 1995:
Group 1--$304
Group 2--$408
Group 3--$467
Group 4--$576
Group 5--$657
Group 6--$769
Group 7--$911
Group 8--$903
ASC facility fees are subject to the usual Medicare deductible and
copayment requirements. Under section 13531 of OBRA 1993, the allowance
for an IOL that is part of the payment rates for group 6 and group 8 is
$150.
In order to implement the inflation adjustment required by section
141(a)(2) of SSAA 1994 beginning in FY 1996, we estimated the annual
percent change in the CPI-U for the 12-month period ending March 31,
1996. However, the first 6 months of this 12-month period, April 1,
1995 through September 30, 1995, fall in FY 1995, and section 13531 of
OBRA 1993 prohibited the Secretary from providing any inflation update
in ASC payment amounts for FYs 1994 and 1995. We believe that
determining, in part, the FY 1996 adjustment factor by reference to
April 1, 1995 through September 30, 1995 does not violate or contradict
the OBRA 1993 provision because our use of the adjustment factor
applies only to payments for ASC services actually furnished beginning
in FY 1996.
A ninth payment group allotted exclusively to extracorporeal
shockwave lithotripsy (ESWL) services was established in the notice
with comment period published December 31, 1991 (56 FR 67666). The
decision in American Lithotripsy Society v. Sullivan, 785 F. Supp. 1034
(D.D.C. 1992), prohibits payment for these services under the ASC
benefit at this time. ESWL payment rates are the subject of a separate
Federal Register proposed notice, which was published October 1, 1993
(58 FR 51355).
We will continue to use the inpatient hospital prospective payment
system (PPS) wage index to standardize ASC payment rates for variation
due to geographic wage differences in accordance with the ASC payment
rate methodology published in the February 8, 1990 Federal Register (55
FR 4526). Because ASC payment rates are updated concurrently with the
annual update of the hospital inpatient PPS wage index, the PPS wage
index final rule that will be implemented on October 1, 1995 will be
used to adjust the ASC payment rates announced in this notice for
facility services furnished beginning October 1, 1995. The policy of
eliminating midyear corrections to the hospital inpatient PPS wage
index applies to ASCs and the calculation of individual ASC payment
amounts as well.
IV. Regulatory Impact Analysis
A. Introduction
This notice implements section 1833(i)(2) of the Act, which
mandates an automatic inflation adjustment to Medicare payment amounts
for ASC facility services during the years when the payment amounts are
not updated based on a survey of the actual audited costs incurred by
ASCs.
Actuarial estimates of the cost of updating the ASC rates by 3.2
percent are as follows:
Projected Additional Medicare Costs
[In millions]*
FY 1996.......................................................... $35
FY 1997.......................................................... 40
FY 1998.......................................................... 50
FY 1999.......................................................... 55
FY 2000.......................................................... 60
*Rounded to the nearest $5 million.
These amounts are in the Medicare budget baseline.
B. Regulatory Flexibility Act
We generally prepare a regulatory flexibility analysis that is
consistent with the Regulatory Flexibility Act (RFA) (5 U.S.C. 601
through 612) unless we certify that a notice will not have a
significant economic impact on a substantial number of small entities.
For purposes of the RFA, all ASCs and hospitals are considered to be
small entities.
Section 1102(b) of the Act requires us to prepare a regulatory
impact analysis if a notice may have a significant impact on the
operations of a substantial number of small rural hospitals. This
analysis must conform to the provisions of section 604 of the RFA. For
purposes of section 1102(b) of the Act, we define a small rural
hospital as a hospital that is located outside of a Metropolitan
Statistical Area and has fewer than 50 beds.
Although we believe an impact analysis on small rural hospitals is
not required, this notice may have a significant impact on a
substantial number of ASCs. Therefore, we believe that a regulatory
flexibility analysis is required for ASCs. In addition, we are
voluntarily providing a brief discussion of the impact this notice may
have on hospitals.
1. Impact on ASCs
Section 1833(i)(2) of the Act requires that we automatically adjust
ASC rates for inflation during a fiscal year when we do not update ASC
payment rates based on survey data. Therefore, we are updating the
current ASC payment rates, which were published in our October 1, 1992
Federal Register notice (57 FR 45544), by incorporating the projected
rate of change in the CPI-U for the 12-month period ending March 31,
1996, a 3.2 percent increase. There are other factors, however, that
affect the actual payments to an individual ASC.
First, variations in an ASC's Medicare case mix affect the size of
the ASC's aggregate payment increase. Although we uniformly adjusted
ASC payment rates by the CPI-U forecast for the 12-month period ending
March 31, 1996, we did not adjust the IOL payment allowance that is
included in the payment rate for group 6 and group 8 because OBRA 1993
froze the amount of payment for an IOL furnished by an ASC at $150 for
the period beginning January 1, 1994 through December 31, 1998.
Therefore, because the net adjustment for inflation for procedures in
group 6 is 2.56 percent and for group 8 is 2.66 percent, ASCs that
perform a high percentage of the IOL insertion procedures that comprise
these groups may expect a somewhat lower increase in their aggregate
payments than ASCs that perform fewer IOL insertion procedures.
A second factor determining the effect of the change in payment
rates is the percentage of total revenue an ASC receives from Medicare.
The larger the proportion of revenue an ASC receives from the Medicare
program, the greater the impact of the updated rates in this notice.
The percentage of revenue derived from the Medicare program depends on
the volume and types of services furnished. Since Medicare patients
account for as much as 80 percent of all IOL insertion procedures
performed in ASCs, an ASC that performs a high percentage of IOL
insertion procedures will probably receive a higher percentage of its
revenue from Medicare than would an ASC with a case mix comprised
largely of procedures that do not involve
[[Page 49622]]
insertion of an IOL. For an ASC that receives a large portion of its
revenue from the Medicare program, the changes in this notice will
likely have a greater influence on the ASC's operations and management
decisions than they will have on an ASC that receives a large portion
of revenue from other sources.
In general, we expect the rate changes in this notice to affect
ASCs positively by increasing the rates upon which payments are based.
2. Impact on Hospitals and Small Rural Hospitals
Section 1833(i)(3)(A) of the Act mandates the method of determining
payments to hospitals for ASC-approved procedures performed in an
outpatient setting. The Congress believed some comparability should
exist in the amount of payment to hospitals and ASCs for similar
procedures. The Congress recognized, however, that hospitals have
certain overhead costs that ASCs do not and allowed for those costs by
establishing a blended payment methodology. For ASC procedures
performed in an outpatient setting, hospitals are paid based on the
lower of their aggregate costs, aggregate charges, or a blend of 58
percent of the applicable wage-adjusted ASC rate and 42 percent of the
lower of the hospital's aggregate costs or charges. According to
statistics from the Office of the Actuary within HCFA, 12.7 percent of
Medicare payments to hospitals by intermediaries is attributable to
services furnished in conjunction with ASC-covered procedures.
We believe that, due to a variety of factors, the ASC rate increase
in this notice will result in only a 0.9 percent increase in
intermediary payments to hospitals for ASC-covered procedures. We would
not expect an ASC rate increase in every instance to keep pace with
actual hospital cost increases, although we would fully recognize cost
increases resulting from inflation alone to the extent that the blended
payment methodology includes aggregate hospital costs. The weight of
the ASC portion of the blended payment amount, which would reflect the
ASC rate increase, is offset to a degree when hospital costs
significantly exceed the ASC rate. Another element that would eliminate
the effect of the ASC rate increase on hospital outpatient payments is
the application of the lowest payment screen in determining payments.
Applying the lowest of costs, charges, or a blend can result in some
hospitals being paid entirely on the basis of a hospital's costs or
charges. In those instances, the increase in the ASC rates will have no
effect on hospital payments. The number of Medicare beneficiaries a
hospital serves and its case-mix variation would also influence the
total impact of the new ASC rates on Medicare payments to hospitals.
Based on these factors, we have determined, and we certify that this
notice will not have a significant impact on a substantial number of
small rural hospitals. Therefore, we have not prepared a small rural
hospital impact analysis.
V. Waiver of 30-Day Delay in the Effective Date
We ordinarily publish notices, such as this, subject to a 30-day
delay in the effective date. However, if adherence to this procedure
would be impractical, unnecessary, or contrary to the public interest,
we may waive the delay in the effective date. The provisions of this
notice are effective for services furnished beginning on October 1,
1995, to coincide with the FY 1996 PPS updated wage index. These
provisions will increase payment to ASCs by 3.2 percent (as modified by
any change to the wage indices), in accordance with section 1833(i)(2)
of the Act, which requires automatic application of an inflation
adjustment. As a practical matter, if we allowed a 30-day delay in the
effective date of this notice, ASCs would be unable to take timely
advantage of the increase in payment rates contained in this notice.
Moreover, we believe a delay is impractical and unnecessary because the
statute, which, as explained earlier, provides that ASC payment rates
be increased by the percentage increase in the CPI-U if the Secretary
has not updated rates during a fiscal year beginning with FY 1996.
Therefore, we find good cause to waive the delay in the effective date.
In accordance with the provisions of Executive Order 12866, this
notice was not reviewed by the Office of Management and Budget.
(Sec. 1832(a)(2)(F) and 1833(i)(1) and (2) of the Social Security
Act (42 U.S.C. 1395k(a)(2)(F) and 1395l(i)(1) and (2)); 42 CFR
416.120, 416.125, and 416.130)
(Catalog of Federal Domestic Assistance Programs No. 93.774,
Medicare--Supplementary Medical Insurance Program)
Dated: July 28, 1995.
Bruce C. Vladeck,
Administrator, Health Care Financing Administration.
[FR Doc. 95-23742 Filed 9-25-95; 8:45 am]
BILLING CODE 4120-01-P