Traditionally, Medicare has paid ASCs a facility fee for surgical services, with the amount of payment depending on which of some nine payment groups the particular procedure fell. On July 16, 2007, CMS placed on display a final rule that will change this approach effective January 1, 2008, as directed by Congress in the MMA of 2003.

Pursuant to the final rule, Medicare's ASCs payment method will resemble that of hospitals outpatient departments, with services falling into APCs and with payments based on the APCs.
The APC-based payment to ASCs will be less than that of hospital outpatient departments in recognition of ASCs' having lower costs. Although final rates have yet to be set, CMS estimates that 2008 ASC rates will be approximately 65 percent of OPPS rates.
Additional payments will be made for device-intensive procedures, that is, procedures for which the cost of the device is more than half of the median cost of the procedure. For these procedures, CMS will pay 100 percent of the corresponding OPPS APC-based payment for the device; the service component of the ASC payment for the procedure will remain at roughly 65 percent of the corresponding OPPS payment.
CMS will cover as ASC procedures some 790 additional surgical procedures, including many now commonly performed in physician offices. To prevent payment incentives that would lead to an inappropriate migration of those procedures from an office setting to an ASC setting, CMS will limit ASC facility payments for procedures commonly performed in the office setting to the lesser of the ASC rate or the physician fee schedule non-facility practice expense rate.
The new rates are to be phased in over a four-year period. Procedures that are on the 2007 list of ASC covered procedures will be paid, in 2008, based on a blended payment using 25 percent of the new APC-based payment rule and 75 percent of the older “nine group” payment rate. In 2009, that percentage will change to 50-50, and in 2010, the payment will be based on 75 percent of the new APC-based rate and 25 percent of the older “nine group” rate. After 2010, the new APC-based rate will cover 100% of the payment.

Ober|Kaler's Comments: On a facility-specific basis, the new payment methodology will likely lead to changes in where certain surgical services are delivered, with greater use being made of ASCs. As a general matter, CMS has assumed, as part of its budget neutrality adjustment, that roughly 25 percent of the new ASC surgical procedures will migrate from hospital to ASC settings in 2008 and 2009, and that during 2008-2012, roughly 15 percent of the new ASC surgical procedures performed in office settings will move to ASCs. Plainly, the degree of facility-specific migration will be affected, in large measure, on the relative reimbursement that services furnished in the facility will generate in one site compared to other sites. Hospitals, ASCs and physician groups therefore should begin examining the proposed payment amounts for their high-volume procedures to assess the medium and long-term impact of this rule and the new business opportunities that the rule may present.