On August 2, 2007, CMS published a final rule revising its payment system for ambulatory surgical centers (ASCs). More recently, in the November 27, 2007 issue of the Federal Register, CMS published its response to comments to the August rule and updates to the revised ASC payment system. The November 27th rule can be accessed through the following link www.access.gpo.gov/su_docs/fedreg/a071127c.html. A few weeks prior, CMS released Transmittals 1325 and 77, and more recently Transmittal 1383, that incorporate the new payment system into the Medicare manuals. Below are some of the key issues and updates addressed in the rule and transmittals.

Under the new ASC payment system, Medicare will reimburse ASCs for an expanded list of covered surgical services. This list can be found in Addendum AA to the November rule. The list of procedures excluded from Medicare payment when performed in an ASC can be found on the CMS website at www.cms.hhs/ASCPayment in Addendum EE.
The revised ASC payment system bases reimbursement on the outpatient prospective payment system (OPPS) ambulatory payment classifications (APCs). CMS estimates that ASC payments will be 65 percent of Medicare OPPS payments for the same procedure. Currently, APCs reflect "packaging," which is the combination of minor ancillary services with the associated more significant procedure into a single payment. In the November 27th rule, CMS finalized its proposal to expand packaging to the following seven service categories: (1) guidance services; (2) image processing services; (3) intraoperative services; (4) imaging supervision and interpretation services; (5) diagnostic radiopharmaceuticals; (6) contrast media and (7) observation services. This will increase the scope of packaged payments under both the OPPS and the revised ASC payment system.
Included in the covered procedures are "office based" procedures that are generally performed in physicians' offices and require a lower level of resource intensity as compared to other ASC services. Reimbursement for these procedures performed in an ASC will not exceed the reimbursement provided when performed in the office setting and are subject to certain caps. In response to comments, CMS clarified that its general policy for designating procedures as office-based not only requires a finding that the procedure is performed in a physician's office 50 percent of the time or more, but also involves the consideration of the clinical characteristics, volume, and utilization data of related HCPCS codes.
The new ASC payment system provides separate reimbursement for covered ancillary services that are integral to, and performed on the same day as, a covered surgical procedure performed in an ASC. These ancillary services include: (1) brachytherapy sources; (2) certain implantable items that are separately payable under OPPS; (3) certain items and services that are designated as contractor-priced including, but not limited to, the procurement of corneal tissue; (4) certain drugs and biologicals for which separate payment is allowed under OPPS; and (5) certain radiology services for which separate payment is allowed under OPPS. In response to comments, CMS stated that it did not envision an increase in the number of separately payable services performed in ASCs due to the fact that a condition of payment is that the services must be provided on the same day as the covered surgical service.
Payment for physician services performed in ASCs will be similar to payment for such services performed in hospital outpatient settings under the new ASC payment system. In the November rule, CMS finalized its proposal to pay physicians the lower facility rate professional fee for both covered and non-covered surgical services in an ASC. Physicians will not be eligible for payment for the technical component of such services. This is in contrast to current policy which allows reimbursement to physicians at the higher non-facility rate for services that are otherwise not covered as ASC services. The Medicare beneficiary will be liable for the costs of ASC charges related to the non-covered services.
Device intensive procedures receive additional reimbursement under the revised ASC payment system. However, this reimbursement is reduced by the estimated cost of the device if the ASC receives a device at no cost or as a full credit for a replacement device. In the November rule, CMS revised its policy with respect to partial credits to reduce reimbursement when the partial credit is greater than or equal to 50 percent of the replacement device cost. The reimbursement reduction would equal 50 percent of the reduction applicable to devices provided at no cost or which were fully credited.
The November rule revised the definition of certain "designated health services" under the Stark regulations. Specifically, CMS adopted its proposal, in the August rule, to exclude from the definition of "radiology and certain other imaging services" those radiology and imaging services that are "covered ancillary services" under the ASC payment regulations. Similarly, CMS finalized its proposal to exclude from the definition of "outpatient prescription drugs," drugs that are "covered as ancillary services" as defined in the ASC payment regulations. CMS is also considering whether to exclude brachytherapy sources supplied in connection with ASC-covered brachytherapy procedures from the definition of designated health services. This would not occur, however, prior to publication of a proposed rule providing for such an exception and the opportunity for public comment. In the meantime, CMS is working on a temporary fix that will permit services to continue to be provided in urologist-owned ASCs.

* On December 19, 2007, CMS posted a "frequently asked question" or "FAQ" in which it interpreted the exception for implants furnished in an ASC to include brachytherapy sources. Therefore, urologists may continue to provides such services in ASCs in which they have an ownership interest without running afoul of the Stark law.

Ober|Kaler's Comments: Anytime there is a new payment system, it is important for providers to monitor their own billings and the payments received from Medicare. In addition, providers should maintain all documentation, correspondence and guidance they receive from Medicare. Finally, the Medicare revisions may also impact payments required to be made by private insurers, if the insurers' payment policies incorporate Medicare principles.