[Federal Register Volume 63, Number 33 (Thursday, February 19, 1998)]
[Notices]
[Pages 8462-8465]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-4227]
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DEPARTMENT OF HEALTH AND HUMAN SERVICES
Health Care Financing Administration
[HCFA-1897-N]
Medicare Program; Update of Ambulatory Surgical Center Payment
Rates Effective for Services on or After October 1, 1997
AGENCY: Health Care Financing Administration (HCFA), HHS.
ACTION: Notice.
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SUMMARY: This notice announces the update of Ambulatory Surgical Center
payment rates effective for services on or after October 1, 1997. It
implements section 1833(i)(2)(C) of the Social Security Act, which
mandates an 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, 1997.
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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 (Part B) program 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 the
basic requirements for ASCs set forth in our regulations at 42 CFR
416.25.
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, Medicare pays
participating ASCs 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
[[Page 8463]]
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 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 in-depth 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).
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.
Section 13531 of the Omnibus Budget Reconciliation Act of 1993
(OBRA 1993) (Public Law 103-66), enacted on August 10, 1993, 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 application of
an inflation adjustment during a fiscal year in which 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 reviewing and updating the list of
Medicare-covered ASC procedures.
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. A proposed rule entitled
``Adjustment in Payment Amounts for New Technology Intraocular Lenses''
(BPD-831-P) was published in the Federal Register on September 4, 1997
at 62 FR 46698.
Section 4555 of the Balanced Budget Act of 1997 (Pub. L. 105-33)
(BBA) amends section 1833(i)(2)(C) of the Act to require, in each of
the FYs 1998 through 2002, that the CPI-U factor by which ASC rates are
to be adjusted be reduced (but not below zero) by 2.0 percentage
points.
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 was mailed to the sample of ASCs in March
1994. 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 asked
facilities to report total volume, Medicare volume, operating room
time, and their average billed charge for the Medicare covered
procedures that were performed at the facility during the survey year.
We audited 100 randomly selected Part II surveys between November 1994
and February 1995. We plan to use the 1994 survey data to rebase ASC
payment rates. In accordance with rulemaking procedures, we will
publish the rebased rate in the Federal Register and solicit public
comments.
We published our last ASC payment rate update notice on October 1,
1996 (61 FR 51295).
II. Provisions of This Notice
During years in which the Secretary has not otherwise updated ASC
rates based on a survey of actual audited costs, section 1833(i)(2)(C)
of the Act, as amended by BBA, requires application of an inflation
adjustment. That inflation adjustment must be the
[[Page 8464]]
percentage increase in the CPI-U as estimated by the Secretary for the
12-month period ending with the midpoint of the year involved, reduced
(but not below zero) by 2.0 percentage points in each of the fiscal
years 1998 through 2002. (The CPI-U is a general index that reflects
prices paid by urban consumers 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 FY that ends March
31, 1998 is 2.6 percent. Reducing the CPI-U factor by 2.0 percent
results in an adjustment factor of 0.6 percent. Increasing the ASC
payment rates currently in effect by 0.6 percent results in the
following schedule of rates that are payable for facility services
furnished on or after October 1, 1997:
Group 1--$314
Group 2--$422
Group 3--$482
Group 4--$595
Group 5--$678
Group 6--$789 (639+150)
Group 7--$941
Group 8--$928 (778+150)
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.
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 were 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 notice. The PPS wage
index final rule published on August 29, 1997 (62 FR 45965), for
implementation on October 1, 1997, will be used to adjust the ASC
payment rates announced in this notice for facility services furnished
on or after October 1, 1997.
III. 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 in which 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 0.6
percent are as follows:
Projected Additional Medicare Costs
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Fiscal year In millions*
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1998.................................................... 15
1999.................................................... 15
2000.................................................... 15
2001.................................................... 15
2002.................................................... 15
2003.................................................... 15
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* Rounded to the nearest $10 million.
The BBA is considered in the estimate, including the prospective
payment system for hospital outpatient services to be implemented on
January 1, 1999, and the formula-driven overpayment elimination
effective October 1, 1997.
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, most ASCs and hospitals are considered to be
small entities either by non-profit status or by having resources of $5
million or less annually.
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 that this notice will not have a significant
impact on a substantial number of small rural hospitals, it 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)(C) of the Act requires that for FYs 1998 through
2002, we automatically adjust ASC rates for inflation during an FY in
which we do not update ASC payment rates based on survey data by a CPI-
U factor reduced (but not below zero) by 2.0 percent. Therefore, we are
updating the current ASC payment rates, which were published in our
October 1, 1996 Federal Register notice (61 FR 51295), by incorporating
the projected rate of change in the CPI-U for the 12-month period
ending March 31, 1998 minus 2.0 percentage points, a net 0.6 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, 1998, 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 0.51 percent and for group 8 is 0.54 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 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
[[Page 8465]]
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 Strategic Planning within HCFA, 12
percent of Medicare payments to hospitals by intermediaries is
attributable to services furnished in conjunction with 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 in the portion
of the blended payment that 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.
IV. 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 on or after October 1,
1997. These provisions will increase payment to ASCs by 0.6 percent (as
modified by any change to the wage index), in accordance with section
1833(i)(2)(C) of the Act, as amended by the BBA. 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, 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 an FY,
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 reviewed by the Office of Management and Budget.
(Sections 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: October 9, 1997.
Nancy-Ann Min DeParle,
Deputy Administrator, Health Care Financing Administration.
Dated: October 30, 1997.
Donna E. Shalala,
Secretary.
[FR Doc. 98-4227 Filed 2-18-98; 8:45 am]
BILLING CODE 4120-01-P
