Despite the rapid expansion and robust growth of ASCs across the U.S., increases in payments for the most common surgical procedures are still much lower than those to hospital outpatient departments, according to Health Affairs.
Ambulatory surgery centers now provide many procedures that previously could only be performed in a hospital. Technological advances and pressure from insurers to control costs have led to the dramatic growth of ASCs, and they are becoming increasingly competitive with hospital and outpatient departments. However, a new study from Health Affairs reveals prices paid to ASCs on the whole increased at a similar rate to general medical care prices, while overall prices paid to hospital outpatient department for the same procedures experienced rapid growth.
Since ASCs are not required to submit cost reports to CMS, it is difficult for the Medicare Payment Advisory Commission to evaluate the adequacy of ASC payment. Despite this lack of insight on relative costs, Medicare currently reimburses ASCs at a percentage of the amount paid to hospital outpatient departments for delivering the same services. However, ASCs are paid primarily by commercial insurers, so most of their revenue is privately negotiated, according to the report. Therefore, there is no publicly available information on the prices ASCs are actually paid for privately insured patients.
To address the gap in information regarding healthcare prices the privately insured pay, Health Affairs used data from 2007 to 2012 from Truven Health Analytics MarketScan Commercial Claims and Encounters Database to evaluate the difference in payments to ASCs and outpatient hospital departments. The study's author used six common high-volume surgical procedures performed in both ASCs and hospital outpatient departments: gastroenterology, ophthalmology and orthopedic surgery.
Here are four findings from the report:
1. For the surgical procedures examined, overall prices paid to ASCs grew at a rate similar to increases in general medical care prices, while overall prices paid to hospital outpatient departments for the same period climbed sharply. Payments to ASCs in 2012 ranged from 8.8 percent lower to 32.3 percent higher than they were in 2007 (without adjusting for general inflation). Overall, they indicate that ASC prices followed general increases in medical care prices during the period. In contrast, hospital outpatient department payments increased from 32 percent in 2007 to 76.7 percent in 2012.
2. Private insurers pay ASCs substantially more than Medicare pays, while private insurers pay hospital outpatient departments more than Medicare for some procedures but less than Medicare pays for others.
3. For 2007, ASC received 62.7 percent of what hospital outpatient department received in payment. Medicare payments in 2007 (including patients' copayments) were substantially lower than private insurance payments for all six procedures evaluated when performed in ASCs. However, Medicare paid more than private insurers for certain procedures, including cataract removal and knee arthroscopy, when performed in a hospital outpatient department.
4. In Pennsylvania, the one state where ASC profit margin data are publicly available, the average operating margin and total margin for ASCs statewide were 24.9 percent and 25.1 percent respectively in fiscal year 2011, and 25.8 percent and 27 percent in FY 2012. According to the report, these margins substantially exceeded those of general hospital services nationwide, for which average operating margins ranged from 5 to 6 percent and total margins averaged 7 to 8 percent for the same time periods.