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Transcript for audio podcast: Payment Differences Between Similar Procedures in Surgical Centers and Hospital Outpatient Departments

From the Office of Inspector General of Department of Health and Human Services

[Lynn Barker] I'm Lynn Barker, Audit Manager in Indianapolis, speaking with Shirley Loos, a senior auditor in our Saint Paul, Minnesota office. Shirley, your audit team recently completed a review of the payment differences between surgical centers and hospital outpatient departments for similar procedures in both settings. Can you give us some background on this review?

[Shirley Loos] Yes, I'd be glad to. Congress asked OIG to assess Medicare's cost of providing outpatient surgical services in surgical centers compared to similar services provided in outpatient departments.

[Lynn Barker] What did you find?

[Shirley Loos] Basically, we found that outpatient departments received higher payments than surgical centers for similar services. We determined that Medicare could save as much as $15 billion dollars through 2017.

[Lynn Barker] Wow, $15 billion dollars! How can Medicare save that much money?

[Shirley Loos] Patients who do not have conditions requiring hospital-level care can be safely treated in an ambulatory surgical center. Medicare pays a lot of extra money when those patients are treated in a hospital, even though there was no medical reason for doing so. That patient could have been treated in the less expensive ambulatory surgical center setting. So if Medicare stopped paying hospitals a higher rate for treating those low risk patients, and, instead, paid the same rate for services given in an ambulatory surgical center, the savings would amount to $15 billion dollars.

[Lynn Barker] That's interesting. So, why is Medicare making higher payments to outpatient departments?

[Shirley Loos] Medicare payments to hospital outpatient departments are set higher to cover those facilities' higher operational costs.

[Lynn Barker] So why not treat all patients in ambulatory surgical centers if they are less expensive?

[Shirley Loos] Some patients' conditions rule out treatment in an ambulatory surgical center and call for hospital treatment, because hospitals are better equipped to treat high-risk patients. For example, a high risk patient might require hospitalization after receiving treatment. Surgical centers are independent of hospitals and can't provide care to high risk patients as easily as outpatient departments. For this reason, our audit findings focused on patients who are not considered high risk and who could properly undergo surgery in an ambulatory surgical center.

[Lynn Barker] So the difference between who must be treated in a hospital outpatient department and who can safely receive care in an ambulatory surgical center is a patient's health risk and what procedure they received?

[Shirley Loos] Correct. Medicare defined the surgical procedures provided by surgical centers as "ASC-approved procedures." For most patients, these procedures do not pose a significant safety risk and do not require an overnight stay. A physician may determine that an ASC-approved procedure should not be performed in a surgical center if a patient is "high risk."

[Lynn Barker] How did you account for patient risk?

[Shirley Loos] The Centers for Medicare and Medicaid Services, or CMS, doesn't track patient risk data. So we used information from a study by the Agency for Healthcare Research and Quality, or AHRQ. We used data from AHRQ's Healthcare Cost and Utilization Project and determined 68 percent of patients are low or no risk. We used this as a guide to determine potential savings.

[Lynn Barker] So Medicare beneficiaries could have lower co-payments for these services?

[Shirley Loos] Yes. Beneficiaries' co-payments could decrease by as much as $4 billion dollars as a result of reduced rates through 2017.

[Lynn Barker] This is an intriguing arena. Is the OIG doing more work in this area?

[Shirley Loos] Yes, we are. We are planning to complete a nationwide survey of surgical centers to collect cost data. This will help us determine whether Medicare payments reflect the cost of providing services in surgical centers. Currently, CMS does not require surgical centers to submit cost reports, so CMS can't monitor the growth of surgical centers' costs over time.

[Lynn Barker] Is there any plan to use the survey data for additional reviews?

[Shirley Loos] We're considering two other reviews: one review would look at the appropriateness of the price index used to update surgical center payment rates. The second review would identify the most viable option for surgical centers to submit cost data to CMS.

[Lynn Barker] Thank you, Shirley, for sharing such important work about the impact of the difference in payments between outpatient departments and surgical centers.

[Shirley Loos] You are very welcome. I appreciate the opportunity to talk about our results and help reduce costs for taxpayers.


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