As focused ultrasound procedures become increasingly commonplace, we foresee there will be a move to perform these procedures in ambulatory surgical centers (ASCs). ASCs are healthcare facilities that perform surgical procedures that do not require patients to stay overnight in a hospital. They are sometimes referred to as “day surgery centers.” Because focused ultrasound procedures are noninvasive, they do not usually require a hospital stay.
The reimbursement level that a facility receives for the treatments it performs is referred to as the payment. Payment rates at ASCs are generally lower than those for hospital outpatient facilities due to lower operating costs. This blog will explore how ASC payments are determined and how companies can price their devices accordingly.
How are ASC payments calculated?
The first thing to remember is that payments are tied directly to costs. CMS determines how much it will pay based on how much the procedure actually costs to deliver in the hospital outpatient setting; CMS only looks at the actual hospital outpatient setting costs, not the costs in an ASC.
Second, while most ASC payments are based on the Hospital Outpatient Prospective Payment System (OPPS) rate, some ASC procedures are also based on Medicare Physician Fee Schedule (PFS) non-facility payment rates. The determining factor is where the bulk of the procedures are performed. If the bulk are performed in the ASC or an outpatient facility, then the payment is based on the OPPS rate. However, if the bulk of procedures are performed in a physician’s office, then payment is based on the PFS rate. This discussion will focus exclusively on ASC and outpatient facility–dominant procedures that adhere to the OPPS rate.
The conversion factor for the payment of a procedure performed in a hospital outpatient department (OPPS rate) for 2024 was $87.382. Meanwhile, the conversion factor for an ASC payment was just $53.514. This means the ASC payment rate is 61% of the payment rate for the same procedure done in the hospital outpatient department under OPPS.
Device-Intensive Procedures
Another factor to consider is that the actual payment to an ASC depends on whether the procedure is considered ‘device intensive.’ To determine whether a procedure falls into this category, one must calculate a device offset percentage. The device offset percentage is the cost of the device divided by the total outpatient facility cost of the procedure which is reported to CMS by only hospital outpatient facilities (the facility costs plus device costs). If the offset is greater than 30%, then the procedure is considered ‘device intensive.’
ASC-referenced procedures that are not device intensive are paid at 61% of the OPPS payment amount. However, if the procedure is device intensive, it gets paid more. How much more is determined by the cost of the device. Remember, this is true only for ASCs and not for a hospital outpatient facility.
If a procedure is device intensive, the ASC gets paid for the cost of the device plus 61% of the OPPS payment for the work done using the device.
Device Non-intensive: Total payment = 61% of total OPPS payment
Device Intensive: Total Payment = 100% of device payment + 61% of OPPS procedure related payment
A Case Study
In this example, let’s assume that a device costs the facility $4,000 per patient and the procedure using that device costs an additional $900 to perform.
If this procedure is performed in a hospital outpatient facility, the total cost for the procedure would be $4,900 ($4,000 + $900). The hospital would receive an OPPS payment of $4,900. This procedure is considered device intensive because the device costs more than 30% of the total cost of the procedure ($4,000/$4,900 = 82%). Therefore, if this procedure is performed in an ASC, the ASC would get paid $4,000 for the device portion of the procedure and 61% of the $900 facility procedure cost, or a total of around $4,500.
Now let’s look at a procedure that is non-device intensive. Here, the device costs just $900 and the rest of the procedure costs of $4,000.
The total cost is the same for the hospital outpatient facility ($4,900), and the OPPS payment would be $4,900. However, if the procedure is performed in an ASC, the payment rate would be 61% of the total OPPS payment, or around $2,970.
In summary, for two procedures each with a total costs $4,900:
Device Non-intensive Payment
$4,900*61% = $2,970
Device Intensive Payment
$4,000 + 61% *$900 = $4,500
Whereas the payment for the device intensive procedure may well cover the cost of performing the procedure, since actual ASC costs are less than OPPS costs, it is possible that even with those lower costs the payment for a device non-intensive procedure may not over the actual costs.
Take Home Message
These case studies demonstrate how device-intensive procedures generate more revenue for the ASC than device non-intensive procedures. Therefore, for device manufacturers, it is important to consider the implication of device pricing when bringing the product to market. If it turns out that the payment to the ASC will significantly underpay the actual costs of performing the procedure, then it is unlikely the procedure will be performed.
It is important to remember that all payment rates are based on outpatient facility Medicare claims. If the preferred place of use for a device is going to be an ASC, it may be beneficial to start in the hospital outpatient facility to establish a favorable reference point. In addition, serious consideration must be given to the single patient device cost relative to the total cost of the procedure. In this way, when the procedure is transitioned to the ASC setting, the payment rate will be sufficient for the ASC to pay for the device and its own facility costs.
Mark Carol, MD, is a senior consultant at the Focused Ultrasound Foundation.
The opinions in this article are not necessarily reflective of those of the Focused Ultrasound Foundation.