	Background

There are some similarities in how Medicare pays ASCs and hospital  outpatient departments for the procedures they perform. APC Groups Accurately Reflect the Relative Costs of ASC Procedures

The APC groups reflect the relative costs of procedures provided by ASCs  as well as they reflect the relative costs of procedures provided in the  hospital outpatient department setting. Specifically, 45 percent of procedures  performed in ASCs fell within a 0.10 point range of the ASC-to-APC median  cost ratio, and 33 percent of those procedures fell within a 0.10 point range  of the OPPS-to-APC median cost ratio in the hospital outpatient  department setting (see figs. Among all procedures in our analysis, the median ASC-to-APC cost ratio  was 0.39. When  weighted by Medicare volume based on 2004 claims data, the median ASC- to-APC cost ratio was 0.84. We determined that the median OPPS-to-APC  cost ratio was 1.04. Although costs for individual  procedures vary, in general, the median costs for procedures are lower in  ASCs, relative to the median costs of their APC groups, than the median  costs for the same procedures in the hospital outpatient department  setting. Comparison of Per- Procedure Costs

To compare the relative costs of procedures performed in ASCs and  hospital outpatient departments, we first compiled information on ASCs’  costs and procedures performed. We then calculated a ratio between each  procedure’s ASC median cost, as determined by the survey, and the  median cost of each procedure’s corresponding APC group under the  OPPS, referred to as the ASC-to-APC cost ratio. We also calculated a ratio  between each ASC procedure’s median cost under the OPPS and the  median cost of the procedure’s APC group, using the data obtained from  CMS, referred to as the OPPS-to-APC cost ratio. To assess how well the relative costs of  procedures in the OPPS, defined by their assignment to APC groups,  reflect the relative costs of procedures in the ASC setting, we evaluated  the distribution of the ASC-to-APC and OPPS-to-APC cost ratios.
Why GAO Did This Study

Medicare pays for surgical procedures performed at ambulatory surgical centers (ASC) and hospital outpatient departments through different payment systems. Although they perform a similar set of procedures, no comparison of ASC and hospital outpatient per-procedure costs has been conducted. The Medicare Prescription Drug, Improvement, and Modernization Act of 2003 directed GAO to compare the relative costs of procedures furnished in ASCs to the relative costs of those procedures furnished in hospital outpatient departments, in particular, how accurately the payment groups used in the hospital outpatient prospective payment system (OPPS) reflect the relative costs of procedures performed in ASCs. To do this, GAO collected data from ASCs through a survey. GAO also obtained hospital outpatient data from the Centers for Medicare & Medicaid Services (CMS).

What GAO Found

GAO determined that the payment groups in the OPPS, known as ambulatory payment classification (APC) groups, accurately reflect the relative cost of procedures performed in ASCs. GAO calculated the ratio between each procedure's ASC median cost, as determined by GAO's survey, and the median cost of each procedure's corresponding APC group under the OPPS, referred to as the ASC-to-APC cost ratio. GAO also compared the OPPS median costs of those same procedures with the median costs of their APC groups, referred to as the OPPS-to-APC cost ratio. GAO's analysis of the ASC-to-APC and OPPS-to-APC cost ratios showed that 45 percent of all procedures in the analysis fell within a 0.10 point range of the ASC-to-APC median cost ratio, and 33 percent of procedures fell within a 0.10 point range of the OPPS-to-APC median cost ratio. These similar patterns of distribution around the median show that the APC groups reflect the relative costs of procedures provided by ASCs as well as they reflect the relative costs of procedures provided in hospital outpatient departments and can be used as the basis for the ASC payment system. GAO's analysis also identified differences in the cost of procedures in the two settings. The median cost ratio among all ASC procedures was 0.39 and when weighted by Medicare claims volume was 0.84. The median cost ratio for OPPS procedures was 1.04. Thus, the cost of procedures in ASCs is substantially lower than the corresponding cost in hospital outpatient departments.