Those who know us are aware that we attempt to find the humor in every situation, the cup half-full rather than half-empty, and the silver lining in every cloud. Indeed, we may be the only lawyers in Washington, D.C., accused of taking a perpetually Pollyanna-ish view of just about every scenario.

These characteristics came into serious question this past year as the ophthalmology and ambulatory surgery communities faced their most serious challenges ever in efforts to promote ophthalmic ambulatory surgery before the Congress and a plethora of federal agencies.

At one point in 2003, it appeared that, based on specious recommendations by the Medicare Payment Advisory Commission (MedPAC), Congress would lop more than a billion dollars out of ambulatory surgical centers' coffers in its efforts to identify savings to pay for the Medicare drug benefit. By the time the bill saw its way to the White House, we had cut our losses and persuaded Congress to place the Centers for Medicare & Medicaid Services on a course to establish what we hoped would be rational processes for calculating facility fees in the decade or so ahead. This article, the first of two, represents our attempt to recap the regulatory and legislative developments affecting ASCs in 2003 and provide a glimpse of what lies ahead for ASCs, particularly in terms of the anticipated activities of the Outpatient Ophthalmic Surgery Society.

MedPAC Focuses on ASCs
MedPAC, chartered nearly a decade ago to provide independent advice on Medicare payment issues to Congress and CMS, has historically devoted little attention to ophthalmology or ambulatory surgery centers. On those occasions when MedPAC did enter our domain, it typically supported OOSS issues, for example, recommending that CMS more expeditiously and comprehensively update the ASC procedures list.

However, spurred by a zealous staff, pressure to find savings to assist Congress pay for a Medicare drug benefit, and an effective hospital-industry public relations and lobbying campaign to smear "niche providers" (i.e., every non-hospital health-care facility from surgical hospitals to ASCs to imaging centers) as threatening the very existence of the nation's community hospitals, MedPAC turned the spotlight on the ASC payment system.

MedPAC, after a series of hearings before the public, recommended to Congress that three reforms be instituted in the Medicare ASC program. First, CMS should, once and for all, collect decent data on ASC services. Who can argue with that?

Second, the Commission also recommended that the inflation adjustment that ASCs are scheduled to receive in 2004 be eliminated. Well, we weren't happy with that, but, with a drug benefit program in the offing, we all have to make a contribution, right? The third, and the shocker: MedPAC recommended that, with respect to those procedures where the ASC payment is higher than the prospective rate paid to the hospital outpatient department, ASC payment rates be reduced immediately to the hospital levels. The most glaring example of the deleterious effect of this proposal on ophthalmic services is the use of the Nd:Yag laser for posterior capsulotomy, under which the reimbursement would drop from $441 to $246. The cost of these proposals to the Medicare program would be almost three-quarters of a billion dollars over the next five years!

What was the basis for the recommendations? The Commission concluded, simplistic as it seems, that Medicare payment rates to ASCs must be too high because, after all, there are more and more centers being established, there are more procedures being performed in ASCs, and Wall Street likes the ASC industry. OOSS's line of attack before MedPAC and Congress has been to educate these policy-makers that there are many good reasons for growth in the ASC community that are unrelated to the alleged and questionable generosity of ASC payment rates. Among them are new technology, appeal of the patient-friendly and convenient environment to consumers, enhanced productivity for providers and private payers, to name a few.

The Drug Bill and Its Impact
The public will remember the Medicare Prescription Drug Benefit and Medicare Improvement Act as the legislation that created the landmark pharmaceutical benefit. Organized medicine will bask in the glow of having secured temporary relief in curtailing negative annual updates in the Medicare physician fee schedule. Ophthalmologists who own and treat their patients in ASCs, on the other hand, will recall this legislation as the first Congressional full-scale examination of the ASC program in the 20 years since the advent of the Medicare ASC program. When the "i's" were finally dotted and the "t's" crossed, several major changes in the ASC program were mandated.

l. We were successful in persuading Congress not to adopt MedPAC's recommendation that ASC payment rates be capped at hospital levels, a phenomenal victory given our starting point.

2. Congress provided for no annual update in ASCs' facilities from 2005 through 2009.

3. Impatient with CMS inaction in revising centers' facility fees to account for changes in the costs of providing surgical care, Congress has placed the agency on a rigorous timetable to establish a new prospective payment for ASC services. OOSS and the ASC community are generally pleased with the direction the government is taking with respect to the rebasing of facility fees. 

 • First, CMS is required to establish this new system by sometime between 2006 and 2008. Importantly, at our request, Congress repealed the current law requirement that rates be based upon a cost survey of hundreds of ASCs; facilities will recall that the survey-based 1998 proposal to rebase rates was profoundly flawed, resulted in double-digit reductions in ophthalmic surgical services, and ultimately met its regulatory demise when the ASC community mounted a massive and successful campaign to kill it. 

 • Second, CMS is to consider whether ASC facility fees should be linked to hospital outpatient prospective payment rates. For reasons to be discussed in the next issue, we believe that there is tremendous potential for ASCs to be afforded fair and stable reimbursement in the future. CMS will also be required to consider the recommendations included in a study which will be conducted during 2004 by the General Accounting Office.

What Rebasing May Mean
What does the rebasing of rates mean to owners of ophthalmic ASCs? It is probably the most important legislative or regulatory development in the history of ambulatory surgery, and accordingly, the OOSS leadership has taken a very progressive and proactive stance with respect to the development of a new system for calculating facility reimbursement. Recognizing that we will not enjoy current rates forever—after all, for how long can Medicare pay ASCs on rates which were developed using 1986 data—we have made some important policy decisions.

First, having experienced the draconian 1998 ASC payment rule, OOSS is unalterably opposed to CMS using another cost survey as the basis for determining ASC rates. CMS does not know how to devise a survey instrument, our ASCs are unable to accurately complete it, and the ultimate analysis of what will surely be faulty data is subject to crude and biased manipulations to expediently garner budget savings.

Second, OOSS and several other progressive and proactive ASC groups have been meeting with CMS for several years to develop a payment system which is fair, based on accurate data, and stable. OOSS has proposed, CMS is leaning towards, and Congress is mandating consideration of a system under which ASC payment rates would be based upon some percentage of the reimbursement provided for the same procedures to hospital outpatient departments.

Next Month
In next month's presentation, we will discuss in greater detail the ASC facility fee rebasing initiative which will generate the rates we live with over the next 10 to 15 years … . MedPAC has recommended that the ASC procedures list be abolished, thereby enabling surgeons and their patients to make the decisions about whether a procedure is appropriate for the hospital or ASC … . In the Medicare drug bill, Congress imposed a moratorium on physician investment in surgical and specialty hospitals. Does this portend changes in policy in the protected status which ASCs enjoy under the anti-kickback and Stark laws? 

Mr. Romansky and Mr. Zimmerman are partners in the Health Law Department of McDermott, Will & Emery's Washington, D.C. office. Mr. Romansky serves as Washington Counsel to the OOSS, the American Association of Ambulatory Surgery Centers, and other groups.