In accordance with § 626 of the Medicare Modernization Act of 2003, which commissioned a study by the GAO to evaluate a payment system using groups of covered services under the outpatient prospective payment system, the Centers for Medicare and Medicaid Services (CMS) proposed a new reimbursement system for Ambulatory Surgery Centers (ASC) on August 23, 2006 in the Federal Register. The full text of the proposal is available at Key changes include:

1.         A new ASC Fee Schedule protocol which will link the ASC procedure payment rate to approximately 62% of the reimbursement rate for the procedures as done in hospital outpatient departments, which rates will be phased in beginning January 1, 2008 and will become fully operational as of January 1, 2009;

2.         The addition of 14 procedures to the lists in 2007;

3.         The addition of 750 new procedures to the lists for 2008, which procedures will primarily be office-based procedures but for which the reimbursement will be capped at the lower of the non-facility expense for that procedure as provided in the Medicare Physician Fee Schedule or the new ASC rates; and

4.         The bundling of most surgical implants into the new ASC rates.

The goal of the new ASC reimbursement protocol is to coordinate ASC payments with hospital outpatient department payments at a rate which is intended to maintain neutrality between site of service choices. The proposed uniform conversion rate is intended to implement such neutrality. However, given the significant relative discrepancies between certain groups of ASC reimbursement at current rates, with some categories increasing and some categories decreasing, the new payment rate may change the economics of current ASC structures. The proposals fail to maintain relative neutrality between site of service by failing to have uniform inflation adjustments or update factors and failing to provide the same set of professional services for ambulatory surgery centers.