Medical Management

Fee Schedules Stabilize Surgery Center Costs

Significant interstate differences in payments to ambulatory surgery centers are tied to the way states regulate those payments.
By: | August 7, 2014

An average rotator cuff surgery for an injured worker in New York may cost $9,000 less than it does in neighboring Connecticut. That’s one of the findings of a new report that looks at average payments for ambulatory surgery centers.

The explosion of ASCs in recent years has attracted the attention of the Workers Compensation Research Institute. The Massachusetts-based organization released studies comparing surgical costs at ASCs in 23 states, and the ASC payments compared to outpatient hospital costs for similar surgeries.

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Many of the findings came down to how states regulate payments. “Large interstate differences in ASC payments per surgical episode were mainly due to the presence and nature of the fee schedules,” the researchers wrote. For example, the average knee arthroscopy in states without a fee schedule was $6,012 — nearly double the $3,148 average payment in states with fixed amount fee schedules.

“The difference between some neighboring states is startling,” the report said. “Payments for ASC surgeries in Connecticut were four times those in New York for knee surgeries and at least five times those for shoulder surgeries. Similarly, ASC payments in Virginia were three and a half times those in Maryland for knee surgeries and two and a half times those for shoulder surgeries.”

There were also payment differences for the same surgeries performed within states, especially those without fixed amount fee schedules. “For instance, a quarter of knee surgeries in Virginia had ASC facility payments under $3,243,” the authors found. “Another quarter of similar knee surgeries in Virginia had facility payments over $7,488. Similarly, a quarter of knee surgeries in New Jersey had ASC facility payments under $3,012 while another quarter of similar knee surgeries in the state had ASC payments over $8,637.”

The second study looked at the payments of similar surgeries performed in ASCs and hospital outpatient departments. Again, the difference in fee schedule regulations may have contributed to differences in the payments.

“The conventional wisdom has been that ASCs are less expensive venues for payors than hospital outpatient departments for common outpatient surgeries. We found support for this in many states,” the report said. “Exceptions were Connecticut, where ASC surgeries were more expensive than hospital outpatient surgeries for all surgery types examined in this study, and to a lesser degree, Georgia, New Jersey, North Carolina and Tennessee, where ASC surgeries were more expensive than hospital outpatient surgeries for some of the surgery types.”

States have different methods to determine payments for surgeries in the two types of facilities, the authors explained. For example, some states set ASC fee schedule rates lower than hospital outpatient fee schedule rates. That contributed to lower ASC surgical payments in Illinois, South Carolina, and Texas.

Other states use fixed amount fee schedules for ASC surgeries and charge-based payments for hospital surgeries. That led to large differences in payments for ASC vs. hospital outpatient departments in Florida, Maryland, Michigan, and Pennsylvania.

“For most of these states we found that hospital outpatient facility payments were at least double the ASC facility payments for the same arthroscopic knee surgery,” according to the report. “In Michigan, the average ASC payment for a knee arthroscopy was $1,334 while the average hospital outpatient payment for the same procedure was $3,670. In Florida, the average ASC payment was $3,731 while the hospital payment was $8,324.”

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Other factors that appeared to contribute to differences in payments for the two types of facilities are network participation rates and billing practices. ASCs, for example, were more likely to bill for multiple surgical procedures from a single surgical event when compared to outpatient departments. That was a “significant reason” for payment differences in Tennessee and North Carolina.

Where states use the same fee schedule rates, payments for ASCs were similar in four of the five states. “This is hardly a surprise given the evidence in this and in other studies that fee schedules play an important role in actual payments,” the report explained. “One exception on this list of states is Oklahoma, where ASC surgeries were less expensive than hospital outpatient surgeries, which may have been determined by a high prevalence of network contracts.”

Nancy Grover is the president of NMG Consulting and the Editor of Workers' Compensation Report, a publication of our parent company, LRP Publications. She can be reached at [email protected]

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The R&I Editorial Team can be reached at [email protected]