Patient mix in outpatient surgery settings and implications for Medicare payment policy

Abstract

In 2008, Medicare implemented a new payment policy for ambulatory surgical centers (ASCs), which aligns the ASC payment system with that used for hospital outpatient departments and reimburses ASCs approximately 65% of what hospitals receive for the same outpatient surgery. The authors assess patient selection across ASCs and hospital outpatient departments for four common surgeries (colonoscopy, hernia repair, knee arthroscopy, cataract repair), using data on procedures performed in Florida from 2004 to 2008. The authors construct measures of patient illness severity and cost risk and find that ASCs benefit from positive selection. Nonetheless, the degree of selection varies by surgery type and patient population. While similar studies in other states are needed, the findings suggest that modifications to the Medicare outpatient payment system may be appropriate to account for the different populations that each setting attracts.