Ambulatory Surgery Center Update
Medicare is revising the outpatient payment system for cataract surgery. What should you expect?
By Mary Pat Johnson, C.O.M.T., C.P.C., C.O.E., and Kevin J. Corcoran, C.O.E., C.P.C. F.N.A.O.

Unlike other types of Medicare reimbursement, payments to ambulatory surgery centers (ASCs) for cataract surgery have been relatively stable since they were introduced in 1982. Reimbursement updates have included modest annual increases, but the regulatory environment has offered few surprises.

This period of stability may end sometime in the next few years as Medicare revises ASC guidelines to accommodate new payment rates and new prosthetic devices. Here's a preview of some of these changes.

ASC Coding Guidelines

In 2002, SMG Marketing Group found ophthalmic procedures comprised 27% of all cases performed in ASCs. Cataract surgery, which accounts for most of these cases, continues to be a mainstay of many ophthalmic and multispecialty ASCs, so it's more important than ever to establish and adhere to accurate coding policies.

Some procedures, such as cataract surgery or YAG laser capsulotomy, follow simple coding rules. Securing reimbursement becomes more difficult when surgery includes new or unlisted procedures or when surgeons perform multiple procedures in a single surgical session. Nevertheless, ASC administrators should try to match CPT and ICD-9 code selections with every procedure listed in the surgeon's operative report. Coding inconsistencies between the ASC and the surgeon may attract unwanted attention from third party payers — especially Medicare.

Payment Rates

The last time Medicare increased ASC payments was October 2003. Since then, the Medicare Prescription Drug and Modernization Act (MMA) of April 2003 reduced ASC payments by 2%. Not only did the act decrease rates, returning them to the

October 2002 schedule, it also froze ASC payments through 2009. During this freeze, ASC reimbursements can change only through adjustments of wage indices used to calculate local rates. In October 2004, Medicare opted to not adjust payment wage indices for 2005.

Currently, hospitals and ASCs receive different Medicare facility fees for identical ophthalmic procedures. For example, the national unadjusted Medicare reimbursement for ASC-based YAG capsulotomy is $446, compared with $290 for the same procedure performed in a hospital. Meanwhile, hospitals receive more money for outpatient cataract surgery ($1,329) than ASCs ($973). This imbalance is partially explained by comparing the payment systems used by ASCs and hospitals.

Hospital-based procedures are regulated by the Outpatient Prospective Payment System (OPPS), which sorts claims into ambulatory payment classification (APC) groups according to clinical similarities. For example, this system assigns hospital-based cataract-related procedures to APC 246.

In contrast, Medicare's ASC reimbursement protocol assigns each allowable procedure to one of nine payment groups based on the resources it uses and how much it costs. Under this system, payment group 2 includes YAG laser capsulotomy, a series of integument procedures (CPT 11xxx), wound repair procedures (CPT 12xxx) and muscle biopsies (CPT 20xxx). These procedures are grouped not by clinical similarity, but by cost per case.

Over the next few years, CMS plans to introduce a new payment system for ASCs. The deadline for implementing this new payment system is Jan. 1, 2008.

IOL Reimbursement

Beginning with the passage of the Omnibus Budget Reconciliation Act-1987, reimbursement for IOLs has been part of, not separate from, the ASC facility fee for the associated surgical procedure. Since 1994, Medicare has reimbursed ASCs $150 per IOL as part of groups 6 and 8. In early 2004, the Office of the Inspector General (OIG) reported ASCs spend an average of $90 per IOL, but also acknowledged costs vary according to lens type and composition. Based on these findings, the OIG has proposed a three-tiered IOL reimbursement system for ASCs, with silicone lenses receiving the highest payment, followed by acrylic and PMMA lenses. CMS will consider this proposal as it revises the current ASC payment system.

The first significant change in IOL reimbursement was announced on May 3, 2005, with the release of the CMS ruling on presbyopia-correcting IOLs. Follow-up instructions will provide further details. If CMS adopts a system similar to the one that regulates reimbursement for deluxe eyeglass frames, beneficiaries will be responsible for charges associated with upgrading from conventional to deluxe IOLs. ASCs and hospital outpatient departments will need to record patients' acceptance on an appropriate form, probably an Advance Beneficiary Notice (ABN).

Prosthetic Devices

IOLs aren't the only prosthetics used by ophthalmologists during cataract surgery. The most recent prosthetic to receive FDA approval is the capsular tension ring (CTR). These intracapsular implants are inserted during cataract surgery to stabilize IOLs in patients who have missing or damaged zonules, lens subluxation, pseudoexfoliation or Marfan syndrome. As with most new, clinically advantageous devices, CTRs and other prostheses create reimbursement challenges.

Since ophthalmic surgery techniques are advancing more rapidly than corresponding payment policies, providers and ASCs often receive inadequate or conflicting advice about coding for ophthalmic prosthetics. Some Medicare carriers treat CTRs as an incidental part of cataract surgery, whereas others pay separately for the device. Disagreement among Medicare carriers often leads to initial claim denials for prosthetic reimbursement, which may be paid on appeal.

If ASCs intend to offer CTRs to patients, they need to receive reimbursement that minimally covers the cost of the device. Balance-billing beneficiaries is prohibited, so ASCs can't recoup losses by passing on costs to patients.

Increasing Complexity

Since the 1980s, the number of ophthalmic procedures performed in ASCs has increased steadily. By some estimates, more than 60% of all ophthalmic surgery is performed in ASCs. Convenient scheduling, shorter surgery times and lower costs to patients are some of the benefits of this trend.

Regulatory changes, like those described in this article, are unlikely to deter ophthalmologists from using ASCs or pursuing new ASC ventures, but revised guidelines may force ASC owners and management to change how they run their facilities.

Effective July 1, 2005, Medicare will update the list of eligible procedures, expanding the number of ophthalmic surgeries that can be performed in ASCs. However, expected rate changes on or after Jan. 1, 2006, will reduce reimbursement rates for some ophthalmic procedures, forcing ASCs to adjust their operating budgets. Finally, IOL reimbursement rates may fall slightly, while other new prosthetic devices will likely gain favorable treatment, after they 

work through the usual introductory phase.

ASCs are held to higher documentation and coding standards than physician practices, so managers of these facilities are encouraged to remain vigilant for policy revisions and maintain internal policy manuals that comply with changing instructions from Medicare. In particular, administrators should ensure claims are consistent with surgeons' operative reports and avoid submitting claims for ineligible procedures.

Mary Pat Johnson, C.O.M.T., C.P.C., C.O.E

Mary Pat Johnson has been with Corcoran Consulting Group (CCG) since 1992, where she is a Senior Consultant. Her most recent clinical position before joining CCG was as a nursing/clinic supervisor in the Department of Ophthalmology at Loma Linda University. Ms. Johnson is a certified ophthalmic medical technologist, a certified professional coder and a certified ophthalmic executive.

Kevin J. Corcoran, C.O.E., C.P.C., F.N.A.O.

Kevin Corcoran is president and co-owner of Corcoran Consulting Group in Southern California. He received his Bachelor of Science degree from the University of California at Irvine and attended the graduate school of business at California State University, San Francisco. Before starting his business in 1985, he held various sales and marketing positions in ophthalmology. Mr. Corcoran is an optician, a certified professional coder and a certified ophthalmic executive.