American Day Surgery System Oct 1988

Oct 11, 1988Article, Day Surgery, Journal Article

Day Surgery Article
Publication Status 3b (Australian Surgeon October 1988)
Review Status SR
Copyright Copyright of this article is vested in the author. Permissions for reprints or republications must be obtained in writing from the copyright holder. This article has been republished here with permission from the copyright holder. (Scanned from The Australian Surgeon. If there is any discrepancy between this scanned reproduction and the original the original takes precedence.)

American Day Surgery System Outlined

Lindsay Roberts, FRCS FRACS
Chairman, Australian Day Surgery Council, 1990 – 2000
President Elect, International Association For Ambulatory Surgery 1999

The American College of Surgeons defines ambulatory surgery as surgery that is performed under general, regional. or local anaesthesia without overnight hospitalisation.

Ambulatory surgical facilities may be hospital based or free-standing (that is, physically separate) and may be hospital controlled or independent 1.

Free-standing ambulatory surgical centres (ASC’s) may vary according to types of ownership and sponsorship, governance structures, comprehensiveness of services, and types of affiliation with hospitals 1,2. (This statement does not specifically address procedures that are performed in the surgeon’s office)


Although well-organised, freestanding and hospital-based ambulatory surgical programs are recent developments. The concept of ambulatory surgery is not a new one.

In fact, as early as 1909 James H Nicoll, MD, a surgeon, reported in the British Medical Journal that he was in incharge of an outpatient clinic at the Glasgow Hospital for Sick Children, where he had performed more than 7,000 operations on an ambulatory basis. On the basis of his work Dr Nicoll concluded that ambulatory surgery was as satisfactory as hospital inpatient care for some procedures.

During the 1960s, the use of safer anaesthetic agents and techniques and an increasing demand for hospital beds brought about increased interest in ambulatory surgical programs.

Two of the early hospital-based surgical outpatient programs were established at the University of California at Los Angeles and at George Washington University in Washington DC.

The earliest recognised freestanding ASC was the Dudley Street Ambulatory Surgical Centre, which opened in Providence, RI, in 1968. This Centre, however, was eventually closed due to lack of financial support. In 1970, the Phoenix Surgicentre was established. It remains in operation today and has become a model for Joiner freestanding ASC’s.

Not until the early 1980s, however, did interest in ambulatory surgery increase on a widespread basis. According to the American Hospital Association’s “Annual Survey of Hospitals, 1986,” for example, the number of surgical procedures performed annually in hospital outpatient settings between 1980 and 1986 increased from approximately 3.2 million to approximately 8.7 million. Outpatient surgery represented 40.4 per cent of all operations performed in hospital-related settings in 1986. Similarly, the Health Care Financing Administration (HFCA) reports that the number of Medicare certified ASC’s increased from 150 in December 1983, the first year for which data are available, to 838 Medicare certified ASC’s in February 1988.1

This shift in the provision of care from inpatient to ambulatory settings has been attributed in part to modern technological advances, including improved anaesthetic agents and the widespread use of more sophisticated techniques, such as endoscopy and laser operations.

Certain reimbursement policies adopted by the Federal Government and other third-party payers also have encouraged the use of ambulatory surgery. Particularly important to the growth of free-standing ASC’s was the enactment of the Omnibus Reconciliation Act of 1980 (P.L. 96499). Section 934 of P.L, 96-499 permitted Medicare to pay – for the first time – for the facility costs of certain operations performed in ASC’s.

Under regulations published on August 5, 1982, which became effective September 7, 1982, surgical procedures performed in Medicare certified ASC’s were divided into four groups, each of which was assigned a prospective reimbursement rate. Procedures were assigned to the groups according to an indexing system developed by HCFA that was based in part on the complexity of the surgical procedures and the resources used for performing them. The payment rates for the four groups were as follows: Group 1 , $231; Group 2, $275; Group 3, $296: and Group 4, $336.2

The regulations provided for 100 per cent reimbursement at these prospectively determined rates, regardless of the actual costs of the services provided. One hundred surgical procedures were selected for reimbursement under this new system. As mandated by P.L. 96-499, the regulations also provided that beneficiaries using ASC’s were exempt from co-payments and deductibles for covered ASC facility services, in order to encourage beneficiaries to seek care from the newly established ASC’s. In addition, physicians’ services were to be billed separately.

As an incentive to provide ambulatory surgical care, physicians who agreed to accept assignment for the services they rendered in a Medicare certified ASC or hospital outpatient department received 100 per cent of reasonable charges for performing procedures on the Medicare approved ASC list.

If the physicians did not agree to accept assignment, they received 80 per cent of reasonable charges, with the beneficiary having responsibility for the usual 20 per cent co-insurance and the remainder of the Physician’s charge in excess of the Medicare allowed amount.

In contrast to the previous method of paying for the facility costs of care provided in ASC’s, procedures performed in hospital outpatient departments have been reimbursed by Medicare under a separate scheme.

Under this system, Medicare has paid 80 per cent of the hospital’s “reasonable costs” for overhead expenses related to surgery performed in such settings, with the patient having responsibility for a 20 per cent co-payment and the $75 annual Medicare Part B deductible.

Many ASC proponents expressed concern that Medicare’s policy of paying hospital outpatient departments on the basis of’ reasonable costs rather than on the basis of a fixed, prospectively set rate resulted in hospitals being paid more than Medicare certified ASC’s for performing the same surgical procedures. They believed that applying a prospective payment system to hospital-based programs would be more appropriate.

Current Status

Recently, changes have been made in government reimbursement policies that are designed to eliminate some of the disparity in payments made by Medicare for the facility costs of ambulatory surgery performed in various settings. Changes, which were mandated under Section 9343 of the Omnibus Budget Reconciliation Act of 1986 (P.L. 99.509), are as follows:

  • HCFA is required to update its List of Covered Procedures for ASC’s at least every two years. In the April 21, 1987, Federal Register, HCFA issued a revised list of the number of Medicare-reimbursed procedures that may be performed in ASC’s, increasing them from 100 to 400.
  • As of July 1, 1987, HCFA was required to update its payment rates for ASC’s on an annual basis. Effective July 1, 1987, Medicare increased its reimbursement to Medicare certified ASC’s by 18.7 per cent. The payment rates for the four prospective payment groups are as follows: Group 1, $274; Group 2, $326; Group 3, $351; and Group 4, $399. The implementation of this increase marks the first time since 1982 that Medicare reimbursement for the facility costs of ASC’s has been increased. 4
  • Medicare began applying to beneficiaries the usual 20 per cent coinsurance and annual Part B requirements for the facility cost of surgical care received from Medicare certified ASC’s. (Although Medicare beneficiaries using ASC’s traditionally have been sheltered from cost-sharing so as to encourage the use of ASC’s by beneficiaries, Congress decided that ASC’s had become sufficiently established to make such special treatment unnecessary. As was noted earlier, Medicare patients provided care in hospital outpatient departments always have had cost-sharing responsibilities for the facility services. )5
  • Effective for hospital cost-reporting periods beginning on or after October 1, 1987, which marked the beginning of fiscal year (FY) 1988, aggregate payments to hospitals for facility services furnished in connection with procedures on the Medicare approved ASC list were limited to the lesser of two amounts: the hospital’s actual customary charges or reasonable costs, or a blended rate based on hospital specific charges or costs (whichever are less) and Medicare’s payment to ASC’s. For FY 1988, the blend is 75 per cent hospital charges or costs and 25 per cent ASC rate; in FY 1989, the blend will be 50 per cent hospital charges or costs and 50 per cent ASC rate. HCFA is required to develop a prospective payment system for ambulatory surgical procedures performed by hospitals and to report to Congress on this system by April 1989.

In addition to the previous changes mandated by P.L. 99-509, the Budget Reconciliation Act of 1987 (P,L. 100203) provided that effective April 1 , 1988, Medicare beneficiaries will begin paying a 20 per cent co-insurance rate for physician services provided in hospital outpatient departments or ASC’s. With this change, physicians performing services on the Medicare approved ASC list who agree to accept assignment will receive 80 per cent of reasonable charges, with the beneficiary having responsibility for a 20 per cent co-payment. If the physician does not agree to accept assignment, the beneficiary is responsible for a 20 per cent co-payment and the remainder of the physician’s charge for performing the procedure.

Another recent change affecting ambulatory surgical care is that beginning in 1988, both hospital outpatient departments and Medicare certified ASC’s are required to undergo review by peer review organisations (PRO’s) of the Medicare reimbursed operations they perform. As of July 1, 1987, the Pennsylvania PRO, Keystone Peer Review Organisation Inc., of Lemoyne, began its responsibilities for reviewing provided in hospital-related ambulatory surgical settings and ASC’s. Because PRO’s previously have not reviewed ambulatory surgical procedures, the Pennsylvania PRO program is being used as a pilot program. Massachusetts began collecting necessary data from ambulatory surgical facilities in March 1988 and is expected to begin the actual review of the facilities by June 1, 1988. Although PRO’s in most of the other states were expected to begin this review function by the end of November 1988, a statutory is likely to provision in P.L. 100-203 cause the implementation date to vary from PRO to PRO and, in some cases, to delay implementation until April 1, 1989.

College Viewpoint

In view of the rapid increase in the number and types of procedures being performed in ambulatory settings, it is appropriate to address some general issues and concerns regarding the performance of ambulatory surgery. The American College of Surgeons recognizes that certain operative procedures may appropriately be performed in an ambulatory surgical facility. Indeed, over time a number of studies have documented low rates of complications, surgical infections, and deaths for certain procedures performed in ambulatory surgery settings. Potential benefits from the use of ambulatory surgical facilities include greater accessibility and scheduling convenience for both the patient and the surgeon, reduction of patient anxiety, and decreased costs for the patient.

When considering whether an ambulatory surgical facility should be established, it is essential to examine the surgical needs of a community as well as the available facilities and surgical services. Reduction of overall medical costs in a community depends upon the use of appropriate existing health facilities; duplication of existing facilities could increase community costs.

A prime concern about ambulatory surgery is the assurance of quality. Ambulatory surgery requires careful patient selection by the surgeon. The patient should be expected to recover sufficiently on the same day so that he or she can safely leave the facility for recuperation at home. Consideration should be given to the anaesthetic risk, age, and general medical condition of the patient the expected duration and complexity of the operation, the anticipated degree and duration of postoperative pain and discomforts and the probability of postoperative complications. An operation should not be performed in an ambulatory setting irrespective of convenience or cost if the risk to a patient in undergoing the operation in such a setting is increased.

The College recognises that it has become common practice for the Federal Government and other third-party payers to develop lists of surgical procedures that must be performed on an outpatient basis for reimbursement purposes. The College is concerned, however, that the development of such lists may lead to categorizing certain procedures unequivocally as “ambulatory”, without taking into account patient suitability or giving proper weight to surgical judgment.

Considerations of quality in a freestanding facility include the qualifications of surgeons using the facility, provisions for utilization review and medical audit, and access to emergency and ancillary facilities in a nearby hospital. The governing authority of a free-standing ambulatory surgical facility should be responsible for maintaining proper standards of surgical care. Surgeons using the freestanding facility should have equivalent surgical privileges in an accredited hospital. Both free-standing and hospital-sponsored ambulatory surgical facilities should meet the same level of quality standards as those established and administered by nationally recognised accrediting bodies.

In summary, the American College of Surgeons approves the practice of performing certain operative procedures in ambulatory surgical facilities, providing that appropriate quality assurance measures are in force. Of prime concern are the patient’s suitability for ambulatory surgery and the provision of proper standards for both surgical privileges and for accreditation of the facility.

New Regulations for Day Rates

In an effort to update ambulatory surgical centre (ASC) facility payment rates, the Health Care Financing Administration (HCFA) will soon publish new regulations that would change the ASC rate-setting methodology.

The HCFA proposal has been sent to the White House for final review by the office of Management and Budget and, once approved, will be published in the Federal Register for public comment. At this time, the proposed regulations are scheduled to take effect July 1, 1988.

The proposal, based on the results of 1986 HCFA survey data of ASC payment rates, would establish seven new payment groups (ranging from $277 to $667) rather than the current four groups (with ranges of $274 to $399). The average increase is estimated at 17 per cent, depending upon the case mix variation of each facility.

HCFA has also suggested changes in the payment for intraocular lens (IOL) prosthesis with cataract extraction procedures (CPT-4 codes 66983 and 66984) by combining each of these Procedures into one and basing payment on the Group 7 rate ($677). In accordance with the Budget Reconciliation Act of 1987, PL. l00-203, HCFA has also slated changes in the payment of IOLs. As stated in the regulations, IOL payment must be related to the acquisition cost of the lens and, thereby, would be allowed a $213 add on per lens to the appropriate payment group. These changes are expected to increase payments for the cataract procedure while decreasing payments for the IOL device.

Payment methods for operations terminated because of medical risks to the patients would also be revised.