Effects of the Medicare Modernization Act on Spending for Outpatient Surgery

Objectives To examine the effects of Medicare's revised ambulatory surgery center ( ASC ) payment schedule on overall payments for outpatient surgery. Data Sources Twenty percent sample of national Medicare beneficiaries. Study Design We conducted a pre–post study of Medicare beneficiaries who underwent outpatient surgery in a hospital outpatient department ( HOPD ), ASC , or physician office between 2004 and 2011. Specifically, we used multivariable regression to compare temporal trends in outpatient surgery before and after implementation of Medicare's revised payment schedule in 2008, which reduced ASC facility payments to roughly two‐thirds that of HOPD s. Our outcome measures included overall Medicare payments, utilization rates, per beneficiary spending, and average episode payments for outpatient surgery. Principal Findings Between the last quarters of 2007 and 2008, overall Medicare payments for outpatient surgery grew by $334 million—an amount nearly three times higher than would have been expected without the policy change ( p  <   .001 for the difference). While utilization rates of outpatient surgery were attenuated, per beneficiary spending and average surgical episode payments increased by 10.4 percent and 7.8 percent, respectively, over the same period. By the end of 2011, Medicare payments for outpatient surgery reached $5.1 billion. Without the policy change, they would have totaled only $4.1 billion. Conclusions Despite lessening demand, reduced ASC facility payments did not curb spending for outpatient surgery. In fact, overall payments actually increased following the policy change, driven by higher average episode payments.