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The Department of Industrial Relations (DIR) has released a 102 page report “Ambulatory Surgical Services Provided Under California Workers’ Compensation: An Assessment of the Feasibility and Advisability of Expanding Coverage.”

Senate Bill 863, which was signed into law in 2012, requires DIR to study the feasibility of establishing a facility fee for Medicare’s “inpatient only” procedures performed in Ambulatory Surgery Centers (ASCs) and report its finding to the legislative committees. At present, Medicare does not have a fee schedule for these procedures when performed in outpatient settings.

The study’s key recommendations are to retain current OMFS policies with regard to “inpatient only” procedures performed in an ambulatory setting; and strengthen patient protections when procedures are performed in an ambulatory setting..

1) ASCs that are currently eligible for an Official Medical Fee Schedule (OMFS) facility fee are likely to be equipped to provide services that do not require a one-night stay. However, Medicare has several requirements for patient protection that are not found in the minimum accreditation requirements for physician-owned facilities that are not Medicare certified. These include accepting only patients who are likely to require less than a 24-hour stay, assuring appropriate post-discharge arrangements are made, and providing the patient with written disclosure of any financial interests between the ASC and the physician.

2) Data analyses and review of the literature do not provide strong support for removing any procedures from the “inpatient only” list with the possible exception of procedures related to anterior cervical spinal fusions.

3) Few “inpatient only” procedures are currently being performed in an ASC on either workers’ compensation or privately insured patients ages 18-64, with the exception of spinal instrumentation.

4) Current OMFS policies of prior authorization process for performing an “inpatient only” procedure in an ASC setting, which allows for individual consideration of the anticipated services, other procedures that will be performed during the same encounter, and post-discharge services, before the services are provided are preferable to an across-the-board pricing methodology.

Under current OMFS policies, “inpatient only” procedures are covered as an exception that permits a payer to authorize payment for an “inpatient only” service in an ambulatory setting at an agreed-upon rate when medically appropriate. If any services are to be removed from the “inpatient only” list for WC patients, an OMFS allowance is needed for those services. In this regard, Section 74 of SB 863 requires DIR to consider a fee set at 85 percent of the Medicare fee schedule amount for the service when performed on an inpatient basis.

RAND examined two basic policy alternatives for paying for these procedures in an ambulatory setting. Consistent with SB 863, the first option would be to pay for the ambulatory surgery based on a multiple of the Medicare inpatient rate for the procedures. The second option would be to base the rate on the amounts paid for comparable services under the hospital prospective payment system. It concluded that the less problematic approach would be to build on the current OMFS for outpatient services. The “inpatient only” procedures could be assigned to the most comparable APC.