Procedure Medicare Category Medicare ASC Rate Average ASC Fee Average Hospital Fee 1. IOL (cataract) 8 $928 $1,225 $1,600
2. Hernia repair 4 $592 $900 $2,183 3. Colonoscopy 2 $419 $650 $1,944 4. Tonsillectomy 5 $675 $1,000 $1,363 5. Knee arthroscopy 3 $480 $1,700 $3,300 6. Epidural pain blocks 1 $312 $550 $700 7. YAG laser capsulotomy 2 $408 $525 $930 8. Breast biopsy 1 $312 $750 $800 9. Lap. Cholecystectomy $3,500 $5,200 10. Laparoscopy 5 $675 $750 $2,648
Note: Currently, laporoscopic cholecystectomy is not reimbursed as a Medicare
procedure. It is expected that approximately 33% of the surgery center surgeries will be reimbursed by Medicare. All ASC reimbursement figures are approximations. Medicare reimbursement rates do not factor in the CPI-U index for area. Thus, they will vary slightly.
Operating Rooms Are Busy
A second core argument focuses on demonstrating that operating rooms in the
community are very busy. Here, there is often flexibility in the use of assumptions that affect conclusions as to capacity (i.e., whether operating rooms are either extremely busy or not too busy).
As a general rule, if more than 950 to 1,000 cases per year per operating room in the certificate of need area are being performed, it may be easy to demonstrate that operating rooms are busy. In contrast, if operating rooms are being used for less than 700 or 800 cases per year, it is hard to demonstrate a need based completely on the undercapacity of operating rooms.
Factors that affect the calculation of operating room usage include: Population growth.
Number of cases per population.
Difference of population between elderly and nonelderly.
Definition of the geographic radius of the certificate of need community. In many states, the state does not specifically define what needs to be included in the certificate of need planning area. Thus, for example, by excluding an outlying community hospital that is not busy, it will be much easier to show statistically that the core area has operating rooms that are very busy.
Breaking down the cases in the area into inpatient and outpatient cases.
Applying expected number of minutes per case to operating rooms in the area. For example, an inpatient case may take an average of 90 to 120 minutes, and an outpatient case may take only 40 or 50 minutes. By using these and by taking the total amount of time that an operating room is open per year, one can demonstrate the amount of capacity in cases per operating room in the community. Then, if one can demonstrate that use is about 1,000 cases per operating room on average and that the addition of two operating rooms would not significantly reduce capacity, then it may be possible to show a need for additional operating rooms. Using Assumptions─ State Guidelines.
Because of the amount of manipulation that has been and can be done with this type of data, many state planning boards have developed specific rules to guide calculations. For example, the state may categorically set the radius for the CON planning area, dictate the number of minutes per case or dictate the threshold number of cases per operating room that can be performed. The State of Illinois, for example, requires that all operating rooms within thirty minutes of the planned site be included in the data and calculations. Here, parties then attempt to demonstrate that certain operating rooms are really more than thirty minutes away as opposed to within thirty minutes.
Building While on Appeal
In many situations, a hearing officer or the planning department or board has approval of certificate of need. Then, however, another party may contest the certificate of need at an appellate level. In certain of these situations, after the initial grant, the provider granted the certificate of need has moved forward to begin development of the facility. Here, case law indicates that moving forward with development is done with significant risk. One court noted this issue as follows:
We are not unaware of the fact that MMC elected to build the North Campus facility prior to receiving this Court's ruling on the validity of the project. It must be considered unwise for any litigant to take costly steps in anticipation of a favorable ruling by this Court. In the case of the appeal of a ruling which was reversed once by the Chancellor, and which only narrowly avoided reversal a second time, this action must be considered a risk assumed solely by MMC. The fact that a litigant has taken such costly steps in anticipation of a ruling by this Court should not, of course, affect the course of this Court's deliberations. To do otherwise would be to abdicate our role as highest court of this State. It is our hope that MMC's motivation in building the North Campus project prior to our decision was not to present this Court with a fait accompli which we would be unwilling to disturb.14
14 St. Dominic-Jackson Memorial Hospital v. Mississippi State Department of Health, 728 So. 2d 81 (Miss.
Review of Alternatives
A third key CON effort focuses on demonstrating that the ASC is the preferred expansion mode for the community. Here, it is typical to address other key alternatives and then articulate that the ASC is the preferred plan. An example of this discussion is as follows.
There are four possible alternatives to the proposed project. Each of the four alternatives is either not practicable, or does not offer the same efficiencies an benefits as the proposed Facility.
Utilization of Other Freestanding Outpatient Surgery Facilities.
The closest freestanding ambulatory surgery centers are located nearly eighty (80) miles away in Davenport, Iowa. The growing needs of patients within the primary service area, and the great distance to other ambulatory surgery centers, make this an impractical a1ternative to the current overutilization problem in Des Moines County and the surrounding counties.
Hospital Alternatives to Multispecialty Freestanding ASC.
The hospital operating room typically does not offer cost efficiencies for outpatient surgery. For example, studies have indicated that the average supply cost per equivalent procedure is highly dependent on the ownership and setting of the facility and that hospital supply costs are typically much higher than ASC supply costs per procedure. Hospital settings simply do not provide the incentives to utilize resources efficiently. The higher costs resulting from inefficient use of supplies ultimately results in higher costs to patients and payors. Moreover, remodeling a hospital to facilitate the improved provision of surgery is likely to be extremely costly and more expensive as compared to building a freestanding ambulatory surgery center. In fact, the Hospital has stated that remodeling would be as expensive as building the new proposed facility. Such costs are then passed on to payors and patients.
Construction of a new hospital facility in the Hospital area will be significantly more costly, higher than construction costs associated with the Facility. Hospital projects cost of a new hospital to equal $72 million. Moreover, note that the timing of the proposed project appears peculiar in that Hospital stated approximately two (2) years ago that it expected such move to Area to be made in the longer term future rather than in response to plans to build an outpatient facility by PHC. At the same time it was re- ported that Hospital had informed a bond rating service (Moody's) that it had no more plans for capital improvements within the next ten (10) years. Hospitals also do not allow for certain benefits envisioned for the Facility such as:
─ Each of hospital based ambulatory surgical centers and hospital based same day surgery result in higher costs to payors and out of pocket costs to patients in the form of higher coinsurance payments.
─ The Facility's design is small as opposed to a large institution which has considerably greater expense and delay required for construction, development and internal transportation needs (Hospital estimates at least two to three years to build a new hospital).
─ Patient convenience is enhanced with easy access, convenient parking and shorter distances.
─ Anesthesia induction and block rooms will reduce turnover time and improve patient care.
─ The small team prevents dilution of care and potential errors when patient care is transferred.
Many health planning authorities have determined a need for freestanding ambulatory surgery center capacity irrespective of hospital operating room capacity. This is because hospital operating rooms and freestanding ambulatory surgery centers are distinctly different in terms of cost, quality of care and physician efficiency. Often, they are not viewed as simple substitutes for one another.
Establish a Hospital Owned and Operated Freestanding ASC.
As indicated in studies by SMG Marketing Group, charges in hospital- owned freestanding ambulatory surgery centers are typically at least twenty-five percent (25%) higher than charges in independently owned ambulatory surgery centers. Thus, as of 1995, approximately eighty percent (80%) of the nation's freestanding surgery centers were independently owned.
It is widely contended that hospitals have been slow to build ASCs because Medicare allows hospitals reimbursement for the same cases at a higher rate than ambulatory surgery centers. Therefore there is no incentive for hospitals to create ambulatory surgery centers. Moreover, if built, Medicare allows hospitals to charge patients higher amounts per case than independent ASCs. This translates to a large difference in costs to payors and in patient co-payment responsibility.
The investment required to provide appropriate in office capacity for surgery and to ensure top quality care and personnel is large and must be shared by multiple specialties and groups to make it efficient. Medicare certification is required for reimbursement of many procedure a certificate of need.
V. SUMMARY
A strong knowledge of the impact of and relationship between certification, licensing and CON issues is needed to advise clients as to their options. This knowledge should help one develop and explain options and should shorten the period between conceptualizing a project and actually moving a project to completion.