United States Government Accountability Office

GAO Report to Congressional Committees

MEDICARE

Payment for 

Ambulatory Surgical 

Centers Should Be 

Based on the Hospital 

Outpatient Payment 

System 

November 2006 

 

GAO-07-86 
What GAO Found

United States Government Accountability Office

Why GAO Did This Study

Highlights

Accountability Integrity Reliability

November 2006

MEDICARE

Payment for Ambulatory Surgical Centers 

Should Be Based on the Hospital 

Outpatient Payment System 

Highlights of GAO-07-86, a report to 

congressional committees 

Medicare pays for surgical

procedures performed at 

ambulatory surgical centers (ASC) 

and hospital outpatient 

departments through different

payment systems. Although they

perform a similar set of 

procedures, no comparison of ASC 

and hospital outpatient perprocedure costs has been

conducted. The Medicare

Prescription Drug, Improvement,

and Modernization Act of 2003 

directed GAO to compare the 

relative costs of procedures

furnished in ASCs to the relative

costs of those procedures 

furnished in hospital outpatient 

departments, in particular, how 

accurately the payment groups 

used in the hospital outpatient 

prospective payment system 

(OPPS) reflect the relative costs of

procedures performed in ASCs. To

do this, GAO collected data from

ASCs through a survey. GAO also 

obtained hospital outpatient data 

from the Centers for Medicare & 

Medicaid Services (CMS).

What GAO Recommends

The Administrator of CMS should 

implement a payment system for

procedures performed in ASCs 

based on the OPPS, taking into 

account the lower relative costs of

procedures performed in ASCs 

compared to hospital outpatient 

departments. CMS stated that 

GAO’s recommendation is

consistent with its August 2006 

proposed revisions to the ASC 

payment system. 

GAO determined that the payment groups in the OPPS, known as 

ambulatory payment classification (APC) groups, accurately reflect the 

relative cost of procedures performed in ASCs. GAO calculated the ratio 

between each procedure’s ASC median cost, as determined by GAO’s survey, 

and the median cost of each procedure’s corresponding APC group under 

the OPPS, referred to as the ASC-to-APC cost ratio. GAO also compared the 

OPPS median costs of those same procedures with the median costs of their

APC groups, referred to as the OPPS-to-APC cost ratio. GAO’s analysis of the 

ASC-to-APC and OPPS-to-APC cost ratios showed that 45 percent of all 

procedures in the analysis fell within a 0.10 point range of the ASC-to-APC 

median cost ratio, and 33 percent of procedures fell within a 0.10 point range 

of the OPPS-to-APC median cost ratio. These similar patterns of distribution 

around the median show that the APC groups reflect the relative costs of 

procedures provided by ASCs as well as they reflect the relative costs of 

procedures provided in hospital outpatient departments and can be used as 

the basis for the ASC payment system. GAO’s analysis also identified 

differences in the cost of procedures in the two settings. The median cost 

ratio among all ASC procedures was 0.39 and when weighted by Medicare 

claims volume was 0.84. The median cost ratio for OPPS procedures was 

1.04. Thus, the cost of procedures in ASCs is substantially lower than the 

corresponding cost in hospital outpatient departments. 

ASC Procedure Median Cost to APC Median Cost Ratios, Distributed by Percentage in 0.05 

Increments, 2004 

0

2

4

6

8

10

12

14

Percentage

Procedure cost ratios

Source: GAO analysis of ASC survey and Medicare data.

45% Percentage of all cost ratios within +/- 0.10 of median cost ratio

0.00

0.10

0.20

0.30

0.40

0.50

0.60

0.70

0.80

0.90

1.00

1.10

1.20

1.30

1.40

1.50

1.60

1.70

1.80

1.90

2.00

2.10

2.20

2.30

2.40

2.50

2.60

2.70

2.80

2.90

3.00

3.10

3.20

3.30

OPPS Procedure Median Cost to APC Median Cost Ratios, Distributed by Percentage in 0.05 

Increments, 2004 

0

2

4

6

8

10

12

14

Percentage

Procedure cost ratios

Source: GAO analysis of Medicare data.

33% Percentage of all cost ratios within +/- 0.10 of median cost ratio

0.00

0.10

0.20

0.30

0.40

0.50

0.60

0.70

0.80

0.90

1.00

1.10

1.20

1.30

1.40

1.50

1.60

1.70

1.80

1.90

2.00

2.10

2.20

2.30

2.40

2.50

2.60

2.70

2.80

2.90

3.00

3.10

3.20

3.30

www.gao.gov/cgi-bin/getrpt?GAO-07-86.

To view the full product, including the scope 

and methodology, click on the link above. 

For more information, contact Kathleen King 

at (202) 512-7119 or kingk@gao.gov. 
Contents 

Letter 1

Background 4

Results in Brief 8 

Many Additional Billed Services Were Similar; Few Resulted in 

Additional Payments to ASCs or Hospital Outpatient 

Departments 9

APC Groups Accurately Reflect ASC Procedure Costs 12 

Conclusions 15

Recommendation for Executive Action 15 

Agency and External Reviewer Comments and Our Evaluation 15 

Appendix I Analysis of the Proportion of Labor-Related 

Costs for Ambulatory Surgical Centers 17 

Appendix II Scope and Methodology 18 

Appendix III Additional Procedures Billed with the Top 20 

ASC Procedures, 2003 23 

Appendix IV Comments from the Centers for Medicare & 

Medicaid Services 25 

Appendix V GAO Contact and Staff Acknowledgments 27 

Figures 

Figure 1: ASC Procedure Median Cost to APC Median Cost Ratios, 

Distributed by Percentage in 0.05 Increments, 2004 13 

Figure 2: OPPS Procedure Median Cost to APC Median Cost Ratios, 

Distributed by Percentage in 0.05 Increments, 2004 14 

Figure 3: ASC Per-Procedure Cost Calculations from ASC Survey 21 

Page i GAO-07-86 Medicare Payment for Ambulatory Surgical Centers
Abbreviations 

AAASC American Association of Ambulatory Surgery Centers 

APC ambulatory payment classification 

ASC ambulatory surgical center 

CMS Centers for Medicare & Medicaid Services 

GI gastrointestinal 

MMA Medicare Prescription Drug, Improvement, and 

 Modernization Act of 2003 

NCH National Claims History

ORA Omnibus Reconciliation Act of 1980 

OPPS outpatient prospective payment system 

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Page ii GAO-07-86 Medicare Payment for Ambulatory Surgical Centers
United States Government Accountability Office

Washington, DC 20548 

November 30, 2006 

The Honorable Charles E. Grassley 

Chairman 

The Honorable Max Baucus 

Ranking Minority Member 

Committee on Finance 

United States Senate 

The Honorable Joe Barton 

Chairman 

The Honorable John D. Dingell 

Ranking Minority Member 

Committee on Energy and Commerce 

House of Representatives 

The Honorable William M. Thomas 

Chairman 

The Honorable Charles B. Rangel 

Ranking Minority Member 

Committee on Ways and Means 

House of Representatives 

In 1982, Medicare began paying ambulatory surgical centers (ASC) to 

perform certain surgical procedures on an outpatient basis. ASCs were 

established as an alternative to hospital inpatient care, which was 

considered a more costly setting. Medicare’s initial ASC payment rates 

were based on ASC cost and charge data from 1979 and 1980. The Centers 

for Medicare & Medicaid Services (CMS), the agency that administers 

Medicare, was required by law to review the ASC payment rates 

periodically and adjust them as appropriate.1

 CMS last revised the ASC 

payment rates in 1990 using ASC data on costs and charges that CMS 

collected in 1986.

2

 Since the payment rates were last revised, there has 

been substantial growth in both the number of ASC facilities and 

procedures they perform, as well as changes in medical practice and 

 1

Omnibus Reconciliation Act of 1980 (ORA), Pub. L. No. 96-499, § 934(b), 94 Stat. 2599, 2637

(codified, as amended, at 42 U.S.C. § 1395l(i)). 

2

ASC payment rates have been periodically updated for inflation. 

Page 1 GAO-07-86 Medicare Payment for Ambulatory Surgical Centers
technology. In 2004, there were approximately 4,100 Medicareparticipating ASCs, a number that has grown substantially since 2000 

when there were about 2,900 Medicare-participating ASCs. In 2004, ASCs 

received approximately $2.5 billion in total Medicare payments, a 

79 percent increase since 2000 when Medicare payments to ASCs totaled 

approximately $1.4 billion. 

While the ASC setting was originally intended to be an alternative to 

hospital inpatient care, the procedures performed in ASCs are now 

frequently performed in the hospital outpatient setting. Medicare pays 

ASCs and hospital outpatient departments through different payment 

systems. While procedures performed in ASCs are placed into payment 

groups based on similar costs, hospital outpatient department procedures 

are placed into payment groups, known as ambulatory payment 

classification (APC) groups, based on both cost and clinical similarity. 

Unlike the ASC payment system, the payment rates for hospital outpatient

departments are revised annually based on cost and charge data included

in reports hospitals are required to submit to CMS each year. 

Although ASCs and hospital outpatient departments perform a similar set 

of procedures, no comparison between the Medicare ASC payment system 

and the Medicare hospital outpatient department payment system, known 

as the outpatient prospective payment system (OPPS), has been 

conducted. The Medicare Prescription Drug, Improvement, and 

Modernization Act of 2003 (MMA) directed us to conduct a study that 

compares the relative costs of procedures performed in ASCs to the 

relative costs of procedures performed in hospital outpatient

departments.3

 As discussed with the committees of jurisdiction, we 

compared (1) additional services billed with procedures performed in 

ASCs with those billed with procedures performed in hospital outpatient 

departments and whether there were any Medicare payments associated 

with those services and (2) the relative costs of procedures when 

performed in ASCs to the relative costs of those procedures when 

performed in hospital outpatient departments, in particular, how 

accurately the APC groups used in the OPPS reflect the relative costs of 

procedures performed in the ASC setting. In addition, we examined the 

proportion of ASCs’ costs that are labor-related; this information is 

provided in appendix I. 

 3

MMA, Pub. L. No. 108-173, § 626(d), 117 Stat. 2066, 2319-2320 (codified at 42 U.S.C. § 1395l 

note). 

Page 2 GAO-07-86 Medicare Payment for Ambulatory Surgical Centers
To compare the delivery of additional services provided with procedures 

performed in ASCs and hospital outpatient departments, we identified all

additional services frequently provided in each setting with one of the top 

20 procedures based on highest Medicare ASC claims volume,4

 which, as a 

group, represented approximately 75 percent of all Medicare ASC claims 

volume in 2003.5

 Using Medicare claims data for 2003, we identified 

beneficiaries receiving one of the top 20 procedures performed in either an

ASC or hospital outpatient department, then identified any other claims 

for those beneficiaries submitted by ASCs, hospital outpatient

departments, durable medical equipment suppliers, and other Medicare 

part B providers. We identified claims for the beneficiaries on the day the 

procedure was performed and the day after.6

 We created a list that 

included all additional services that were billed at least 10 percent of the 

time with each of the top 20 procedures when they were performed in 

ASCs. We created a similar list of additional services for each of the top 20

procedures when they were performed in hospital outpatient departments. 

We then compared the lists to determine if the additional services 

provided by ASCs and hospital outpatient departments with each of those 

procedures were similar. To compare the Medicare payments for 

additional services provided with procedures performed in ASCs and 

hospital outpatient departments, we identified whether any additional 

services included in our analysis resulted in an additional payment. 

To compare the costs of procedures performed in ASCs and hospital 

outpatient departments, we first compiled information on ASCs’ costs and 

procedures performed. We conducted a survey of 600 ASCs to obtain 2004 

cost and procedure data. We received responses from 397 ASC facilities, 

and through our data reliability testing, determined that data from 290 

responding facilities were sufficiently reliable for our purposes. 

To allocate ASCs’ costs among the individual procedures they perform, we 

first separated ASCs’ direct and indirect costs. We then allocated each 

ASC’s direct costs among procedures it performed using a relative weight

scale we constructed with data from CMS, supplemented by information 

 4

For the remainder of the report, we refer to these as the top 20 procedures. 

5

For Medicare payment purposes, the bills that providers submit for payment are referred 

to as claims. 

6

We included services delivered the day after a procedure to allow for the inclusion of

services, such as laboratory services, that may not be provided immediately following the

procedure. 

Page 3 GAO-07-86 Medicare Payment for Ambulatory Surgical Centers
from medical specialty societies and clinicians who work for CMS. The 

relative weight scale captures the general variation in costs associated 

with performing the different procedures. We allocated each ASC’s 

indirect costs equally across all procedures it performed. For each 

procedure, we summed the direct and indirect costs for each ASC and 

arrayed the total cost for each of the ASCs performing that procedure. To 

obtain a per-procedure cost across all ASCs, we then identified the median

cost for each procedure from the array. 

To compare per-procedure costs for ASCs and hospital outpatient 

departments, we first obtained from CMS the list of APC groups included 

in the OPPS and the procedures assigned to each APC group. We also 

obtained from CMS the OPPS median cost of each procedure and the 

median cost of each APC group. We then calculated a ratio between the 

median cost for each procedure performed at an ASC, as determined by 

the survey, and the median cost of each procedure’s corresponding APC 

group under the OPPS. For the same procedures, we also calculated a 

ratio between the median cost of each procedure under the OPPS and the 

median cost of the procedure’s APC group, using the data obtained from 

CMS. To evaluate the difference in procedure costs between the two 

settings, we compared the ASC-to-APC and OPPS-to-APC cost ratios. To 

assess how well the relative costs of procedures in the OPPS, defined by 

their assignment to APC groups, reflect the relative costs of procedures in 

the ASC setting, we evaluated the distribution of the ASC-to-APC and 

OPPS-to-APC cost ratios. 

We also conducted interviews with CMS officials and representatives from

ASC industry organizations, specifically, the American Association of 

Ambulatory Surgery Centers (AAASC) and FASA, as well as physician 

specialty societies, and individual ASCs. For details on our methods, see 

appendix II. We performed our work from April 2004 through October 

2006 in accordance with generally accepted government auditing 

standards. 

There are some similarities in how Medicare pays ASCs and hospital 

outpatient departments for the procedures they perform. However, the

methods used by CMS to calculate the payment rates in each system, as 

well as the mechanisms used to revise the Medicare payment rates, differ.

Background 

Page 4 GAO-07-86 Medicare Payment for Ambulatory Surgical Centers
In 1980, legislation was enacted that enabled ASCs to bill Medicare for 

certain surgical procedures provided to Medicare beneficiaries.7

 Under the 

ASC payment system, Medicare pays a predetermined, and generally allinclusive, amount per procedure to the facility. The approximately 2,500 

surgical procedures that ASCs may bill for under Medicare are assigned to

one of nine payment groups that contain procedures with similar costs, 

but not necessarily clinical similarities. All procedures assigned to one 

payment group are paid at the same rate. Under the Medicare payment 

system, when more than one procedure is performed at the same time, the 

ASC receives a payment for each of the procedures. However, the 

procedure that has the highest payment rate receives 100 percent of the

applicable payment, and each additional procedure receives 50 percent of

the applicable payment.

Structure of the ASC 

Payment System 

The Medicare payment for a procedure performed at an ASC is intended to

cover the direct costs for a procedure, such as nursing and technician 

services, drugs, medical and surgical supplies and equipment, anesthesia 

materials, and diagnostic services (including imaging services), and the 

indirect costs associated with the procedure, including use of the facility 

and related administrative services. The ASC payment for a procedure 

does not include payment for implantable devices or prosthetics related to 

the procedure; ASCs may bill separately for those items. In addition, the 

payment to the ASC does not include payment for professional services 

associated with the procedure; the physician who performs the procedure 

and the anesthesiologist or anesthetist bill Medicare directly for their 

services. Finally, the ASC payment does not include payment for certain 

other services that are not directly related to performing the procedure 

and do not occur during the time that the procedure takes place, such as 

some laboratory, X-ray, and other diagnostic tests. Because these 

additional services are not ASC procedures, they may be performed by 

another provider. In those cases, Medicare makes payments to those 

providers for the additional services. For example, a laboratory service 

needed to evaluate a tissue sample removed during an ASC procedure is 

not included in the ASC payment. The provider that evaluated the tissue 

sample would bill and receive payment from Medicare for that service. 

Because ASCs receive one inclusive payment for the procedure performed 

and its associated services, such as drugs, they generally include on their 

Medicare claim only the procedure performed. 

 7

ORA, Pub. L. No. 96-499, § 934, 94 Stat. 2599, 2637-2639 (codified, as amended, at 42 U.S.C.

§ 1395l(i)). 

Page 5 GAO-07-86 Medicare Payment for Ambulatory Surgical Centers
In 1997, legislation was enacted that required the implementation of a 

prospective payment system for hospital outpatient departments;8

 the 

OPPS was implemented in August 2000. Although ASCs perform only 

procedures, hospital outpatient departments provide a much broader array 

of services, including diagnostic services, such as X-rays and laboratory 

tests, and emergency room and clinic visits. Each of the approximately 

5,500 services, including procedures, that hospital outpatient departments 

perform is assigned to one of over 800 APC groups with other services 

with clinical and cost similarities for payment under the OPPS. All services 

assigned to one APC group are paid the same rate. Similar to ASCs, when 

hospitals perform multiple procedures at the same time, they receive 

100 percent of the applicable payment for the procedure that has the 

highest payment rate, and 50 percent of the applicable payment for each

additional procedure, subject to certain exceptions. 

Structure of the OPPS 

Like payments to ASCs, payment for a procedure under the OPPS is 

intended to cover the costs of the use of the facility, nursing and 

technician services, most drugs, medical and surgical supplies and 

equipment, anesthesia materials, and administrative costs. Medicare 

payment to a hospital for a procedure does not include professional 

services for physicians or other nonphysician practitioners. These services 

are paid for separately by Medicare. However, there are some differences

between ASC and OPPS payments for procedures. Under the OPPS, 

hospital outpatient departments generally may not bill separately for 

implantable devices related to the procedure, but they may bill separately 

for additional services that are directly related to the procedure, such as 

certain drugs and diagnostic services, including X-rays.9

 Hospital 

outpatient departments also may bill separately for additional services that 

are not directly related to the procedure and do not occur during the 

procedure, such as laboratory services to evaluate a tissue sample. 

Because they provide a broader array of services, and because CMS has 

encouraged hospitals to report all services provided during a procedure on

their Medicare claims for rate-setting purposes, hospital claims may 

provide more detail about the services delivered during a procedure than

ASC claims do. 

 8

Balanced Budget Act of 1997, Pub. L. No. 105-33, § 4523, 111 Stat. 251, 445-450 (codified, as

amended, at 42 U.S.C. § 1395l(t)). 

9

There are a limited number of implantable devices that are considered new technology

devices for which the hospital outpatient department may bill and receive separate 

payment. 

Page 6 GAO-07-86 Medicare Payment for Ambulatory Surgical Centers
CMS set the initial 1982 ASC payment rates based on cost and charge data

from 40 ASCs. At that time, there were about 125 ASCs in operation. 

Procedures were placed into four payment groups, and all procedures in a 

group were paid the same rate. When the ASC payment system was first 

established, federal law required CMS to review the payment rates 

periodically.10 In 1986, CMS conducted an ASC survey to gather cost and 

charge data. In 1990, using these data, CMS revised the payment rates and 

increased the number of payment groups to eight. A ninth payment group 

was established in 1991. These groups are still in use, although some 

procedures have been added to or deleted from the ASC-approved list. 

History of the ASC System 

Rate Setting 

Although payments have not been revised using ASC cost data since 1990, 

the payment rates have been periodically updated for inflation. In 1994, 

Congress required that CMS conduct a survey of ASC costs no later than 

January 1, 1995, and thereafter every 5 years, to revise ASC payment 

rates.11 CMS conducted a survey in 1994 to collect ASC cost data. In 1998,

CMS proposed revising ASC payment rates based on the 1994 survey data

and assigned procedures performed at ASCs into payment groups that 

were comparable to the payment groups it was developing for the same 

procedures under the OPPS.12 However, CMS did not implement the 

proposal, and, as a result, the ASC payment system was not revised using 

the 1994 data. In 2003, MMA eliminated the requirement to conduct ASC 

surveys every 5 years and required CMS to implement a revised ASC 

payment system no later than January 1, 2008.13 During the course of our 

work, in August 2006, CMS published a proposed rule that would revise 

the ASC payment system effective January 1, 2008.14 In this proposed rule, 

CMS bases the revised ASC payment rates on the OPPS APC groups. 

However, the payment rates would be lower for ASCs. 

 10ORA, Pub. L. No. 96-499, § 934(b), 94 Stat. 2599, 2637 (codified, as amended, at 42 U.S.C. § 

1395l(i)). Congress later changed this requirement to an annual review and update of ASC 

payment rates. Omnibus Budget Reconciliation Act of 1986, Pub. L. No. 99-509, § 9343(b), 

100 Stat. 1874, 2040 (codified, as amended, at 42 U.S.C. § 1395l(i)). 

11Social Security Act Amendments of 1994, Pub. L. No. 103-432, § 141, 108 Stat. 4398, 4424-

4426 (codified, as amended, at 42 U.S.C. § 1395l(i)). 

1263 Fed. Reg. 32,290, 32,307-308 (June 12, 1998). 

13MMA, Pub. L. No. 108-173, § 626(b), 117 Stat. 2066, 2319 (codified, as amended, at 

42 U.S.C. § 1395l(i)). 

1471 Fed. Reg. 49,505 (Aug. 23, 2006). 

Page 7 GAO-07-86 Medicare Payment for Ambulatory Surgical Centers
The initial OPPS payment rates, implemented in August 2000, were based 

on hospitals’ 1996 costs. To determine the OPPS payment rates, CMS first 

calculates each hospital’s cost for each service by multiplying the charge

for that service by a cost-to-charge ratio computed from the hospital’s 

most recently reported data.15 After calculating the cost of each service for 

each hospital, the services are grouped by their APC assignment, and a 

median cost for each APC group is calculated from the median costs of all

services assigned to it. Using the median cost, CMS assigns each APC 

group a weight based on its median cost relative to the median cost of all 

other APCs. To obtain a payment rate for each APC group, CMS multiplies 

the relative weight by a factor that converts it to a dollar amount. 

Beginning in 2002, as required by law, the APC group payment rates have 

been revised annually based on the latest charge and cost data.16 In 

addition, the payment rates for services paid under the OPPS receive an 

annual inflation update. 

For the top 20 procedures, we found many similarities in the additional 

services billed with procedures performed by ASCs and hospital 

outpatient departments.17 Of the additional services billed in either setting 

with a top 20 procedure, few are paid separately by Medicare in one 

setting but not the other. Hospital outpatient departments received 

payment for some of the additional services, such as X-rays, they billed 

with the procedures, while in the ASC setting, other providers billed 

Medicare for these services and received payment for them. This is a result 

of the differences in the structure of the two payment systems; that is, 

while ASCs may bill Medicare only for procedures, hospitals may bill for a 

broader array of services. 

History of OPPS Rate 

Setting 

Results in Brief 

The APC groups in the OPPS accurately reflect the relative costs of 

procedures performed at ASCs. We compared each procedure’s ASC 

median cost to the median cost of the APC group in which it would be 

 15Hospitals set charges for their services that are generally above the costs of the services. 

A cost-to-charge ratio is a calculation that describes the cost and charge relationship for 

services provided in a specific hospital. 

16The Medicare, Medicaid, and SCHIP Balanced Budget Refinement Act of 1999, Pub. L. 

No. 106-113, App. F, § 201(h), 113 Stat. 1501A-321, 1501A-340 (codified, as amended, at 

42 U.S.C. § 1395l(t)). 

17In our analysis, we included only those services billed with a procedure at least 

10 percent of the time in either the ASC or hospital outpatient department setting. 

Page 8 GAO-07-86 Medicare Payment for Ambulatory Surgical Centers
placed, which we refer to as the ASC-to-APC cost ratio. We repeated this 

analysis by comparing the costs of those same procedures under the OPPS 

with the median costs of their APC groups, which we refer to as the OPPSto-APC cost ratio. Our analysis of the cost ratios showed that the ASC-toAPC cost ratios were more tightly distributed around their median cost 

ratio than were the OPPS-to-APC cost ratios; that is, more of them were 

closer to their respective median. Specifically, 45 percent of all procedures

in our analysis fell within a 0.10 point range of the ASC-to-APC median 

cost ratio, and 33 percent of procedures fell within a 0.10 point range of 

the OPPS-to-APC median cost ratio. These similar patterns show that the 

APC groups reflect the relative costs of procedures provided by ASCs as 

well as they reflect the relative costs of procedures provided in the 

hospital outpatient department setting and can be used as the basis for an

ASC payment system. While our analysis demonstrated that the APC 

groups accurately reflect the relative cost of procedures performed in 

ASCs, it also showed that procedures in the ASC setting had substantially 

lower costs than those same procedures in the hospital outpatient 

department setting. The median cost ratio among all ASC procedures was 

0.39. The median cost ratio among all OPPS procedures was 1.04. 

We recommend that the Administrator of CMS implement a payment 

system for procedures performed in ASCs based on the OPPS, taking into

account the lower relative costs of procedures in ASCs compared to 

hospital outpatient departments. In commenting on a draft of this report, 

CMS stated that our recommendation is consistent with its August 2006

proposed revisions to the ASC payment system. Representatives of AAASC 

and FASA, who reviewed a draft of this report, provided comments, which 

we incorporated where appropriate.

We found many similarities in the additional services provided by ASCs 

and hospital outpatient departments with the top 20 procedures. Of the 

additional services billed with a procedure, few resulted in an additional 

payment in one setting but not the other. Hospitals were paid for some of 

the related additional services they billed with the procedures. In the ASC 

setting, other providers billed Medicare for these services and received 

payment for them. 

Many Additional 

Billed Services Were 

Similar; Few Resulted 

in Additional 

Payments to ASCs or 

Hospital Outpatient 

Departments 

Page 9 GAO-07-86 Medicare Payment for Ambulatory Surgical Centers
In our analysis of Medicare claims, we found many similarities in the 

additional services billed in the ASC or hospital outpatient department 

setting with the top 20 procedures. The similar additional services are 

illustrated in the following four categories of services: additional 

procedures, laboratory services, radiology services, and anesthesia 

services. 

Many Additional Services 

Billed in Each Setting Were 

Similar 

First, one or more additional procedures was billed with a procedure 

performed in either the ASC or hospital outpatient department setting for 

14 of the top 20 procedures. The proportion of time each additional 

procedure was billed in each setting was similar. For example, when a 

hammertoe repair procedure was performed, our analysis indicated that 

another procedure to correct a bunion was billed 11 percent of the time in

the ASC setting, and in the hospital outpatient setting, the procedure to 

correct a bunion was billed 13 percent of the time. Similarly, when a 

diagnostic colonoscopy was performed, an upper gastrointestinal (GI) 

endoscopy was billed 11 percent of the time in the ASC setting, and in the 

hospital setting, the upper GI endoscopy was billed 12 percent of the time.

For 11 of these 14 procedures, the proportion of time each additional 

procedure was billed differed by less than 10 percentage points between 

the two settings. For the 3 remaining procedures, the percentage of time 

that an additional procedure was billed did not vary by more than 

25 percentage points between the two settings. See appendix III for a 

complete list of the additional procedures billed and the proportion of 

time they were billed in each setting.

Second, laboratory services were billed with 10 of the top 20 procedures in 

the hospital outpatient department setting and 7 of the top 20 procedures 

in the ASC setting. While these services were almost always billed by the 

hospital in the outpatient setting, they were typically not billed by the 

ASCs. These laboratory services were present in our analysis in the ASC 

setting because they were performed and billed by another Medicare part 

B provider. 

Third, four different radiology services were billed with 8 of the top 20 

procedures. Radiology services were billed with 5 procedures in the ASC 

setting and with 8 procedures in the hospital outpatient department 

setting. The radiology services generally were included on the hospital 

outpatient department bills but rarely were included on the ASC bills. 

Similar to laboratory services, hospital outpatient departments billed for 

radiology services that they performed in addition to the procedures. 

When radiology services were billed with procedures in the ASC setting, 

Page 10 GAO-07-86 Medicare Payment for Ambulatory Surgical Centers
these services generally were performed and billed by another part B 

provider. 

Fourth, anesthesia services were billed with 17 of the top 20 procedures in 

either the ASC or hospital outpatient settings and with 14 procedures in 

both settings. In virtually every case in the ASC setting, and most cases in 

the hospital outpatient department setting, these services were billed by 

another part B provider.

According to our analysis, ASCs did not generally include any services 

other than the procedures they performed on their bills. However, in the 

hospital outpatient setting, some additional services were included on the 

hospitals’ bills. We believe this is a result of the structure of the two 

payment systems. As ASCs generally receive payment from Medicare only 

for procedures, they typically include only those procedures on their bills. 

In contrast, hospital outpatient departments’ bills often include many of 

the individual items or services they provide as a part of a procedure 

because CMS has encouraged them to do so, whether the items or services 

are included in the OPPS payment or paid separately. 

Additional Services 

Resulted in Few Additional 

Payments to ASCs or 

Hospital Outpatient 

Departments 

With the exception of additional procedures, there were few separate 

payments that could be made for additional services provided with the top 

20 procedures because most of the services in our analysis were included 

in the Medicare payment to the ASC or hospital. Under both the Medicare 

ASC and OPPS payment systems, when more than one procedure is 

performed at the same time, the facility receives 100 percent of the 

applicable payment for the procedure that has the highest payment rate 

and 50 percent of the applicable payment for each additional procedure. 

As this policy is applicable to both settings, for those instances in our 

analysis when an additional procedure was performed with one of the top 

20 procedures in either setting, the ASC or hospital outpatient department 

received 100 percent of the payment for the procedure with the highest 

payment rate and 50 percent of the payment for each lesser paid 

procedure. 

Individual drugs were billed by hospital outpatient departments for most 

of the top 20 procedures, although they were not present on the claims 

from ASCs, likely because ASCs generally cannot receive separate 

Medicare payments for individual drugs. However, none of the individual 

drugs billed by the hospital outpatient departments in our analysis 

resulted in an additional payment to the hospitals. In each case, the cost of 

Page 11 GAO-07-86 Medicare Payment for Ambulatory Surgical Centers
the particular drug was included in the Medicare payment for the 

procedure. 

In the case of the laboratory services billed with procedures in the ASC 

and hospital outpatient department settings, those services were not costs 

included in the payment for the procedure in either setting and were paid 

separately in each case. For both settings, the payment was made to the 

provider that performed the service. In the case of the hospital outpatient 

department setting, the payment was generally made to the hospital, while, 

for procedures performed at ASCs, payment was made to another provider 

who performed the service. 

Of the four radiology services in our analysis, three were similar to the 

laboratory services in that they are not included in the cost of the 

procedure and are separately paid services under Medicare. Therefore, 

when hospitals provided these services, they received payment for them. 

In the ASC setting, these services were typically billed by a provider other 

than the ASC, and the provider received payment for them. The fourth 

radiology service is included in the payment for the procedure with which 

it was associated. Therefore, no separate payment was made to either 

ASCs or hospital outpatient departments. With regard to anesthesia 

services, most services were billed by and paid to a provider other than an 

ASC or hospital. 

As a group, the costs of procedures performed in ASCs have a relatively 

consistent relationship with the costs of the APC groups to which they 

would be assigned under the OPPS. That is, the APC groups accurately

reflect the relative costs of procedures performed in ASCs. We found that 

the ASC-to-APC cost ratios were more tightly distributed around their 

median cost ratio than the OPPS-to-APC cost ratios were around their 

median cost ratio. Specifically, 45 percent of all procedures in our analysis 

fell within 0.10 points of the ASC-to-APC median cost ratio, and 33 percent 

of procedures fell within 0.10 points of the OPPS-to-APC median cost 

ratio. However, the costs of procedures in ASCs are substantially lower 

than costs for the same procedures in the hospital outpatient setting. 

The APC groups reflect the relative costs of procedures provided by ASCs 

as well as they reflect the relative costs of procedures provided in the 

hospital outpatient department setting. In our analysis, we listed the 

procedures performed at ASCs and calculated the ratio of the cost of each 

procedure to the cost of the APC group to which it would have been 

APC Groups 

Accurately Reflect 

ASC Procedure Costs 

APC Groups Accurately

Reflect the Relative Costs 

of ASC Procedures 

Page 12 GAO-07-86 Medicare Payment for Ambulatory Surgical Centers
assigned, referred to as the ASC-to-APC cost ratio. We then calculated

similar cost ratios for the same procedures exclusively within the OPPS. 

To determine an OPPS-to-APC cost ratio, we divided individual 

procedures’ median costs, as calculated by CMS for the OPPS, by the 

median cost of their APC group. Our analysis of the cost ratios showed 

that the ASC-to-APC cost ratios were more tightly distributed around their 

median than were the OPPS-to-APC cost ratios; that is, there were more of 

them closer to the median. Specifically, 45 percent of procedures 

performed in ASCs fell within a 0.10 point range of the ASC-to-APC median 

cost ratio, and 33 percent of those procedures fell within a 0.10 point range 

of the OPPS-to-APC median cost ratio in the hospital outpatient 

department setting (see figs. 1 and 2). Therefore, there is less variation in 

the ASC setting between individual procedures’ costs and the costs of their 

assigned APC groups than there is in the hospital outpatient department 

setting. From this outcome, we determined that the OPPS APC groups 

could be used to pay for procedures in ASCs. 

Figure 1: ASC Procedure Median Cost to APC Median Cost Ratios, Distributed by Percentage in 0.05 Increments, 2004 

0

2

4

6

8

10

12

14

Percentage

Procedure cost ratios

Source: GAO analysis of ASC survey and Medicare data.

45% Percentage of all cost ratios within +/- 0.10 of median cost ratio

0.00

0.10

0.20

0.30

0.40

0.50

0.60

0.70

0.80

0.90

1.00

1.10

1.20

1.30

1.40

1.50

1.60

1.70

1.80

1.90

2.00

2.10

2.20

2.30

2.40

2.50

2.60

2.70

2.80

2.90

3.00

3.10

3.20

3.30

Page 13 GAO-07-86 Medicare Payment for Ambulatory Surgical Centers
Figure 2: OPPS Procedure Median Cost to APC Median Cost Ratios, Distributed by Percentage in 0.05 Increments, 2004 

0

2

4

6

8

10

12

14

Percentage

Procedure cost ratios

Source: GAO analysis of Medicare data.

33% Percentage of all cost ratios within +/- 0.10 of median cost ratio

0.00

0.10

0.20

0.30

0.40

0.50

0.60

0.70

0.80

0.90

1.00

1.10

1.20

1.30

1.40

1.50

1.60

1.70

1.80

1.90

2.00

2.10

2.20

2.30

2.40

2.50

2.60

2.70

2.80

2.90

3.00

3.10

3.20

3.30

ASC Procedures’ Median 

Costs Are Generally Lower 

Than Those for OPPS 

Procedures 

The median costs of procedures performed in ASCs were generally lower 

than the median costs of their corresponding APC group under the OPPS.18

Among all procedures in our analysis, the median ASC-to-APC cost ratio 

was 0.39.19 The ASC-to-APC cost ratios ranged from 0.02 to 3.34. When 

weighted by Medicare volume based on 2004 claims data, the median ASCto-APC cost ratio was 0.84. We determined that the median OPPS-to-APC 

cost ratio was 1.04. This analysis shows that when compared to the 

median cost of the same APC group, procedures performed in ASCs had 

substantially lower costs than when those same procedures were 

performed in hospital outpatient departments. 

 18APCs’ median costs are determined from the costs of all of the services included within 

the APC. 

19If the median cost of an ASC procedure and the median cost of its respective APC group

were equal, the cost ratio would be 1.00. 

Page 14 GAO-07-86 Medicare Payment for Ambulatory Surgical Centers
Generally, there are many similarities between the additional services 

provided in ASCs and hospital outpatient departments with one of the top 

20 procedures, and few resulted in an additional Medicare payment to 

ASCs or hospital outpatient departments. Although costs for individual 

procedures vary, in general, the median costs for procedures are lower in 

ASCs, relative to the median costs of their APC groups, than the median 

costs for the same procedures in the hospital outpatient department 

setting. The APC groups in the OPPS reflect the relative costs of 

procedures performed in ASCs in the same way that they reflect the 

relative costs of the same procedures when they are performed in hospital 

outpatient departments. Therefore, the APC groups could be applied to 

procedures performed in ASCs, and the OPPS could be used as the basis 

for an ASC payment system, eliminating the need for ASC surveys and 

providing for an annual revision of the ASC payment groups. 

We recommend that the Administrator of CMS implement a payment 

system for procedures performed in ASCs based on the OPPS. The 

Administrator should take into account the lower relative costs of 

procedures performed in ASCs compared to hospital outpatient 

departments in determining ASC payment rates. 

We received written comments on a draft of this report from CMS (see 

app. IV). We also received oral comments from external reviewers 

representing two ASC industry organizations, AAASC and FASA. 

In commenting on a draft of this report, CMS stated that our 

recommendation is consistent with its August 2006 proposed revisions to 

the ASC payment system. 

Industry representatives who reviewed a draft of this report did not agree 

or disagree with our recommendation for executive action. They did, 

however, provide several comments on the draft report. The industry 

representatives noted that we did not analyze the survey results to 

examine differences in per-procedure costs among single-specialty and 

multi-specialty ASCs. Regarding this comment, we initially considered 

developing our survey sample stratified by ASC specialty type. However, 

because accurate data identifying ASCs’ specialties do not exist, we were 

unable to stratify our survey sample by specialty type. 

Conclusions 

Recommendation for 

Executive Action 

Agency and External 

Reviewer Comments 

and Our Evaluation 

CMS Comments 

Industry Comments and 

Our Evaluation 

Page 15 GAO-07-86 Medicare Payment for Ambulatory Surgical Centers
The industry representatives asked us to provide more explanation in our 

scope and methodology regarding our development of a relative weight 

scale for Medicare ASC-approved procedures to capture the general 

variation in resources associated with performing different procedures. 

We expanded the discussion of how we developed the relative weight 

scale in our methodology section. 

Reviewers also made technical comments, which we incorporated where 

appropriate.

We are sending a copy of this report to the Administrator of CMS and 

appropriate congressional committees. The report is available at no charge 

on GAO’s Web site at http://www.gao.gov. We will also make copies 

available to others on request. 

If you or your staff members have any questions about this report, please 

contact me at (202) 512-7119 or kingk@gao.gov. Contact points for our 

Offices of Congressional Relations and Public Affairs may be found on the 

last page of this report. GAO staff members who made significant 

contributions to this report are listed in appendix V. 

Kathleen King 

Director, Health Care 

Page 16 GAO-07-86 Medicare Payment for Ambulatory Surgical Centers
Appendix I: Analysis of the Proportion of 

Labor-Related Costs for Ambulatory Surgical Appendix I: Analysis of the Proportion of Centers 

Labor-Related Costs for Ambulatory Surgical 

Centers 

The Medicare payment rates for ambulatory surgical centers (ASC), along 

with those of other facilities, are adjusted to account for the variation in 

labor costs across the country. To calculate payment rates for individual 

ASCs, the Centers for Medicare & Medicaid Services (CMS) calculates the

share of total costs that are labor-related and then adjusts ASCs’ laborrelated share of costs based on a wage index calculated for specific 

geographic areas across the country. The wage index reflects how the 

average wage for health care personnel in each geographic area compares

to the national average health care personnel wage. The geographic areas

are intended to represent the separate labor markets in which health care 

facilities compete for employees. 

In setting the initial ASC payment rates for 1982, CMS determined from the 

first survey of ASCs that one-third of their costs were labor-related. The 

labor-related costs included employee salaries and fringe benefits, 

contractual personnel, and owners’ compensation for duties performed for 

the facility. To determine the payment rates for each individual ASC, CMS

multiplied one-third of the payment rate for each procedure—the laborrelated portion—by the local area wage index. Each ASC received the base 

payment rate for two-thirds of the payment rate—the nonlabor-related 

portion—for each procedure. The sum of the labor-related and nonlaborrelated portions equaled each ASC’s payment rate for each procedure. 

In 1990, when CMS revised the payment system based on a 1986 ASC 

survey, CMS found ASCs’ average labor-related share of costs to be 

34.45 percent and used this percentage as the labor-related portion of the

payment rate. In a 1998 proposed rule, CMS noted that ASCs’ share of 

labor-related costs as calculated from the 1994 ASC cost survey had

increased to an average of 37.66 percent, slightly higher than the 

percentage calculated from the 1986 survey. However, CMS did not 

implement the 1998 proposal. Currently, the labor-related proportion of 

costs from CMS’s 1986 survey, 34.45 percent, is used for calculating ASC 

payment rates. 

Using 2004 cost data we received from 290 ASCs that responded to our 

survey request for information, we determined that the mean labor-related 

proportion of costs was 50 percent, and the range of the labor-related 

costs for the middle 50 percent of our ASC facilities was 43 percent to 

57 percent of total costs. 

Page 17 GAO-07-86 Medicare Payment for Ambulatory Surgical Centers
Appendix II: Scope and Methodology 

Page 18 GAO-07-86

Appendix II: Scope and Methodology 

To compare the delivery of procedures between ASCs and hospital 

outpatient departments, we analyzed Medicare claims data from 2003. To 

compare the relative costs of procedures performed in ASCs and hospital 

outpatient departments, we collected cost and procedure data from 2004 

from a sample of Medicare-participating ASCs. We also interviewed 

officials at CMS and representatives from ASC industry organizations, 

specifically, the American Association of Ambulatory Surgery Centers 

(AAASC) and FASA, physician specialty societies, and nine ASCs. 

To compare the delivery of additional services provided with procedures 

performed in ASCs and hospital outpatient departments, we identified all

additional services frequently billed in each setting when one of the top 20 

procedures with the highest Medicare ASC claims volume is performed. 

These procedures represented approximately 75 percent of all Medicare 

ASC claims in 2003. Using Medicare claims data for 2003, we identified 

beneficiaries receiving one of the top 20 procedures in either an ASC or 

hospital outpatient department, then identified any other claims for those

beneficiaries from ASCs, hospital outpatient departments, durable medical 

equipment suppliers, and other Medicare part B providers. We identified

claims for the beneficiaries on the day the procedure was performed and 

the day after.

1

 We created a list that included all additional services that 

were billed at least 10 percent of the time with each of the top 20 

procedures when they were performed in ASCs. We created a similar list 

of additional services for each of the top 20 procedures when they were 

performed in hospital outpatient departments. We then compared the lists 

for each of the top 20 procedures between the two settings to determine 

whether there were similarities in the additional services that were billed 

to Medicare. To compare the Medicare payments for procedures 

performed in ASCs and hospital outpatient departments, we identified 

whether any additional services included in our analysis resulted in an 

additional payment. 

Analysis of Additional 

Services 

We used Medicare claims data from the National Claims History (NCH) 

files. These data, which are used by the Medicare program to make 

payments to health care providers, are closely monitored by both CMS and 

the Medicare contractors that process, review, and pay claims for 

 1

We included services delivered the day after a procedure to allow for the inclusion of

services, such as laboratory services, that may not be provided immediately following the

procedure. 

Medicare Payment for Ambulatory Surgical Centers
Appendix II: Scope and Methodology 

Medicare services. The data are subject to various internal controls, 

including checks and edits performed by the contractors before claims are 

submitted to CMS for payment approval. Although we did not review these 

internal controls, we did assess the reliability of the NCH data. First, we 

reviewed all existing information about the data, including the data 

dictionary and file layouts. We also interviewed experts at CMS who 

regularly use the data for evaluation and analysis. We found the data to be

sufficiently reliable for the purposes of this report. 

To compare the relative costs of procedures performed in ASCs and 

hospital outpatient departments, we first compiled information on ASCs’ 

costs and procedures performed. Because there were no recent existing 

data on ASC costs, we surveyed 600 ASCs, randomly selected from all 

ASCs, to obtain their 2004 cost and procedure data. We received response 

data from 397 ASC facilities. We assessed the reliability of these data 

through several means. We identified incomplete and inconsistent survey 

responses within individual surveys and placed follow-up calls to 

respondents to complete or verify their responses. To ensure that survey 

response data were accurately transferred to electronic files for our 

analytic purposes, two analysts independently entered all survey 

responses. Any discrepancies between the two sets of entered responses 

were resolved. We performed electronic testing for errors in accuracy and 

completeness, including an analysis of costs per procedure. As a result of 

our data reliability testing, we determined that data from 290 responding 

facilities were sufficiently reliable for our purposes. Our nonresponse 

analysis showed that there was no geographic bias among the facilities 

responding to our survey. The responding facilities performed more 

Medicare services than the average for all ASCs in our sample. 

Comparison of PerProcedure Costs 

To allocate ASCs’ total costs among the individual procedures they 

perform, we developed a method to allocate the portion of an ASC’s costs 

accounted for by each procedure. We constructed a relative weight scale 

for Medicare ASC-approved procedures that captures the general variation

in resources associated with performing different procedures. The 

resources we used were the clinical staff time, surgical supplies, and 

surgical equipment used during the procedures. We used cost and quantity

data on these resources from information CMS had collected for the 

purpose of setting the practice expense component of physician payment 

rates. For procedures for which CMS had no data on the resources used, 

we used information we collected from medical specialty societies and 

physicians who work for CMS. We summed the costs of the resources for 

each procedure and created a relative weight scale by dividing the total

Page 19 GAO-07-86 Medicare Payment for Ambulatory Surgical Centers
Appendix II: Scope and Methodology 

cost of each procedure by the average cost across all of the procedures. 

We assessed the reliability of these data through several means. We 

compared electronic CMS data with the original document sources for a 

large sample of records, performed electronic testing for errors in 

accuracy and completeness, and reviewed data for reasonableness. Based 

on these efforts, we determined that data were sufficiently reliable for our 

purposes. 

To calculate per-procedure costs with the data from the surveyed ASC 

facilities, we first deducted costs that Medicare considers unallowable, 

such as advertising and entertainment costs. (See fig. 3 for our perprocedure cost calculation methodology.) We also deducted costs for 

services that Medicare pays for separately, such as physician and 

nonphysician practitioner services. We then separated each facility’s total 

costs into its direct and indirect costs. We defined direct costs as those 

associated with the clinical staff, equipment, and supplies used during the 

procedure. Indirect costs included all remaining costs, such as support 

and administrative staff, building expenses, and outside services 

purchased. To allocate each facility’s direct costs across the procedures it 

performed, we applied our relative weight scale. We allocated indirect 

costs equally across all procedures performed by the facility. For each

procedure performed by a responding ASC facility, we summed its 

allocated direct and indirect costs to determine a total cost for the 

procedure. To obtain a per-procedure cost across all ASCs, we arrayed the 

calculated costs for all ASCs performing that procedure and identified the 

median cost. 

Page 20 GAO-07-86 Medicare Payment for Ambulatory Surgical Centers
Appendix II: Scope and Methodology 

Figure 3: ASC Per-Procedure Cost Calculations from ASC Survey 

Step 1: Identify an ASC’s total costs from its income statement.

Step 2: Deduct costs not covered by Medicare’s facility payment (such as separately paid services

and unallowable costs). 

Step 3: Adjust the ASC’s labor-related costs for local wage rates by the current wage index.

Steps 1 through 8 were calculated for each ASC in the survey. 

Step 4: Separate the ASC’s total direct costs (defined as clinical staff, equipment, and supplies)

from total indirect costs (all other expenses).

Step 8: Calculate a cost for each procedure by summing direct (Step 6) and indirect (Step 7)

cost amounts.

Step 9: For each procedure, identify the median cost value from among all ASCs in the survey

that performed the procedure.

Step 5: For each ASC, adjust procedure

volume to account for the relative cost of

performing multiple procedures.

Step 6: Calculate a direct cost amount for

each procedure by allocating a facility’s

direct costs to individual procedures using

GAO-calculated relative weights and

discount-adjusted procedure volume.

Step 7: Divide total indirect costs by the total

number of procedures to get a per-procedure

indirect cost amount.

ASC’s total direct costs ASC’s total indirect costs

ASC procedure’s median cost

Source: GAO.

Step of methodology calculation

Output (cost)

Page 21 GAO-07-86 Medicare Payment for Ambulatory Surgical Centers
Appendix II: Scope and Methodology 

To compare per-procedure costs for ASCs and hospital outpatient 

departments, we first obtained from CMS the list of ambulatory payment 

classification (APC) groups used for the outpatient prospective payment 

system (OPPS) and the procedures assigned to each APC group. We also

obtained from CMS the OPPS median cost of each procedure and the 

median cost of each APC group. We then calculated a ratio between each 

procedure’s ASC median cost, as determined by the survey, and the 

median cost of each procedure’s corresponding APC group under the 

OPPS, referred to as the ASC-to-APC cost ratio. We also calculated a ratio

between each ASC procedure’s median cost under the OPPS and the 

median cost of the procedure’s APC group, using the data obtained from 

CMS, referred to as the OPPS-to-APC cost ratio. To evaluate the difference 

in procedure costs between the two settings, we compared the ASC-toAPC and OPPS-to-APC cost ratios. To assess how well the relative costs of 

procedures in the OPPS, defined by their assignment to APC groups, 

reflect the relative costs of procedures in the ASC setting, we evaluated 

the distribution of the ASC-to-APC and OPPS-to-APC cost ratios. 

To calculate the percentage of labor-related costs among our sample 

ASCs, for each ASC, we divided total labor costs by total costs, after 

deducting costs not covered by Medicare’s facility payment. We then 

determined the range of the percentage of labor-related costs among all of

our ASCs and between the 25th percentile and the 75th percentile, as well

as the mean and median percentage of labor-related costs. 

Analysis of LaborRelated Costs 

We performed our work from April 2004 through October 2006 in 

accordance with generally accepted government auditing standards. 

Page 22 GAO-07-86 Medicare Payment for Ambulatory Surgical Centers
Appendix III: Additional Procedures Billed 

with the Top 20 ASC Procedures, 2003 

Times additional procedure was 

performed with procedure

(percentage) 

Medicare ASC

procedure

volume ranking Procedure Additional procedure ASC

Hospital 

outpatient 

department

1 Cataract surgery with intraocular lens 

insertion, one stage 

None N/A N/A

2 Colonoscopy, with diagnosis Upper gastrointestinal (GI) 

endoscopy, with biopsy 

11 12

3 After cataract laser surgery None N/A N/A

4 Upper GI endoscopy, with biopsy Colonoscopy, with diagnosis 12 14

5 Colonoscopy, with lesion removal, 

snare technique

Upper GI endoscopy, with biopsy 10 10

Colonoscopy, with biopsy 14 22

Colonoscopy, with lesion removal 10 14

6 Spine injection, lumbar, sacral None N/A N/A

7 Colonoscopy, with biopsy Upper GI endoscopy, with biopsy 12 14

Colonoscopy, with lesion removal 18 21

8 Colonoscopy, with lesion removal Upper GI endoscopy, with biopsy 10 10

Colonoscopy, with biopsy 11 15

Colonoscopy, with lesion removal, 

snare technique

23 32

9 Paravertebral injection, lumbar, 

sacral, add-on

Spine injection, lumbar, sacral 13 12

Paravertebral injection, lumbar, 

sacral, single level 

99 99

10 Injection foramen epidural, lumbar, 

sacral, single level 

Injection foramen epidural, lumbar, 

sacral, add-on

39 36

11 Upper GI endoscopy, with diagnosis Dilate esophagus 12 9

Colonoscopy, with diagnosis 17 19

12 Cystoscopy None N/A N/A

13 Colon cancer screening, not high-risk 

individual 

Colonoscopy, with diagnosis 21 38

14 Paravertebral injection, lumbar, 

sacral, single level 

Spine injection, lumbar, sacral 14 13

Paravertebral injection, lumbar, 

sacral, add-on

86 79

15 Colorectal screening for high-risk 

individual 

Colonoscopy, with diagnosis 24 49

16 Carpal tunnel surgery None N/A N/A

Appendix III: Additional Procedures Billed 

with the Top 20 ASC Procedures, 2003 

Page 23 GAO-07-86 Medicare Payment for Ambulatory Surgical Centers
Appendix III: Additional Procedures Billed 

with the Top 20 ASC Procedures, 2003 

Times additional procedure was 

performed with procedure

(percentage) 

Medicare ASC

procedure

volume ranking Procedure Additional procedure ASC

Hospital 

outpatient 

department

17 Repair of hammertoe Release of foot contracture 16 15

Correction of bunion 11 13

Correction of bunion with metatarsal 

osteotomy 

18 20

18 Injection foramen epidural, lumbar, 

sacral, add-on

Injection foramen epidural, lumbar, 

sacral, single level 

99 99

19 Upper GI endoscopy, with insertion of 

guide wire

Upper GI endoscopy, with biopsy 50 39

20 Spinal injection, cervical or thoracic None N/A N/A

Source: GAO analysis of CMS data. 

Note: N/A = not applicable. 

Page 24 GAO-07-86 Medicare Payment for Ambulatory Surgical Centers
Appendix IV: Comments from the Centers for Appendix IV Medicare & Medicaid Services : Comments from the Centers for 

Medicare & Medicaid Services 

Page 25 GAO-07-86 Medicare Payment for Ambulatory Surgical Centers
Appendix IV: Comments from the Centers for 

Medicare & Medicaid Services 

Page 26 GAO-07-86 Medicare Payment for Ambulatory Surgical Centers
Appendix V: GAO Contact and Staff Acknowledgments

Page 27 GAO-07-86

Appendix V: GAO Contact and Staff 

Acknowledgments 

GAO Contact Kathleen King, (202) 512-7119 or kingk@gao.gov

In addition to the contact named above, key contributors to this report 

were Nancy A. Edwards, Assistant Director; Kevin Dietz; Beth Cameron 

Feldpush; Marc Feuerberg; and Nora Hoban. 

Medicare Payment for Ambulatory Surgical Centers

Acknowledgments 

(290359) 
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