Basics of Medicare Payment for Ambulatory Surgical Services (ASCs)
                     
Basics of Medicare Payment for Ambulatory Surgical Services (ASCs)
Medicare covers surgical procedures provided in freestanding or hospital-operated ambulatory surgical services 
centers (ASCs). In January 2008, Medicare began paying for facility services provided in ASCs— such as nursing, 
recovery care, anesthetics, drugs, and other supplies—using a new payment system that is primarily linked to 
the hospital outpatient prospective payment system (OPPS). (Medicare pays for the related physician services
—surgery and anesthesia—under the physician fee schedule.) Like the OPPS, the ASC payment system sets 
payments for procedures using a set of relative weights, a conversion factor (or base payment amount), and 
adjustments for geographic differences in input prices. Beneficiaries are responsible for paying the Part B 
deductible and 20 percent of the ASC payment rate
Approved Procedures of Ambulatory Surgical Services
The unit of payment in the ASC payment system is the individual surgical procedure. Each of the approximately 
3,600 procedures approved for payment in an ASC is classified into an ambulatory payment classification (APC) 
group on the basis of clinical and cost similarity.
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Basics of Medicare Payment for Ambulatory Surgical Services (ASCs)
• There are several hundred APCs. All services within an APC have the same payment rate. The ASC system 
largely uses the same APCs as the OPPS Within each APC, CMS packages most ancillary items and services 
with the primary service.
• CMS pays separately for certain ancillary items and services when they are integral to surgical procedures. 
For example, CMS pays separately for corneal tissue acquisition; brachytherapy sources; certain radiology 
services, and many drugs.
• In addition, ASCs can receive separate payments for implantable devices that are eligible for pass-through 
payments under the OPPS. Pass-through payments are for specific, new technology items that are used in 
the delivery of services. The purpose of these payments is to help ensure beneficiaries’ access to 
technologies that are too new to be well represented in the data that CMS uses to set OPPS rates.
• In 2008, CMS substantially expanded the list of services that qualify for facility payment in ASCs. Medicare 
began paying for all procedures that do not pose a significant safety risk when performed in an ASC and do 
not require an overnight stay. CMS updates the list of approved procedures annually.
Defining Payment Rates
The relative weights for most procedures in the ASC payment system are based on the relative weights in the
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Basics of Medicare Payment for Ambulatory Surgical Services (ASCs)
OPPS. These weights are based on the geometric mean cost of the services in that payment group according to 
hospital outpatient cost data. The ASC system uses a conversion factor to translate the relative weights into 
dollar amounts.
• The ASC conversion factor is less than the OPPS conversion factor for two reasons. First, CMS set the initial 
ASC conversion factor for 2008 so that total ASC payments under the new payment system would equal 
what they would have been under the previous payment system. By comparison, the initial OPPS 
conversion factor was based on total payments for hospital outpatient services in 2000. Second, CMS uses 
different update factors to account for changes in input prices for ASCs and hospitals. The 2018 ASC 
conversion factor is $45.58, which is 58 percent of the OPPS conversion factor. Consequently, the ASC rates 
are less than the OPPS rates. Also, ASCs that do not submit their data on a set of standardized quality 
measures face a 2.0 percent reduction in their conversion factor and, consequently, their payment rates.
• CMS uses methods different from the one described above to set ASC payment rates for new, office-based 
procedures; separately payable radiology services; separately payable drugs; and device-intensive 
procedures. New, office-based procedures are services that CMS began paying for in ASCs in 2008 or later 
that are performed in physicians’ offices at least 50 percent of the time.
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Basics of Medicare Payment for Ambulatory Surgical Services (ASCs)
• Payment is the lower of the standard ASC rate (based on the method described above) or the practice 
expense portion of the physician fee schedule rate that applies when the service is furnished in a physician’s 
office (this amount covers the equipment, supplies, non-physician staff, and overhead costs of a service). 
CMS set this limit on the ASC rate for new, office-based services to minimize financial incentives to shift 
services from physicians’ offices to ASCs. CMS applies the same policy to separately payable radiology 
services. When separately payable drugs are provided in ASCs, CMS pays ASCs the same amount it pays 
under the OPPS.
• Device-intensive procedures are defined as OPPS services for which the device cost is packaged into the 
procedure payment and the cost of the device (such as a spine infusion pump) accounts for more than 40 
percent of the total payment. When these procedures are provided in ASCs, CMS divides the payment for 
these services into a device portion (which includes the cost of the device) and a non-device portion. CMS 
pays the ASC the same amount it would pay under the OPPS for the device portion of the service but pays 
the standard ASC rate for the non-device portion of the service.
• To account for geographic differences in input prices, CMS adjusts the labor portion of the ASC rate by the 
hospital wage index. CMS does not adjust the non-labor portion of the ASC rate. Based on research
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Basics of Medicare Payment for Ambulatory Surgical Services (ASCs)
conducted by the Government Accountability Office, which concluded that labor accounts for 50 percent 
of ASC costs, both the labor portion and the non-labor portion of the ASC rate are equal to 50 percent.
• As in the OPPS, ASC payment rates are adjusted when multiple surgical procedures are performed during 
the same encounter. In this case, the ASC receives full payment only for the procedure with the highest 
payment rate; payments for the other procedures are reduced to one-half of their usual rates. CMS updates 
the ASC relative weights annually based on changes to the OPPS relative weights and the physician fee 
schedule practice expense amounts. Because the OPPS relative weights usually change each year by a small 
amount, CMS adjusts the new OPPS weights so that projected program spending based on the current mix 
of services does not change. However, the mix of services in ASCs differs from that of hospital outpatient 
departments. Therefore, using the new OPPS relative weights could increase or decrease total ASC 
spending. To ensure that ASC spending does not change as a result of the new weights, CMS adjusts each 
ASC’s relative weight by the same scaling factor. In 2018, this factor reduced the ASC relative weights by 10 
percent below the OPPS weights. This scaling factor does not apply to separately payable drugs or pass-
through devices.
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Basics of Medicare Payment for Ambulatory Surgical Services (ASCs)
• In 2018, CMS increased the ASC conversion factor by 1.2 percent, based on a 1.7 percent increase in the 
consumer price index for all urban consumers, which CMS uses to update ambulatory surgical services 
centers rates, minus a 0.5 percent deduction for multifactor productivity growth, as required by the Patient 
Protection and Affordable Care Act of 2010.
About MedicalBillersandCoders
When it comes to ASC medical billing, Medical Billers and Coders (MBC) is one of the best service providers. 
With our 15+ years of experience in the medical billing domain and with our proven 
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underpayments. Our billing professionals not only specialize in ambulatory surgical services coding and billing 
but also incorporate the knowledge throughout the process for offering end-to-end solutions. To know more 
about our ASC medical Billing services you can contact us at 888-357-3226/[email protected]
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