Medicare should pay hospitals less for low-risk outpatient surgeries, the program’s fiscal watchdog suggests  in a report published this morning. Bringing prices in line with those charged at cheaper ambulatory surgical centers could save the government as much as $15 billion over six years and save Medicare patients $4 billion in copayments, the report projects.

HHS’ Office of the Inspector General recommends that the CMS seek Congress’ permission to pay hospital outpatient-surgery departments the same rates for Medicare surgeries as those received by stand-alone ambulatory surgery centers. ASCs are typically paid 30% to 50% less than hospital outpatient-surgery departments. The change would only apply to patients at low risk for complications.

“We recognize that not all procedures can be performed in an ASC because a procedure might pose a significant safety risk to the patient,” the OIG report says. But according to federal data, 68% of hospital patients aged 65 and older fall into categories of “low risk” or “no risk.”

The House Ways and Means Committee has taken an interest  in matters of ASC payments in the past, but the new proposal would almost certainly face staunch opposition from hospital interest groups.

Community hospitals have long argued that smaller surgical hospitals performing same-day surgeries are “cherry-picking” the less-serious, more-profitable procedures that larger hospitals need to offset financial losses from running emergency departments and other costly but essential services.

ASCs don’t have emergency rooms, and they’re not equipped to treat patients overnight. That means they don’t bear the financial overhead that a general acute-care hospital does.  Congress in 2008 greatly expanded the number of services Medicare would cover at ASCs, and established a system where ASC rates are based on a percentage of the equivalent hospital outpatient rate.

While some advocates for ASCs have  called for their prices to rise to hospital outpatient levels, the HHS inspector general report reached the opposite conclusion: Hospitals should be paid less to treat the low-risk patients who would otherwise go to ASCs.

To arrive at that conclusion, the OIG created a sample of 91 million actual Medicare surgical procedures, encompassing $47 billion in reimbursement from 2007 to 2011. The office ran calculations looking at past trends and future projections, and estimated the effects of lowering payments for low- and no-risk patients using data published by the federal  Agency for Healthcare Research and Quality.

The conclusion: paying hospitals at ASC rates to treat only the “no-risk” patients would save $7 billion between 2012 and 2017. Expanding the group to include both “no-risk” and “low-risk” patients doubled the estimated savings to $15 billion in those years.

And because Medicare Part B copayments are percentages of the Medicare rate, patients would spend $2 billion to $4 billion less in those years.

CMS Administrator Marilyn Tavenner wrote in response to the audit that paying hospitals based on ASC rates could become confusing, since the ASC rates are themselves based on the hospital rates—a problem she described as “circularity.” Further, OIG didn’t suggest specific clinical criteria that could be used to identify the low-risk patients, even though that would be a critical factor in implementing such a change.

The OIG report suggests that patients and their doctors could actually make the risk calculation themselves.

“When the beneficiary’s clinical needs allow for a procedure to be performed in an ASC, the beneficiary could choose to do so and benefit because the payment rates are usually lower than in an outpatient department,” the report says. However, “a physician may determine that a covered procedure cannot be performed in an ASC because of a specific patient’s clinical needs.”

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