The $27.9B reason policymakers should stop widening the ASC-HOPD payment gap

ASCs generated $27.9 billion in Medicare savings between 2019 and 2024, according to KNG Health Consulting data prepared for the Ambulatory Surgery Center Association. The federal government’s response has been to keep cutting what it pays them.

Federal policy has cut their reimbursement rate from roughly 85% of hospital outpatient department rates to 62%, and the gap is still widening, according to the data, which draws on Medicare fee-for-service claims data from 2019 to 2024, comparing average payments for procedures performed at ASCs vs. HOPDs at the HCPCS code level.

“As healthcare costs continue to rise, this report highlights how surgery centers are saving money for the Medicare program and its beneficiaries,” ASCA Chief Advocacy Officer Kara Newbury said in a June 1 news release. “Patients, providers and policymakers should take note of not only the savings already achieved, but also the increase in projected future savings if care is directed to these safe and cost-effective sites of service for appropriate outpatient procedures.”

How the gap developed

Prior to 2019, CMS updated ASC reimbursement using the Consumer Price Index for Urban Consumers, a general inflation measure. HOPDs received updates tied to the hospital market basket index, which tracks healthcare-specific cost inputs including wages and equipment. Because healthcare costs inflate faster than general consumer prices, HOPDs pulled ahead annually under that structure.

CMS extended a market basket fix for ASCs through 2025. The analysis underlying the $27.9 billion figure assumes ASCs revert to CPI-U updates after that. Without a permanent legislative fix, the gap widens again automatically.

There is a bill aiming to fix this gap: the HR 8091. The Outpatient Surgery Access Act of 2026, was introduced in the House on March 25 by Reps. Beth Van Duyne, R-Texas, and John Larson, D-Conn. If enacted, itwould align annual payment updates for ASCs with HOPDs  beginning in 2027 and eliminate an ASC-specific budget-neutrality adjustment. 

CMS has extended the hospital market basket update for ASC rates on a temporary basis since 2019, most recently through CY 2026, while continuing to evaluate the policy. The bill would make that permanent.

According to the analysis, the wider HOPD-ASC payment gap produces larger per-procedure Medicare savings when cases migrate to the lower-cost setting. But if reimbursement rates fall to levels where providers cannot cover costs, cases may remain in HOPDs or not get performed at all. Annual savings are projected to reach $12.5 billion by 2034, a figure that assumes ASC capacity and participation hold.

Brett Shore, MD, an orthopedic surgeon at DISC Sports and Spine Center in Marina Del Rey, Calif., told Becker’s that payer partnerships between ASCs and commercial insurers are expanding and can improve access, efficiency and physician reimbursement. However, Medicare remains a wild card for outpatient orthopedics, with some procedures reimbursed adequately and others falling short.

“Understanding how to incorporate or choosing not to incorporate Medicare into the ambulatory model and what that means both in terms of physician, surgeon and anesthesiologist reimbursement, is going to be critical for the success of surgery centers going forward,” he said. 

He noted that without adjustments to Medicare reimbursement rates, practices and ASCs will continue to face tough decisions.

“There doesn’t seem to be a lot of appetite for increasing the reimbursement rates in Medicare in the federal government anytime soon,” he said.

Additionally, the Medicare Hospital Insurance Trust Fund is projected to become insolvent in 2033. ASCs are projected to save the program $84.8 billion over the decade leading up to that date.

Furthermore, the data shows Medicare Advantage plans and traditional fee-for-service Medicare use ASCs at nearly identical rates, approximately 31% each, despite MA plans having financial incentives to steer patients toward lower-cost settings. The ASCA data suggests untapped savings potential if MA plans more aggressively optimized site-of-care decisions.

Making the market basket update permanent would not close the reimbursement gap with HOPDs, the analysis said. It would stop the gap from continuing to grow.
“From a methodology perspective, it makes sense for CMS to use the same update framework for ASCs that it uses for hospitals,” Matthew Humbarger, group vice president of payer engagement and strategy at SCA Health, told Becker’s. “That kind of consistency supports sustainability and helps ensure ASCs remain a high-value option for outpatient care.”