The Department of Health and Human Services’ Office of Inspector General (“OIG”) has released a report in which it recommends that the Centers for Medicare and Medicaid Services (“CMS”) equalize payment rates for surgical procedures performed in hospital outpatient departments (“HOPDs”) and ambulatory surgery centers (“ASCs”). The report is A-05-12-00020 (April 2014) and is entitled “Medicare and Beneficiaries Could Save Billions if CMS Reduces Hospital Outpatient Department Payment Rates for Ambulatory Surgical Center-Approved Procedures to Ambulatory Surgical Center Payment Rates.” In the report, the OIG explained that Medicare ASC payment rates are frequently lower than HOPD payment rates. The OIG found that Medicare saved almost $7 billion during calendar years (“CYs”) 2007 through 2011 for surgical procedures performed in ASCs rather than in HOPDs and could potentially save an additional $12 billion from CYs 2012 through 2017. The OIG also determined that if CMS would reduce Medicare HOPD payment rates for ASC-covered procedures to ASC payment levels for procedures performed on beneficiaries with low-risk and no-risk clinical needs, Medicare could save as much as $15 billion for CYs 2012 through 2017. The OIG recommended that CMS seek legislation that would exempt the reduced expenditures as a result of lower outpatient prospective payment system (“OPPS”) rates from budget neutrality adjustments for ASC-approved procedures. The OIG also recommended that if Congress passes the budget-neutrality exemption for the reduced expenditures, CMS: (i) reduce OPPS payment rates for ASC-covered procedures on beneficiaries with no-risk or low-risk clinical needs in HOPDs; and then (ii) develop and implement a payment strategy in which HOPDs would continue to receive the standard OPPS rate for ASC-approved procedures that must be provided in an outpatient department because of a beneficiary’s individual clinical needs. Review the OIG’s report.