Medicare is taking the rare step of adding pre-treatment approval requirements before patients can get care at certain outpatient surgical facilities that have seen a sharp uptick in billings.

Why it matters: Medicare's decision shows that it still sees prior authorization as a useful tool for controlling costs, even as the Biden administration cracks down on misuse of a practice detested by health care providers and patients.

The big picture: The Biden administration in January required Medicare Advantage insurers and other private plans to speed up prior authorization reviews, and some major insurers have also cut back following public backlash to policies potentially curbing patient access to needed care.

• The recent controversy overshadowed the purpose of prior authorization: making sure payers — including private insurers and governments — don't waste money on inappropriate care, said KFF executive vice president Larry Levitt.
• So it's not "inconsistent" for the Centers for Medicare and Medicaid Services to now add on prior authorization requirements to traditional Medicare, Levitt said. "But the optics, I'd say, appear in conflict."

Driving the news: CMS quietly said in February it would require ambulatory surgery centers to submit claims for approval to Medicare before providing certain services that have cosmetic as well as medical purposes.

• The surgery centers are independently owned and generally receive lower Medicare payments than outpatient surgery centers attached to hospitals.
• Medicare added prior authorization requirements for these services at hospital outpatient departments in 2020.
• Since around that time, CMS said there's been a significant increase in how often they're being provided at ambulatory surgery centers, raising concerns that inappropriate billing has shifted to these facilities.

How it works: The new requirements apply to 40 services related to five procedures, including rhinoplasty, eyelid lifts and varicose vein treatments.

• Medicare covers the services as medical treatments, but billing for cosmetic purposes is considered fraud.
• Medicare will test the prior authorization requirements over a five-year period that could begin as early as this fall. They will only apply in some of the states with the most ambulatory surgical centers, including California, Florida and Texas.

CMS said Medicare spending on the services dropped 28% at hospital outpatient departments after implementing the requirements in those facilities, creating savings of $22.4 million.

• The agency projects similar savings at ambulatory surgery centers.

The other side: The trade group representing the facilities said it was blindsided by Medicare's decision and argued it will just create new burdens for providers.

• "There are mechanisms currently in place to help with fraud, so … is this new program necessary?" said Kara Newbury, director of government affairs at the Ambulatory Surgery Center Association.
• The group said none of the surgery centers' most-billed services are among the 40 now subject to new prior authorization requirements, according to its data. Just seven of those were billed at least 1,000 times nationwide in 2022.
• "I have great concern about the assumption that this is unnecessary utilization," said Michael Repka, spokesperson and medical director for government affairs at the American Academy of Ophthalmology.

Editor's note: This story has been updated with Michael Repka's correct title.