Why ASC-Heavy Technologies Might Do Well to Launch in the Hospital Setting First
Nicole Coustier has over 20 years of experience in U.S. Reimbursement and Market Access and has helped early-stage MedTech achieve widespread reimbursement coverage in the U.S.
Ambulatory Surgery Centers (ASCs) are an increasingly important site of care in the U.S. Medicare has steadily expanded the list of procedures eligible for ASC payment, and commercial payers are steering more patients toward these lower-cost facilities. For some technologies, particularly in orthopedics, ophthalmology, cardiovascular care, and GI, the ASC feels like the obvious long-term home.
But here’s the counterintuitive truth: if your technology is new to the market and will ultimately be used heavily in ASCs, you may want to launch in hospitals first. That’s because of the way Medicare payment is structured, how costs are managed in ASCs, and the insurance mix of your target patients.
The Medicare Payment Backdrop
Medicare pays ASCs and hospital outpatient departments (HOPDs) under two separate systems:
The Outpatient Prospective Payment System (OPPS) for hospital-based care
The ASC Payment System for freestanding surgical centers
For the same CPT code, Medicare almost always pays more in an HOPD than in an ASC, often 40–50% more, because OPPS rates are meant to account for the higher overhead of hospital-based care. This difference matters for new technology adoption because higher payment gives hospitals more room to cover device costs, staffing, and other operational needs without eroding margins.
Where Transitional Pass-Through (TPT) Payment Fits In
If your device qualifies for Medicare’s Transitional Pass-Through (TPT) payment, it’s assigned a C-code so providers can bill for it separately from the procedure. During the TPT period (usually two to three years), Medicare pays the procedure rate plus the device cost in both HOPDs and ASCs.
So far, so good: ASCs can bill the C-code just like hospitals, and Medicare will pay it.
The nuance comes when the TPT period ends. At that point, CMS usually elects to “package” or bundle the device payment into the procedure payment rate going forward. To do that, CMS looks at historical claims data to see how much providers spent on the device and adjusts the permanent payment rate accordingly.
Here’s the key: CMS only uses HOPD claims, not ASC claims, to set that permanent payment rate.
Why This Matters for Launch Strategy
If your early adoption is mostly in ASCs, you’re missing an opportunity to influence the long-term Medicare payment rate. Even though ASCs are paid for the device during the TPT period, their claims won’t count toward the data Medicare uses when deciding how much to pay for that procedure after TPT expires.
The result? If CMS doesn’t see enough cost in the HOPD claims, the permanent payment rate may be set too low to cover your device, especially in the lower-paying ASC setting.
By starting in hospitals, you ensure that:
Early cases generate HOPD claims with the C-code, feeding directly into CMS’s rate-setting calculations
The long-term payment rate has a better chance of reflecting your device’s actual cost
When you later expand into ASCs, the procedure payment already “bakes in” the device cost at a sustainable level
ASC Cost Sensitivity
Even with TPT payment available, ASCs tend to operate on thinner margins and are highly sensitive to per-case profitability. Many are physician-owned or part of smaller groups, and new device adoption often comes down to whether it makes financial sense today, not over the long term.
Hospitals, while still cost-conscious, may adopt earlier if a technology helps them meet strategic goals, such as expanding service lines, attracting referring physicians, or differentiating themselves in competitive markets. This willingness to invest ahead of perfect economics makes hospitals a more forgiving launch environment for new devices.
Payer Mix Considerations
The insurance profile of your target patient population can also play a major role in deciding where to launch. Medicare beneficiaries represent a significant portion of ASC procedure volume, especially in specialties like orthopedics, ophthalmology, and cardiovascular care. While this aligns with many new technologies’ intended markets, Medicare’s lower ASC rates can make it harder to sustain favorable economics in this setting early on.
Hospitals, by contrast, typically see a more diverse payer mix. Alongside their Medicare patients, they care for a substantial share of commercially insured individuals, and commercial plans often reimburse at higher rates than Medicare. This mix gives hospitals more financial flexibility to trial new technologies before the economics are fully optimized. By building adoption in a hospital environment first, you can take advantage of this broader payer mix to establish clinical and economic value, while also ensuring that your Medicare claims history is working in your favor when it comes time to enter the ASC market.
A Strategic Two-Step
For technologies destined for ASC-heavy use, the long-term goal is still to thrive in that setting. But a hospital-first strategy may allow you to:
Influence permanent Medicare payment rates by generating HOPD claims during the TPT period
Validate coding, coverage, and payment in a setting with higher reimbursement
Build real-world clinical and economic evidence before entering a more price-sensitive market
Of course, place of service strategy will depend on a lot of factors, some of which might not be relevant to your tech. But don’t ignore the consideration that launching in hospitals first isn’t delaying your ASC opportunity, it’s securing it.
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