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ASC Managed Care Contracting in 2014: 10 Core Concepts

Written by Laura Dyrda | January 17, 2014

NayaKehayesThe managed care landscape is changing but there are still several opportunities for ambulatory surgery centers to achieve appropriate reimbursement rates.

"Align with the payers and look for opportunities to work together to save money," says Eveia Health Consulting & Management Founder and Managing Principal I. Naya Kehayes. She discusses 10 core concepts for ASC success next year with managed care.

1. Pay attention to exchange products. Healthcare insurance exchanges are rolling out across the country as a result of the Affordable Care Act and many providers will soon face patients with exchange plans. Around 69 percent of physicians who have seen payment rates from ACA exchange insurers report these rates are lower than average commercial payer rates in their area, according to the MGMA Legislative and Executive Advocacy Response Network's ACA Insurance Exchange Implementation Report.

However, those rates aren't set in stone.

"Ambulatory surgery center leaders should make sure they negotiate those products," says Ms. Kehayes. "Quite often payers are looking for reductions over their commercial rates and there is really no information quite yet on the population or volume you will receive from participating in the Exchange network. So it's important that ASCs actually negotiate this contract, especially if the payer proposes a reduction from a commercial product."

2. Demonstrate savings to payers. Insurance carriers remain interested in working with surgery centers that can demonstrate savings. Payers are very concerned with hospital acquisitions because these transactions often result in a rate lift. Sometimes if an independent surgery center considers going into a joint venture because of financial issues, payers may be willing to work with the center, says Ms. Kehayes.

"I think the time is right to speak with payers about these issues," she says. "At the same time, payers have a lot of pressure right now because of the implementation of the ACA, so they are going through a lot of challenges."

3. Market to ACOs. Accountable care organizations can be a great opportunity for surgery centers that demonstrate higher value and lower costs than their competitors. Hospital-run ACOs may not be willing to work with independent ASCs, but physician-run ACOs are often willing to consider contracting with surgery centers.

"ASCs should really be marketing themselves to ACOs as an entity that could subcontract to provide surgical services lower their costs," says Ms. Kehayes. "A lot of the ACOs are being developed by the insurance companies and hospital systems, and there aren't many freestanding ASCs as part of the ACO network. It's important to show the ACO that you can be a subcontractor and save them money which should encourage the ACO to work with the ASC."

However, physician owners must be aligned with the center to work with ACOs. In communities where hospitals are dominant, joint venturing with the hospital could position your center for a future participation in a hospital-driven ACO.

4. Ask the payer about ACOs during renegotiations. If you're having trouble breaking into local ACOs — or are unaware of any forming in your area — ask the payers during contract negotiations if they're working on any that you could participate in. They may be willing to work with you on encouraging participation.

"ACOs are at risk for the dollars and it would behoove them to find the lowest cost site for service," says Ms. Kehayes. "The key is to talk to the right people about that. Once the rates are negotiated, it's up to the ACO to lower costs. If it's hospital-run and they don't have an ASC in their network, meet with the VP of contracting at the hospital and show them how you could save them money."

5. Present the business case for ASCs during contract renewals. Insurance companies are increasingly concerned with the value of their dollars, and ASC leaders can make the best case for increased rates if they demonstrate their savings by showing how they can move surgery out of a higher cost setting resulting in a savings to the payer and their members, the patient. The insurance company is looking for the hard numbers as proof; just a conversation won't cut it.

"You really have to have those numbers and evidence to show the payers it's in their best interest to work with them," says Ms. Kehayes. "Also, if the ASC has opportunities to grow their business and their contracts do not provide adequate reimbursement to add these new services, it's important that the ASC does not provide the services until their contracts are set up with appropriate reimbursement. They could potentially lose money and then it becomes more challenging to present to the payer the win-win opportunity to renegotiate the contract and enable the ASC to grow."

6. Look for new growth opportunities with physician groups. Identify physician groups in the community that are currently working out of the hospital but could bring cases to the ASC. If you are able to contract for those services in advance, the ASC will be more successful at recruitment of physicians who will bring their cases to the ASC.

"If you know there is a big gynecology group working with the hospital for example that can perform hysterectomies in an outpatient setting, talk to the payers ahead of time; if your contract does not provide the rate structure to move the cases because it takes a while to renegotiate the contract to add services. You will have more success with payers working ahead of time. If the services are not currently performed at your center, then any increases to payment rate to enable the ASC to provide the services will not impact the payers budget for your center; once you start doing the cases and ask for an increase, then this impacts the payer budget and willingness to increase your rates".  

7. Show insurers why their rates are too low. Payers today are trying to achieve uniform rates across all surgery centers and all locations in a state or region. Standardized rates won't work for all centers when there are variations in cost structures and different types of centers providing different services.

"ASCs shouldn't be surprised if insurers come to them and say 'Here's our contract. Take it or leave it'," says Ms. Kehayes. "Payers are trying to predict costs and make them uniform, but that's detrimental to the ASC's ability to function. It's important that ASCs are able to demonstrate the reasons why they want to contract with them."

If payers offer $1,000 for a surgery that costs $1,500, show them the physician's preference cards and cost structure for each case. Show them capital expenses and other expenses your center incurs in order to provide the services.

"You really have to educate the payers because a lot of times they are out there restructuring their contracts and payment systems and they don't understand the difference between two ASCs," says Ms. Kehayes. "They might say others contracted for a lower rate, but they are comparing an orthopedics specialty ASC to a multispecialty center with primary ENT. It's becoming more and more critical that you go into the discussion with data and build the business case that you have savings for the center."

8. Move cases out of the hospital. If surgery centers can demonstrate they move volume out of the hospital, or have the potential to move volume out of the hospital, payers may work with you to build the contracts necessary for recruiting physicians. "If you have an established relationship with the payer, they will work with you to build the rate first so you can bring the physicians to your center," says Ms. Kehayes. "That's a great opportunity for the ASC that wants to grow."

This strategy is particularly attractive to payers because their contracts don't require them to spend money immediately; they are contracting for potential cases in the future.

"There are a few national payers interested in doing that because they don't want to see certain cases going back to the hospital," says Ms. Kehayes. "They may be able to motivate surgeons to do cases in the ASC. That's a different angle on the negotiation. But if the payer doesn't have money in their budget, they aren't apt to move forward on commercial contracts but one thing you can do is work with them on creating this future opportunity."

9. Differentiate yourself in competitive markets. In markets where multiple ASCs provide the same services, negotiating rate increases becomes more difficult. However, ASCs may build a case for better rates based on new technology or the reputation of their surgeons as a differentiating factor.

"You really have to have something that differentiates you in order to create an opportunity for a meaningful negotiation," says Ms. Kehayes. "There are payers that will walk away and say their network rate is adequate. The ASC has to look at whether losing money on the contract is sustainable; in most instances it is not economically feasible."

However, if the contracted rates are really inadequate and the ASC is losing money on them, you can ask the physicians to move those cases back to the hospital, which would get the attention of the payer. "But then you have to track how many cases they take to the hospital because you can't afford to do them anymore," she says. "That could potentially arm you with the data you need for the payer to show that there is value in your relationship and you present the payor with an opportunity for savings."

10. Benefits for in-network patients utilizing in network facilities. ASCs are now finding the opportunity to work with insurance companies who have designed benefit plans that encourage patients to utilize in network ASCs. Payers are designing benefit structures that reward patients for using in network facilities and that will motivate patients to come to the ASC, such as zero-dollar copays.

"You want your ASC on the preferred list," says Ms. Kehayes. "If you are in a market where there isn't a lot of surgery centers, there is an opportunity to expand services by restructuring contracts that enable you to grow your business while providing a savings to the payer, and most important, the patient."

More Articles on Surgery Centers:
ASC Management & Development Companies: A Growing Market Power?

8 Tactics to Boost ASC Patient Volume in Competitive Markets

6 Statistics on Surgery Center Revenue by Case Volume


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