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6 Steps for ASCs to Participate in New Payment Models

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David Harlow on ASC payment methodsHere are six steps for surgery centers to participate in new payment models.

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1. Figure out how to participate in ACOs productively. ACOs are becoming more common in different healthcare markets across the country and ambulatory surgery centers need to figure out how they can most productively participate. First and foremost, they should leverage the relationships they have with hospitals and physician groups for a seat at the table during the ACO formation.

"There is clearly a place for physician led ACOs because we are talking about developing systems to control costs that are ultimately directed by physician order," says David Harlow, principal at The Harlow Group, a healthcare law and consulting firm. "There is an opportunity for physician-led ASCs to participate in ACOs and benefit from the payment incentives that are included in the program simply because of the ability to improve quality and reduce costs over a baseline period, and that could fall to the ASC's bottom line."

Integration will be easier if the ACO is physician-led. Hospital-led ACOs may focus on filling hospital ORs; however, surgery centers also have partnership options if the ACO is hospital-led.

2. Partner with hospitals and other providers.
Surgery centers will need to integrate with other providers in their market, which includes hospitals. This is especially important if the ACO is hospital led. In that instance, surgeons can enter into a joint venture or sell their ASC to the hospital so it becomes a hospital outpatient department that can take advantage of better rates and payor contracts.

"In the past, ASCs benefited from establishing a single or multispecialty center that served patients more cost effectively and efficiently than hospitals," says Mr. Harlow. "However, the name of the game in the future will be integration in the healthcare system. Now folks need to partner to take advantage of population-based payment systems like ACOs."

Selling part or all of the shares for the surgery center can raise capital for ASC owners and strategically align them with the hospital. "The options you choose really depend on the market and the preexisting relationship with hospital management," says Mr. Harlow.

3. Expand your relationship with physician groups.
Your surgery center should already have a good relationship with major physician groups in the market, but when preparing for ACOs you should take that relationship a step further. Make sure you are on the same page with the physician groups, especially primary care physicians.

"Enhance your relationship with physician groups now and you'll see potential benefits through ACOs and other payment reform opportunities," says Mr. Harlow. "The individual ASC has to determine what will be the best long-term affiliation with an ACO. They will likely include both Medicare and private payors in the future, and independence may be easier to maintain in markets dominated by physician-led ACOs."

4. Innovate in ambulatory bundled payments.
Hospitals and physician groups around the country are partnering with payors to develop bundled payment options for episodes of care. Some of the most prominent bundled payments focus on orthopedics including total joint replacements which can now be performed in the outpatient ambulatory setting. As a result, surgery centers should begin planning for potential bundled payments down the road.

"The CMS Center for Innovation has a giant budget to develop innovative approaches to improving care and reducing costs," says Mr. Harlow. "One area that hasn't been addressed directly so far is ambulatory surgery. There could be bundled payments for total joint replacements in the future. ASCs would have to apply to participate in that program, which creates an opportunity moving away from traditional fee-for-service and bundling services across the broader spectrum of care."

Surgery centers participating in bundled payments will need to provide pre- and postoperative services or partner with those specialists to provide a full range of care. "That has been done effectively by providers with other conditions, so there is no reason it couldn't be successful for ASCs that can understand their costs," says Mr. Harlow.

5. Initiate quality reporting.
Hospitals are already reporting quality data for Medicare and efforts for surgery center reporting will be increased over the next few years. The Centers for Medicare and Medicaid Services are asking for new and different reporting measures, and surgery centers need to prepare.

"There are a growing number of measures that need to be reported on a regular basis to Medicare and other payors, and that is continuing to the world of ASCs," says Mr. Harlow. "There are five to 10 quality measures that have to be reported to Medicare as part of the billing process and over time this will evolve from pay-for-reporting to pay-for-performance, as it has with other provider types."

These measures will be important for Medicare pilot ACOs as well as ACOs with private payors, who are increasingly looking for clinical evidence of cost-effectiveness.

"In the future, if quality isn't reported for Medicare cases, fee-for-service reimbursement will be reduced by 2 percent which is a significant issue, especially given the anemic reimbursement environment," says Mr. Harlow. "ASCs need to reconfigure their relationships with payors in the face of ACO development and move away from fee-for-service payment in general, taking a more holistic approach to quality."

6. Develop a tighter cost structure.
Surgery center administrators should understand the cost structure of their organizations to effectively prepare for ACOs, bundled payments and other types of payment programs. This is especially important for negotiating payment for episodes of care with Medicare pilot programs, and other payors experimenting with approaches to contracting and payment.

"It's impossible to plan for effective changes in operations if you don't have a sense of your cost structure, and that has real implications for the future," says Mr. Harlow. "You can't bid on a Medicare pilot and price it below Medicare fee-for-service rates if you aren't confident of your costs."

Medicare will be looking at reimbursement for population health instead of just sick care and individual episodes of care, which will allow surgery centers to become part of that system. Administrators and surgeon leaders need to know what each component of every case costs in order to restructure payment in the future.

David Harlow’s award-winning blog is HealthBlawg. You can also follow him on Twitter.

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