Arguably one of the more difficult responsibilities of being an ASC administrator is negotiating rates with payers. Here, three ASC administrators and one ASC payer negotiations specialist share their processes for ensuring fair reimbursement rates.
Question: When is it best to negotiate rates with insurance companies?
Susan Cheek, CPA, CASC, CHCC, Administrator, Dallas Endoscopy Center: Negotiating rates is an integral part of the insurance contracting process. The costs of providing quality services are rising, and you have to make sure your contracts are covering those costs.
Dan Connolly, MHS, ARM, Vice President of Payer Contracting, Pinnacle III: Negotiating reimbursement is essential to optimize reimbursement and, ultimately, return on investment to your ASC. An ASC should attempt to negotiate reimbursement whenever possible and when in the ASC's best interest.
Bruce Feldman, MS, CPPM, Island Endoscopy Center/Island Gastroenterology Consultants (West Islip, N.Y.): Insurance companies are always going to try to pay you the least amount possible. It's time to resort to rate negotiation when the reimbursement rates you are getting fall short of covering your costs.
Gary A. Richberg, RN, BSN, ALNC, CMPE, CASC, Administrator, Pacific Rim Outpatient Surgery Center (Bellingham, Wash.): Facilities should always plan on contract rate negotiations, since the cost of medical care increases on a consistent basis, reimbursement patterns typically decrease as a standard rule as well
Q: How do you begin to organize, once you decide you will have to engage in rate negotiation?
Ms. Cheek: I start by analyzing our costs for providing our services, and I also analyze our historical patient volume from a particular payer along with future volume to demonstrate impact to the payer.
Mr. Connolly: I begin by assembling data on the potential case and procedure mix, identifying case costs and determining how existing contracts and associated reimbursements compare to the proposed reimbursements. To do this, I look at a minimum of six months to one year of payment data, identify top-volume procedures and compare reimbursement by payers at the CPT level.
Mr. Feldman: The first step is to understand your payer mix and to know what percentage of your patient population is represented by each type of payer. You need to know the costs of doing each type of procedure. It's also important to have a handle on your competition. You need to know how many other ASCs in your geographic area provide the same services that you do, both free-standing and hospital-based.
Mr. Richberg: The best way to organize is to develop a spreadsheet or other assistive tool of your cost of care for your procedures along with reimbursements by CPT compared across your payers. Include dates of when you last negotiated that contract and any notes of those conversations. The processes of negotiations are made easier when you can identify comparable reimbursements across carriers by procedure, which shows you where your strengths and weaknesses are within those contracts.
Q: What kind of planning must occur for success in negotiations? What kind of information do you need at hand?
Ms. Cheek: Along with the information already mentioned, you need to have an idea of the rate differential to the payer, if the cases coming to your center moved to another location because of pricing.
Mr. Connolly: Prepare to "show and tell" your story, including demonstrating the ASC's value and leverage points to the payer. It is important to establish what the market is bearing as well as the case costs incurred by the ASC. Have a value proposition and proposal prepared for the payer.
Mr. Feldman: The most important piece of information you need is your case volume by payer. If you're negotiating a rate with Oxford, for instance, you want to know how many patients with Oxford you are currently seeing. You also need to know your cost of performing that procedure at your ASC.
Mr. Richberg: Knowing your costs is key to planning contract negotiations. It's highly important to establish and maintain positive relationships with carriers to aid in getting the best rates as possible. Explain your cost of care with data (implant cost, drug cost, staffing cost, equipment cost, etc.) to justify why your request for increased reimbursements are valid. Insurance carriers are often data-driven, so by providing this data and having an established relationship, you will have a better opportunity to improve your overall facility reimbursement. I recommend that you study your market and try to access what your competitors are getting paid for the same procedures you are doing.
Q: What is your single best piece of advice for negotiating with payers?
Ms. Cheek: Demonstrate your value over other facilities in your area to negotiate competitive rates. Show the payer how your high quality services save the payer and patient and what the impact would be to the payer if the cases were performed elsewhere or if your center could not function any longer due to inadequate contracts. Also, demonstrate the impact to the carrier if your facility were to go out of network.
Mr. Connolly: Do not treat payers as adversaries! View payers as allies. Payer representatives you have taken the time to build a rapport with are more likley to give you increases than those who find you confrontational.
Mr. Feldman: Begin by asking what ideal rate you want, but be receptive to reaching a middle ground. It needs to be a "give and take" conversation and not a "take it or leave it" approach.
Q: What do you find is the most difficult part of rate negotiation?
Ms. Cheek: Understanding the nuances of the financial areas that are of the most importance to the payer.
Mr. Connolly: Ensuring a win-win outcome for both parties.
Mr. Feldman: Locking in the term of your contract and specifying annual increases if your contract is going to be greater than one year.
Mr. Richberg: Many carriers are using the PPACA as a primary reason to place limits on reimbursements or use a type Medicare reimbursement methodology or a lower multiple fee schedule as the initial basis for contract negotiations. The overwhelmingly shared frustration in our industry is the slow recognition by insurance carriers to appreciate the fact that ASCs are the lower cost providers of care compared to the hospitals. Some carriers have started to recognize this; however there is still more work to be done.
Q: In which areas are payers most likely to give?
Ms. Cheek: Many times a payer may not give you an overall increase, but you may be able to carve out some of your highest volume codes and negotiate an increase.
Mr. Connolly: It really depends on the payer and the market, but I have experienced success in obtaining increases to base reimbursement and negotiating carve-outs.
Mr. Richberg: Carve-outs in my experience are the most likely areas where payers are most likely to give first. It's easier for them to focus on increasing reimbursements for certain CPT codes as opposed to the entire contract. Depending on your facility, getting increased reimbursement on certain carve-outs may be more lucrative than increasing the rates for the entire contact. Again, this can depend on your marketplace and on any unique services your facility provides. This is where you should know your cost per case of what procedures your institution benefits from the most.
Q: Are you seeing any trends in rate negotiation or your ability to get the rates you want?
Ms. Cheek: Yes, it seems that the payers understand that ASCs are a lower-cost, high-quality alternative to the hospital, and in order for ASCs to continue to exist, payers need to stay consistent in our rate increases.
Mr. Connolly: Yes, I'm finding we have to work both harder and smarter to obtain necessary increases. Also, I'm finding that it's taking longer to get the job done, due to the increased demands on payers.
Mr. Feldman: It's becoming more and more difficult to get the rates you want if you're not a major player in your specific geographic area. Volume is a key ingredient that drives the rates you want. It's the old adage of "power in numbers."
Mr. Richberg: Yes, as I stated above, especially with the PPACA being the main factor by which payers are tailoring their contracts, it has been more challenging to convince payers that cost can still increase for healthcare services and that the need to maintain and increase reimbursement still remains for ambulatory surgery centers. Any contract should cover the cost of the surgical care provided and must have an acceptable measure of profitability for it to be a viable payer agreement for your institution. I continue to have ongoing discussions with my payers regarding the cost of care for my facility; I also continue to maintain frequent communications with them to maintain a positive relationship, which helps during the final negotiations.
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