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Healthcare Reform: Impact on ASC Managed Care Contracting Next Year

Written by Laura Miller | January 29, 2014

NayaKehayesEveia Health Consulting & Management Founder and Managing Principal I. Naya Kehayes has a wealth of experience in the healthcare and ambulatory surgery center industry, with particular expertise in reimbursement methodologies and managed care contract negotiations.

Healthcare reform implementation will be in full swing next year, and Ms. Kehayes says a few of the biggest concerns for ASC administrators and physician owners include:

•    Hospital employment of physicians;
•    Payer reduction in reimbursement with changing payment methodologies;
•    Declining out-of-network access;
•    Hospitals/health systems and payers collaborating on accountable care organizations.

Based on the primary concerns, here is how Ms. Kehayes sees a few of the biggest challenges playing out in the coming year:

Health insurance marketplaces: The Obama administration is pushing forward with fixing the glitches in healthcare insurance exchange websites and maintained coverage requirements for 2014. Uninsured individuals will be mandated to purchase insurance or pay the penalty for next year.

"With the implementation of health insurance marketplace 'exchanges,' employers, in addition to the uninsured, will have the opportunity to shop on the exchanges," says Ms. Kehayes. "Traditional commercial business may start to move toward exchange products. Payer reimbursement under the exchange products is being offered, in many instances below commercial rates, with some offering rates comparable to Medicare or Medicaid as a result of healthcare reform, despite the fact that premiums will be paid to the insurance carriers for participation by the member."

As a result, Ms. Kehayes sees a potential negative shift in reimbursement as the traditional commercial payer moves to the exchange products, even though there will be increased access to insurance. "Therefore, consideration and negotiation of exchange products are very important for ASCs to pay attention to in 2014 and in the future thereafter," she says.

New payment models: Healthcare providers are collaborating with insurance companies on new payment models such as accountable care organizations and bundled payments. There may be opportunities for ASCs to align with payers on bundled payments and move cases from the hospital to the outpatient surgery center, says Ms. Kehayes.

These payment models pass risk from insurers to providers and patients. If ASCs have surgeon alignment, they can approach ACOs as a subcontractor to offer a savings for outpatient surgery.

"Reach out to payers and notify them of your interest in ACOs," says Ms. Kehayes. "Find out from the payers if they are actively pursuing an ACO in your marketplace and if so, by whom? Approach the hospital/healthcare system of your interest to subcontract with the ACO and your ability to offer them savings for outpatient surgery."

Many providers are consolidating to increase market share and build strength during payer negotiations.

"As healthcare systems enter into gain sharing contracts with payers, ASCs have the potential for opportunity to increase reimbursement via alignment with healthcare systems as a cost effective site in the healthcare system," says Ms. Kehayes. "As healthcare systems continue to grow, by acquiring ASCs and physicians, the alignment of ASCs and their surgeons with a system may be critical to their future success."

As downward pressure on healthcare costs continue, insurance companies will be interested in working with physicians and ASCs to demonstrate savings. They will continue to look for new specialties to move from the hospital setting into outpatient ASCs safely and effectively, including spine and total joint procedures.

"If you are in a state that allows overnight recovery care, that can enable the center to move bigger cases out of the hospital and if the ASC has surgeons that are willing to move bigger cases, consider setting up overnight recovery care to enable access," she says. "Approach payers to set-up contracts that will motivate movement of the cases out of the hospital."

Market consolidation: Hospitals and health systems are employing primary care physicians and specialists to gain market share and participate in ACOs. As a result, ASCs have a smaller pool of physicians to recruit and may consider aligning, partnering or joint venturing with a hospital or health system.

"A joint venture may be advantageous to sustain ability to contract and access to volume due to increased employment of physicians," says Ms. Kehayes.

In addition to help with managed care rates, hospitals that joint venture with surgery centers may allow employed physicians to perform cases at the center. Primary care physicians employed by the hospital may also refer cases to surgeons working at the
ASC  since the center is now within their network.

ASC success: There are several steps forward-thinking ASC administrators and owners can take now to prepare for 2014 and beyond. Ms. Kehayes outlines a few of the key concepts and opportunities to consider:

•    Add spine, total joint and other higher acuity cases to your ASC if the clinical conditions and operations permit.
•    Align the ASC for contracting with ACOs.
•    Joint venture with a healthcare system to sustain and enhance strength in negotiations and access to patient volume.
•    Your ASC may present an opportunity for healthcare systems to JV and enhance their relationships with payers via clinical integration
•    Prepare for price transparency demands prior to performing surgery

ASCs that wish to remain independent may find an unlikely bedfellow in insurance companies paying high prices to local hospitals. Payers understand that ASC rates are considerably lower than even hospital outpatient department rates.  If the ASC can't survive at current reimbursement levels and communicates to the payer that it must sell to the hospital, there is an increase opportunity to succeed at capturing rate increases from the payers to sustain independence.  

"Working with payers in markets where there are large healthcare systems to direct care out of the hospital/health system and into the ASC [is an opportunity]," says Ms. Kehayes. "Payers are interested in having ASCs maintain their independence and may be willing to help if they feel the ASC is a potential target for acquisition by a healthcare system."  

More Articles on Surgery Centers:
ASC Ownership Trends: Are Physicians Making the Investment?

ASC Buyers & Sellers: Valuation in 2014

2014: A Promising Year for De Novo ASCs?


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