Contract negotiation 101 — What anesthesia groups & ASC administrators need to know

When an ASC enters into a contract with an anesthesia group, both sides should have a firm understanding of what each party expects from the partnership.

Anesthesia Business Consultants CEO and President Tony Mira shares his thoughts with Becker's ASC Review on the most quintessential elements of contract negotiations from both sides of the agreement.  

Question: If an anesthesia group is trying to establish a partnership with an ASC, what advice do you have for the group concerning negotiations?

Tony Mira: The most important aspect of a contract between a facility and an anesthesia group is a clear statement of service requirements. The agreement should specify the number of rooms that must be covered each day of the week, whether ramp-up projections will be met, consistency of case volume, the timeframe for credentialing and many other factors. To prepare, the bidding practice should obtain reliable data about the facility's payer mix, projected volumes and types of cases.  

The anesthesia providers should require a contract that gives them the ability to control selection of patients for surgery. The anesthesia providers should have the final word on whether patients do or do not meet risk assessment criteria. This is often the determining factor in the success of a facility's relationship with its anesthesia providers. The group should also aim for terms that include no termination without cause within the first two years of the agreement.

For economic reasons, many ASCs are reluctant to offer subsidies to the anesthesia group. No practice should accept a contract without a reliable financial pro forma to understand the economic consequences of starting a service with a potential significant lag in actual cash collections. If the anesthesia group can afford it, one approach is to use the group's lines of credit or cash surpluses from other operations until the facility is profitable. Another is to secure a loan from the ASC until the facility is cash-flow positive and the working capital loan can begin to be repaid.

To increase the chances of winning the contract, the anesthesia group should indicate its willingness to execute the same managed care contracts as the ASC, and show that it understands the facility’s business goals and clinical needs and is willing to help the facility meet those goals.  At an orthopedic ASC, for example, it is imperative for the anesthesia group to send anesthesiologists with extensive block expertise. The anesthesia group can also offer to create benchmarks regarding such metrics as turnover times and  postoperative nausea and vomiting incidence.

The anesthesia group should be aware of the ASC's in-network responsibilities. Many payers have language in their facility agreements that require the facility to use in-network ancillary providers, and if the ASC does not comply, it is fined.

The anesthesia group can attempt to secure an equity position within the ASC. The leverage to do so will be greater if the group also provides a pain service, which can generate additional revenue for the ASC.

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