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10 Assertions Payors Make in Surgery Center Contract Negotiations and How to Respond

T.K. Miller, MD, medical director of Roanoke (Va.) Ambulatory Surgery Center, cites 10 assertions payors make in contract negotiations and how he would respond.

1. "This is all you're going to get." Negotiations are particularly tough with Anthem, which controls 60 percent of the local market. "They tend to start off negotiations by telling you, 'This is all you're going to get,' " Dr. Miller says. He says it's important to get past that demand and explain to them why you need to be paid more.

2. "We want to negotiate one-on-one." The local hospital owns 50 percent of the ASC. It might well be preferable to negotiate through the hospital, because it has more clout, but the hospital is a silent partner that does not get involved in contract negotiations and the payors like it like that. "We negotiate on our own," Dr. Miller says. Since the hospital also owns an HOPD, "there was a concern that if the hospital weighed in, there would be a conflict of interest," he adds.

3. "We don't believe your cost data." When the ASC last negotiated with Anthem in 2007, "we did not have as firm an idea of our costs, and they didn't believe our data," Dr. Miller says. "We could give them a range but not an exact number." But in negotiations for a new contract three years later, Anthem wasn't able to refute the center's cost data. Every expense could be pinpointed. Anchors, shavers, sutures and other supplies are now bar-coded and scanned at the point of use. The center rounds out its data with national benchmarks supplied by a management company. This time the center could quote costs down to the decimal point. "We could give them a valid argument for our prices," he says. "We could get to the real cost."

4. "We want to stay with groupers." When CMS switched payments from groupers to ambulatory payment classifications, it reduced payments for eye, GI and ENT procedures and substantially raised them for orthopedics. Staying with groupers might be advantageous for a GI-only facility, but two-thirds of Roanoke's cases are in orthopedics. The ASC had to insist on more favorable rates than groupers.

5. "We'll give you a flat increase." Anthem offered Roanoke a 3 percent across-the-board increase. That might be acceptable if Roanoke were equally involved in all specialties, but it did not reflect increases in its major specialty. "We said, wait a minute, we just had a 50 percent increase in orthopedics alone," Dr. Miller says. Furthermore, the price of orthopedic implants, a big part of the total cost, rises about 9 percent a year. The ASC needed to go beyond a flat increase and specifically address orthopedics.

6. "We don't allow carve-outs for implants." Anthem doesn't normally allow carve-outs for implants. Under a carve-out, the ASC would get a percentage increase for each procedure to reflect the implant. Since his ASC could not use carve-outs, Dr. Miller decided to negotiate fees based on the center's average cost. For this to work, the ASC needs to know the exact amount for each CPT code, which it can do now, because of bar-coding and other improvements.

7. "Costs are lower in our region." Anthem's usual argument is that rates can be lower in southwestern Virginia because the cost of doing business there is lower there. This may be true for staff salaries, but not for supplies like implants, which represent a big part of the total cost of orthopedic surgery.

8. "Volume for this case is too low to matter." The volume of each procedure makes a difference in negotiations. For instance, Anthem considers a cadaver graft used in ACL reconstructions to be an implant, meaning the center loses about $1,000 on each operation. Dr. Miller hinted that surgeons might have to move these operations to the high-priced hospital, but payors just shrug at that. "They in effect said, 'Go ahead, your case volume here is not a big financial issue for us,'" he says.

9. "But we do want you to stay open." Even if it isn't exactly said, both sides know it's in the insurer's best interest that the ASC makes enough money to stay open, and that can be a powerful negotiating tool. "We're still cheaper than the hospital, but if we can't get the rates we need, we'd have to go out of business," Dr. Miller says. "Imagine, 4,000 procedures a year suddenly shift to hospital-based charges. That is a significant increase in cost for the payor."

10. "We want spine out of the hospital." Roanoke recently started giving spine surgeon's block time, and Anthem is pleased because it means moving spine out of the hospital. "They'd love to have spine out of the hospital," Dr. Miller says. "We said to them, 'If you give us a good across-the-board rate, we will make a conscious effort to move spine cases out of the hospital and into this facility.'"

Learn more about Roanoke Ambulatory Surgery Center.


Read more about ambulatory surgery center contracting:


- 10 Key Surgery Center Managed Care Contract Provisions and Terms to Know


- Webinar Discusses Keys to Transforming Surgery Centers Into a Profitable Business


- 3 Ways Health Plans are Corralling OON Surgery Centers Into Their Networks

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