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10 Trends in ASC Payor Reimbursement & Contracting for 2012

Reimbursement trends can impact surgery centers significantly, depending on their specialty mix and their dependence on particular payors. Eric Woollen, vice president of managed care for Practice Partners in Healthcare, discusses 10 trends that may impact payor reimbursement and contracting for surgery centers in 2012.

1. GI and pain may suffer under Medicare in 2012.
Mr. Woollen says gastroenterology and pain management overall continue to take minor decreases on Medicare reimbursement this year, a trend that could signal trouble ahead for GI- and pain-driven surgery centers. When Medicare reduces reimbursement, commercial payors are likely to take notice and follow suit, meaning surgery centers that perform a high volume of low-reimbursed cases will have to be careful with costs and volume to stay profitable.

Luckily, Mr. Woollen says these two specialties may be safe because of the high volume they bring in. "GI and pain are typically still volume-driven from an operations standpoint," he says. "The more efficient you are and the quicker you can turn a room over, the more likelihood for overall positive revenues ."

2. Medicare quality reporting will start in 4Q 2012. Mr. Woollen says Medicare quality reporting will begin for surgery centers in the fourth quarter of 2012. While the program does not come with financial incentives for proven quality, Mr. Woollen says the program gives ASCs "a chance to provide to Medicare that we have high-quality, cost-effective services." Building this repository of data will give surgery centers leverage in the future in lobbying for increased reimbursement from the federal government. While surgery centers are nationally recognized as a provider of high-quality care, the industry desire is to submit the data to back up these claims.

For now, data reporting is the only requirement for surgery centers, and ASCs will not be penalized for what the data indicate. For example, in 2013, CMS will ask ASCs to report whether they used a safe surgical checklist during the 2012 calendar year. As long as your ASC informs CMS that you used a safe surgery checklist, you have fulfilled the obligation. Failure to report the required data to the Medicare program in 2012 will result in reductions of Medicare payments to that facility in 2014, and failures to report in subsequent years will affect future years' payment to the same extent.

3. More commercial payors are giving the option of using an implant management service. Orthopedic-driven centers may see a trend of commercial payors offering the option of an implant management service, Mr. Woollen says. "It's something I'm seeing in proposals as we move forward with contracting," he says. "In the past, if we were able to get the implants paid, the reimbursements would come directly to the facility. Now we have these implant management services that take the risk somewhat off the facility." He says this can be beneficial for orthopedic centers trying to get implants covered or paid in the facility contract.

4. Percentage of Medicare may not be the smartest option.
Mr. Woollen says while many ASC administrators pursue "percent of Medicare" as a model for their payor contracts, he does not recommend the strategy. He says the model works well when Medicare reimbursement remains relatively predictable year over year, but in the current climate of "negative pricing reimbursement changes," percent of Medicare can prove less profitable than other models. For example, if Medicare slashes reimbursement levels significantly, a contract that pays 150 percent of Medicare will suddenly become much less profitable.  

5. Payors are increasingly using "homegrown" payment methodologies. Mr. Woollen says most commercial payors use their own payment methodologies that combine crosswalks from the old Medicare grouper-based methodology with more up-to-date payment determinations. He says the "homegrown" methodologies have become popular due to the number of procedures moving into the outpatient setting in recent years.

For example, procedures like spine surgery are not currently reimbursed in an outpatient ASC setting under Medicare but are reimbursed by many commercial payors. Because spine cases are unable to be performed in the ASC under Medicare, the old grouper methodology would not be helpful in setting reimbursement terms. Instead, the payors  may use guidance from a myriad of different sources to determine how new procedures should be classified and reimbursed.

6. Out-of-network is shrinking, but probably won't disappear completely.
While other experts have predicted an end to out-of-network reimbursement, Mr. Woollen believes out-of-network will still work for some centers. "The ability to perform OON is shrinking, whether that's the result of the types of products on the market or the ability of some commercial plans to use internal policies to not pay OON claims," he says. "I'm of the professional opinion that OON will not completely go away."

He says markets that still depend heavily on self-insured patients may be able to survive on OON reimbursement in the next few years. "When you have a fully-insured scenario, you have much more market control from the payor," he says. "When more patients are self-insured, the payor isn't taking on the risk. They're simply providing a network and performing administrative functions."

7. Dependence on a single payor is dangerous. Most ASCs should look for their case mix to come from a variety of payors, Mr. Woollen says. In certain states, a particular commercial payor may represent 90 percent of the commercial market, and surgery centers have little choice as to where their volume comes from. In general, however, surgery centers should look for a variety of payor sources, whether that means government payors or commercial insurers.

Depending heavily on Medicare or a single commercial payor can be treacherous because a unilateral rate decrease can drastically affect surgery center profitability. Medicare, which usually pays at a lower rate than commercial payors, should not make up the majority of a surgery center's payor mix unless the ASC can provide significant volume to offset the low profit margin.

8. Data is still king in negotiations. Having formerly worked for United Healthcare, Mr. Woollen says the most common error he sees ASC leaders make in payor contract negotiations is failing to review and understand relevant data. He says ASC leaders should understand their case costs down to the procedure. "Every time you do an ACL repair, every time you do a meniscus repair, you need to understand what it costs," he says. Make a spreadsheet that lists the average cost of every procedure your surgery center performs by physician, then cross-reference those costs with the terms of your payor contracts.

"At a minimum, you need to understand every time an ACL comes in, what does it mean from a particular payor?" he says. "If you can't [cover the costs on a procedure], itmay be time to open up the contract and talk to that particular payor." He says presenting this data to the payor at your contract negotiation can validate cost concerns in asking for higher reimbursement levels. Bring along data on quality, cost savings and patient satisfaction in your surgery center to tip the scale in your favor.

9. Physician re-syndication means a second look at payor contracts. If your surgery center is going through a growth phase, you might want to take another look at your payor contracts, Mr. Woollen says. "If you're going to add a new specialty or a new physician group, you need to know what kind of cases that group is going to bring, what kind of capital equipment is necessary and what kind of supplies are necessary," he says.

Take a look at the cases coming into your center, and make a note of the short- and long-term expenses your ASC will incur by adding a new group or specialty. Once you know how much you will have to spend on your new cases, you can negotiate with the payors and propose reimbursements that makes sense for each case.

10. Neck, spine and bariatrics are increasingly accepted by payors. Mr. Woollen says he sees three specialties — neck, spine and bariatrics —moving into the outpatient setting at an increasing rate due to payor acceptance. He says initially, ASC leaders could not always contract with commercial payors for neck and spine procedures because of concerns about risk. "If there's an adverse event, it's a high-acuity case, and you're talking about potential transfers to the hospital," he says. "That made payors kind of nervous. As time has evolved, we've been able to demonstrate that we screen these patients and we can provide the same high quality level of care at the ASC at a cost savings to both the plan and patient."

He says bariatrics has followed a similar path. In the past, payors preferred physicians to direct patients toward other methods of weight loss — diet and exercise, namely — before recommending weight-loss surgery. While weight-loss surgery is still hit-or-miss with commercial payors, the development of quality standards and the designation of "Bariatric Centers of Excellence" have made insurance companies more comfortable. "Payors are starting to feel more comfortable with the quality, and they're covering these procedures more often," he says.

Learn more about Practice Partners in Healthcare.

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