4 Tactics Payors Use to Drive Surgery Centers In-Network – and How to Respond

Payors in recent years have established a variety of tactics to drive out-of-network surgery centers into their networks. Common strategies include launching payor online provider directories and online cost of care tools, steering patients to in-network facilities and physicians, and using specific contract language in provider agreements that deters or prohibits in-network physicians from referring patients to out-of-network facilities.

Here are four key ways payors drive patients to in-network facilities and, as a result, attempt to drive out-of-network centers in-network.

Tactics Payors Use to Drive Centers In-Network

1. Payors establish online provider directories to steer members to in-network providers. When patients log on to their insurance provider's website, they can access a directory containing the names of all in-network physicians, leading these patients to ignore out-of-network centers entirely in their search for a specialist. Some payors also provide online "cost of care" estimators that allow patients to compare the cost of care for healthcare services from one facility to another. This shows patients the implicated costs of using an in-network provider versus an out-of-network provider, says Adriaan Epps, director of contracting services for abeo Management Corporation in Irving, Texas.

2. Payors restructure out-of-network benefits to place the burden of cost on the patient. Payors have restructured their out-of-network benefits over the past several years so that deductibles and co-insurance are higher, and payments for out-of-network services are considerably lower — changes that place the burden of cost on the patient if they seek medical services from out-of-network physicians and facilities, says Mr. Epps. "This of course impacts out-of-network ASCs as they attempt to collect payments from patients, which often takes longer to collect, and can lead to greater A/R balances," he says.

3. Payors prohibit in-network physicians from referring patients to out-of-network facilities. "Another factor to consider is language in the provider agreements," says Mr. Epps. "Many managed care provider agreements specifically prohibit in-network physicians from referring patients to out-of-network physicians, ambulatory surgery centers and hospitals." Many in-network physicians therefore must reconsider referring patients to out-of-network providers, particularly since payors can take action against those who show a pattern of referring patients to out-of-network providers. "Payors do not renew or cancel contacts with the referring physician practices, cutting off much of the surgery volume that is referred to out-of-network ASCs," says Nick Janiga, manager at HealthCare Appraisers in Denver.

4. Payors create more administrative billing work for out-of-network facilities. In some markets, payors have started routing out-of-network payments directly to the patient, placing the burden on ASCs to use additional resources to track down the patient to request payment, says Mr. Janiga. "This has led to increased bad debts and write-offs, as well as increasing accounts receivable days for out-of-network ASCs," he says. "Payors also have begun to nitpick each claim, requiring additional billing resources to provide the necessary documentation and ultimately slowing the payment made to the ASC."

How to Respond

Out-of-network surgery centers are not necessarily required to give in to these pressures and go in-network. Here are several options for responding and negotiating with payors that implement the above tactics.

1. Establish a payment policy that offers competitive pricing. Out-of-network centers can offer competitive pricing for services to self-pay patients and patients using out-of-network benefits, says Mr. Epps. To do this, an ASC should inform the patient prior to the procedure that the center may be out-of-network with their health insurance company. Explain why the ASC is out-of-network, and work out a payment system with the patient prior to undergoing a procedure. The transparent pricing and communication strategy "will eliminate any confusion and potential payment concerns at the time of service," says Mr. Epps.

2. Establish and maintain relationships with local hospitals and physicians who refer patients to the ASC. Nurturing these preexisting relationships is critical to preserve the current flow of referred patients. To bolster the relationship even further, an out-of-network ASC should focus on differentiating itself from others in the community, either through quality of care, expertise or specialty services offered, says Mr. Epps. "If the ASC is in-network, but due to failed negotiations with a payor recognizes that it must go out-of-network, notifying the hospital and referring physicians prior to going non-par is important to sustaining these relationships," he adds. "It is also important to explain why you are going non-par and what steps you will take to continue to provide coverage."

3. Carefully evaluate the impact of becoming an in-network provider. If an ASC is considering going in-network, it is important to compile data focusing on how the payor ties in to the center's market, cases and reimbursements. "Use the surgery center's data to explain the benefits the surgery center offers to its patients and the community. These benefits will likely include both quality and go-forward cost metrics," says Mr. Janiga.

According to Mr. Epps, a center should compile data on the total volume of business each payor represents with a breakdown by case, procedure, payments and payor, as well as the reimbursement requirements for each level of service, including services such as lab tests and implants that may not be reimbursed in-network. "Centers should also analyze and compare industry benchmarks and cost data to the ASC in an effort to effectively target a competitive and favorable reimbursement structure," says Mr. Epps.

Out-of-network centers should also analyze the reimbursement of all their contracted and non-contracted payors and model against new proposals, and hone in on what differentiates the ASC from other facilities in the market. These collective strategies allow the surgery center to maintain a degree of control and negotiating power when considering going in-network with payors — a decision that may be more financially beneficial in the long term than remaining out of network. "I believe collaboratively working with the insurers to negotiate contracts is likely the better route to take," says Mr. Janiga.

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