5 Methods for All-Star Managed Care Contract Negotiations

Managed care contract negotiation consistently tops the list of ambulatory surgery center operational challenges. Adriaan Epps, abeo vice president of practice management, outlines steps to mitigate barriers to gaining favorable reimbursement rates.

1.    Preparation. Entering payer negotiations without adequate preparation is fruitless. Beforehand, gain a commanding knowledge of cost per case. Compare case costs to payer reimbursement; are your costs being covered adequately? Prepare to answer why you are trying to negotiate higher rates and have the data to back up any claims. Before entering negotiations find the answers to questions such as the following:

•    Market research: How many ASC’s in the market provide similar services?  Are they in-network or out-of-network with the payer(s)?  How do their quality and outcomes compare? Are there fewer ASC’s in the market?
•    Course of performance: How successful were negotiations with the payer in the past?  Learn from past experience, i.e. what worked and what did not.  
•    How do other payer rates compare? Create a graph to include case volume and average reimbursement levels by payer to demonstrate variances in compensation
•    What is the implication of not receiving a rate increase and what is the ASCs BATNA?
•    Are the majority of the referrals coming from in-network or OON physicians?  How would referrals be impacted if the ASC joined the network or went OON?
•    Identify the ASCs top procedure codes by volume and profit.  Is it more or less advantageous to carve out these top codes?  
•    Is it more beneficial to utilize a TPA for implants or to carve them out at cost plus X percent?
•    Is there language in the current agreement which should be revised or removed?
•    Does the payer automatically include the ASC in their exchange network at existing commercial rates or will they attempt to offer a new agreement for the exchange with reduced rates?

2. Payer education. Major payers operate on state-wide fee schedules. "All ASCs receive the same rates regardless of cost, quality, specialty, volume, outcomes and/or locality," says Mr. Epps. But, there are always opportunities for negotiation.

"Demonstrate the key cost savings of services provided at the ASC compared to inpatient and outpatient hospital stays and hospital-owned ASCs," says Mr. Epps. If an ASC is the only provider in an area to offer a certain procedure or specialty, use that as leverage. If low-cost, quality is king in healthcare, ASCs should be first in line for the throne. Gather data demonstrating superior outcomes at a lower cost and present it to payers. Use all of the ASC industry hallmarks to explain why higher reimbursement rates make sense for not only the center, but the payer.

3. Consistent, productive communication. Contract negotiation and renegotiation is an ongoing, often arduous, process. Open lines of communication demonstrate to the payer willingness to work together. Though the process can be frustrating at times, maintain productive communication. "Do not be adversarial from the onset," he says. Ask useful questions, such as:

•    What are the primary concerns in this market?
•    What are the short and long term strategic network goals of the payer?
•    If the payer mentions cost concerns and/or cutting costs, what action is the payer taking to address the key driving factors of costs in the health care industry and how can our ASC work with the payer to drive more business from hospitals to our cost saving surgery center(s)?
•    What can our facility do to create a long term and mutually beneficial partnership?
•    Could we potentially partner with you on any pilot programs, ACO’s, or other quality programs?

"If you are not getting anywhere within two months, escalate the conversation and go to the vice president of network management," he says. Generally, contractors do not have the authority to make final decisions regarding negotiations. Network VPs, though extremely busy, are generally receptive to meeting requests. Involve ASC leaders, whether the administrator, medical director or center CEO, and continue to push for progress through communication.

4. Understanding of payer methodology. "Research and understand payer contracting strategies, their annual network planning and budgeting process and how these strategies can and will impact current and future negotiations," says Mr. Epps. Payers tend to begin their annual budget planning process in the spring. Though they will not readily admit it, they do plan for at least a 3 to 5 percent increase in their in-network budgets, according to Mr. Epps. There is always room to negotiate higher rates.

5. Commitment to continued value.  "Identify opportunities to offer new services and/or expand upon the services currently provided," says Mr. Epps. Payers are facing the pressure to cut costs and an ASC that is unwilling to change or participate in new initiatives will come to be viewed as expendable. "Partner with payers to establish cost savings initiatives and quality programs with shared savings opportunities," he says. Look for and analyze all the possible ways to exhibit indispensable value, the true key to successful rate negotiation.

More Articles on Coding and Billing:
3 Notable Trends in Medicare and Medicaid Reimbursement for ASCs
Using Technology to Address ICD-10, RAC Documentation
7 of the Most Common ASC Coding Questions Answered

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