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5 Mistakes Surgery Centers Make When Dealing With Payors

Dan Connolly, MHS, ARM, vice president of payor contracting for Pinnacle III, discusses five mistakes surgery centers make in payor negotiations.

1. Treating the payor as an adversary. Many surgery center leaders tend to view their payors as adversaries rather than allies, observes Mr. Connolly. He encourages ASC leaders to build effective working relationships with their payors. Payor representatives respond positively to individuals who have taken the time to establish a rapport with them, Mr. Connolly says. When ASC leaders create common ground and build upon that foundation during each interaction, payor representatives are more inclined to create mutually beneficial contractual terms, points out Mr. Connolly. It helps to remember that payor representatives are people, too.

He encourages ASCs to keep in touch with their payors throughout the year rather than only contacting them when a reimbursement increase is desired. "You shouldn't wait until you need something to knock on the door," he says. "Offer yourself as a resource to the payor, so they will call you and say, 'Hey, I know this doesn't have anything to do with you, but I'm seeing this with other surgery centers and I want to know your thoughts.'"

2. Waiting several years to renegotiate a contract.
Insurance company negotiation teams generally operate under strict guidelines about the increases they can offer based on each year's budget. If you let your contract lapse, rolling over under the evergreen clause from one year to the next, then ask for several years' worth of increases, the payor will simply not be able to afford your request. "If you let your reimbursement lapse for five years, it's going to be hard — if not impossible — for the payor to absorb five years of increases in a one-time rate adjustment," Mr. Connolly states. "Poor planning on your part creates a crisis on the payor's end and can easily lead to hard feelings."

Mr. Connolly recommends looking at each contract every year and exercising some form of renegotiation if feasible. He says if the contract has a 12-month term, the surgery center should assemble its renegotiation plan and start the renegotiation process no later than 120 days prior to the contract's anniversary date. This will allow the payor the necessary time to assemble historical reimbursement and utilization data, for both parties to analyze proposed reimbursement scenarios and, ultimately, for the payor to load and execute the new rates upon renewal.

3. Assuming the payors know your business. Mr. Connolly notes many surgery center leaders make the mistake of assuming the payor understands their business. "Imagine you are a payor who deals with hundreds of different types of providers," he says. "It's the surgery center's responsibility to educate the payor, because you know your business better than they do." This means educating payors about the general value surgery centers bring to the health care marketplace — providing high quality care in a cost-effective manner — as well as the specific nuances of your individual center.

For example, you may want to explain that your physicians have privileges at hospitals in the local community and will take their cases to those facilities if the payor cannot provide an increase to the surgery center. "They will start connecting the dots and see that if they don't bring the ASC on board, the payor will more than likely end up paying more for the surgeries at the hospital," he says.

4. Making the first offer — or accepting theirs. Mr. Connolly advises surgery center leaders to avoid making the first offer. "This is typical negotiation 101, but it's so common to go in and tell someone what you want," he remarks. In most cases, he tries to get the payor to send him a proposal. He observes that if you ask for a proposal, the payor may offer something you would not have asked for or expected to receive. Even if you know the payor won't reimburse for implants, you can gain more leverage by pointing out that their proposal did not include implant coverage and that you will need another amenity to make up for it.

Similarly, Mr. Connolly points out negotiators should rarely, if ever, accept the payor's first offer. "If the ASC administrator is not a seasoned negotiator, hire someone who is," he remarks. A professional will understand when and how to effectively push for an increase and when to accept an offer.

5. Negotiating over the phone or email. Mr. Connolly recommends surgery center leaders negotiate in person rather than over the phone. In some cases, your payor will be located far away and the expense of travel will outweigh the potential increase; however, whenever face-to-face negotiation is possible, this is the manner in which you should proceed. "If you are trying to build or improve a relationship with the payor, you will more effectively accomplish that task in person," he says. "Face-to-face meetings allow you an opportunity to pick up on non-verbal communication that can assist you in determining whether you should push for higher rates." 

Learn more about Pinnacle III.

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