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5 Tactics to Negotiate Bundled Payments for Surgery Centers

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More payors are introducing bundled payment programs, giving surgery centers and hospitals the ability to accept a pre-determined rate for a procedure in exchange for higher volume from the payor. In this scenario, the payor and the facility also work together to determine quality goals that the facility will meet in exchange for additional reimbursement. Adriaan Epps, director of contracting services for abeo, discusses five steps surgery centers and physicians should take during negotiation for bundled payments.

1. Make sure all physicians have a seat at the table. Every physician who works at the surgery center should have a seat at the table when it comes to negotiating bundled payments, Mr. Epps says. Bundled payments generally mean that the facility receives a total "bucket of money" for a procedure or set of procedures, and then that bucket is divided among the providers who perform the surgery. "Typically facilities, whether hospitals or surgery centers, will recognize that a surgeon should receive more of the money versus other providers," he says. "It will end up being 75 percent to the surgeon, and the others will have to fight for the scraps." For example, if the anesthesiologists don't have a voice in the negotiation, they will most likely miss out on significant money.

Mr. Epps says it's important to demonstrate the value these other providers bring to services and procedures. "We only see, time and again, the surgeons that are bringing the patients," he says. "The patient doesn't come through the radiologist, and therefore the facility views them as a cost and a necessary evil. It's very important for all parties to come to the table and demonstrate the value they bring to the organization."

2. Make sure bundled payments are lucrative compared to current reimbursement. Healthcare costs are high in the United States at the moment — it's a common topic of conversation, and payors are all too aware of it. "They view payments to doctors as already too high, and the concept is to find additional methods to reduce compensation," Mr. Epps says. Surgery centers benefit from the movement to reduce cost because they are a high-quality, low-cost provider, especially compared with higher-paid hospitals. But despite efforts on the part of payors to lower reimbursement, surgery centers should only accept bundled payments that are as lucrative (either in terms of individual case reimbursement or volume) as their previous reimbursement.

"Facilities need to make sure that it's a financially viable methodology, and that it doesn't further reduce revenues or profitability," Mr. Epps says. He says the methodology for bundled payments is generally quite complex and varies significantly from payor to payor — some give reimbursement based on fee-for-service methodology, while others use a case rate plus carve-out codes tied to Medicare methodology. Others tie reimbursement to efficiency parameters. Either way, he says physicians should perform due diligence and determine whether a boost in volume or stable reimbursement will keep the surgery center at the same level of profitability.

3. Understand which procedures will be included.
Mr. Epps says facilities and payors commonly carve out the codes that will be included in the bundled services, and it doesn't always encompass every service offered at the facility. Mr. Epps says the facility should share with the payor their data on the most commonly performed procedures (or most commonly documented codes) at the surgery center. The bundled payments should probably be based on the highest-volume procedures at the center.

4. Determine how to measure quality. Bundled payments are based on the idea that facilities can receive additional reimbursement for meeting critical quality benchmarks. For example, most payors across the United States focus on the total cost index of the hospital and how that relates to average length of stay. If quality measures show that the physicians in the facility are performing high-quality services more effectively than their competitors, the payors will reward those physicians by saying, "If you meet this certain benchmark or threshold, we'll pay a certain amount of money per procedure or group of procedures." If the physicians further prove that they have been more efficient and reduced average length of stay, they would receive a percentage of dollars captured as a reward.

Because of this methodology, Mr. Epps says you need to agree with the payor on the quality measures that will be used to determine your reimbursement. "If they can't agree on the measures, it's really difficult to negotiate the methodology and premise behind the bundled payment," he says. "The payor needs to be able to capture the same data as you."

He says reimbursement may be based on SCIP or PQRI measures and should be measured approximately every quarter or six months. "The facility needs to demonstrate their outcomes through quality improvement programs they have in place," he says. "They need to be able to sit down with key people on the payor's side and share those quality parameters."

5. Make sure you understand the contract. "It's always important to understand the terms of the agreement," Mr. Epps says. "See a copy and review what is being proposed." He says the payor may be changing contract language as a result of the movement to bundled payments. If the bundled payments only apply to certain procedures, you need to know how other services will be reimbursed if they're not included in the program. "It's so easy for payors to re-contract the doctors or for them to sign an amendment without understanding what it means to the practice or facility," he says.

Mr. Epps says the agreement should be an overall boon for your facility. "Is this cost-effective to your business, and how do you get out of the contract if it turns out not to be?" he says. There's a chance that this may not be the best time to start bundled payments — you should always be able to revisit in six to 12 months if necessary.

Learn more about abeo.

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