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6 Ways to Prepare for Successful Payor Contract Negotiations

There are several steps ambulatory surgery center administrators can take to ensure the negotiations are successful as possible. "We feel very strongly about choreographing every step of this process from the start. Know what the insurance company means to you," says Tom Faith of The C/N Group. Here are six tips on preparing for payor contract negotiations.

1. Keep track of important dates in the contract.
Identifying the expiration date for rate renegotiation, termination notification and other important dates for each payor is important for any ASC. Some payors allow 90 days for contract termination while others allow 150 days, which means knowing the language of each separate contract is absolutely necessary. To keep all of this information straight, Mr. Faith suggests creating a spreadsheet with important dates and information about each payor. Print off the spreadsheet and post it on the wall so it's available to everyone at any time throughout the year. Having the information visible also reminds practice administrators to keep track of the contracts and reinforces the different dates associated with each contract.

2. Understand the impact of each payor on your reimbursement mix.
Knowing the dollar impact and percentage of patients covered by the payor before entering into contract negotiations can impact the decisions you make during the negotiation. The insurance may affect certain procedures and surgeons in the practice. Before going into the negotiations, understand how resources for the different procedures are consumed in supply cost, recovery time, drugs and implants, and use this information as a negotiating tool. However, keep in mind that it's important to maintain a good relationship with each payor regardless of the contract's impact on the practice. "We really try to treat all contracts the same," says Jim Odom of The C/N Group. "In the past, we let a couple of payors get away from us and it was incredibly difficult to get them on par with other payors." The payor might not have a big presence in your market now, but if the payor successfully expands in the future, you can build upon the positive relationship that already exists.

3. Know your procedure margins and prepare to negotiate a carve-out for appropriate procedures. Knowing the margins on each procedure allows you to negotiate reimbursement for a group or procedure that is negatively impacting the ASC's profitability. When the group or procedure has a negative impact on revenues, suggest a carve-out to achieve adequate reimbursement. This is especially important as new, more expensive technology emerges because the old reimbursement levels may no longer be sufficient. "When some technologies first start coming out, reimbursement doesn't even cover supply cost," says Mr. Faith. "If asking for an appropriate increase doesn't work, focus on negotiating a carve-out with the payors for recognized reimbursement."

Understanding the average cost per case at your ASC is also important if you are looking to add a new specialty or procedure type because it promotes a good dialogue as far as setting reimbursement at a level that makes since for your ASC.

4. Focus on all aspects of the procedure, including the patient's length of stay.
Know the data for all aspects of a procedure, including the implant costs, OR time and patient's recovery time, because every step places a financial burden on the ASC. Some procedures, such as orthopedic and podiatric procedures, often include significant implant costs and while these procedures may not take long in the OR, the patient stays at the ASC longer for the extended recovery process. "Don't get caught up in OR times and supplies because the nursing staff on the front and back end is an expense," says Mr. Faith. "Looking at the whole stay is important because these expenses can't be overlooked in the process."

5. Understand the payors and cater to what they want.
Find out what is important to the payor, either during the previous negotiations or through ongoing dialogue, and focus on those areas to show improvement. "When we did that back in 2003, we learned a payor was very interested in pay-for-performance," says Mr. Faith. "We offered a pay-for-performance component. One of our contracts boosted our reimbursement rate by 2 percent." The ASC continued to set quality goals and changed the criteria depending on what the payor was focused on at the time. They have been successful in keeping the rate increase for the past several years.

6. Set reasonable goals going into the negotiations.
Before the negotiations begin, set a goal for the outcome of your negotiation in dollar figures. "We look at what impact the payor has on the center and establish a dollar goal," says Mr. Odom. If the payor doesn't meet this dollar amount through initial negotiations, change tactics. This may mean negotiating for a shorter contract or pushing for an extra percentage or reimbursement for multiple procedure cases. Figure out how your center can achieve appropriate reimbursement through discussing quality insurance incentives, complex procedures or other unique focuses of the ASC, says Mr. Odom.

Learn more about The C/N Group.

Read other coverage on contract negotiations:

- Prevailing in Vendor Contract Negotiations: 5 Best Practices

- 8 Quick Tips for Picking the Best Insurance Plans for Your ASC

- 10 Best Practices to Negotiate Insurance Contracts for Orthopedic, Spine and Pain-Driven ASCs

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