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Tips for Simpler Managed Care Negotiations

I. Naya Kehayes, MPH, managing principal and CEO of Eveia Health, and Matthew Kilton MBA, MHA, principal and CEO of Eveia Health, recently spoke on managed care negotiation strategies at Becker's 18th Annual ASC Conference in Chicago.

The first step to more successful negotiations is to supply payors with meaningful data. "There's some information you think might be useful but isn't as useful to the payor," said Ms. Kehayes. She outlined information needed to negotiate contracts: operating cost data, capital expenditures, hospital reimbursement, volume that can be moved to and from the hospital, examples of actual hospital cases, variances in payment methodologies, literature demonstrating trends, case mix and payor mix.

Few payors operate under the same payment system in this country, according to Ms. Kehayes. Understanding the variances in payments is crucial, as one might be advantageous for your center, while another may not. Other questions ASCs should consider include the effects of adding new surgeons or gaining access to new volume. ASCs should ensure their resources, space and staff can accommodate a potential change in cases. "We've seen ASCs go out and get a big contract, and then they don't have enough OR time to accommodate all the new cases," said Ms. Kehayes.

Payor representatives who negotiate ASC rates are typically not clinicians or ASC operators. "They do not have any experience running an ASC," said Ms. Kehayes. "The folks doing ASC negotiations are typically not as seasoned as some of the other representatives, so they may need some education." Ms. Kehayes said these representatives are often provided with little to no education on surgical costs, but they are still accountable to sticking to a budget.

"Payor representatives commonly believe ASCs are all alike. They might say, 'The ASC down he street works with this rate, why can't you?'" said Ms. Kehayes. It is often necessary to distinguish and explain differences between centers. There are a few other points of education ASCs may need to provide representatives. They usually classify any ASC "spend" (a payor-industry term) as negative, when it often calls for more context and analysis, and representatives frequently do not understand how much more they pay for hospital procedures.

Mr. Kilton's portion of the presentation focused on data collection. "The source of this data is your medical staff," said Mr. Kilton. The most useful data is patient specific and easily verifiable by payors. When gathering information from physicians, there are a few critical factors: date of service, payor name, product type, procedures billed in the order they were billed by the physician, location name and location type. Location should be specific — not just the name of the hospital, but whether it was performed in the hospital's outpatient or inpatient unit. These differences may or may not further ASCs' argument.

Mr. Kilton also shared some pitfalls, such as ambiguity between procedures and cases (secondary codes listed as primary codes, for instance) and unclear location listings, such as "hospital" or "Memorial Med Cnt." There can also be unclear product categories, such as commercial, PPO and HMO, that make cases difficult to classify. "You may not know the full extent of volume for that specific payor," said Mr. Kilton.

When you've gathered the information, the data should be analyzed and filtered to reflect: ASC appropriateness, contracting opportunity and realistic volume forecasts. Mr. Kilton also discussed hospital explanation of benefits. These often explain what the hospital was paid -- the "missing link" in an ASC's negotiation. This can establish the market rate and determine what contracting opportunities and projected reimbursement ranges the ASC can obtain.

Mr. Kilton used an example where a hospital received a reimbursement of $3,200 for a breast reconstruction. "That's not a lot," Mr. Kilton said. "This shows there may not be that much opportunity in this marketplace." To obtain a hospital EOB, surgeons have to request the information from a patient. Some of the most appropriate times to ask for this information are before surgery and in surgery follow-up. These documents can be requested as a resource to compare prices, to save the patient money or simply out of curiosity.

Related Articles on Contract Negotiations:

11 Tips for Effective Negotiations With Suppliers
Key Issues When Moving to In Network Status: Q&A With Greg Horner at Smithfield Surgical Partners
12 Ways for ASCs to Improve Payor Contracting

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