13 Things to Know About ASC Operations

Experts from the ASC industry discuss 13 of the most important things to know about surgery center contract negotiations, revenue, billing and coding, supplies and staffing.

Contract negotiations

1. Re-negotiate contracts when you start a new specialty. According to Luke Lambert, CEO of ASCOA, starting a new specialty is the perfect time to evaluate your existing contracts and negotiate prices for new contracts. "If you're an eye center and you're going to start doing pain management, you'll need to evaluate whether you're going to get paid adequately on those pain management procedures," he says. He says this evaluation will involve looking at all your other contracts to determine whether they will allow you to bring the new line into your center successfully.

2. Look at contracts a year before they have to be renewed. Mr. Lambert says contracts coming up for renewal should be examined closely a year ahead of time to give ample time for the center to determine where changes need to be made. For example, if you have a new technology coming into play for a specific type of case, you may need to talk to the payor about accommodating the extra cost. "You'd say, 'Here, there's this new implant that's much better for the patient, and you're not paying enough for us to use it right now, but we don't want to have to take it to the hospital where you'll have to pay much more,'" he says.

He says it can be difficult to negotiate contract increases if your initial negotiation went poorly. "Payors are loathe to make any improvements because when they already have a contract with you, they already have you slotted into a budget," Mr. Lambert says. He says ASCs must present compelling economic rationale as to why the payor will suffer if the ASC has to drop cases.

3. Out-of-network facilties are facing challenges in some states. In some states, out-of-network facilities are facing new laws that reduce OON reimbursements or place caps on these reimbursement rates. In New Jersey, OON ASCs have historically benefited from very lucrative reimbursement rates, receiving on average three times the reimbursement for being OON than in-network. But that trend may be about to change: New Jersey insurance carriers have recently announced plans to tie OON network reimbursement of ASCs to Medicare.

Larry Trenk, president of the New Jersey Association of ASCs, says if insurance companies are successful in curtailing or controlling the OON insurance level, the power will shift dramatically from ASCs to payors. If insurance companies gain extreme leverage over OON ASCs, he predicts in-network ASCs will also be adversely impacted. "If the most they're going to pay you is a certain percentage of Medicare if you're OON, who's to say they're not going to pay the same thing for in-network?" he says.

According to Krystal Mims, president of Texas Health Partners, Texas insurance companies are pursuing similar plans. At a recent ASC conference, Ms. Mims heard discussion about BlueCross BlueShield announcing OON rates will be tied to Medicare rates. "If these changes occur, that could affect all the facilities that have historically been OON," she says.


4. Focus on high-revenue physicians. Rather than opening your doors to as many physicians as you can find, pursue high-revenue cases and the physicians who bring those cases. A large group of physicians will not benefit your center if their cases are not profitable. "Five spine cases a month can increase your revenue by as much as $500,000," Lori Ramirez, founder and CEO of Elite Surgical Affiliates, says. "We want to bring in someone who can contribute a lot of impact for the same amount of ownership. Identify your most and least profitable cases and physicians so you know where to make cuts if you need to."

5. Track concentration of revenue among specialties quarterly. If you run a multi-specialty ASC, you need to know "what your revenue is made of," according to Aaron Murski of VMG Health. If you keep track of how much revenue each specialty brings to the ASC, you can make better informed decisions during contract negotiations. "It's important to see the direction of your case mix," he says. "It's not necessarily something you can have control over, but you can definitely brace for something if you know it's coming." For example, he says if you know that Medicare reimbursements for GI are being tied to hospital outpatient department rates, you can use that information to budget for the coming years based on your concentration of GI rates.

According to VMG Health's Multi-Specialty ASC Intellimarker 2010, the most profitable cases by net revenue in the last year were orthopedics ($2,443), OB/GYN ($1,757) and ENT ($1,742). This may vary in your area, but make sure to keep up with the most profitable cases to ensure healthy revenue in your facility.

Billing and coding

6. Simple mistakes can lead to an automatic denial. According to Lisa Rock, president, and Ryan Flesner, director of A/R, for National Medical Billing Services, simple mistakes on a claim can lead to an instant denial. These mistakes could include:

• ID card errors, meaning mistakes in the ID number, date of birth or subscriber date of birth.
• Failure to verify and authorize insurance, meaning your staff fails to make sure the patient actually has coverage before undergoing a procedure.
• Failure to coordinate benefits, meaning your patient's primary, secondary and teriary coverage — if applicable — are loaded incorrectly into the system.
• Failing to understand carrier-specific modifiers, meaning your coders don't know which carriers prefer which modifiers before they submit a claim.

7. Collections on the front end will save a lot of hassle on the back end. According to Rob Morris, vice president of marketing and new business development for GE Capital's CareCredit, billing should not be an option in your ASC's financial policy. "I've talked to a bunch of ASCs, and they have huge accounts receivable because they don't collect at the time of service," he says. "Once people receive the service, they just don't pay, and healthcare providers end up at the bottom of the list of [monthly] financial obligations."

According to Mr. Morris, once an A/R account goes over 90-120 days, the chances of being paid are significantly lowered. Even if the ASC hands the patient over to a collection agency, the facility will receive very little money relative to the actual payment. To tackle this, Cathy Meredith, vice president of finance for ASCOA, says patients should be contacted three days before service to discuss payment. There should be no discussions of patient payment at the front desk. "The only reason you should bill after the surgery is if there are changes because of [complications during surgery]."

Supplies and equipment

8. Make sure physicians know their case costs. Mr. Lambert says one of the easiest ways to bring down case costs for individual physicians is to make them aware of the case costs of every physician in the center. "No physician wants to be the high-cost guy," he says. "Label the preference cards with how much each item costs and let them comment on it. They'll say, 'I had no idea this costs that much. Do I really need to use this, or is there something cheaper I could use?'" He says this case cost comparison will also foster collaborative between specialties and make it more likely that your lowest-cost physicians will lead the group in choosing items.

9. Buy refurbished equipment or lease directly from vendors. Ms. Ramirez recommends saving money by increasing your ASC's use of refurbished equipment, as well as directly leasing from vendors. "A lot of these vendors are eager for business, and they need to sell their equipment," she says. "Not many people are buying new equipment, and fewer people are buying the latest-and-greatest fancy toys, so vendors need to get their product moved," Ms. Ramirez explained. She says she has found vendors accommodating on lease agreements because of the down economy, and she recommends that ASCs take advantage of that fact.


10. Compress surgical schedules to save money. According to Mr. Lambert, the most important thing an ASC can do to control cost is compress its surgical schedule. "Whether you do 15 cases a day or 40 cases a day at the center, by and large it's going to cost you the same amount to staff the center," he says. "So obviously if you can have a higher throughput, in the tough reimbursement environment we're in, having a lot of cases going through your day is really essential to be profitable."

He says some very successful centers flourish by seeing cases for just two days a week and filling those days with cases. "That's fine because they're very busy on the two days they're open, and on the other days, they may have a scheduler and a billing person, but they don't have all the clinical staff," he says.

Sandy Berreth, administrator of Brainerd Lakes Surgery Center in Baxter, Minn., says you should be clear when you first hire staff about your scheduling policies. Many ASCs use a flexible scheduling model that means if there are no patients, staff members don't come in. For staff members who are not used to the ASC environment, this "no patients, no work" policy might come as a shock. Make sure your staff understands that patient volumes may fluctuate from week to week based on acuity levels and scheduled cases.

"If all of a sudden we recognize [that] the next day we have four patients that need a lot of help because they have high pain needs, we have the kind of staff who will accept that and come in," she says. Your ASC can also use PRN staff to cover shifts that don't require a full-time employee.

11. Allow physicians to add cases at will. Larry Taylor, president and CEO of Practice Partners in Healthcare, says the most successful surgery centers create an environment that allows physicians to add-on cases at will, creating a culture that's "distant from the hospital environment." He says ASC staff members should be taught to be flexible about last-minute additions or changes to the case load. "You have to be willing to serve the number one customer, the physician," he says. "When you have a staff that can actually perform better when they're thrown a curve ball, that gives value to the ASC and makes doctors want to bring more cases."

12. Know what other ASCs are paying their staff. According to the ASC Association's 2010 ASC Employee Salary & Benefits Survey, the average administrator salary in 2010 was $93,870, a 1 percent increase from 2009. The average medical director salary was $28,800, the average registered nurse salary was $60,500 and the average business office manager salary was $53,000. Benchmark your facility's salaries against other facilities to make sure you are paying a competitive rate but not spending money unnecessarily.

13. Use anesthesiologists to tighten pre- and post-operative processes.
According to Thomas Wherry, MD, medical director for Health Inventures and principal of Total Anesthesia Solutions, anesthesia providers can assist nurses and other staff members in tightening up pre-operative phone calls and post-operative discharge processes. "If anesthesiologists do not take ownership of the [pre-op phone call] process, the center spends a lot of wasted time on the phone call asking questions that aren't as directed as they could be," he says. "They may be gathering data and labs that aren't necessary."

He says anesthesiologists can also help nurses understand when it's appropriate to discharge a patient. Many ASC nurses base patient discharge on timing rather than physiologic symptoms, so a patient may be staying for thirty minutes longer than necessary just because the guidelines dictate an hour of recovery before discharge. "Anesthesiologists should help determine discharge guidelines," he says. "Without the direction and leadership from anesthesia, I find that the nursing staff may keep a patient an excessively long time. If it's all on [the nurses'] shoulders, they'll take the more conservative approach and keep the patient an extra half hour."

Read more advice on how to operate a successful ASC:

-5 Achievable Goals for ASCs in 2011 From Michael Lipomi of Surgical Management Professionals

-4 Goals for Cutting Down ASC Costs

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