Payer contract negotiations can be a thorny and challenging process, but ambulatory surgery center administrators can mitigate the stress by preparing thoroughly and avoiding common missteps.
"Payer contracting is never an easy or quick process," says Jessica Nantz, president of Outpatient Healthcare Strategies in Houston. "The key to effective contracting is understanding your business and the costs of providing your services. Unfortunately, many facilities are worried about losing access to patients, so rather than being prepared to walk away from a contract that could harm volume, they sign contracts that will not pay enough to cover the cost of the services and, ultimately, the center loses money."
Here are six common mistakes ASC administrators make when entering negotiations with payers:
1. Thinking the ASC can make up the difference between contracted pricing and actual cost. Administrators sometimes agree to a less-than-satisfactory contract, thinking the center can make up the difference through increased volume, says Ms. Nantz. While an increase in cases decreases fixed cost, it does not lower other costs, such as salary or supply costs, enough to be an effective solution. It is important to have specific reimbursement rates and/or carve-outs for each procedure that cover all of your costs and provide a margin of profit per case.
2. Accepting vague language. The terms of any contract should be stated clearly so administrators fully understand what their ASC is agreeing to. Administrators can avoid pitfalls by obtaining a legal review of their contracts.
"For example, be aware of terms like 'lesser of' in the payment methodologies and their effect on your reimbursement," says Ms. Nantz. "Also, avoid language that limits your ability to change your chargemaster, and make sure the contract includes a clear definition of a 'clean claim.' This is important information for your ASC in producing clean claims that will result in expedited payment. Include specific remedies for untimely payments, for example, interest or late fees. Finally, insist on language addressing timeframes for submission and payment of clean claims."
3. Allowing contracts to roll over. Be aware of evergreen contracts that can continue from one year to the next without renegotiation or a termination date, says Ms. Nantz. Medicare reimbursement may change from contract year to contract year, and you may not be receiving the increases in your rates as compared to Medicare if the contract rolls over without renegotiation. If a new procedure or technology is approved during the contract term, ensure your contract has language that will allow you to negotiate or renegotiate pricing.
4. Not building a relationship with your payers. An ASC rarely gets everything it wants in negotiations. You need to establish a rapport with the payer, know your high-revenue groupers so you can give and take with the payer. Also, document your costs, prove your value, request parity with hospital outpatient departments, always have a counteroffer ready and, finally, be patient.
5. Not drilling down into the specifics. Go over every payer policy and clause to clarify the payer's payment policy on multiple surgical procedures, down-coding and bundling. "Be aware of the existence of different policies and procedures for different payers that may be included under one contract and request a list of payers attached to the contract," Ms. Nantz adds.
6. Not reviewing contracts before negotiations. Review all documents and supporting information, and then develop a negotiation "road map," advises Ms. Nantz. Focus on the specialties that have the largest impact on your business to achieve the goals and objectives you set out to meet for your ASC.
"While negotiations vary among payers, knowledge of your ASC's volume, costs and specialty needs will always be essential factors for a positive result. Critical to any successful contract negotiation is an administrator's preparation and a thorough knowledge of the ASC's operational and financial situation," says Ms. Nantz.