ASC Managed Care Contracting Best Practices by Specialty

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ASC managed care contracting best practices are largely dependent on an ASC's specialty mix. While single-specialty centers can rely on best practices for their specific specialty, multi-specialty facilities must take into account the volume of each of their service lines to negotiate the most favorable contracts, says Naya Kehayes, managing principal & CEO of Eveia Health Consulting & Management, a managed care contracting consulting firm. For example, centers with large GI and pain management volumes benefit by staying on Medicare grouper methodology, while orthopedic- and ENT-dominated centers benefit from moving to Ambulatory Payment Classification methodology when negotiating rates.

Here are several tips, by specialty, to improve the profitability and success of your managed care contracting negotiations.

  • Consider introducing the APC payment system to payors as an alternative methodology to the old grouper system or fee schedule. "APC methodology does a better job of weighting payments for orthopedics with respect to costs," says Ms. Kehayes.
  • If moving to the APC system, ensure allowances are high enough to cover high-cost implants. "Procedures with high-cost implants may still require carve-outs," Ms. Kehayes says. For example, a shoulder arthroscopy with three anchors might exceed the cost threshold in an allowed rate, while a two-anchor procedure may not, dependent upon the unit cost and implant type. In this instance, the ASC should carve out the procedure when it involves more than two anchors, she says.


  • ASCs should perform payor due diligence to ensure the payor has spine codes on its approved ASC procedures list before adding the service line. If a payor does not have these codes approved in the ASC setting, centers may need a spine surgeon to get involved. This may require meetings with the insurer's medical director and/or providing literature to educate the insurer on the appropriateness of spine cases in the ASC setting, Ms. Kehayes says.
  • Highlight the cost savings of moving spine cases from the hospital to the ASC. "Demonstrate the cost savings that is created for the payor by moving these cases from the hospital to the ASC" says Ms. Kehayes. "Often this savings is significant and will be attractive."  To quantify the value of the cost savings to the payor, the ASC must work with physician offices to capture EOBs from patients who have had spine surgery in the hospital or ask the surgeons to provide information to the payor regarding payor members that have been taken to the hospital. It is beneficial to provide the payor with the Member ID number, physician name, date of service, CPT codes the physician billed, name of the hospital where the case was performed and the potential volume of cases the surgeon can move from the hospital to the ASC.
  • Include capital expenditure costs in evaluating reimbursement rates. Adding spine includes significant start-up costs — sometimes up to $300,000 — for centers, so it is important that administrators include these costs in addition to supply and labor costs when evaluating spine rates, Ms. Kehayes notes. "When determining volume and rates needed to break even, capital costs must be considered," she says. "If an administrator determines case costs without the capital expenditure expense, the contracted rate might not be high enough to ensure the center breaks even."
  • Don't assume every payor is interested in moving spine cases out of the hospital. "Moving these well-reimbursed cases out of the hospital could be detrimental to that hospital," says Ms. Kehayes. "If the loss to the hospital is enough that it puts the payor's contract with the hospital at risk, then the savings might not be worth it the payor. This is especially true in a one-hospital market." Consider the following scenarios: 1) A payor saves $1 million dollars by moving spine cases to an ASC, but, as a result, the hospital drops its contract with the payor. The payor must then pay out-of-network rates to the hospital, and it is the only option in the market for patients. In this situation, the payor might experience increased costs in the millions of dollars, even when accounting for its savings on spine cases. 2)  A payor saves $1 million dollars by moving cases to an ASC, but as a result, the hospital demands a 10 percent increase in its contract in order to stay in network with the payor. In a one hospital market, the payor cannot sell insurance to employer groups without the hospital in network. The hospitals contract is valued at $30 million, so the cost to the payor to keep the hospital in network is $3 million. In these scenarios, the payor is clearly not motivated to move the volume because the cost to maintain the hospital as an in network provider outweighs the cost saving benefit that is presented by the ASC.


  • Stay on a grouper payor methodology. "Be on the lookout for payors that want to put you on the 'current Medicare payor methodology,'" says Ms. Kehayes. "APC methodology — which is the current Medicare methodology for ASCs — is less favorable than the grouper methodology for GI."
  • If moving to the APC system, understand what percentage increase on the new Medicare methodology equates to the center's current payment rates. For example, 130 percent of a grouper rate is going to be higher than 130 percent of an APC rate for GI cases. Centers, therefore, must know what percent of APC rates will be equivalent to their current reimbursement rate. In addition, if the payor is moving with transitional weights on APCs, the reduction in 2011 will be even greater. Thus, the APC weight year should be locked in when negotiating with the payor. Further challenging GI ASCs, HOPD APC rates for GI cases may actually be lower than ASC rates based on old grouper methodology. This could make ASC negotiations much more challenging in markets where hospitals have switched to the APC system, says Ms. Kehayes.

Pain management

  • Stay on a grouper methodology. "Pain management is very similar to GI in that centers with high pain management volumes will benefit from staying on the grouper methodology," says Ms. Kehayes. As with GI, if centers do switch to APC rates it is critical they translate their current grouper rates into a percentage of APC rates, she says.
  • Understand how site-of-service differentials impact rates payors are willing to pay. This holds true for GI as well, says Ms. Kehayes. Injections and certain GI procedures can be performed as office-based procedures, which are often less costly to payors than procedures performed at an ASC. As a result, most pain management and GI codes include site-of-service adjustments in physician fees. If a physician performs an injection at the office, the physician fee is higher, based upon a non facility value unit of compensation to account for the costs for the "facility" component of the fee. Payors often will not pay a higher reimbursement rate to the ASC than the "facility" component paid to the physician when the procedure is performed in an office, which restricts the level of compensation an ASC may get for procedures that are approved in the office setting. "If physicians have the ability to do the same procedures at the ASC in their office, this creates a stumbling block for the ASC," says Ms. Kehayes. "If the physicians do not have the ability to perform the procedure in-office, they need to let the payor know so the ASC's reimbursements won't be impacted." For example, if a C-Arm is required to do the procedure, and the physician does not have a C-Arm available in the office.


  • Consider introducing the APC payment system. With ENT, like orthopedics, reimbursement should increase from a switch to current Medicare methodology. Centers with high volumes of ENT should consider transitioning to this new methodology.
  • Ensure contracts contain language allowing for reimbursement of unlimited multiple procedures. "If your ASC provides a high volume of ENT procedures, make sure your contracts do not limit reimbursement on multiple procedures," says Ms. Kehayes. "If your contract has limitations on multiple procedures and your center does have significant volume of ENT cases, use this as leverage for higher reimbursements on primary and secondary procedures." For example, if an ASC is only reimbursed for the first two codes rather than for all codes, centers should ensure reimbursement on the first two codes will cover cases that involve three or more procedures. 
  • Consider adding BAHA and cochlear implant procedures. BAHA and cochlear implants (CPT 69714, CPT 69715 and CPT 69930) are now approved by Medicare for reimbursement when performed in the ASC. "These cases are expensive in the hospital setting and present an opportunity to move volume out of the hospital and into the ASC, which can be very attractive to payors," says Ms. Kehayes.

Learn more about Eveia Health Consulting & Management.

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