Q & A: Reimbursement and Volume Impacts of Moving From Out-of-Network to In-Network

Q: When an ASC goes in-network after being out-of-network, what's the typical decline in reimbursement per procedure? What is the typical bump in number of cases?

Eric Woollen, vice president managed care, Practice Partners in Healthcare: This is a tricky question with a plethora of different scenarios. In regards to reimbursement, what is prudent is a comparison of in- vs. out-of-network reimbursement. If a center is already OON, they would simply make a case-by-case comparison of what they have been paid (already as OON) vs. what the particular payor is offering in terms of an in-network contract.

To gain a general understanding of potential increases in case volume, the facility would need to request membership information by insurance product from the prospective payor. Sometimes any increase in volume still would not result in better reimbursement vs. remaining OON. If a majority of the business sold in that market already has OON benefits, those patients could already be seen regardless of a contract. What you are trying to accomplish is an increase in volume not discounting existing business. Any increase in volume would need to be weighed in terms of lost reimbursement vs. OON payments.

I. Naya Kehayes, MPH, managing principal & CEO, EVEIA HEALTH Consulting & Management:
The decline in reimbursement is variable depending upon the case mix of the center and your ability to negotiate as well as the ASCs fee schedule. It is also market driven as well as a function of the volume that the center will realize by moving in-network. Therefore, if the volume gain is greater, then the decline in reimbursement is typically greater because you will have an overall net gain on revenue due to the increase in volume if you have negotiated a favorable in-network contract. For example, if out-of-network average net revenue per case is $4,000 and in-network average net revenue per case is 2,800, and you realize a 100 percent increase in volume (which can be the case with some major payors), then overall, as long as your incremental cost per case is not more than $800, you will break even or be profitable on the contract. If you realize a 20 percent increase in volume, then you will realize significant losses in this example. Therefore, it is critical that the center understand the volume that will be gained by moving in-network in order to determine the financial impact of the contract. It is also very important to understand the incremental cost of moving in-network, which is a function of the increase in volume. You will definitely have an increase in operating cost; however non-operating cost/fixed cost will go down as volume increases.

We strive for contract rates at a 20-30 percent discount or less compared to out-of-network; however, we have seen payors striving for 70 percent or more in reduced rates when a center is moving in-network from out-of-network. We can justify deeper discounts if the payor represents a larger market share that we can validate will move to the center. If the center moves cases from the hospital, then this demonstrates a bigger cost savings to the payor, and the center should have more negotiating power because it offers a greater value to the payor; thus, it typically can be a win-win situation because the center can negotiate a better rate while presenting a savings to the payor and the member.

Scott Becker, JD, CPA: The per procedure impact will be a direct comparison of what the center is being paid out-of-network as compared to what payors will pay as in-network.

The potential increases in case volume are heavily dependent upon whether or not the current partners perform a great number of out-of-network procedures or are actually not doing so due to concerns with payor threats or other risks. Where physicians currently bring a great percentage of their patients to the center, the increase in volume can be very minimal. In contrast, where there are specific types of patients that the physicians see in their practice and specifically don't see at the center, then it is easier to project a larger increase in volume.

Further, in either event, the movement to in-network can have some positive impact on patient numbers simply due to the increased convenience to the physician who is seeing other patients at the center.

The actual assessment of changes in reimbursement must be made based on actual payor offers and payor case numbers. The actual assessment of changes in volume must be made based on actual case numbers per physician who utilizes the center and what they specifically cannot or do not do at the center solely due to payor contracting issues. In some situations, we have seen some substantial increases in case volume. However, we have also seen situations where moving in-network has had little positive impact on case volumes. A good estimate really requires digging into real case numbers with the physician and their office staff.

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