Surviving on a High Percentage of Medicare: 8 Thoughts From Health Inventures' Dana Folstrom

Mirage Endoscopy Center, a joint venture between physicians and Eisenhower Medical Center managed by Health Inventures, sits in the Coachella Valley in Rancho Mirage, Calif., a warm, sunny area flooded with retirees. The large population of elderly people means that Mirage Endoscopy Center depends on a high percentage of Medicare reimbursement — around 50-60 percent, according to administrator Dana Folstrom. Medicare reimbursement is a dangerous game for any surgery center, but because the center is GI-focused, a high percentage of Medicare reimbursement poses a significant challenge to profitability. Since 2007, CMS has instituted around 20 percent in cuts to GI rates, with more expected in the future.

When CMS first announced cuts to GI reimbursement several years ago, Mr. Folstrom realized that significant measures would be necessary to maintain or increase profitability. Here he discusses what the center has done to stabilize revenue and keep physicians happy despite reliance on an unstable reimbursement platform.

1. Take an aggressive approach with commercial payors. Surgery center administrators can't do anything to change Medicare reimbursement, so centers with a high percentage of Medicare volume must concentrate on using their managed care contracts to offset decreased governmental reimbursement rates. Mr. Folstrom talked to his major insurers — Blue Cross Blue Shield, Aetna and United Healthcare — and negotiated contracts with "escalators" every year to make up for the continuing decline in Medicare rates.

He says the payor contracting department through Health Inventures helped the center take a "fairly aggressive approach" with payors. The center sent soft termination letters to each payor in order to move negotiations along and provided data to payors that showed the benefit of using the surgery center for patient cases. "It's cheaper and more efficient for payors to do procedures in the ASC," he says. "We're just honest with the payors. Medicare is cutting our reimbursement, we want to stay open and we provide a high-quality cost-saving service to our community"

2. Move away from percent of Medicare contracts. When Medicare starting cutting GI reimbursement, Mr. Folstrom decided to move the center away from "percent of Medicare" contracts, which reimburse based a percentage of ever-changing Medicare reimbursement rates. Instead, the center started negotiating contracts based on "case rates," payment to the provider based on a pre-agreed fee that includes all aspects of care regardless of additional costs incurred during the procedure. Mr. Folstrom says case rate contracts have been more profitable for the surgery center, though some smaller payors  reimburse based on percent of charges.

3. Concentrate on reducing average days in A/R. Administrators agree: The longer you wait to collect your money, the less likely you are to get paid in full. Mr. Folstrom said from a cash flow standpoint, it became very important for the ASC not to allow A/R to age beyond a certain point. "That was a real focus for us — keeping our A/R around 28, 29 or 30 days and keeping our aged A/R down to 5 percent," he says. "We have to make sure we get the billing out and that we're following up."

He says the biggest issue that contributed to high days in A/R was problems with initial billing. "Your initial billing has to be clean," he says. The surgery center changed its original clearinghouse and has managed to sign most of its payors up for electronic billing. Mr. Folstrom says electronic billing allows the office staff to track a claim while the payor is reviewing it. "When you do a hard bill, you call the payor and they say they didn't receive the claim," he says. "With electronic billing, I can say, 'I know you received it, because it's right here in the system.'"

4. Bill directly to Medicare. Mr. Folstrom's ASC has also started billing directly to Medicare to increase the speed at which claims are paid. "Because we do such a high percentage of Medicare, we went to direct bill to Medicare," he says. "They have a software product you can use, and the turnaround on those claims becomes much quicker." He says with the Medicare software, his staff finds it easier to identify errors with the billing, correct them and re-submit in a timely fashion. He says the software also makes it easier to communicate with Medicare about when payments are due back to the surgery center.

5. Increase efficiency. Low reimbursement increases the necessity for high volume, meaning a Medicare-dependent surgery center must be efficient to schedule as many cases as possible. Mr. Folstrom says efficiency depends on several things: providing the staff support to move patients through the center quickly, remodeling problem areas to improve patient flow and cross-training employees.

"From a staffing standpoint, we make sure we have adequate staff to move the patients through the center with no wait time," he says. "That way, we're not waiting for staff to get from one area to another or finish something and then get to the next patient." He says cross-training employees also helps with efficiency because the ASC can assign a PACU task to a pre-op nurse if the pre-op is empty and all the other nurses are swamped.

6. Negotiate lower prices for high-volume supplies. To save money in a GI ASC, Mr. Folstrom recommends looking at the supplies you use most often and talking to your vendors about better pricing. He says his center has been successful in negotiating lower prices for forceps and snares — two of the highest-volume items — by encouraging competition among vendors.

"We don't like to jump around among vendors — that's not the point," he says. "We just made it pretty clear that based on the reimbursement rates we were receiving, we weren't going to be able to pay [our vendor's current rates] long-term." He says he emphasized to vendors that the surgery center performs a high volume of GI in the area, making the ASC a "desirable account" for suppliers.

7. Talk to physicians about high-cost GI supplies. Mr. Folstrom says there are several supplies in his ASC that are too expensive for Medicare-reimbursed cases. For example, when the surgery center performs esophageal dilation, the physicians have the option to use a multi-inflation balloon that opens to different sizes. Unfortunately, the multi-inflation balloon is expensive enough that the surgery center will not make money on the procedure if it is used.

He says the same holds true for gold probes or banding and clipping supplies. "Typically patients that require these interventions will present with higher acuity, and we will screen them to assure they are seen in the appropriate clinical setting to ensure a  quality outcome," he says. "It allows us to proactively plan with our physicians to provide alternate supply solutions that will provide the same quality outcome for our patients." While Mr. Folstrom says the surgery center has not stopped taking certain Medicare procedures, he does talk to physicians about lower-cost options that will improve their distributions without jeopardizing quality.

8. Set physician expectations for time per procedure. ASC efficiency does not only depend on how quickly staff can turn over a room, Mr. Folstrom says. "The center has worked with physician to create a process that allows us to do the amount of volume needed to remain profitable," he says. "We have an extraordinary buy-in from all our physicians on the patient flow and block time structure, and this helps ensure on-time starts and efficient use of center resources." He says this buy-in allows the center to maintain high volume, quality outcomes and high patient satisfaction scores.

Learn more about Health Inventures.

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