8 financial issues for total joint replacements in ASCs

From proper patient selection to performing the procedure with absolute precision, the clinical aspects of outpatient total joints are essential. But, ambulatory surgery center leaders who desire these higher acuity cases also need to crunch the numbers: What will it cost to bring total joints to the center and does it make financial sense?

Julie Bell, RN, administrator of Surgical Care Affiliates center Hawthorn Surgery Center in Vernon Hill, Ill., and Deborah Lee Crook, RN, CASC, administrator of Valley Ambulatory Surgery Center in St. Charles, Ill., each stand at the helm of ASCs that recently introduced total knee and hip replacements. Ms. Bell and Ms. Crook describe eight fiscal issues essential to understanding the total joint equation.

1. Managed care contracting. Payer negotiation is the biggest puzzle piece when it comes to total joints in the outpatient setting. If payers won't get on board, the program will have difficulty expanding beyond the scope of a few select patients willing to undergo such a major procedure on a cash-pay basis. Negotiation is necessary, but prepare for an uphill battle. Total joints are relatively new to the outpatient space in many markets and payers need to be convinced.

Valley Ambulatory Surgery Center performed its first total knee replacement in 2002 as charity care, but commitment to a full total joint program didn't begin until 2012. The first step was to carve out reimbursement rates with big payers in the market and collect solid quality data as leverage. The process at Hawthorn Surgery Center began in much the same way. "We used a lot of clinical data and put together a deck for managed care contracting. We had to prove our cases are not only safe, but also done at a much lower cost," says Ms. Bell. "Payers then began requesting conversations with the medical director and on-site visits."

The more data you have, the more convincing the argument. If your ASC is part of a national management company, ask if any other centers are already doing total joints. Pull from that larger pool of data and involve physician leadership whenever possible. "You have to have a superstar physician that is willing to put in the extra time," say Ms. Bell. It took both Hawthorn Surgery Center and Valley Ambulatory Surgery Center the better part of two years to fully engage and convince payers, but now both centers have profitable total joint programs.

2. Implant costs. The single most expensive aspect of a total joint procedure is the implant. "In 2011 we had our first financial conversation and it focused on implants and how much they would cost," says Ms. Crook. Before any procedure is performed ASC leaders must know their implant prices and how much reimbursement is needed to cover those costs. A single unpaid total joint procedure can deal a significant financial blow. Whether the implants will be paid for under carved-out rates or through a third party such as Access MediQuip, a plan must be in place.

3. Equipment and supplies. Total joints are typically the natural next step for an ASC that already performs orthopedic procedures. In which case, much of the necessary equipment is already at the center, but a number of different tools may need to be purchased. The number of equipment trays per procedure is much higher than a typical orthopedic procedure. A different type of operating table may be necessary. Additionally, total joints call for different types of medication and anesthesia.

4. Staff training and hours. For many clinical staff members total joints will represent a large shift in the daily routine. Rather than caring for patients for 45 minutes after a procedure and discharging them, patients could be at the ASC postoperatively for anywhere from five hours to 23 hours, dependent on state law. "There is not much increase in OR hours. The biggest changes is in OR recovery," says Ms. Bell. "There isn't a great increase in labor hours; it is simply a matter of taking on a different staffing model."

5. Outside relationships. For many lower-acuity ASC procedures, once a patient has left the building the facility's involvement ends. But, this is not the case with total joints. ASC leaders are responsible for coordinating physical therapy services and home health services. Contracting with these different groups is another financial line in the total joint ledger.

Some ASCs have in-house anesthesia services, while others contract with outside groups. In either case, the anesthesia providers need to be brought up to speed. "Our co-medical director is an anesthesiologist. He was able to work with the anesthesia team to prepare them for total joints," says Ms. Bell.

6. Physician preference. The market for total joints is growing, so naturally the options for physicians performing the procedures are on the rise. Preference cards, while an excellent way to keep physicians happy with the ASC, can lead to overspending. Work with physicians to understand case costing and reduce variation wherever possible. "I have surgeons who are very cost conscious. They trimmed down on their preference cards," says Ms. Crook. "When you show them how much their cases are costing, they get competitive. That also helps cut costs."

7. Business office preparation. Once payer relations are in place, the coding and billing aspects of total joints are relatively simple. "These cases are often confined to one CPT code. It's very simple for business office staff," says Ms. Crook. The most important role the business office has is knowing the carve-out and contracted rates by heart to ensure proper reimbursement.

8. Analyzing ROI. Once you have the numbers in front of you the question becomes whether or not they add up. "Once we started getting an idea of what payers would pay, it was a simple mathematical formula," says Ms. Bell. Determine how many physicians are committed to the program and the number of cases they will bring to the center each month. If the commitment and numbers are there, the program will ultimately generate profit.

Even after launching the program, continually monitor the financial outcome. "Organize everything by supply cost, implant cost (which varies greatly), OR time, staff cost and patient recovery time," says Ms. Crook. "Pre-certify each case and know your worst case payment scenario."

More articles on ASC issues:
7 things for ASC leaders to know for Monday
12 key statistics on the independent physician practice field
Total joints in action: 14 ASCs offering total knee replacement

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