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Strategies for Developing an Optimal Payer Mix in the ASC

In a May 6 webinar hosted by Becker's ASC Review, Kelly D. Webb, vice president and general manager of MediGain's ASC billing division, presented strategies for developing an appropriate payer mix in an ASC setting.

Mr. Webb discussed using benefits to drive ASC profits and payer mix to improve revenue, engaging in a hybrid strategy, understanding baseline pricing required to keep an ASC profitable and leveraging benefits in the current market.

According to Mr. Webb, a large part of why deductibles and premiums have risen recently stems from commercial insurance companies' efforts to "survive" under the Patient Protection and Affordable Care Act.

"By creating the changes that they have — an a la carte selection of services and benefits — insurance companies are trying to limit their exposure to risk. They may exclude certain specialties for payment in their benefits," said Mr. Webb.

For ASCs to continue to receive payments for procedures, Mr. Webb recommended surgery centers understand how physicians are paid before surgery is scheduled. This understanding is crucial to a center's ability to develop a beneficial demographic and payer mix. Mr. Webb demonstrated a payer mix analysis to explore baseline footprint ASC costs — in other words, the fixed minimum costs of any ASC procedure.

Performing the analysis

The first step of the analysis is to examine insurance company contracts. Contrasting in- and out-of-network options and examining which benefits cover which procedures clarifies how much patients must contribute to cover their surgeries, given what insurance companies have agreed to pay.

Keep in mind, negotiation is necessary, said Mr. Webb. "The very first contract they send to you may be loaded with terms that favor the insurance company, assert legal rights to dictate fee schedule and list benefit exclusions that may prohibit charging the patient in excess of the benefit, forcing the ASC to eat the cost," he said.

The second step is to lay out case data. "Even paper-based ASCs can create a payer mix analysis," said Mr. Webb. "Take a full set of cases for the month, and then analyze where the cases are coming from, the average case rate, the percentage of cases coming from different insurance companies, and see where business is coming from."

He cited one ASC's example, in which 30 percent of all cases were out-of-network but brought in 70 percent of a surgeon's revenue. Prior to creating a payer mix analysis, the center had relied upon high volumes as a guarantor of profits. After the analysis, the center was able to phase out the unprofitable contracts, and profits soared 300 percent.

Practical implications and bottom line

When rates change, ASCs must re-evaluate what the fallout may be. "When insurance companies make changes and adjustments, your business model has to make changes to go with the flow — to make better business plans for your own entity," said Mr. Webb. He urged administrators to observe how revenue aligns along individual provider lines during the revaluation. "Case averaging is good, but it makes sense to have an out-of-network mix within a plan, so higher cases can make up for lower-paying ones," he added.

Another practical implication of keeping close tabs on insurance rates and case mix extends to the PPACA, according to Mr. Webb, who noted that while platinum plans may have feasible reimbursements from an ASC perspective, bronze, silver and gold plans need consistent verification of benefits up front. "Gold, silver and bronze plans pay at 67 percent of Medicare rates," he said. "Lots of ASCs are passing up on exchange insurance, though platinum plans can pay really well."

In the end, Mr. Webb recommended a hybrid strategy for ASCs. "The reality is network strategy must be handled based on payer mix, area demographics and the market share of various insurance companies," he said.

To view the webinar, click here.

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