6 Reimbursement and Business Concepts for Spine in ASCs

1. Negotiations with payors can be more difficult for spine than orthopedics. Since Medicare does not reimburse spine cases in the outpatient setting, negotiating ASC rates for spine cases with private payors can be more difficult than other specialties because payors often set rates at a percent or multiple of Medicare rates.

"Negotiating for spine is much more difficult than orthopedics because payors don't really know how to pay for spine — Medicare doesn't reimburse it in the ASC," says Jay Rom, president of Blue Chip Surgical Center Partners. "You should negotiate off of what payors are paying the hospital. You want to be less expensive than the hospital and sell that to the payors."

Mr. Rom suggests administrators check payor Web sites for information on estimated costs for spine procedures at the hospital. This will give them a better sense of current payor costs as insurers are increasingly making cost estimates available to their members.

Blue Chip ASCs are typically able to offer a 30-40 percent discount over hospital costs to payors while still covering costs and building in a profit, says Mr. Rom.

2. Don't add spine before examining and renegotiating existing contracts. If an ASC is considering adding a spine service line, it should not add the services before closely examining its current contracts with payors.

"Because many contracts do not include codes that Medicare does not cover, existing payor contracts are not likely to include spine reimbursement," says Mr. Rom. "A lot of contracts have a default category for cases not covered elsewhere in the contract, and this will almost never be feasible for spine. You have to start negotiations with the payor early, because the process doesn't usually go quickly."

3. Contracts with payors must address implant costs.
Just as with orthopedic cases, considering implant costs are critical to profitable spine cases. In fact, they may even be more important for spine cases because implant costs typically run higher with spine — as much as $2,000-$5,000 per case — than in traditional orthopedic cases, says Mr. Rom.

Mr. Rom says spine cases must be carved out or the case rate must be built to assume implant costs. Since implant costs can vary from physician to physician — sometimes by as much as $3,000 — rates must also cover the most expensive physician, he says.

"While we do a lot of work trying to minimize cost differences, there are practice differences that are going to exist. Some physicians are trained with different materials that just cost more," says Mr. Rom.

4. Allow 6-12 months for negations and don't be afraid to walk away.
Mr. Rom suggests existing centers allow six months to negotiate with payors, while new centers should allow up to a year. ASCs must also know their case costs and work from the cost up. "Understand your implant and facility costs and build in a sufficient level of profit," he says.

"If an ASC already has a contract with a payor, it can move more quickly, but you may have to terminate the contract if the payor will not come around," says Mr. Rom. "It depends on how important and how big of an opportunity it is to the ASC to bring the spine cases. Look at the termination provision and threaten to use it or use it."

Kamshad Raiszadeh, MD, director of the Advanced Spine Institute of Alvarado Hospital in San Diego and a physician-owner of the recently-opened Physicians Surgery Center in San Diego, says his ASC had to be willing to exclude payors that didn't offer good contracts as the ASC would only lose money on the cases. So far, Physicians Surgery Center has remained in-network with its payors, but Dr. Raiszadeh reports that other ASCs in the area peforming spine procedures have found some success by going out-of-network. "The reimbursements are higher [for out-of-network ASCs], but the volume is more variable," he says.

Mr. Rom suggests ASCs be as active as possible in helping payors understand spine at ASCs and the cost-saving benefits of contracting with a center.

5. Reduce implant costs by negotiating with vendors. Since steeper discounts are offered on implants as more devices are ordered, ASCs should work to reduce the number of vendors they order from.

Mr. Rom says Blue Chip ASCs typically try to use only 1-2 major vendors, which allows them to negotiate exclusive contracts offering better pricing.

ASCs may also find additional discounts by joining with other facilities to order implants. Dr. Raiszadeh says he is familiar with several ASCs that have joined together to order implants and receive bulk pricing as a result. He also said that ASCs with hospital partners may benefit from using the hospital's volume to its advantage.

6. Pursue workers' compensation cases. Worker's compensation cases traditionally reimburse well for spine in the ASC setting, so physician-owners should consider performing these cases in the ASC, when appropriate.

Dr. Raiszadeh says many of his workers' compensation cases, including most anterior cervical and lumbar discectomies and some fusions, can be performed in the outpatient setting. These cases bring additional revenue to an ASC, and building relationships with workers' compensation representatives can be beneficial.

Contact Lindsey Dunn at lindsey@beckersasc.com.

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