Here are four things to know about bundled pricing use by ASCs to help you make the most of the opportunities this practice presents.
1. Expect to see an increased use of bundled pricing. The use of bundled pricing is expected to increase in the coming years with both private and public payors.
CMS is leading the fight for the use of bundled pricing because of the savings it can provide, and experts expect other payors to expand their use of this reimbursement strategy as well. Payors who have bundled fee agreements with providers can save money by reducing administrative costs and gain more certainty about total costs.
Peter Kongstvedt, principal of P.R. Kongstvedt Co. and an independent healthcare expert with particular expertise in managed care, expects that the increased push for bundling by CMS will cause private insurers to expand the use of bundled fees in their contracts.
“Bundling more and more fees, such as facility, equipment and professional service fees, into one package is very much in the sights of CMS,” he says. “CMS makes and breaks markets, and I believe that in this case, CMS is going to accelerate the market for comprehensive bundled prices.”
Craig Jeffries, Esq., a healthcare public policy consultant, concurs. “Medicare would very much like to see entire episodes of care bundled — facility fees, professional fees, device fees and pre-surgery to follow-up professional fees,” he says.
Although CMS is currently only exploring the use of comprehensive bundled fees at hospitals with its Acute Care Episode Demonstration project, Mr. Jeffries indicated that with new direction from healthcare reform, CMS will eventually turn toward implementing bundled fees at other types of facilities, such as ASCs, and that private insurers will likely follow.
2. ASCs often offer the most encompassing bundled fees to private insurers and patients. ASCs have been offering some of the most compressive bundled fees to private insurers and patients for many years.
Tom Mulhern, executive director at Limestone Medical Center in Wilmington, Del., says that his facility has been using bundled pricing for more than 10 years. According to Mr. Mulhern, in the early days of ASCs, insurance companies did not entirely understand how to pay surgery centers for their services. ASCs began to realize that by bundling fees, they could draw in insurance contracts with low prices and guaranteed pricing.
Limestone currently has approximately 3,000 bundled fee arrangements for various procedures with different payors. Mr. Mulhern says that the largest of these bundled fees include payment for facility, surgeon fees and anesthesia, which goes directly to the surgery center.
Mr. Mulhern believes this type of arrangement with private insurers is fairly unique to ASCs. “To the best of my knowledge, ASCs are currently the only type of medical facility to offer bundled fee packages to private insurers that encompass the big three — facility fees, surgeon fees and anesthesia fees,” he says.
For example, a facility might charge a bundled fee of $6,500 to an insurer for a breast augmentation. Of that $6,500, which is paid directly to the surgery center, $1,500 would go toward the facility fee, $500 would go to the anesthesiologist for his or her services and the remaining $3,500 would be paid out to the physician for his or her services and for any implantable devices required for the procedure.
Limestone’s bundled fee arrangements cover many different procedure types. However, Limestone is unique in the breadth of bundled fees it offers. Most surgery centers limit their use of bundled fee arrangements to specific procedure types, such as plastic surgery.
Joseph Zasa, JD, a partner at Woodrum/ASD, a leading developer and manager of ASCs, says that bundled fees are “not widely used outside plastics.”
In addition, not all bundled fees used by ASCs are comprehensive, encompassing facility, surgeon and anesthesia fees.
Mr. Zasa says that the surgery centers he works with typically bundle facility and anesthesia fees separately from physician and device fees. “Facility and anesthesia fees are paid by the patient [for an elective, plastic surgery procedure] in full, prior to the surgery,” he says. “The surgeon’s fee, which is assessed in 15 minute increments, and the cost of the device, if applicable, are then paid by the patient after the surgery.”
3. Large bundles can create a win-win situation for ASCs, insurers, physicians and patients. The use of large, comprehensive bundles creates benefits for ASC, insurers, physicians and patients.
Insurers benefit from bundled fees with ASCs because they save the insurer money, says Mr. Mulhern. “The insurers that I work with are eager to develop bundled fees with our ASC because it costs them less if their policy holder has a procedure at an ASC as opposed to a hospital. They can’t pay physicians better rates to encourage them to use our facilities, but they can allow us to determine a reasonable payment.”
ASCs that are willing to work with insurers on cost-saving bundles may be named preferred providers for that insurer, which also benefits the ASC’s bottom line. “Insurers are always looking to pay less,” says Mr. Kongstvedt. “If a surgery center offers packages that save an insurer money, an insurer may name that center as a preferred provider and direct people toward that center, giving the center more business.”
Patients, many of whom now must pay a certain percentage of coinsurance for procedures, benefit from these arrangements because they will pay less in out-of-pocket expenses than if the procedure was performed at a costlier facility.
Patients and insurers also benefit from the convenience of bundled billing. Insurers only need to cut one check, and patients do not have to deal with bills and statements of coverage that list numerous codes and fees. Additionally, patients undergoing elective surgery that is not covered by insurance also benefit from bundled fee arrangements because the will know going into a surgery the likely costs of a procedure.
4. ASCs should actively look for beneficial bundling opportunities. It is presently more common that insurers will approach facilities about developing bundled fees, according to Mr. Kongstvedt. However, ASCs can benefit from approaching insurers with the right bundled packages.
Mr. Mulhern suggests ASCs explore using bundled fees with insurers to attract procedures in specialty areas such as ENT and orthopedics to the outpatient setting. “Although ASCs do a number of orthopedic procedures, not many ASCs are doing ACLs or rotator cuffs. There’s an opportunity there to bring procedures to ASCs that are now being done in hospitals,” he says.
Contact Lindsey Dunn at lindsey@beckersasc.com.
