Stephanie Wasek: From your perspective, what’s the immediate impact of the new Medicare payment system on ASCs?
Caryl Serbin: For the most part, I think everybody is just really trying to get their arms around what the changes are, do some modeling and look at the potential financial impact. It’s tough not knowing the final percentage of HOPD rates until at least November, because typically, the budgeting process starts in August. So everyone is going to be behind the eight-ball in that regard.
SW: What can ASCs do to avoid as much as possible falling behind?
CS: Go ahead and start the budgeting. You might not be able to figure out Medicare’s reimbursement yet, but you can work through expenses and forecasting volumes. That’s time-consuming as it requires your physicians to let you know what amount of volume increase or decrease they are forecasting. Allocate time for budgeting, accept from the start that it will be more lengthy and difficult, and designate somebody who’s really Excel-proficient. I think the take-away is this: Just because you don’t have that final piece of information, don’t hold up the budgeting process.
In order to determine which procedures you can afford to do and which ones you can’t, you need to compare the proposed reimbursement to what it costs you to do the case. Case-costing should be ongoing anyway, but now that there’s even more emphasis because of the radical reimbursement changes, make sure you are up-to-date. Another area to focus on is how Medicare changes are going to affect your fee schedules. Compare your reimbursement from both Medicare and managed care and develop a reasonable fee schedule (need that Excel expert again). Currently most ASC fee schedules are based on a percentage of Medicare groupers and, since groupers are going away, you will have to rethink and revamp. Most ASCs will end up basing their fee schedules not only on a percentage of mark-up of Medicare rates, but will do cost-basis as well.
During the development of your fee schedule, be aware that some of the new Medicare reimbursement rates can be $20 or less (office-based procedures). As an example, a fee based on 300 or 400 percent of Medicare APCs results in an unacceptable reimbursement rate for those procedures, so look at setting a minimum default fee. It’s very important to be able to tell insurers what the minimum is that you can accept for a particular case, and that figure is going to vary per center based on overhead.
If your plan is to dump in the APCs, do a multiple and build off of that, you’re going to be in trouble. You have to do a lot of data mining to determine how these numbers translate. You may also consider doing a percentage of the unadjusted HOPD rates. The message is it’s going to take a lot of research. Try different methods until you find the right one, or usually a combination of several. As you experiment, you may find the results of one configuration are too low, but another can be substantially too high. For example, orthopedics as it ramps up may no longer lend itself to 500 percent of Medicare, so you’re really going to have to look at individual procedure codes. Whatever you decide, allot enough time to do this and do it right.
SW: Does the new payment system affect billing of private insurers? If so, how?
CS: Yes and no. Currently there aren’t many changes in the billing process for private insurers, except for the new UB-4 form. However, the thought is that managed care may do something similar in the near future, such as a single fee schedule based on a percentage of hospital rates. The new system will affect how you renegotiate your managed care contracts. Review your contracts for renewal dates and determine those whose reimbursement is based on Medicare groupers. Develop a proposal based on the new Medicare rates. Once you have your new fee schedule and case costing in place, these will be excellent tools for negotiation.
SW: How can ASCs help their coders and billers prepare?
CS: In terms of coding, the CPT codes are the same, so that’s not a change. That’s not to say you shouldn’t educate coders and billers on what the changes are and how they’re going to affect processes. There are new approved procedures now; that’s the big thing the coders and billers are going to have to know – what they are, how to code them properly, and information about packaged items.
We’re changing from a one-digit grouper to a fourdigit APC, which should be a function of the software. If your center is using traditional ASC software, these changes should have been prepared for. It may be more difficult for those who have other types of software. We’re getting a lot of calls saying, "We have outdated or non-ASC software, would it be smarter to outsource?" or "We don’t want to pay for software and/or we just lost our coder." We’re also seeing clients from bigger centers who just don’t want to deal with this. Although they’re sophisticated and understand the new payment system, it’s sort of the straw that broke the camel’s back. I also think it’s fueled by managed care: They’re more demanding than ever. It has become such a challenge, has become a science to get paid at all.
When they did the NPI form change, it was a simple thing, but that really affected everyone’s collection — not for a long period of time, but centers that bill on their own weren’t ready for the blip. They didn’t see it coming, and they lost revenue during that time. Well, this Medicare change is a much bigger blip than the form changes.
SW: How can a coding and billing company help?
CS: A billing company is immersed in this all day long; it’s a focused effort, so the end result is better. The next couple of years are going to be a challenge. If an ASC has few resources, it’s likely going to have a rough time. For years physicians said, "What does a management/billing company do for me?" I don’t believe that will be the situation anymore. Practices and ASCs often begrudgingly outsourced billing in the past, now there’s excitement – "Here, you take it!" We will probably reach a point where we’ll have to say we can take some clients, but not others. Another area where outsourcing may make a difference is the struggle ASCs are having with repeated appeals. Going forward, it will be the ability to chase the money and do two and three and four appeals that make the difference between success and failure for some ASCs. It’s especially important with managed care, because if they think they can get away without paying you, they’ll do it.
SW: Any other advice on surviving the changes?
CS: Yes! ASCs need to start hoarding some cash. Because of the last-minute modifications in the reimbursement plan and just due to the complete revamping of the system, I don’t see any way this can be accomplished on time without severe glitches. Even the best-prepared ASCs can still expect delays and errors in payments.
Typically, a profitable surgery center does a quarterly distribution. Consider modifying or eliminating that during the last quarter in 2007. I advised our governing boards to either hoard cash or open a line of credit right away as this often takes time to accomplish. Educate your physicians; explain why they need to hold that money and I’m not so sure you wouldn’t want to secure a credit line anyway as a backup. It’s the same thought process as preparing for Y2K. That didn’t happen. But this is going to happen. Remember, all things considered, this is a positive change for most surgery centers. However, preparation is key in this situation — it certainly won’t eliminate all the problems associated with this major change, but if your ASC does all of these things, you’ll have a better chance to come out smiling on the other side.
Ms. Serbin is the founder and president of Fort Myers, Florida-based Surgery Consultants of America and Serbin Surgery Center Billing.
