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Payor Contracting

ASC Reimbursement

Already maximizing ASC reimbursement on your commercial contracts? Now what?

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I am often asked, “What if I’m already maximizing ASC reimbursement on my facility’s commercial contracts?” Three responses quickly come to mind.  First, how do you know you’re receiving optimal reimbursement?  Second, have you capitalized on moving cases from the hospital setting to your facility to create a leverage opportunity on your lower acuity procedures? Finally, if you truly do know you’ve already secured maximum reimbursement, don’t draw fire.

How Do You Know You Are Receiving Optimal Reimbursement?

From my bleacher seat, you don’t know what you’re capable of securing in terms of reimbursement unless you’ve answered at least two questions.

Have you thoroughly analyzed how your major commercial payors reimburse your ASC for the services you routinely provide?

Measuring how your ASC is reimbursed for its top volume procedures is a great place to start. This will allow you to assess your facility’s market parity and identify differences in reimbursement among your key payors. Since differences sometimes create opportunities, this analysis could help you identify ways to increase reimbursement.  It could also assist your facility in establishing practical renegotiation goals. Please see my blog Payor Contracting Tip: How to Determine Market” for additional details on determining market parity.

Has a payor contracting professional evaluated your opportunities?

This starts with hiring an impartial third party who possesses the knowledge and expertise necessary to analyze your facility’s contracts with, and corresponding reimbursement from, commercial payors. This party should also be able to fully negotiate third-party payor contracts. Having this additional set of eyes on your reimbursement when evaluating trends is priceless.

Moving Cases from Hospitals to ASCs

Your facility is most valuable to its payors when it can help them lower their costs.  Simply asking for reimbursement increases will not work in your favor.  In fact, payors may view this approach negatively and be less likely to grant you the reimbursement increases you are pursuing.   However, if payors can save money by moving high acuity cases from the hospital setting to your facility, they may see value in what your facility offers which could facilitate increased reimbursements.  Only then will they be willing to dig deeper into their pockets to pay you more for lower acuity procedures. Please see my blog What Opportunities Can You Leverage to Increase ASC Reimbursement?” for additional details on moving cases from hospitals to ASCs.

Don’t Draw Fire

Once you determine a payor is paying your facility exceptionally well, do not request changes on your contract unless forced to do so by the payor.  If, however, a payor is utilizing percent of billed charge as their payment methodology – a rarity among major payors these days – you can offset increasing costs of care by performing modest charge master increases annually.[1]  Doing so allows your facility to maximize reimbursement afforded under percent of charge reimbursement without drawing fire because you tried to renegotiate your contract.

[1] Pinnacle III encourages facilities to thoroughly research whether its commercial contracts have charge master increase limitations prior to implementing changes.  This will allow them to avoid any unintended consequences of any adjustments made.

Dan Connolly – Vice President of Payor Relations and Contracting

ASC Reimbursement

What Opportunities Can You Leverage to Increase ASC Reimbursement?

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Multiple leverage opportunities are available to increase ASC reimbursement. Two that quickly come to mind are generally applicable across all outpatient surgery centers.  First, always recognize the payor needs you.  Second, the payor community consistently strives to find lower-cost alternatives to their members being served at hospitals.  

The Payor Needs You

The payor needs to provide a comprehensive provider network to its members. Many payors offer their members a site-of-service differential to steer members to the most cost-effective and appropriate care setting.  For example, a payor may only require a co-payment from the member for services provided at an ASC, but the member will be subject to more costly co-insurance provisions if the same service is obtained at a hospital facility.  Therefore, the payor needs your ASC to help them accomplish their goal of securing high quality and cost-effective care at the lowest out-of-pocket cost for their members.

Moving Cases from Hospitals to ASCs

Payors are increasingly looking for additional opportunities to move higher acuity cases from hospitals to ASCs.  Why?  Because the difference in cost to both the patient and the health plan can be three to four times greater at the hospital.  Therefore, if your ASC can entice payors with the cost savings benefit of performing higher acuity cases on their members at your facility, you may be able to create a “leverage opportunity” that can produce greater ASC reimbursement on some of your lower acuity procedures.

For example, many commercial payors have expressed interest in having total joint replacements and high acuity spine cases performed in ASCs because they recognize the opportunity for cost savings.  In some instances, you can increase the leverage opportunity by offering to perform these cases at a predictable cost.  Some payors (self-insured plans in particular) wish to transfer the risk associated with implant variations by agreeing to an all-inclusive facility price for each high-acuity case type that is negotiated.

If your ASC is interested in, or required to, negotiate all-inclusive rates, be sure your data accounts for all variable costs (e.g., staff, supplies, implants) and associated frequency factors before heading to the negotiation table.  This includes a solid understanding of the size, number, and frequency of use for each implant type, along with any extraordinary supplies associated with each case.  And therein lies the rub – many ASCs who want to perform these cases aren’t equipped to negotiate prosperous at-risk arrangements.  To combat this, consider hiring a seasoned negotiator who has successfully secured at-risk arrangements – someone who will recognize and be better equipped to understand all the moving parts.  Alternatively, your ASC would be wise to refrain from performing at-risk cases initially, focusing instead on cases falling under fee-for-service arrangements.  Doing so allows you to assemble the necessary utilization data before attempting to negotiate all-inclusive case rates.

While adding high acuity orthopaedic and spine cases requires a capital outlay for your ASC, the added investment should not be overly detrimental if you’re already performing orthopaedic cases.  In that case, chances are your center already has a good portion of the instrumentation and equipment necessary to perform the higher acuity procedures.  If you are starting from scratch, however, you will want to complete a comprehensive feasibility analysis to demonstrate the costs and benefits of offering total joint replacement and/or spine cases at your facility.

In any case, enticing payors with the possibility of performing higher acuity cases on their members at your ASC could not only create a leverage opportunity, it may also add to the payor’s dependence on your ASC.  This puts you in a strong position to obtain higher ASC reimbursement, something you were seeking all along.

Dan Connolly – Vice President of Payor Relations and Contracting 

Payor Contracting

Payor Contracting Tip: How to Determine Market

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First, let’s define what we mean by the market. In a general sense, the market is what customers are willing to pay for a product.  Along the same lines, your ASC’s market is what both governmental and commercial payors are willing to pay for the use of your facility.  In this sense, it is the reimbursement range your ASC receives from its most common payors for the services it most frequently provides.

Your ASC’s definition of market will most likely differ from that of your payors. Commercial payors may define the market as part of a state, an entire state, or even an entire region of the country.  However they define it, it will not likely favor your ASC.  Unlike the payor, who may organize data to support lower the reimbursement they offer your ASC, you’d be wise to organize your reimbursement data to help optimize your ASC’s reimbursement.

How Should Facilities Determine Market?

For starters, most regions typically have four to six major commercial payors. Think of them as the “major league payors.” The other commercial payors are usually “minor league payors.” Your minor league payors may reimburse at a higher rate, but your ASC may only provide care to a fraction of patients from these payors compared to the rest.  When looking at the market, it’s more important to focus on your major league payors – those whose members commonly fill your operating rooms.

Next, look at what each major league payor is reimbursing your ASC for the services you’re routinely providing.  This includes measuring how your ASC is reimbursed for its top volume procedures – the codes representing the bulk of your collective commercial volume.  I generally start by looking at the top 20-25 procedure codes then target the codes with at least 50% of the ASC’s procedure volume.  What you are seeking to obtain from this data is a snapshot of the most likely overall reimbursement composition for each payor. This is a statistic that can be compared to that of your other payors as well as with Medicare. By assembling the data reflecting reimbursement by payor and overall percent of utilization by procedure, you can calculate the average rate of reimbursement. This approach will allow you to define your ASC’s market.  In addition, after compiling reimbursement data, you can drill down to see if, and how, each payor reimburses differently by procedure which will help you establish practical renegotiation goals.

What Should Facilities Do With This Information?

Now that you’ve determined the market, what can you do with this information? You can use the data to leverage payors.  If necessary, you can even submit blinded comparative data to each payor you are dealing with, reflecting where each unfavorably compares to their peers.  The key is leveraging your data wherever, and however, it is advantageous to your ASC.  By navigating this correctly, you can start the process to achieve optimal reimbursement. At the very least, you get a picture of the fluctuations you experience for each procedure reimbursement by payor, while being armed with the ammunition necessary to prompt more productive payor contract negotiations.

Dan Connolly – Vice President of Payor Relations and Contracting