Ron Brank, a group vice president for Symbion in Nashville, Tenn., offers 10 points on using cost data for managed care contract negotiations.
1. Meaningful data is essential. In managed care contract negotiations, "an ASC needs meaningful data about the costs of each particular type of case to know whether it can make a profit on the rates the payor is offering," Mr. Brank says. Ambulatory surgery centers that cannot do this often end up accepting a money-losing rate. Alternatively, the data-poor ASC may compare the payor's offer to estimates of costs or a small sample of cases. This is risky because it may not accurately reflect the true average cost per case.
2. Perform case-costing to obtain data. Many ASCs do not have cost data because they typically don't need it when sending out claims. For example, Symbion ASCs are mostly paid through a set fee schedule or a grouper methodology. To capture cost information, ASC staff members need to perform case-costing, which involves reviewing the chart for each case, determining what supplies, such as implants, were used. Then they add up the supply and labor costs for each case and enter the data into the patient accounting system. "This will require extra staff time, but the cost is well worth it," Mr. Brank says. Symbion's IT department captures this information into its data warehouse, adds indirect and fixed costs and provides reports on case-profitability in a number of views, such as by CPT code, specialty, financial class and physician.
3. Make sure data is accurate. "Since the data will be used in managed care negotiations, accuracy is essential," Mr. Brank says. Inaccurate entry of the total cost of an implant, for example, will throw off the data presented in negotiations and harm the center's footing in negotiations. Also, the ASC's data should match the managed care company's data as closely as possible, and if it does not match, you should find out why. "Remember, you will be negotiating based on the payor's numbers," he says.
4. Assembling data. The case-costing data can be used in many different ways. "With this information entered into your system, you can drill down to the individual CPT code," Mr. Brank says. "You can get how much you are paid and how much it costs you for each CPT code. This allows you to determine whether you are making or losing money on each particular type of case as well as in total."
5. Using data in negotiations. Having accurate data about costs makes you a more persuasive negotiator. Demonstrating that you would lose money on the proposed rate may not impress the payor, but it could stiffen your resolve to propose a higher rate or walk away from negotiations. "A payor in one of our Symbion facilities was going to cut our rates dramatically," Mr. Brank recalls. "From our data, we knew that they were proposing rates that would not even cover our variable costs. We determined the proposal was financially unacceptable and informed the payor we could not continue with the contract." The ASC team also pointed out that the payor's cases would go to the local hospital, where payments would likely be considerably more than the ASC asked for, assuming the hospital was getting at least HOPD rates. "While you won't always be successful in these situations, accurate data does often help us to gain fair and acceptable rates for our ASCs," he says.
6. Other data to capture. Whether the insurer or patients pay in a timely manner is another useful data point to capture. Presented with these findings, the payor may agree to higher payments to offset the slow turnaround time. However, the payor might argue that the reason for lagging payments was that the claims were submitted late or were incorrect and required re-submittal. That assertion could be quickly checked out if adequate data is readily available. The data could also provide pointers on how to correct the billing problem.
7. Your data will have holes in it. For example, when the payor claims that a competing ASC accepted its proposed rate, you are legally barred from verifying that with the other ASC. However, you can still consult your own data to determine whether the proposed rate is tenable for you, which is the most important question. Also, a few states provide annual ASC reports that list average rates in specific markets, ranging from high to low for comparison and analysis purposes.
8. Use cost data to shift volumes. If the data tells you the ASC will make money on a particular type of procedure, based on the negotiated payor's rates, the ASC should focus on boosting volume in that area. Also, providing accurate and useful data to key surgeons can often help to increase the volume of profitable cases and reduce the volume money-losing cases or reduce the costs for those cases.
9. Use same data to evaluate physicians. Data based on case-costing will also show which surgeons may be overspending on supplies, to the point where a potentially profitable case may become a money-losing one. Presenting surgeons with accurate, meaningful data can help persuade them to reduce costs. "We often find that providing our surgeons with accurate and meaningful data is welcomed and helps to gain their cooperation in improving case and cost management," Mr. Brank says. "The end result can also assist in providing surgical services at the most reasonable cost for the patients served."
10. Understand the view of the payor. "You have to realize that the objectives of the payor may be different from the ASC," Mr. Brank says. The ultimate goal of both sides should be that patients get safe surgery at a reasonable cost to them and both the payor and the ASC have profitable operating results. "Ultimately, you hope the outcome of the negotiations result in a benefit to all sides: payor, ASC, surgeons, and patients," he says.
Learn more about Symbion Healthcare.
Read more managed care contracting best practices:
- ASC Managed Care Contracting Best Practices by Specialty
- 4 Ways to "Manage" Managed Care Contracts
- 3 Reminders for Effective ASC Managed Care Contracting