At the 19th Annual Ambulatory Surgery Centers Conference in Chicago on Oct. 26, I. Naya Kehayes, MPH, managing principal and CEO of Eveia Health Consulting & Management, discussed issues that are impacting negotiations between ambulatory surgery centers and payors, what ASCs can do to be proactive and strategies for effective negotiations.
Ms. Kehayes began her discussion of payor negotiations by covering issues that have impacted payor negotiations.
The recession has reshaped the landscape for payor negotiations. According to Ms. Kehayes, the landscape has shifted in the following four ways:
• Employers are holding payors accountable for justification of premiums
• Payors are becoming more innovative to meet the demands of employers to compete for business
• Payors are increasing pressure on providers to prove efficiency and demonstrate savings
• Payors are comparing ASC rates in market for same line of business and providing employers with data to drive members to lower cost providers
2. New employer expectations
In addition to the changing landscape, employers have new and different expectations for payors. According to Ms. Kehayes, employers expect to pay a fair price for healthcare services, and there is an increasing demand for data from self-insured employers, which show the cost structure for services at different sites.
“In addition, employers are looking for transparency. Payors may have difficulty defending why a procedure costs $5,000 at one ASC and $2,500 at another ASC less than 30 miles away. That is pretty hard for a payor to defend from a contract standpoint for employer groups,” said Ms. Kehayes. “Maybe that ASC is performing the service for $2,500, but it may not actually be providing the same service. Some of that impacts discussion with the plan and understanding what may be different techniques or different cost structure.”
3. Hospital competition with ASCs
While it is important to understand what an employer group may expect, it is also important to know where the hospitals are coming from. As Ms. Kehayes said, “What is driving hospitals to compete with an ASC on outpatient rates?”
According to her, there are a couple of elements driving hospitals to compete with ASCS. “The migration of outpatient surgical volume from the hospital setting to the ASC and office-based setting is eroding a hospital’s ability to leverage reimbursement rates. In response, hospitals are increasingly employing physicians who can redirect care and leverage an entire contract with payors,” said Ms. Kehayes.
However, hospitals can provide tradeoffs. Hospitals could offer to reduce rates in outpatient surgery in exchange for an increased rate on other lines of business, such as the high-cost inpatient services like cardiac surgery or neurosurgery, said Ms. Kehayes.
“It is important to educate payors regarding differentiation of services and the benefit to subscribes. ASCs may find value in educating employer groups on the potential benefits of an ASC as well,” said Ms. Kehayes.
• Length of negotiations
• Increase in number of surgery centers saturating the markets
• The time to negotiate -- not to obtain -- a favorable contract is lengthening
• “No” is heard more often as an initial response to a rational proposal
• Staffing levels at payors have decreased industry-wide; negotiators and provider representative positions are being cut
1. When a new service is added and the existing contract does not provide adequate reimbursement or access to the new services.
2. Change in ownership structure, addition of new services or hospital joint venture.
3. When a payor mergers with another payor.
4. When the contract is not economically viable and there is no alternative but to terminate.
Lastly, Ms. Kehayes recommended additional strategies ASCs can use to focus on great opportunities with payors and move contract negotiations forward in an effective manner. Some strategies include:
5. Identify cases or areas of concern and provide supporting data to the payor.
6. Move cases or areas of concern and provide supporting data to the payor.
7. Move cases back to the hospital if rates are not adequate
8. Use Casemix changes that provide justification for rate or payment method restructure.
9. Provide payors with new volume by physician and by specialty that can move to the ASC.
10. Identify cost savings opportunities for the health plan.
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Ms. Kehayes began her discussion of payor negotiations by covering issues that have impacted payor negotiations.
ASC-Payor Negotiation Issues
1. Impact of recession on payor negotiation landscapeThe recession has reshaped the landscape for payor negotiations. According to Ms. Kehayes, the landscape has shifted in the following four ways:
• Employers are holding payors accountable for justification of premiums
• Payors are becoming more innovative to meet the demands of employers to compete for business
• Payors are increasing pressure on providers to prove efficiency and demonstrate savings
• Payors are comparing ASC rates in market for same line of business and providing employers with data to drive members to lower cost providers
2. New employer expectations
In addition to the changing landscape, employers have new and different expectations for payors. According to Ms. Kehayes, employers expect to pay a fair price for healthcare services, and there is an increasing demand for data from self-insured employers, which show the cost structure for services at different sites.
“In addition, employers are looking for transparency. Payors may have difficulty defending why a procedure costs $5,000 at one ASC and $2,500 at another ASC less than 30 miles away. That is pretty hard for a payor to defend from a contract standpoint for employer groups,” said Ms. Kehayes. “Maybe that ASC is performing the service for $2,500, but it may not actually be providing the same service. Some of that impacts discussion with the plan and understanding what may be different techniques or different cost structure.”
3. Hospital competition with ASCs
While it is important to understand what an employer group may expect, it is also important to know where the hospitals are coming from. As Ms. Kehayes said, “What is driving hospitals to compete with an ASC on outpatient rates?”
According to her, there are a couple of elements driving hospitals to compete with ASCS. “The migration of outpatient surgical volume from the hospital setting to the ASC and office-based setting is eroding a hospital’s ability to leverage reimbursement rates. In response, hospitals are increasingly employing physicians who can redirect care and leverage an entire contract with payors,” said Ms. Kehayes.
However, hospitals can provide tradeoffs. Hospitals could offer to reduce rates in outpatient surgery in exchange for an increased rate on other lines of business, such as the high-cost inpatient services like cardiac surgery or neurosurgery, said Ms. Kehayes.
How can ASCs be responsive and proactive?
With all of these issues influencing payor negotiations, ASCs need to be responsive and proactive. How can they do this? According to Ms. Kehayes, payors may assume that because a rate is lower at an alternative provider, that the service is available at the lower cost site. However, hospitals and competing ASCs who have not provided the services and are at a lower rate may not be equipped or staffed to provide the services.“It is important to educate payors regarding differentiation of services and the benefit to subscribes. ASCs may find value in educating employer groups on the potential benefits of an ASC as well,” said Ms. Kehayes.
Payor trends
Next, Ms. Kehayes covered current trends for payors that are impacting negotiations in a number of ways.• Length of negotiations
• Increase in number of surgery centers saturating the markets
• The time to negotiate -- not to obtain -- a favorable contract is lengthening
• “No” is heard more often as an initial response to a rational proposal
• Staffing levels at payors have decreased industry-wide; negotiators and provider representative positions are being cut
Strategy: How do you get the payor to negotiate with your center?
According to Ms. Kehayes, ASCs could use the following justifications for reasons to negotiation new or renegotiate old contracts with payors.1. When a new service is added and the existing contract does not provide adequate reimbursement or access to the new services.
2. Change in ownership structure, addition of new services or hospital joint venture.
3. When a payor mergers with another payor.
4. When the contract is not economically viable and there is no alternative but to terminate.
Lastly, Ms. Kehayes recommended additional strategies ASCs can use to focus on great opportunities with payors and move contract negotiations forward in an effective manner. Some strategies include:
5. Identify cases or areas of concern and provide supporting data to the payor.
6. Move cases or areas of concern and provide supporting data to the payor.
7. Move cases back to the hospital if rates are not adequate
8. Use Casemix changes that provide justification for rate or payment method restructure.
9. Provide payors with new volume by physician and by specialty that can move to the ASC.
10. Identify cost savings opportunities for the health plan.
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