Overall reimbursements for ambulatory surgery centers may be dropping, but through a combination of effective business management and savvy contract negotiations, ASCs can still make money in the upcoming year.
Two financial healthcare experts weigh in on the best ways to increase per procedure earnings in 2013. Andrea Woodell is the managed care director at Regent Surgical Health, and April Sackos, CASC, is the vice president of revenue cycle management at ASCOA.
Here are Ms. Woodell and Ms. Sackos' 11 ways for ASCs to make more money.
1. Avoid limiting contract clauses. Several large commercial payors — including Aetna, United and Humana — have begun insisting on three-year agreement rights for managed care contracts. No matter what, don’t sign a three-year contract, Ms. Woodell says.
Signing a three-year agreement locks you into reimbursement rates for the remainder of the term, and ASCs case mix and ownership structure are not static and contracts require ongoing adjustments
"We are the Jet Ski to the steam boat (of hospitals)," she says. "We are nimble and our case mix is always getting fine-tuned and tweaked."
A three-year contract would keep an ASC from being able to adjust to the changing needs of an evolving case mix.
Another limiting clause popping up in contracts allows the payor to pick the lowest rates it will pay, and binds an ASC to those rates, even if a joint venture or merger takes place. This language limits a surgery center from being able to benefit from annual increases or higher rates that they would normally enjoy from the new business partnership.
Watch out for these and other clauses which may keep your center from responding to future needs.
"If you don’t sign them, (the payors) do have alternate, less binding language," Ms. Woodell says.
2. Carefully review all managed care contracts. Even after you have negotiated your managed care contract with a payor representative, review the contract thoroughly before signing, Ms. Woodell says.
"Because you are in a hurry, your inclination is not to look at it closely," she says, "because all terms have been agreed to."
Occasionally payors will drop key components in the contracts, such as carve out terms for implants, or revert to contract templates when changes were agreed upon. If you are not vigilant about your terms, you can agree to a change that will cost your ASC profits.
Ms. Woodell also recommends paying close attention to the carve out language addressing CPT per case definition. She has seen payors attempt to bundle codes inserting language defining what originally was a "per CPT carve out" and inserting a definition defining the carve out as "global case rate" to the detriment of the ASC.
3. Conduct a waste study. Unconscious supply waste often occurs in ASCs. Bringing staff members' attention to the waste helps cultivate an environment of awareness and frugality.
A great learning tool and quality improvement study involves putting trash bags in the operating room for one month and instructing staff to put in items for each case that are opened but not used, Ms. Sackos says.
"Put a patient label on each bag to identify the surgeon and the case," she says. "A frequent side effect is that staff tends to not open items when the study is in progress."
Consequently, the study helps staff members "recalibrate their thinking" and think twice before unnecessarily opening a supply.
4. Evaluate supply costs. Supplies are often an overlooked procedure cost, and having too wide a variety can lose your center money.
Ms. Sackos recommends having physicians write down their supply preferences. Compare the cards, and when at all possible, standardize supplies, she says.
"It is important to educate your physicians on supply costs to further the discussion on product alternatives with cost savings," she says.
Even saving small amounts of money through buying the most cost-effective materials can add up to significant savings over time, especially on supplies used in high-frequency procedures.
5. Consider a GPO. A first step toward lowering costs and improving case profits can be joining a Group Purchasing Organization to leverage access to purchasing supplies, Ms. Sackos says. GPOs may allow your ASC to obtain supply discounts through vendors.
To get the maximum benefit from a GPO, though, ASC administrators or clinical leaders must constantly monitor the organization and refrain from assuming it will automatically bring cost savings.
"You need to implement meticulous price tracking and compliance to assure items ordered through the GPO vendors are the lowest cost and that the pricing on invoices is at the GPO pricing," she says.
6. Outsource contract negotiations. Sometimes clinical — and even business — staff members are too close to the surgery center to be the most effective managed care contract negotiators. A third-party negotiator can often get better rates for procedures by being slightly removed from the day-to-day ASC activities.
"I don't live in the center, enabling me to emotionally be less reactive," Ms. Woodell says. "A clinical person sitting in that chair may be thinking about how a doctor will react to a contract because they are under immediate pressure. I can play the game better because I'm a step removed."
Having an experienced, trained negotiator can bring immense value to a center. Even in a tight reimbursement market, Ms. Woodell says, she is still negotiating increases through effective techniques.
While not part of the day to day operations of your ASC, a third-party negotiator who is a proper fit will still have the center's best interests in mind and have a stake in the financial success.
"It's not like I have any less skin in the game," she says. "I am deeply committed to enhancing the revenue stream to physicians and operations."
7. Increase staffing efficiencies. ASCs can increase the amount of work accomplished each day by cross-training staff members in at least two areas. Having flexible, proficient staffers can also free up clinical personnel to focus on their tasks in the operating room, thus increasing OR throughput and daily case volume, Ms Sackos says.
She also recommends scheduling employees with flex hours to reduce overtime costs and avoid paying an employee for a block of hours when only a few hours of work were needed.
"It is also beneficial to use per diem nurse staffing, as they can be cancelled when not needed and don't have high associated benefit costs," she says.
8. Optimize coding. Coders are the last line of defense before a claim is submitted for payment, and these staff members have to be able to deal with challenges such as incomplete physician documentation, multiple procedures, compliance issues, modifiers and unclear operative notes, Ms. Sackos says.
The best people to handle such challenges are certified coders with surgery center experience who have access to current information about coding and regulatory changes. Well-trained coders will submit accurate claims and get their surgery centers paid promptly.
"Coders should have their work audited at least annually and have a 95 percent accuracy or better," she says.
ASC managers should implement continuing education based on the needs of the coders and the results of audits.
9. Negotiate reimbursement rates annually. Managed care contracts often get neglected after negotiations are completed and subsequently not revisited for several years. Avoid shelving your contracts and strive to negotiate rates annually, Ms. Woodell says.
Even if an annual revisit only earns your ASC an additional 2 percent reimbursement, it's more money than you were receiving.
Prepare a compelling reason, such as increased volume of a particular case, to get your payor to reopen a contract. Aim to receive incremental contract rate increases for six-month and year anniversaries, she says. No one will offer you these increases outright, but they can be achieved by a skilled negotiator.
"If you have an old contract, it's not the payor's fault if no one has touched it," she says.
10. Add payment for multiples. Surgery centers should always strive to negotiate a multiple procedure discount policy with payors. Ms. Woodell has seen payors who traditionally offered 100-50-25 dropping the second or third multiple.
"If you think you negotiated an 8 percent increase, have a multispecialty center, and let the third multiple go, you probably received closer to a 3 percent increase," she says.
A third CPT code can add 5 percent value to a multispecialty ASC's contract. Try not to accept an offer with reduced multiples
11. Allow more time for contract negotiations. Commercial payors are also having their processes altered by federal healthcare reform, and many of their requirements must be fulfilled in advance of practitioner deadlines. Their push to meet implementation deadlines can lengthen the amount of time it takes to complete your ASC's managed care contract negotiations, Ms. Woodell says.
"I've heard from some payors, 'We are being pulled to a special project for ObamaCare and can't get to that right now,'" she says. "I do believe that is legitimately occurring in their office."
Expect a delay and allow more time, starting sooner than you would normally for contract renewals. If a typical negotiation takes four months, then expect up to eight months in the current environment, Ms. Woodell says.
More Articles on Coding, Billing and Collections:
How to Document and Bill Global Procedures
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Report: Paying for Value, Not Volume Could Save $600B Over 10 Years
Two financial healthcare experts weigh in on the best ways to increase per procedure earnings in 2013. Andrea Woodell is the managed care director at Regent Surgical Health, and April Sackos, CASC, is the vice president of revenue cycle management at ASCOA.
Here are Ms. Woodell and Ms. Sackos' 11 ways for ASCs to make more money.
1. Avoid limiting contract clauses. Several large commercial payors — including Aetna, United and Humana — have begun insisting on three-year agreement rights for managed care contracts. No matter what, don’t sign a three-year contract, Ms. Woodell says.
Signing a three-year agreement locks you into reimbursement rates for the remainder of the term, and ASCs case mix and ownership structure are not static and contracts require ongoing adjustments
"We are the Jet Ski to the steam boat (of hospitals)," she says. "We are nimble and our case mix is always getting fine-tuned and tweaked."
A three-year contract would keep an ASC from being able to adjust to the changing needs of an evolving case mix.
Another limiting clause popping up in contracts allows the payor to pick the lowest rates it will pay, and binds an ASC to those rates, even if a joint venture or merger takes place. This language limits a surgery center from being able to benefit from annual increases or higher rates that they would normally enjoy from the new business partnership.
Watch out for these and other clauses which may keep your center from responding to future needs.
"If you don’t sign them, (the payors) do have alternate, less binding language," Ms. Woodell says.
2. Carefully review all managed care contracts. Even after you have negotiated your managed care contract with a payor representative, review the contract thoroughly before signing, Ms. Woodell says.
"Because you are in a hurry, your inclination is not to look at it closely," she says, "because all terms have been agreed to."
Occasionally payors will drop key components in the contracts, such as carve out terms for implants, or revert to contract templates when changes were agreed upon. If you are not vigilant about your terms, you can agree to a change that will cost your ASC profits.
Ms. Woodell also recommends paying close attention to the carve out language addressing CPT per case definition. She has seen payors attempt to bundle codes inserting language defining what originally was a "per CPT carve out" and inserting a definition defining the carve out as "global case rate" to the detriment of the ASC.
3. Conduct a waste study. Unconscious supply waste often occurs in ASCs. Bringing staff members' attention to the waste helps cultivate an environment of awareness and frugality.
A great learning tool and quality improvement study involves putting trash bags in the operating room for one month and instructing staff to put in items for each case that are opened but not used, Ms. Sackos says.
"Put a patient label on each bag to identify the surgeon and the case," she says. "A frequent side effect is that staff tends to not open items when the study is in progress."
Consequently, the study helps staff members "recalibrate their thinking" and think twice before unnecessarily opening a supply.
4. Evaluate supply costs. Supplies are often an overlooked procedure cost, and having too wide a variety can lose your center money.
Ms. Sackos recommends having physicians write down their supply preferences. Compare the cards, and when at all possible, standardize supplies, she says.
"It is important to educate your physicians on supply costs to further the discussion on product alternatives with cost savings," she says.
Even saving small amounts of money through buying the most cost-effective materials can add up to significant savings over time, especially on supplies used in high-frequency procedures.
5. Consider a GPO. A first step toward lowering costs and improving case profits can be joining a Group Purchasing Organization to leverage access to purchasing supplies, Ms. Sackos says. GPOs may allow your ASC to obtain supply discounts through vendors.
To get the maximum benefit from a GPO, though, ASC administrators or clinical leaders must constantly monitor the organization and refrain from assuming it will automatically bring cost savings.
"You need to implement meticulous price tracking and compliance to assure items ordered through the GPO vendors are the lowest cost and that the pricing on invoices is at the GPO pricing," she says.
6. Outsource contract negotiations. Sometimes clinical — and even business — staff members are too close to the surgery center to be the most effective managed care contract negotiators. A third-party negotiator can often get better rates for procedures by being slightly removed from the day-to-day ASC activities.
"I don't live in the center, enabling me to emotionally be less reactive," Ms. Woodell says. "A clinical person sitting in that chair may be thinking about how a doctor will react to a contract because they are under immediate pressure. I can play the game better because I'm a step removed."
Having an experienced, trained negotiator can bring immense value to a center. Even in a tight reimbursement market, Ms. Woodell says, she is still negotiating increases through effective techniques.
While not part of the day to day operations of your ASC, a third-party negotiator who is a proper fit will still have the center's best interests in mind and have a stake in the financial success.
"It's not like I have any less skin in the game," she says. "I am deeply committed to enhancing the revenue stream to physicians and operations."
7. Increase staffing efficiencies. ASCs can increase the amount of work accomplished each day by cross-training staff members in at least two areas. Having flexible, proficient staffers can also free up clinical personnel to focus on their tasks in the operating room, thus increasing OR throughput and daily case volume, Ms Sackos says.
She also recommends scheduling employees with flex hours to reduce overtime costs and avoid paying an employee for a block of hours when only a few hours of work were needed.
"It is also beneficial to use per diem nurse staffing, as they can be cancelled when not needed and don't have high associated benefit costs," she says.
8. Optimize coding. Coders are the last line of defense before a claim is submitted for payment, and these staff members have to be able to deal with challenges such as incomplete physician documentation, multiple procedures, compliance issues, modifiers and unclear operative notes, Ms. Sackos says.
The best people to handle such challenges are certified coders with surgery center experience who have access to current information about coding and regulatory changes. Well-trained coders will submit accurate claims and get their surgery centers paid promptly.
"Coders should have their work audited at least annually and have a 95 percent accuracy or better," she says.
ASC managers should implement continuing education based on the needs of the coders and the results of audits.
9. Negotiate reimbursement rates annually. Managed care contracts often get neglected after negotiations are completed and subsequently not revisited for several years. Avoid shelving your contracts and strive to negotiate rates annually, Ms. Woodell says.
Even if an annual revisit only earns your ASC an additional 2 percent reimbursement, it's more money than you were receiving.
Prepare a compelling reason, such as increased volume of a particular case, to get your payor to reopen a contract. Aim to receive incremental contract rate increases for six-month and year anniversaries, she says. No one will offer you these increases outright, but they can be achieved by a skilled negotiator.
"If you have an old contract, it's not the payor's fault if no one has touched it," she says.
10. Add payment for multiples. Surgery centers should always strive to negotiate a multiple procedure discount policy with payors. Ms. Woodell has seen payors who traditionally offered 100-50-25 dropping the second or third multiple.
"If you think you negotiated an 8 percent increase, have a multispecialty center, and let the third multiple go, you probably received closer to a 3 percent increase," she says.
A third CPT code can add 5 percent value to a multispecialty ASC's contract. Try not to accept an offer with reduced multiples
11. Allow more time for contract negotiations. Commercial payors are also having their processes altered by federal healthcare reform, and many of their requirements must be fulfilled in advance of practitioner deadlines. Their push to meet implementation deadlines can lengthen the amount of time it takes to complete your ASC's managed care contract negotiations, Ms. Woodell says.
"I've heard from some payors, 'We are being pulled to a special project for ObamaCare and can't get to that right now,'" she says. "I do believe that is legitimately occurring in their office."
Expect a delay and allow more time, starting sooner than you would normally for contract renewals. If a typical negotiation takes four months, then expect up to eight months in the current environment, Ms. Woodell says.
More Articles on Coding, Billing and Collections:
How to Document and Bill Global Procedures
Report: Data Breaches Cost $7B Annually
Report: Paying for Value, Not Volume Could Save $600B Over 10 Years