Tammy Brinkman, director of contracting and reimbursement at Blue Chip Surgical Center Partners in Cincinnati, describes seven situations when an ambulatory surgery center might consider terminating a payor contract and what the center can do to avoid these situations.
"Everyone would prefer to be in-network," she says. "It's generally less expensive for payors, easier for ASCs to manage and easier for patients because they pay less out-of-pocket."
1. Payor stays with Medicare groupers. The carrier has chosen not to migrate to the Medicare APC payment methodology and remains in the old Medicare groupers. This can be beneficial for ophthalmology procedures and colonoscopies, which have lost reimbursements under the APC model, but it is harmful for some other specialties, such as orthopedics.
The administrator of an orthopedic-driven ASC might think the only choices are to continue losing money or to drop the contract. But there may be room to negotiate a higher rate, particularly if the ASC can point out that the proposed rate is still much lower than what would be paid to the hospital. Ms. Brinkman says the key is gathering the costs associated with the episode of care and taking your findings to the carrier. "You really need to have a conversation with the network manager, the head of the department, or the medical directors — anyone who is willing to listen and authorize an increase in reimbursement," she says.
2. Updates reduce reimbursements. Generally, payors update the fee schedule once a year and typically follow Medicare's lead. "If the payor implements reductions, assess their impact on the center's A/R," Ms. Brinkman says. Factor in any reductions in volume and increases in supply costs, particularly the cost of implants, and develop a total figure for potential losses under the new payments. Present the findings in a crisp, professional-looking report to the payor and ask to negotiate the rates. If the payor refuses to negotiate, consider ending the contract.
"The last resort would be to exercise your right to terminate," Ms. Brinkman observes. Even after the ASC issues a termination, payors may make an eleventh-hour offer, because it is in their interest to stay in-network. "When an ASC goes out-of-network, the payor's medical costs generally increase," she says.
3. No cost of living adjustment. Some payors simply won't agree to an annual cost of living adjustment in the contract, which could add up to significant losses in a multi-year agreement. Calculate increases in the center's costs to determine how much money it is losing by not having a COLA. Present this information to the appropriate parties at the insurance company and request for an increase to cover this. Be sure to remind them that if the ASC were forced to cancel the contract, patients would have to go to higher-cost hospital outpatient departments, and cite the HOPD rates. "Even if you request a 3-5 percent increase, it still is a huge savings compared with the HOPD rate," Ms. Brinkman says.
4. Chronically late payments. Payments that are continually late can wreak havoc on a center's cash flow and could be sufficient cause for terminating the contract. But in states with strict prompt payment laws, an alternative to termination would be reporting the company to the state department of insurance. Ms. Brinkman, who used to work for a health insurance company, can attest that state inquiries have a serious impact on insurers. "The world stopped when you had a DOI complaint," she says. "It is a very effective strategy."
5. Payments below agreed-upon levels. When the company chronically pays below rates stipulated in the contract, ASC staff has to spend significant time and effort recouping the unpaid portion of the claim. They have to send out a second bill and may even have to haggle with clerks each time, which may be enough to warrant dropping the contract. But before reaching this point, be sure to go higher up on the organizational ladder and address the issue with the insurer's network manager. "The network manager has the obligation to research the trends of underpayments and the authority to change the company's practice," Ms. Brinkman says.
6. Refusing to cover certain procedures. As spine procedures move into ASCs, certain payors still won't cover them. This does not make a great deal of sense, because in-network ASCs represent substantial savings for spine payors and for patients with high out-of-pocket payments, Ms. Brinkman says. These payors are sticking with Medicare policy, which does not cover outpatient spine. "Before you terminate the contract, you may want to present your case to the payor," she says. For example, the center could argue that refusing coverage may be clinically appropriate for elderly patients in Medicare, but it's simply not appropriate for the younger patients covered by private payors.
"Speak clinical to clinical," Ms. Brinkman says. "Ask one of your neurosurgeons to meet with the medical director at the insurance company." Coverage decisions tend to be decided by the medical director and others on the local level, even in large insurance companies. For example, UnitedHealthcare pays for ASC-based spine procedures in some states but not in others.
Centers also need sufficient payment levels from insurers. "Once you persuade them to allow the spine procedures in your ASC, be prepared to move to the discussion of rates to ensure adequate reimbursement for the cases," she says.
7. Unilateral changes in product participation. Sometimes ASCs unwittingly agree to unilateral changes in product participation. For example, the insurer may add the center to its workers' compensation, Medicare or Medicaid products at lower reimbursement rates, such as 90 percent of the state allowable. "This allows the payor to make a little money at the ASC's expense," Ms. Brinkman says.
The payor initiates this strategy by sending a letter announcing the policy change, in the hope that it will be opened by a staffer who simply files it away. After all, the letter states: "No action is needed on your part." What this really means is if no action is taken, the ASC is stuck participating in these products with undesirable rates for the remaining term of the contract. However, the company provides a window, typically 90 days long, to refuse this unilateral change. If someone at the center carefully reads the letter within that time period, it can reject the offer and avert low payments without having to end the contract.
Learn more about Blue Chip Surgical Center Partners.
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