The process of managed care contract negotiations can be painstaking. Orthopedics and spine-driven ASC leaders often need to take an extra step to carve-out adequate rates for the higher acuity cases performed in their centers. Dan Connolly, vice president of payer contracting with Pinnacle III, analyzes the carve-out strategy and offers insight into approaches for the most effective negotiations.
Opportunities
As higher acuity cases migrate to the ASC setting, carve-outs remain an invaluable strategy. Over the past few years, total joints and spine have emerged as promising ASC specialties and, without carve-outs, reimbursement for these procedures may not even cover the costs of a case.
"Any procedure that is unique, expensive and has high variability in cost presents an opportunity for a carve-out," says Mr. Connolly. "I have negotiated carve-outs for just about every specialty, but high acuity cases hold the most opportunity right now."
Advances in technology and clinical acumen are driving factors in the movement of spine and total joints to the ASC, but this trend is also supported by an overwhelming call for lower cost, high quality care. "The ASC industry is able to generate huge cost savings to the system which is appealing to payers," says Mr. Connolly. ASC leaders can leverage this ability to gain initial carve-outs and improve on existing rates.
Challenges
Healthcare reform, as any other sweeping change, is a two-sided coin presenting both opportunities and challenges. "I am finding system-wide, whether for carve-outs or general contracting, that everyone on the payer side is extremely busy," says Mr. Connolly. Payers are pulled in multiple directions and carve-outs can force them to step into an unfamiliar arena. Something as simple as nailing-down the time to present an ASC's case for carve-outs can be the greatest challenge.
Payers are now inundated with ASCs and providers pushing for better rates and favorable carve-outs. "Only the best of the best will fare well in terms of securing the greatest net revenue as a result of negotiations," he says.
Best practices
1. Collect data. Mr. Connolly has dubbed his approach "evidence-based negotiations," the root of which is data. "Data is king," he says. Information to present to payers includes:
• Fixed costs
• Variable costs
• Implant costs
• ASC's current reimbursement rates vs. market rates and hospital rates
• Patient needs
• Surgeon outcomes
• Infection rates
2. Educate payers. Carve-outs can be difficult, especially when payers are not initially attuned to the value procedures, such as spine or total joints, have when performed in an ASC. Payers are heavily reliant on data, and without it they are stepping outside of a comfort zone. Provide them with that carefully collected data. "I go to great lengths to lay out a formal presentation," says Mr. Connolly. "Lay out the evidence and present it in such a fashion that it ultimately sells them on the fact that there is value there."
3. Single case agreements. Payers may not always be willing to leap straight into carve-out negotiations. Single case agreements, though not overly common, can be valuable tools. "This gives you the opportunity to demonstrate value on the level of a specific case," says Mr. Connolly. "If you secure a few single case agreements, a payer may wake up and amend the contract. Build your evidence in a real world scenario."
4. Revisit contracts. All ASC leaders know that contract negotiation is never done, and the same applies to carve-outs. "A lot of payers will not be willing to let you add additional carve-outs or modifiers until a contract is up for renewal," says Mr. Connolly. "But, a wise payer will be willing to discuss changes earlier if you can demonstrate savings." This will vary from payer to payer, but careful monitoring of data and contracts, as well as familiarity with key players on the payer side, will ensure ASC leaders do not miss such opportunities should they arise.
Forming a long-term game plan
Favorable carve-outs are heavily dependent on how payers view providers. "Build rapport with the payer until you are perceived as a partner," he says. "You are likely to obtain greater reimbursement in general for your ASC." Readily demonstrating consistent savings to a payer paired with good relations will pave the way for improved carve-outs and lessen the likelihood of broad reimbursement cuts.
However, carve-outs are an uphill battle. In the short-term, Mr. Connolly sees carve-outs as a necessary strategy, especially for ASCs performing and considering high acuity cases. "I don't envision this process getting any easier," he says. "You need to become a gladiator in terms of these negotiations."
Though reform has left providers wondering what the future of healthcare looks like, some things are certain. Providers will have to shoulder more risk and healthcare will steadily move away from the fee-for-service model. Carve-outs may be set aside for alternative models such as bundled payments. "The bottom line: you need to look towards methods that will help you remain competitive," says Mr. Connolly. "These methods will force you to become better at managing and containing costs."
The bundled payments model is still in its infancy, but over the next few years Mr. Connolly predicts it will gain momentum in the spine and total joint arena. The data collected for carve-out negotiation leverage will help build the bridge to bundled payments.
More Articles on Coding and Billing:
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Opportunities
As higher acuity cases migrate to the ASC setting, carve-outs remain an invaluable strategy. Over the past few years, total joints and spine have emerged as promising ASC specialties and, without carve-outs, reimbursement for these procedures may not even cover the costs of a case.
"Any procedure that is unique, expensive and has high variability in cost presents an opportunity for a carve-out," says Mr. Connolly. "I have negotiated carve-outs for just about every specialty, but high acuity cases hold the most opportunity right now."
Advances in technology and clinical acumen are driving factors in the movement of spine and total joints to the ASC, but this trend is also supported by an overwhelming call for lower cost, high quality care. "The ASC industry is able to generate huge cost savings to the system which is appealing to payers," says Mr. Connolly. ASC leaders can leverage this ability to gain initial carve-outs and improve on existing rates.
Challenges
Healthcare reform, as any other sweeping change, is a two-sided coin presenting both opportunities and challenges. "I am finding system-wide, whether for carve-outs or general contracting, that everyone on the payer side is extremely busy," says Mr. Connolly. Payers are pulled in multiple directions and carve-outs can force them to step into an unfamiliar arena. Something as simple as nailing-down the time to present an ASC's case for carve-outs can be the greatest challenge.
Payers are now inundated with ASCs and providers pushing for better rates and favorable carve-outs. "Only the best of the best will fare well in terms of securing the greatest net revenue as a result of negotiations," he says.
Best practices
1. Collect data. Mr. Connolly has dubbed his approach "evidence-based negotiations," the root of which is data. "Data is king," he says. Information to present to payers includes:
• Fixed costs
• Variable costs
• Implant costs
• ASC's current reimbursement rates vs. market rates and hospital rates
• Patient needs
• Surgeon outcomes
• Infection rates
2. Educate payers. Carve-outs can be difficult, especially when payers are not initially attuned to the value procedures, such as spine or total joints, have when performed in an ASC. Payers are heavily reliant on data, and without it they are stepping outside of a comfort zone. Provide them with that carefully collected data. "I go to great lengths to lay out a formal presentation," says Mr. Connolly. "Lay out the evidence and present it in such a fashion that it ultimately sells them on the fact that there is value there."
3. Single case agreements. Payers may not always be willing to leap straight into carve-out negotiations. Single case agreements, though not overly common, can be valuable tools. "This gives you the opportunity to demonstrate value on the level of a specific case," says Mr. Connolly. "If you secure a few single case agreements, a payer may wake up and amend the contract. Build your evidence in a real world scenario."
4. Revisit contracts. All ASC leaders know that contract negotiation is never done, and the same applies to carve-outs. "A lot of payers will not be willing to let you add additional carve-outs or modifiers until a contract is up for renewal," says Mr. Connolly. "But, a wise payer will be willing to discuss changes earlier if you can demonstrate savings." This will vary from payer to payer, but careful monitoring of data and contracts, as well as familiarity with key players on the payer side, will ensure ASC leaders do not miss such opportunities should they arise.
Forming a long-term game plan
Favorable carve-outs are heavily dependent on how payers view providers. "Build rapport with the payer until you are perceived as a partner," he says. "You are likely to obtain greater reimbursement in general for your ASC." Readily demonstrating consistent savings to a payer paired with good relations will pave the way for improved carve-outs and lessen the likelihood of broad reimbursement cuts.
However, carve-outs are an uphill battle. In the short-term, Mr. Connolly sees carve-outs as a necessary strategy, especially for ASCs performing and considering high acuity cases. "I don't envision this process getting any easier," he says. "You need to become a gladiator in terms of these negotiations."
Though reform has left providers wondering what the future of healthcare looks like, some things are certain. Providers will have to shoulder more risk and healthcare will steadily move away from the fee-for-service model. Carve-outs may be set aside for alternative models such as bundled payments. "The bottom line: you need to look towards methods that will help you remain competitive," says Mr. Connolly. "These methods will force you to become better at managing and containing costs."
The bundled payments model is still in its infancy, but over the next few years Mr. Connolly predicts it will gain momentum in the spine and total joint arena. The data collected for carve-out negotiation leverage will help build the bridge to bundled payments.
More Articles on Coding and Billing:
Bullish on Bundled Payments: How Specialists Can Benefit From the Program
How Do GI Coding Changes Affect the Field? Reimbursement, Technology, Denials & More
CMS: ICD-10 Guidance Coming "Soon"