This Article is written by I. Naya Kehayes, MPH, Managing Principal and Founder of Eveia Health.So why won’t the payor negotiate rates, if the ASC can save the payor money? Does moving higher acuity cases out of the hospital setting and into the ASC setting always provide a cost savings to the payors?
Over the course of the past few years, higher acuity cases have successfully started to migrate to the ASC setting with positive outcomes, enabling surgery centers to embark on new business development opportunities. Some examples include, but are not limited to: hysterectomies, cochlear implants, spine fusions and total joints. The cost for these surgeries in the hospital setting for both the payor and the patient is substantial.
Many ASCs assume that payors will be optimistic about their business development efforts to recruit surgeons and move cases out of the hospital setting because the ASC is able to provide the service at a lower cost to the payor. However, it’s not uncommon for ASCs to receive a less than positive response from the payor. Since many of these new services can often require capital expenditures, high cost implants and supplies, coupled with overall increases to direct operating cost, ASC contracts are typically not set up with adequate reimbursement rates to provide the services. Therefore, it is critical that the ASC expedite due diligence with the payors before implementing new services. This could take some time, so it is important to clearly outline the process with the physicians.
Do your homework ahead of time – key steps to adding higher acuity cases to your payor contracts:
• Review your current contracts with major payors to determine if the contract allows these cases in the ASC setting
• Expedite a cost analysis to project expenses associated with adding new cases and by case type inclusive of direct operating expenses and capital requirements
• For contracts that have the codes approved or eligible, evaluate the rates and compare to the cost to determine the economic feasibility of moving forward with the cases without negotiation
• Try to obtain hospital EOBs to assess the hospital cost to the payor and patient in the market.
• If the reimbursement is reasonable and adequate, and is providing a savings to the payor and patient that is reasonable, compared to the hospital (typically look for 25 percent to 35 percent savings is desirable), then it is advantageous to move forward.
• If the reimbursement is not appropriate for the services, do not do the cases; you will not make up the losses on volume.
• Actions speak louder than words! If you do the cases at a loss, you have effectively communicated to the payor that the reimbursement rates are adequate for the services provided.
What should you do when the contract rates are not adequate enough or the CPT codes are not considered “ASC eligible” under your contract with the payor?
• Contact all major payors your ASC is contracted with before moving the volume.
• If the CPT codes are not approved by the payor for the ASC setting, this typically requires a change in medical policy and may require approval from the payor medical director.
• Do not start doing these cases, you will not be paid.
• If the contract allows the CPT codes to be performed in the ASC setting, and the rates are inadequate, seek a commitment from the payor to re-negotiate the contract rates.
• When you contact the payor, provide the payor with the names of the physicians who want to move cases, and the volume expected to move to the ASC, the location of hospital where the cases will move from and present the with the opportunity to realize a cost savings by working with the center to re-negotiate the contract rates.
So you have made the Payor Inquiry, and they do not have interest in setting up the contract to enable the surgery to move to the center. Why wouldn't the payor want to save money by working with your ASC?
Some of the primary reasons why a payor may not have interest in working with the Center are outlined below:
• Medical policy will not approve the CPT codes; therefore, they will not negotiate rates.
• The market is dominated by a major hospital system and the payor is concerned that a relationship with the ASC could have an unfavorable impact with the hospital; the payor needs the hospital in their network to provide coverage to their members.
• Providing access to the ASC, could result in rate increase demands to the payor from the hospital.
• The rate increases demanded by the hospital resulting from the loss in volume exceed the savings represented by the volume shift to the ASC.
• Payor has concern about allowing traditional hospital cases, especially those where the CPT codes are classified by CMS as "inpatient only" to be provided in the ASC setting.
Overall, adding new services that can move from the hospital setting are typically high cost. Although the ASC may be able to provide the services at a lower cost, it is important not to assume that the payors will be willing or able to restructure your contract to enable access. It is critical that you do your homework before doing these cases and effectively communicate with your surgeons to avoid any potential losses that can result.
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