Joint-Venture Managed Care Contracting: A Guide to Success

Andrea Woodell is managed care manager for Regent Surgical Health.

There are several steps necessary to ensure a profitable transition from an independent ambulatory surgery center to a partnership with a hospital:

• Identify who will lead the negotiation by payor and set your goals. Also identify who will be the hospital contact assigned to work with the ASC contact/contractor.
• Create a proforma
• Work within the confidentiality confinements of hospital outpatient department (HOPD) contracts and current ASC contracts
• Identify/prioritize contract review for renegotiation.
• Create a spreadsheet showing the term dates of all ASC current contracts, allowing enough time to renegotiate new rates and minimize time spent out of network
• Evaluate charge master and make changes, ensuring payor compliance to charge master increases
• Allocate resources so the top 5-7 contracts are all worked simultaneously. Turnaround time is critical to ensuring proforma objectives are attained
• Contact payors as a representative of the hospital to notify them of the change in ownership and to initiate negotiation
• Seek recommendations on draft proposals from hospital
• Maintain timely access to key hospital staff

The difference in hospital rates versus ASC rates are often a 2-5 times multiplier. You can gain aggressive increases while still offering a differential to HOPD rates and not causing the payor to become entrenched and walk away.

Payors will often pushback when faced with a request for substantial increases. Some of the initial responses you are likely to get include:

• We will not pay you more for the same service
• We will not pay you above what the market bares for ASCs
• We will redirect patients to other ASCs
• Our insurance division has challenged us to contain healthcare costs and we don’t have the ability to pay you 40-60 percent higher rates
• How would the physicians and hospital like to respond to the community on why their premiums and out of pocket costs are increasing?
• We don't understand this trend for hospital JVs and are not going to pay these rates to an ASC

When considering your response, think about what leverage you hold and what pressure points you can create:

ASC

• Even with increased rates, the ASC is offering a significant savings to HOPD rates. The joint venture will also facilitate a movement of cases due to change in ownership from the less cost effective HOPD to the more cost effective ASC.
  • Make sure to capitalize on the addition of new specialties. Payors will not know and will have difficulty modeling
• Consider the future if the ASC does not make it as an independent entity. Will the hospital become a 100 percent owner in six months to a year, moving the ASC to true HOPD rates operating under the same tax ID number as the hospital?
• Know the local competition: Where can the payor move the HMO cases and at what cost to their member satisfaction?
• If you are in a market with independent practice associations (IPAs) holding risk, initiate contact to discuss the financial challenges the ASC is facing and the move to add a hospital partner to bolster rates and keep them a viable part of community.
  • Point out that the payor is rewarding inefficiency, paying a huge differential between HOPD and freestanding ASC rates, and that the ASC is simply trying to stay in business. The threat to the IPA at risk is the loss of a high quality, efficient, lower cost ASC. Moving their cases to an HOPD will impact their expenditure within a cap and influence their risk pools
  • Follow similar strategy for any local large employers in the market

Physician partners

• Direct payor marketing
  • Identify key surgeons whose movement to or away from an HOPD will impact a payor.
  • Is that physician a good candidate to meet with the payor?

• Risk tolerance of partnership
  • If a payor is not willing to pay what you need and you go out-of-network, will the physicians take those few cases "only" to the HOPD?
    • Work with the physicians' business offices and collect data on number and type of cases that would be relocated to the hospital. Note difference in payments to make greater the impact and send updates to payor.

• Ask physicians to let members know about loss of access to surgery center and have the patient call member services to complain.

Learn more about Regent Surgical Health.

More Articles Featuring Regent Surgical Health:

6 Points on Building an ASC Joint Venture With an Academic Medical Center

Maximizing ASC Board Productivity With a View Towards an Alignment of Goals