Short Hills Surgery Center in Millburn, N.J., is the largest ASC in the state by size, with eight ORs. Here Nancy Easley-Mack, LPN, business office manager of the surgery center, discusses five steps in moving from out-of-network to in-network reimbursement.
1. Mounting pressure to move in-network. Short Hills was under mounting pressure to come in-network. As the state tightened laws restricting out-of-network status, insurers had begun sending reimbursement checks to patients, rather than the ASC, and requiring out-of-network disclosure forms that alarm patients. Insurers were also giving surgeons who used out-of-network ASCs lower quality ratings or dropping them from networks for professional payments.
"We had our antennae up and we were beginning to see change coming," Ms. Easley-Mack says. "We became convinced that out-of-network is probably going to disappear in New Jersey, and if it remains it's going to be very different." The physician-owners were ready to go in-network, even though they realized it would not be easy. Twelve specialties at the ASC, from spine to oral maxillofacial surgery, would have to be moved in-network.
2. Negotiations with two insurers begin. "We had a rough 2009," Ms. Easley-Mack recalls. "Volume was down." In spring 2009, the ASC was approached by two large insurers. They offered contracts based on a relatively small percentage over Medicare. "Our philosophy was Medicare should be your floor, not your ceiling," she says. "To have a contract with a percent of Medicare is tricky." The ASC rejected that arrangement and began negotiating for a better deal.
The center now had to propose the rates it wanted, which required performing some statistical modeling based on historic rates and volume. "We wanted to see if the center would survive with more in-network cases," Ms. Easley-Mack says. It was clear that rates would have to fall as the ASC went in-network. How much of a drop could Short Hills take?
3. Increased volume expected. "Reductions in payment would have to be made up in more volume," Ms. Easley-Mack says. She expected an automatic bump up in volume because HMO patients were not allowed to go out-of-network, and while PPO patients were allowed to go out-of-network, they were apprehensive about the higher payments required at out-of-network facilities. If patient payments could be lowered by going in-network, "we knew patients would prefer to come to us," she says.
Physicians who used the center, including 65 physician-partners, were asked to estimate what percentage of their ASC-appropriate cases was going to other facilities because the center was out-of-network. Each physician reviewed his case log for a certain period of time. "This took a bit of time but the physicians were motivated because they had ownership in the ASC," Ms. Easley-Mack says.
Results varied by physician and specialty. While some individual physicians would see very little growth in volume, every specialty would see significant growth in volume and overall growth would be substantial. The analysis showed the greatest growth in volume would come in orthopedic surgery, urology and ENT and the least in pain, ophthalmology, spine and reconstructive surgery.
4. Negotiate rates, then language. First, Short Hills negotiated reimbursement rates with payors, a process that lasted April to August 2009. One insurer agreed to a percent of billed charges with a cap on the top of the range. The other agreed to a flat case rate, meaning that the base charge would be the same for a simple procedure, such as removing a lesion, as for a complex case, such as a spine procedure. Under a carve-out, the insurer would pay extra for implants, supplies and medications if costs passed a certain threshold.
After rates were settled, negotiators moved to the ancillary service agreement and the contract's actual language. In the negotiating process, "You don't mess with the language until you get the rates down," Ms. Easley-Mack explains. The language was negotiated over three months, from August to November.
Negotiating the language involved a series of reviews by experienced healthcare lawyers. "The legal review definitely had to come from outside," Ms. Easley-Mack says. "We are by no means healthcare attorneys." Lawyers went through several rounds of redlining the contract. "The first edits didn't quite satisfy," she says. One example was the rules to qualify for carve-outs. Under the language in an earlier draft, "if we did not submit information to the insurer in the manner in which they wanted it, the claim would be denied," she says. The ASC objected to that provision.
In negotiating contract language, "we weren't able to change everything that we didn’t like," Ms. Easley-Mack says. "But at least we were very clear on what our responsibilities would be." Thoroughness of the review process meant that ASC staff became intimately aware of the rules they would have to live by.
The ASC board approved the contracts in mid-November. The contracts were not a surprise to board members because many of them had kept tabs on them throughout the negotiating process. "They understood the contract before it came to them for a vote," Ms. Easley-Mack says.
5. Implementing the changes. Once the contract was approved, the ASC had only one and a half months to prepare physicians and staff before the contract took effect on Jan. 1, 2010. First, the contract terms were presented to the physicians. "The physicians needed to know what was expected of them," Ms. Easley-Mack says. Policies and protocols had to be written and established.
The billing staff would undergo some of the biggest changes. Before the contracts, "reimbursements were not as complex," Ms. Easley-Mack says. "The benefits were the same. It didn't matter what product line it was." Fortunately, the center could outsource billing to an agency that was well acquainted with in-network billing. But front office staff at the ASC still needed to deal with several contractual requirements, such as the need to get a referral from the surgeon's office and reminding patients in advance of their out-of-pocket charges.
Each payor was involved in on-site training of ASC staff. "The business office learned payor-specific nuances," Ms. Easley-Mack says. Staff had to learn each insurer's product lines and how the payor affects reimbursement. For example, they learned to access the payor's website, find out what the out-of-pocket charge for the patient should be and ask patients for their out-of-pocket payments, which they had rarely done before.
ASC staff hosted several meetings for staff at their physicians' practices to inform them about new requirements, such as providing patient referrals. And because the ASC expected an increase in volume, there would be fewer openings in the schedule. It was now necessary for surgeons' offices to schedule cases as early as possible.
When Short Hills went live, "it was a smooth transition," Ms. Easley-Mack says. "We had no operational issues." The new credit card machines were working and the upfront collection policies were up and running. That's because the ASC had done its homework. "It was not easy to do," she says. "It was a big achievement."
Learn more about Short Hills Surgery Center.
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