When opening an ambulatory surgery center (ASC), one of the first tasks to complete is developing a fee schedule.
This financial plan is one of the main pillars of your organization. It determines what you will be reimbursed for services performed, if you are meeting procedure costs and making a reasonable profit, and if your ASC is maintaining a positive cash flow.
To put you on a path to best ensure your ASC has a solid foundation upon which to build and grow, here are some of the most important steps to take for developing your fee schedule.
1. Choose fee schedule development team
Choosing the right team members to be involved in the fee development process is essential to success. Members should include the administrator, business office manager, clinical staff representative, physician(s), governing body member, and coder/biller. If your ASC is a joint venture, include a hospital representative as well.
2. Establish time frame for development
When preparing for the fee schedule development process, allow appropriate time to complete the remaining steps. They include the following:
• evaluation of your area for factors affecting specialties, fees, and reimbursement;
• compilation of proposed procedure list;
• procedure cost determination;
• evaluation of your managed care market;
• input/approval by the governing body; and
• entering the fee schedule into your ASC's software system.
Let's now take a closer look at these and other critical steps.
3. Evaluate demographic area
When evaluating your ambulatory surgery center's demographic area, take into consideration economic status. Examples include the following:
• High population young adults with children may indicate a heavy need for otolaryngology (ENT) procedures. Reimbursement may consist of a mix of HMO/PPO/commercial/Medicaid.
• Ski resort area may have a high concentration of orthopedic needs. Reimbursement will probably be less Medicare and more HMO/PPO/commercial.
• Industrial area may consist of high orthopedic and general surgery. Expect more reimbursement from HMO/workers' compensation. Develop relationships with employers in proximity to your ASC to inform them that you have contracts with their PPO/HMO.
• Retirement community with elderly population may require more ophthalmology, gastroenterology, and general surgery, with reimbursement primarily a mix of Medicare/Medicaid.
4. Compile procedure list
After evaluating your demographic area and evaluating which specialties/procedures will primarily serve the population in the ASC's community, begin to compile a list of the most common procedures that will be performed in the facility. Ask your surgeons for a list of procedures they perform in the office and/or hospital outpatient departments (HOPDs) to determine which may be moved to your ASC. In addition, review providers' credentialing packets and delineation of procedure forms to identify those procedures that are payable in the ASC and the equipment required to perform them. This information, along with the list of procedures approved by the ASC's governing body, will assist in identifying planned equipment purchases.
Compare the list of procedures to the Centers for Medicare & Medicaid Services' (CMS) list of approved ASC procedures. For CMS non-approved procedures, determine which procedures may be paid by private payers. If there are any procedures that are not approved by either CMS or private insurance, identify these procedures as self-pay.
5. Perform cost analysis
Take your common procedures list and narrow it down further, identifying 20 (or possibly fewer, if you are a small or single-specialty facility) of the most common procedures to be performed in your ASC. Obtain provider preference information from the hospital to assist in estimating direct costs specifically associated with the procedure (e.g., clinical labor/benefits, supplies, implants, and equipment used). Estimate indirect costs (i.e., not directly associated with a procedure), such as rent, utilities, administrative/business office salaries/benefits, maintenance, fixtures like OR tables/lights, marketing costs, employee education, and office supplies and postage. You may need to consult your accountant for assistance in identifying and estimating these costs.
Add the estimated direct and indirect costs for each procedure to arrive at your case cost. Use this information to help evaluate what type of fee schedule to choose (more on this below), what percentage of markup is needed to achieve the desired profit margin, and what amount will be used to negotiate managed care contract rates.
Suggested resources to assist in determining your fee schedule include the following:
• Ambulatory Surgical Center Payment System via CMS
• Ambulatory Surgery Centers Association (ASCA)
• Managed care companies
• Consultants
• Large supply companies
6. Evaluate managed care market
In preparation for managed care contract negotiation, contact the largest private payers in your area. Provide them with a list of your most commonly performed procedures and ask for proposed rates. Also, request their policies on multiple procedure discounts. Determine reimbursement rates for implants, prosthetics, supplies, and/or equipment. Identify carve-out possibilities. In addition, obtain a copy of your state's Medicaid fee schedule and workers' compensation fee schedule as well as a copy of your providers' managed care reimbursement rates.
7. Prepare questions for your legal counsel
If you have any questions about potential legal issues associated with developing the fee schedule, agreeing to managed care contracts, or other related issues, you will want to engage with legal counsel to have these concerns addressed before taking any actions or making decisions. Examples of such common questions you may ask legal counsel and their answers are as follows:
Q: Can I share information with competitors?
A: You cannot agree with competitors to allocate markets, business opportunities, or territories or to discontinue certain services, businesses, suppliers, insurers, or patients. You cannot discuss prices, reimbursement, or salaries. You cannot share fee schedules.
Q: Should I agree to a "most-favored nation" provision in a payer contract?
A: If you do, you guarantee that you will charge the lowest price to that plan. If you agree to a lower price with another payer, you must then lower your price to the most-favored nation to equal that price. We recommend avoiding this clause whenever possible.
Q: Is there a minimum/maximum amount you should charge?
A: Although the amount the ASC charges has little to do with reimbursement anymore, a fair and equitable fee schedule should be developed. Be sure that your ASC's charges are at least equal to Medicare ASC rates to avoid violation of the federal excessive charges law.
8. Understand fee schedule options and essential elements
There are several types of fee schedules you will want to evaluate to help you determine which is best for your ASC. The following are two common types:
• Medicare-based — This is the most common type of fee schedule and is the easiest to maintain as it can be updated when Medicare rates are changed. If basing your fee schedule on Medicare rates, determine the percentage over reimbursement rate you plan to use. Check your proposed fees against the cost of some of your more expensive procedures to determine if you will achieve an adequate profit margin. These procedures may need to be addressed individually. Assign all CPTs the appropriate Medicare rate and then multiply reimbursement rate by 400% (or the percentage of your choice) to complete your fee schedule.
• Fee schedule based on cost — This is a more time-consuming type of fee schedule to institute but is considered more equitable. Determine the case cost for each CPT of your most performed procedures. Multiply these figures by an established percentage to arrive at desired fee. If there is little difference in cost for similar procedures, you may wish to assign the same fee to like procedures (e.g. colonoscopies, knee arthroscopies).
Other types of fee schedules include those based on a percentage of Medicare HOPD reimbursement rates, a combination of Medicare rates and cost, and individually set rates.
Additional items to include in fee schedule
Other areas where rates need to be established include the following:
• Implants — Although most government contracts include the cost of the implant in the procedure reimbursement, ensure that private carriers' contracts include implant coverage. To determine the fee for HCPCS-allowable codes, decide on either doubling the implant cost or adding up the cost of the implant plus shipping and handling. Once decided, maintain consistency.
• Procedure discounts — In accordance with your governing body-approved financial policies and procedures, define discounts for multiple procedures performed in one case. Decide if you are going to bill 100% for each procedure performed per case, bill 100% for first procedure and 50% of your fee for each additional procedure, or bill 100% for first procedure, 50% for second procedure, and 25% for each additional procedure. Once decided, maintain consistency.
Some quick tips are as follows:
• For non-ASC codes, use similar approved codes or cost-based fees.
• Determine minimum fee for low-cost procedures.
• Specify fees for carve-outs.
• Indicate what is included in your fee (e.g., labs, EKGs).
• Keep your fee schedule simple. Too many exceptions typically confuse insurers and increase claim turnaround time.
• Record all of your decisions.
9. Maintain compliance with fee schedule
When coding procedures, use the appropriate CPT code and its stipulated fee. Bill only for services provided; never upcode (or downcode). Apply discounts for multiple procedures, where applicable. Maintain appropriate documentation for implants/prosthetics billing.
Give your ASC's fee schedule the attention it deserves
While developing a fee schedule may seem like a complex procedure, remember that your fee schedule sets the stage for reimbursement, allows for a reasonable profit margin, helps you meet governmental requirements and regulations, and ultimately determines the financial success of your ASC. Take the necessary time to do it right. If you have concerns about your ability to develop an appropriate fee schedule, don't risk it. Bring in an outside ASC revenue cycle expert for assistance.
Caryl Serbin, RN, BSN, LHRM, is president and founder of Serbin Medical Billing, an ASC revenue cycle management company. Serbin Medical Billing's primary objectives are to provide the best coding, billing, and accounts receivable management services available to ambulatory surgery centers (hospital joint-venture, corporate-owned, or independent) and anesthesia providers. Ms. Serbin has been a leader in the ASC industry for 30 years. She was the founder of the first ASC-specific billing company.