ASC leaders and physicians continuously vent their frustrations over stalled negotiations with payers, as facilities face declining reimbursement from CMS and private payers alike.
"Payers tend to only want to talk to you if you're a part of or affiliated with a health system," Kristopher Kitz, CEO of Wyatt Surgery Center in Tucson, Ariz., told Becker's. "If you're not, payers typically will try to not talk to you or give you really bad rates, and that was the case where I am now."
Mr. Kitz is also CEO of Eye Associates of Tucson and Tucson Ambulatory Anesthesia, all of which are connected under a single ownership structure. Previously, WSC was privately owned by a single physician.
"Right now, we are renegotiating our payer contract because our rates are so terrible," he said. "And the only reason why they will speak with us and even entertain materially better rates is because we have a health system affiliation."
The challenges for ASCs' like WSC start when the payers realize the relatively low bargaining position of these facilities. Mr. Kitz's first line of defense has been to purchase market data, allowing him to see the rates that private payers offer to other health system-affiliated ASCs or hospitals.
"Even with that, their argument is, 'we can't make a jump that big in one year.' Even when you make the argument that the surgeons who just bought into this place are bringing cases that they're doing in the hospital only to the ASC, so it's in their best interest—they being the payers' best interest—even then, they still push back," he said. "I'm not sure if they don't understand or if they just don't care."
That being said, Mr. Kitz still advocates using market data as a tool that can give those negotiating rates for ASCs more transparency in their talks with payers.
"You can't have one ASC in our region getting paid 50% less than another one, because then they're not competitive, and they can't reinvest, and then it just doesn't work," he said.
He noted that the strain in these conversations often comes down to individual negotiators on the payer side, who are often disincentivized to award higher reimbursements.
"I think it's more a function of that you're negotiating with an individual person whose annual targets, are based on a certain number of increases in the negotiating contracts," Mr. Kitz said. "So they are incentivized to not give increases, even though, overall, the health plan or insurance company would save money."
This amounts to a deeply frustrating situation for smaller or independent facilities looking to grow. While not possible for all ASCs, Mr. Kitz also recommends "leaning on" health systems or hospital affiliates if a center has them.
"The CFO of the health system who's in our joint venture sits on our board," he said. "Sometimes you take them with you to the conversations, because health plans respond very differently to health systems than they do to individual ASCs."
Beyond that, the only other leverage that Mr. Kitz sees for ASCs in this situation is to shift procedures back to hospital settings in hopes that payers notice how much more expensive these procedures are in the hospital setting than the ASC.
"But is that in the best interest of the patient or the community? No, it's not at all," he said. "So no one wants to do that, but it's frustrating because they have so much power over what they will and will not do, and it's not even rational. … [W]hat we're proposing makes so much sense for everyone, from a patient-care perspective and from a financial perspective."
Continuing down this road of stalled negotiations will ultimately lead to increased consolidation, Mr. Kitz said, as ASC and private practice owners and physicians hit their limit. Increased leverage with payers is a top reason that physicians have migrated to employed settings over the last several years.
"If you can't get a survivable or sustainable rate in your surgery center, then you have no choice, right?" he said. "And that's why, USPI and SCA [Health] and the other consolidators in the market are growing so quickly. It's because they come in and say, 'Hey, we have these amazing payer rates'— And they do. I've seen them— 'if you sell us 51% of your ASC, then you'll get these too.' You'll lose control. And sure, a big for-profit corporation will be in charge, but you'll give me fair rates, right? … [I]f you're struggling, that can be really tempting."