Scott Becker, JD, Chairman of the Healthcare Department at McGuireWoods and the Publisher of Becker's ASC Review and Becker's Hospital Review, discussed key business and legal issues for ambulatory surgery centers in a webinar sponsored by SourceMedical on December 13, 2012.
After the Supreme Court upheld the individual mandate in the Patient Protection and Affordable Care Act in June and President Barack Obama was re-elected in November, healthcare providers must prepare for healthcare reform implementation.
"This means a continuation of a few of the trends that have taken aggressive hold over the past three to five years," says Mr. Becker. "The first core concept that you see is the expansive amount of consolidation in healthcare generally. It's at the hospital/hospital level and the hospital/physician level. The core driver of this activity is that payors and employers want a one-stop place where they work with providers to provide them with an entire network."
Mr. Becker also discussed consolidation within the payor market, noting several areas that have become dominated by one payor through mergers or acquisitions over the past few years.
Consolidation at both ends impacts surgery centers. Fewer independent physicians in the market shrinks the pool of potential unaffiliated physicians bringing cases into ASCs. Additionally, when one payor dominates the market surgery centers are forced to contract on the payor's terms.
Given today's healthcare environment, here are 10 key business issues for ASCs:
1. Markets for surgery centers — traditionally difficult markets such as Washington DC or Maryland will continue to be difficult despite leadership abilities. In other areas where there is less consolidation and opportunity for out-of-network contracting, success will be easier.
2. Tighter reimbursement — over the past five to 10 years margins have become tighter, so it's critically important for surgery centers to capture all reimbursement dollars. Aggressively pursue lost reimbursement on claims and constantly recruit new cases and physicians.
3. Bad contracts — some surgery centers sign bad contracts for a very small percentage of their business for various reasons. After the contracts are signed, they are rented to other networks and suddenly instead of giving up 2 percent of the patient population, it becomes 20 percent to 30 percent, which has a bigger impact on collections and earnings.
4. Normalized costs — surgery centers don't want to be considered the "low cost" provider, or the Wal-Mart of their specialty; instead, they want to be considered a dominant provider of great care. Carefully rationalize costs by making sure supply and implant costs are level because there won't be excess reimbursement going forward.
5. Outstanding leadership — surgery centers must have strong administrators and physician managers to drive a successful business. The leadership should be engaged on surgery center costs and quality of care.
6. Managed care contracts — while some organizations continue to aggressively pursue out-of-network contracts, most surgery centers will need managed care contracts to survive. During negotiations leverage whatever advantages you have because those rates will have a big impact on the center's bottom line.
7. Joint ventures — surgery centers choose to joint venture with hospitals for several reasons, including capital gains, income improvement or increases in managed care contracting. However, payors are becoming more skeptical of these arrangements and aren't always immediately improving managed care rates as they did in the past.
8. Engage physicians — several factors in a physician's personal and professional life can drive focus away from the surgery centers, especially after changes in the volatile healthcare market. Make sure to engage these physicians with regular board meetings, and other activities to integrate them within the ASC.
9. Community branding — surgery centers that have created a positive brand in the community will have leverage during managed care negotiations because patients will want the center in their network. The long term survivors will be built a around a great reputation and providing outstanding care.
10. ACO relationships — accountable care organizations are sprouting up across the country. However, hospitals and not surgery centers generally control the funds. Even though surgery centers might be a lower cost provider in the market, hospitals will continue to direct services and funds internally.
Learn more about SourceMedical.
Click here for a recording of the webinar.
Click here for slides from the webinar.
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