Surgical Management Professionals COO Reed Martin discusses five of the biggest financial issues for ambulatory surgery centers this year.
1. ICD-10 will begin in October, barring any further delays, and unprepared ASCs could take a huge financial hit. Properly train coders in the transition so when ICD-10 is required, claims can be processed efficiently from the ASC's side. However, there is always the concern whether payers will be able to handle the switch.
"There is a significant increase in diagnosis and CPT codes, and there is a concern about whether the insurance companies, specifically the smaller companies, can process all the claims," says Mr. Martin. "That hits the ASCs in cash flow areas. We recommend building a reserve starting in September to create a cushion in case there is an issue. If the facility normally reserves 30 days when making distribution recommendations, we might recommend reserving 60 days or more at this point."
2. There are far more patients with high deductible health plans today, which means patients are waiting longer to have elective procedures and required to pay more out-of-pocket. More surgery centers are developing policies and procedures to collect deductibles or co-insurance upfront on the day of surgery.
"That's important to the facility from the financial side because accounts receivable is growing and it's helpful for the patient to know on the day of surgery what their out-of-pocket is," says Mr. Martin. "That can also be a patient satisfier in the long run, and it's easier to collect money before or the day of surgery instead of 30 to 60 days afterward when the insurance company has paid and the patient already received services."
3. As ASCs age, physician populations are also aging and ownership reaches a point when one or more founders will retire. Establishing a reserve for share buy back is critical for the center's growth and evolution. "One effective strategy is holding back or reserving some of the funds when a new physician buys into the facility," says Mr. Martin. "We recommend a five-year window for projecting new members or retirements, which we've found effective."
4. Bonus programs for staff members are an important part of rewarding good service and motivating future performance. "We think programs that provide for employee bonuses based on improvements in patient satisfaction and profitability indicators for the facility align very well with the board's and owners' goals for the facilities," says Mr. Martin. "Bonus programs that reimburse up to 3 percent to 5 percent of earnings or distributions can be quite effective."
5. Managed care contract negotiations are continuously an important opportunity for surgery centers, and access to case costing data is a very important component in contract negotiations. If ASCs can show cost savings, they may have leverage with payers. "All portions of the healthcare industry are under scrutiny to identify additional cost savings and increased revenues," says Mr. Martin. "The importance of negotiating increases for specific new cases that involve implants or for overall bread-and-butter cases continue to be very important because we know other costs are increasing at the center."
Case costing is especially important if the ASC is trying to add and contract for new procedures or specialties, such as total joints or spine.