Surgery centers that depend heavily on specialties like ophthalmology, GI/endoscopy and pain management may struggle to remain profitable, as CMS institutes meager increases to reimbursement and commercial payors follow suit. Reed Martin, chief operating officer for Surgical Management Professionals, discusses tactics surgery center leaders can use to make up for low-reimbursement specialties — and how to profit even when payor contracts don't promise a windfall.
1. Create personal relationships with payors. Build a long-term relationship with your payors, and you'll find it easier to get increases in difficult years, Mr. Martin says. "It works best when we have personal relationships with the medical director and the negotiators at insurance companies, on a regional and national basis," he says. "In the past, it has been important for me to be on a first-name basis with the negotiator and medical director for the major payors."
He says this kind of familiarity sets the tone when you're negotiating and makes the interaction more friendly and honest. He also says surgery center leaders should make themselves available as resources on the ASC industry. "Payors have issues where they need to understand what's happening with ACOs, or the movement of neuro and spine into ASCs," he says. "It should be a two-way street."
2. Present your patient satisfaction scores during negotiation. "Put your best foot forward" and present your patient satisfaction scores upfront, Mr. Martin says. He says it's important to have patient satisfaction as an agenda item for quarterly board meetings and then to use this information with your payors.
The surgery center should be thinking about how to improve the patient experience on a regular basis — and payors want to know that. "ASC patients are managed care members, and payors want to know how your facility compares to other hospital systems or other ASCs," he says.
3. Understand how your charges and reimbursement compare with the HOPD. How do your charges and reimbursement compare with the local hospital outpatient department? Mr. Martin says this question is essential to effective contract negotiation.
"We know hospitals are paid 40 percent more by Medicare, and oftentimes considerably more by managed care," he says. "It's important to be able to discuss the lower reimbursement that ASCs receive, and translate that to savings to the members and insurance companies."
He says you can either estimate the amount the hospital receives, or you can work with patients who are willing to show you their EOBs. Payors may be more willing to give you a good reimbursement rate if they understand that you save them money when cases go outside the hospital.
4. Make Medicare "the floor." Medicare should be the lowest reimbursement level your facility accepts, Mr. Martin says. If a commercial payor tries to offer you a rate lower than Medicare, you should most likely consider an out-of-network strategy. However, he believes that most surgery centers should not run into this problem.
"I think in the long-term, insurance companies do look at what happens with Medicare, but it's not year by year," he says. "They realize that the two main areas of our costs — supplies and personnel — are increasing at a greater rate than 1 percent per year."
5. Target block time utilization and late case starts. Make sure your physicians are using their block time to full effect, Mr. Martin says. If one physician isn't using his scheduled block time — and another wants to bring more cases to the ASC — talk to the physicians and see if one will relinquish his time. You may want to bring the medical director into this conversation to smooth the process.
Mr. Martin says it's also important to release block time early, so that physicians can add cases in the empty slots before the date passes. "A good yardstick is to release block time five days before," he says. "If you're releasing time that's then not being filled, that's a problem."
He says it's also important to keep track of late case starts, which can push the whole day's schedule back and create dissatisfaction among physicians. "If the first provider is a habitually late provider, perhaps he or she should not have the first case of the day," he says.
6. Script your processes to create a calm atmosphere. Patients will feel more calm and cases will move more smoothly if staff can explain every step of the process as it happens, says Mr. Martin. "We work on training the staff to explain to the patient why they're moving from one room to another, how we evaluate them before they're released " he says.
This scripting helps in two ways: First, the patient feels calm and cared for because they understands what's happening. Second, staff can move through the steps efficiently because they're so used to repeating the same script every day.
7. Work to standardize implants. Implant costs can drag down net reimbursement very quickly, so make sure your physicians understand the importance of standardization. Mr. Martin says Surgical Management Professionals has found that comparing costs — without physician names included — can help spur healthy competition among providers.
"Having board support and medical director support is very effective in this regard," he says. "The ASC should have a supply value analysis committee that evaluates supply costs and includes a physician, some clinical management and the materials manager." He says this group should meet on a monthly or quarterly basis to discuss any "outlier" implants and chat with physicians about possible standardization or generic purchasing.
8. Look at contracts for laundry and maintenance. Make sure you look at your contracts for laundry and maintenance on an annual basis, at the least, Mr. Martin says. "You really don't know what's happening in the market unless you get a competitive quote," he says. Look at your bill and determine whether you need to be paying for everything in your contract.
9. Consider adding a more lucrative specialty. If you're highly dependent on a few specialties with historically low reimbursement, you might consider adding a specialty that averages a higher payoff per case, Mr. Martin says. For example, orthopedics generally provides robust reimbursement, as long as you can negotiate a carve-out for the expensive implants required. The issue with adding orthopedics is the significant capital outlay required for the specialty.
"You'd want to make sure you had a group of orthopedic surgeons who would commit to the facility," Mr. Martin says. "You'll have an additional cost in capital and supplies as well as the additional revenue." He says orthopedics is also very different clinically — and in terms of scheduling — than specialties like GI and ophthalmology, which depend on moving many cases through the ASC at a rapid pace. He says if a surgery center is already performing GI and ophthalmology, pain management might be an easier addition to start with.
Learn more about Surgical Management Professionals.
Related Articles on ASC Turnarounds:
9 Statistics on Surgery Center Size, Rent and PP&E
OrthoVirginia and HCA Virginia Open Medical Facility, Joint Venture Surgery Center
5 Ways to Boost Ambulatory Surgery Center Profits
1. Create personal relationships with payors. Build a long-term relationship with your payors, and you'll find it easier to get increases in difficult years, Mr. Martin says. "It works best when we have personal relationships with the medical director and the negotiators at insurance companies, on a regional and national basis," he says. "In the past, it has been important for me to be on a first-name basis with the negotiator and medical director for the major payors."
He says this kind of familiarity sets the tone when you're negotiating and makes the interaction more friendly and honest. He also says surgery center leaders should make themselves available as resources on the ASC industry. "Payors have issues where they need to understand what's happening with ACOs, or the movement of neuro and spine into ASCs," he says. "It should be a two-way street."
2. Present your patient satisfaction scores during negotiation. "Put your best foot forward" and present your patient satisfaction scores upfront, Mr. Martin says. He says it's important to have patient satisfaction as an agenda item for quarterly board meetings and then to use this information with your payors.
The surgery center should be thinking about how to improve the patient experience on a regular basis — and payors want to know that. "ASC patients are managed care members, and payors want to know how your facility compares to other hospital systems or other ASCs," he says.
3. Understand how your charges and reimbursement compare with the HOPD. How do your charges and reimbursement compare with the local hospital outpatient department? Mr. Martin says this question is essential to effective contract negotiation.
"We know hospitals are paid 40 percent more by Medicare, and oftentimes considerably more by managed care," he says. "It's important to be able to discuss the lower reimbursement that ASCs receive, and translate that to savings to the members and insurance companies."
He says you can either estimate the amount the hospital receives, or you can work with patients who are willing to show you their EOBs. Payors may be more willing to give you a good reimbursement rate if they understand that you save them money when cases go outside the hospital.
4. Make Medicare "the floor." Medicare should be the lowest reimbursement level your facility accepts, Mr. Martin says. If a commercial payor tries to offer you a rate lower than Medicare, you should most likely consider an out-of-network strategy. However, he believes that most surgery centers should not run into this problem.
"I think in the long-term, insurance companies do look at what happens with Medicare, but it's not year by year," he says. "They realize that the two main areas of our costs — supplies and personnel — are increasing at a greater rate than 1 percent per year."
5. Target block time utilization and late case starts. Make sure your physicians are using their block time to full effect, Mr. Martin says. If one physician isn't using his scheduled block time — and another wants to bring more cases to the ASC — talk to the physicians and see if one will relinquish his time. You may want to bring the medical director into this conversation to smooth the process.
Mr. Martin says it's also important to release block time early, so that physicians can add cases in the empty slots before the date passes. "A good yardstick is to release block time five days before," he says. "If you're releasing time that's then not being filled, that's a problem."
He says it's also important to keep track of late case starts, which can push the whole day's schedule back and create dissatisfaction among physicians. "If the first provider is a habitually late provider, perhaps he or she should not have the first case of the day," he says.
6. Script your processes to create a calm atmosphere. Patients will feel more calm and cases will move more smoothly if staff can explain every step of the process as it happens, says Mr. Martin. "We work on training the staff to explain to the patient why they're moving from one room to another, how we evaluate them before they're released " he says.
This scripting helps in two ways: First, the patient feels calm and cared for because they understands what's happening. Second, staff can move through the steps efficiently because they're so used to repeating the same script every day.
7. Work to standardize implants. Implant costs can drag down net reimbursement very quickly, so make sure your physicians understand the importance of standardization. Mr. Martin says Surgical Management Professionals has found that comparing costs — without physician names included — can help spur healthy competition among providers.
"Having board support and medical director support is very effective in this regard," he says. "The ASC should have a supply value analysis committee that evaluates supply costs and includes a physician, some clinical management and the materials manager." He says this group should meet on a monthly or quarterly basis to discuss any "outlier" implants and chat with physicians about possible standardization or generic purchasing.
8. Look at contracts for laundry and maintenance. Make sure you look at your contracts for laundry and maintenance on an annual basis, at the least, Mr. Martin says. "You really don't know what's happening in the market unless you get a competitive quote," he says. Look at your bill and determine whether you need to be paying for everything in your contract.
9. Consider adding a more lucrative specialty. If you're highly dependent on a few specialties with historically low reimbursement, you might consider adding a specialty that averages a higher payoff per case, Mr. Martin says. For example, orthopedics generally provides robust reimbursement, as long as you can negotiate a carve-out for the expensive implants required. The issue with adding orthopedics is the significant capital outlay required for the specialty.
"You'd want to make sure you had a group of orthopedic surgeons who would commit to the facility," Mr. Martin says. "You'll have an additional cost in capital and supplies as well as the additional revenue." He says orthopedics is also very different clinically — and in terms of scheduling — than specialties like GI and ophthalmology, which depend on moving many cases through the ASC at a rapid pace. He says if a surgery center is already performing GI and ophthalmology, pain management might be an easier addition to start with.
Learn more about Surgical Management Professionals.
Related Articles on ASC Turnarounds:
9 Statistics on Surgery Center Size, Rent and PP&E
OrthoVirginia and HCA Virginia Open Medical Facility, Joint Venture Surgery Center
5 Ways to Boost Ambulatory Surgery Center Profits