Decreasing reimbursements by Medicare pose as a serious challenge to ASCs looking to stay profitable in an already struggling economy. Here, Jim Stilley, CEO of Northwest Michigan Surgery Center in Traverse City, Mich., shares four best practices for staying afloat amidst declining reimbursements and a tough economy.
1. Compensate for lack of Medicare reimbursements by working with other payors. Despite the difficulty in staying profitable in spite of declining reimbursements, Mr. Stilley says reaching out and working with other insurance carriers can help make up for the loss in profits. He says the biggest selling point when negotiating contracts with other payors is the fact that the cost to perform surgeries in an ASC setting is much less than the cost to perform the same surgeries in the hospital setting.
"If we do a colonoscopy, the price to do it here is half that at a hospital, plus we don't have to provide some of the things that a hospital might have to," he says. "So because our costs are so much lower than a hospital's to perform any one surgery, we have more leverage with Blue Cross, Aetna and other payors to make more, so you have to use those opportunities to make up for the losses with Medicare."
2. Strategize number of cases by payor per day. Limiting or expanding the number of patients of a certain payor per day is one strategy for ASCs to consider. To stay profitable, Mr. Stilley says surgery centers may have to cap the number of visits by patients covered by Medicare.
"If I have room to see 16 GI patients each day, I might have to cap the number of Medicare patients each day to seven or eight patients," he says. "We can only afford to operate with that many Medicare beneficiaries, and it's unfortunate we have to close that enrollment group, but we have to make room for other payors. Otherwise we won't be profitable. Our facility has the physical capacity to take more patients but not the financial capacity."
3. Level with supply vendors. Negotiating with supply vendors for better price points on instruments, equipment and other supplies is common practice among most ASCs, but laying out the facts about decreasing reimbursements can help gain some leverage during those negotiations.
"There are a lot of advanced techniques in negotiating with supply companies, and sitting down and showing them the facts about Medicare is one of them," Mr. Stilley says. "I have to show them the facts about decreasing reimbursements and ask them how they are going to make their products more price-appropriate for surgery centers if, for example, they are going to charge $180 for a GI balloon used for an EDG when we're only getting $300 for Medicare to cover that charge. The surgery center can't survive on that."
4. Keep a safe level of inventory. Although ASCs should order just enough supplies to hold the facility over for a designated amount of time, they should also consider ordering enough to hold them over in case of rainy days, such as was the case in the sudden shortage of propofol experienced last year.
"Most ASCs try to keep inventory levels down to maintain higher profits, but that can also put you in a bind," Mr. Stilley says. "We usually have no more than two weeks' worth of supplies on hand, and it's a great cost-cutting measure in terms of keeping overhead costs down and using every dollar wisely. But in the case of the propofol shortage, you may not be able to do cases because you don't have that anesthetic agent needed to perform GI cases. You want to have a little more for those rainy days."
Learn more about Northwest Michigan Surgery Center.
1. Compensate for lack of Medicare reimbursements by working with other payors. Despite the difficulty in staying profitable in spite of declining reimbursements, Mr. Stilley says reaching out and working with other insurance carriers can help make up for the loss in profits. He says the biggest selling point when negotiating contracts with other payors is the fact that the cost to perform surgeries in an ASC setting is much less than the cost to perform the same surgeries in the hospital setting.
"If we do a colonoscopy, the price to do it here is half that at a hospital, plus we don't have to provide some of the things that a hospital might have to," he says. "So because our costs are so much lower than a hospital's to perform any one surgery, we have more leverage with Blue Cross, Aetna and other payors to make more, so you have to use those opportunities to make up for the losses with Medicare."
2. Strategize number of cases by payor per day. Limiting or expanding the number of patients of a certain payor per day is one strategy for ASCs to consider. To stay profitable, Mr. Stilley says surgery centers may have to cap the number of visits by patients covered by Medicare.
"If I have room to see 16 GI patients each day, I might have to cap the number of Medicare patients each day to seven or eight patients," he says. "We can only afford to operate with that many Medicare beneficiaries, and it's unfortunate we have to close that enrollment group, but we have to make room for other payors. Otherwise we won't be profitable. Our facility has the physical capacity to take more patients but not the financial capacity."
3. Level with supply vendors. Negotiating with supply vendors for better price points on instruments, equipment and other supplies is common practice among most ASCs, but laying out the facts about decreasing reimbursements can help gain some leverage during those negotiations.
"There are a lot of advanced techniques in negotiating with supply companies, and sitting down and showing them the facts about Medicare is one of them," Mr. Stilley says. "I have to show them the facts about decreasing reimbursements and ask them how they are going to make their products more price-appropriate for surgery centers if, for example, they are going to charge $180 for a GI balloon used for an EDG when we're only getting $300 for Medicare to cover that charge. The surgery center can't survive on that."
4. Keep a safe level of inventory. Although ASCs should order just enough supplies to hold the facility over for a designated amount of time, they should also consider ordering enough to hold them over in case of rainy days, such as was the case in the sudden shortage of propofol experienced last year.
"Most ASCs try to keep inventory levels down to maintain higher profits, but that can also put you in a bind," Mr. Stilley says. "We usually have no more than two weeks' worth of supplies on hand, and it's a great cost-cutting measure in terms of keeping overhead costs down and using every dollar wisely. But in the case of the propofol shortage, you may not be able to do cases because you don't have that anesthetic agent needed to perform GI cases. You want to have a little more for those rainy days."
Learn more about Northwest Michigan Surgery Center.