There is a lot going on in the payer world today — formation of narrow provider networks, rising premiums, health plan consolidation, advent of health insurance exchanges — and with all these changes come opportunities for ambulatory surgery centers.
"Payers are moving more and more towards shared savings models, which are ideal for ASCs because we can better control anesthesia, implant, supply, and labor costs and still deliver high quality within a single episode of care," says Vice President of Managed Care at Meridian Surgical Partners Jamison Pearlman. "Bundled payments are a great opportunity for ASCs to align incentives with payers to ensure greater patient access and participation within evolving narrow networks focused on greater efficiency and accountability."
Insurance companies are looking for providers who are more engaged in every aspect of patient care, from the clinical outcomes to managing overall costs. They are looking for physicians and facilities to participate in accountable care organizations, patient-centered medical homes and even broader population management initiatives. Because ASCs have been traditionally a cost-effective care option, Mr. Pearlman sees all these new payment models as potentially advantageous for ASCs.
"In terms of outpatient surgery, hospitals aren't as efficient as ASCs and hospital-aligned ASCs in a market without any competition don't have the same incentive to compete on rates as independent ASCs," says Mr. Pearlman. "Independent ASCs are in a better position to participate in these new payer arrangements. But we have to work with payers and demonstrate our value to drive savings and promote quality. The days of just having contracts and expecting sufficient member steerage alone are over."
Payers are also more at ease with the growing trend of higher acuity cases being performed in ASCs — such as total joint replacements and spine surgery — and more willing to reimburse a reasonable amount for those procedures. Especially as ASCs can show a considerable cost savings alongside clinical safety evidence, some payers are actively directing more cases to the outpatient setting.
"I think payers have become easier to work with, allowing more patients to have surgery in the ASC," says Mr. Pearlman. "They are also noticing ASCs do a great job with patient safety and selection protocols. Now we can get TLIFs and PLIFS reimbursed appropriately at the center."
However, in some cases payers are becoming savvier about spine surgery pricing through ongoing data collection efforts. When it comes time to renew contracts, payers have done their homework, understanding related costs and are more prepared to insist on material discounts. Likewise, since certain spine procedures have been more commonly performed in the ASC setting, payers often have more contracts to benchmark to warrant more competitive rates.
"Payers are more sophisticated now in what they are paying and we've seen them approach contract negotiations with more targeted rates," says Mr. Pearlman. "They have information about case costs and look to us for better pricing. However, even with increased pressure on pricing, these cases are still advantageous for the ASC and the margins with regards to orthopedics, total joints and spine remain favorable."
ASCs may have some leverage during contract negotiations because payers often want to move costly spine surgeries out of the hospital setting when possible. In certain markets and situations, payer relationships with the hospital prevents them from directing more patients to the ASC, but the potential of cost savings will become even greater in the future.
However, there are a few concerning payer trends for ASCs today:
• Out-of-network leverage is decreasing
• Saturation of ASCs undercutting each other on price
• Patients' benefits have higher deductible amounts
"The window of opportunity for out-of-network leverage is shrinking; payers are more and more implementing maxim fee allowables," says Mr. Pearlman. "There are also a lot of unknowns with the exchanges and what the private employers are doing. If and when employers move to defined contributions, their employees will pay more attention to their care costs and may not choose a non-participating ASC."
For in-network contracts, benefits are designed to bring patients into networks where they are directed to "preferred providers" who meet the payer's criteria for quality and savings. These participator networks are structured to deliver providers with a higher case volume in exchange for a discounted reimbursement rate. Too much competition for volume is helping to push rates downward.
"There are some ASCs in saturated markets that are accepting rates well below market and in turn payers use those lower rates as a baseline when comparing other ASCs," says Mr. Pearlman. "Then our rates are undercut and it's difficult to show payers why we need the higher fees to cover our expenses."
As patient deductibles continue to increase and out-of-pocket expenses are pushed to the forefront, lower-cost ASCs become more attractive. Some surgery centers are posting prices online, and Medicare cost data has been released for hospitals and physicians. There are also insurance companies in some states publishing out-of-pocket spend for patients on their websites. Cigna, for example, has consumer directed plans that allow members to compare quality and cost for each provider.
"Prices are going to be online and ASCs should be positioned to handle that," says Mr. Pearlman. "Technology drives much of this, and soon patients will make decisions about their care based on available data sets. ASC can take advantage of this opportunity, but will need to remain price competitive as patients will be doing more 'shopping' within the context of greater transparency."
More Articles on Surgery Centers:
Biggest Challenges Facing ASCs in 2014: What's Yours?
2014 ASC Valuation Trends: Key Insights From HealthCare Appraisers
5 Recent ASC Industry Leadership Moves & Honors
"Payers are moving more and more towards shared savings models, which are ideal for ASCs because we can better control anesthesia, implant, supply, and labor costs and still deliver high quality within a single episode of care," says Vice President of Managed Care at Meridian Surgical Partners Jamison Pearlman. "Bundled payments are a great opportunity for ASCs to align incentives with payers to ensure greater patient access and participation within evolving narrow networks focused on greater efficiency and accountability."
Insurance companies are looking for providers who are more engaged in every aspect of patient care, from the clinical outcomes to managing overall costs. They are looking for physicians and facilities to participate in accountable care organizations, patient-centered medical homes and even broader population management initiatives. Because ASCs have been traditionally a cost-effective care option, Mr. Pearlman sees all these new payment models as potentially advantageous for ASCs.
"In terms of outpatient surgery, hospitals aren't as efficient as ASCs and hospital-aligned ASCs in a market without any competition don't have the same incentive to compete on rates as independent ASCs," says Mr. Pearlman. "Independent ASCs are in a better position to participate in these new payer arrangements. But we have to work with payers and demonstrate our value to drive savings and promote quality. The days of just having contracts and expecting sufficient member steerage alone are over."
Payers are also more at ease with the growing trend of higher acuity cases being performed in ASCs — such as total joint replacements and spine surgery — and more willing to reimburse a reasonable amount for those procedures. Especially as ASCs can show a considerable cost savings alongside clinical safety evidence, some payers are actively directing more cases to the outpatient setting.
"I think payers have become easier to work with, allowing more patients to have surgery in the ASC," says Mr. Pearlman. "They are also noticing ASCs do a great job with patient safety and selection protocols. Now we can get TLIFs and PLIFS reimbursed appropriately at the center."
However, in some cases payers are becoming savvier about spine surgery pricing through ongoing data collection efforts. When it comes time to renew contracts, payers have done their homework, understanding related costs and are more prepared to insist on material discounts. Likewise, since certain spine procedures have been more commonly performed in the ASC setting, payers often have more contracts to benchmark to warrant more competitive rates.
"Payers are more sophisticated now in what they are paying and we've seen them approach contract negotiations with more targeted rates," says Mr. Pearlman. "They have information about case costs and look to us for better pricing. However, even with increased pressure on pricing, these cases are still advantageous for the ASC and the margins with regards to orthopedics, total joints and spine remain favorable."
ASCs may have some leverage during contract negotiations because payers often want to move costly spine surgeries out of the hospital setting when possible. In certain markets and situations, payer relationships with the hospital prevents them from directing more patients to the ASC, but the potential of cost savings will become even greater in the future.
However, there are a few concerning payer trends for ASCs today:
• Out-of-network leverage is decreasing
• Saturation of ASCs undercutting each other on price
• Patients' benefits have higher deductible amounts
"The window of opportunity for out-of-network leverage is shrinking; payers are more and more implementing maxim fee allowables," says Mr. Pearlman. "There are also a lot of unknowns with the exchanges and what the private employers are doing. If and when employers move to defined contributions, their employees will pay more attention to their care costs and may not choose a non-participating ASC."
For in-network contracts, benefits are designed to bring patients into networks where they are directed to "preferred providers" who meet the payer's criteria for quality and savings. These participator networks are structured to deliver providers with a higher case volume in exchange for a discounted reimbursement rate. Too much competition for volume is helping to push rates downward.
"There are some ASCs in saturated markets that are accepting rates well below market and in turn payers use those lower rates as a baseline when comparing other ASCs," says Mr. Pearlman. "Then our rates are undercut and it's difficult to show payers why we need the higher fees to cover our expenses."
As patient deductibles continue to increase and out-of-pocket expenses are pushed to the forefront, lower-cost ASCs become more attractive. Some surgery centers are posting prices online, and Medicare cost data has been released for hospitals and physicians. There are also insurance companies in some states publishing out-of-pocket spend for patients on their websites. Cigna, for example, has consumer directed plans that allow members to compare quality and cost for each provider.
"Prices are going to be online and ASCs should be positioned to handle that," says Mr. Pearlman. "Technology drives much of this, and soon patients will make decisions about their care based on available data sets. ASC can take advantage of this opportunity, but will need to remain price competitive as patients will be doing more 'shopping' within the context of greater transparency."
More Articles on Surgery Centers:
Biggest Challenges Facing ASCs in 2014: What's Yours?
2014 ASC Valuation Trends: Key Insights From HealthCare Appraisers
5 Recent ASC Industry Leadership Moves & Honors