ASCs have been forced to seek new avenues of reimbursement and ways of differentiating themselves in their markets.
The following content is sponsored by ASD Management.
Lower operating costs, higher quality of care and increased patient satisfaction have fostered the creation of ambulatory surgery centers in almost every area of the nation. Over 5,000 ASCs operate in the U.S. today. Most major cities have multiple ASCs, and most hospitals or physician groups either sponsor or participate in a center. While a few markets still have out-of-network ASCs, which do not contract with major or multiple insurers or other payers, this contracting approach is diminishing as hospitals, physicians and insurance companies form their own provider networks.
ASCs have saved Medicare and payers millions of dollars, and saved patients millions out-of-pocket through reduced deductibles, co-payments and coinsurance. Despite this success and because ASCs are so ubiquitous in many markets, payers of all types use their leverage to continue downward pressure on pricing. This has dramatically reduced reimbursement for ASCs over the last 5 years, while ASC operating costs have naturally risen. Contracting with payers has become very competitive among existing ASCs and potentially challenging for new ASCs due to pricing driven by dominant payers or provider panels in their market.
Thus, ASCs have been forced to seek new avenues of reimbursement and ways of differentiating themselves in their markets. This has been aided by many new surgical procedures clinically accepted into outpatient delivery over the last five years. Advances in anesthesia agents, technology for minimally invasive surgery, and innovative surgical techniques and instrumentation are enabling many procedures to be safely and more cost effectively delivered in the outpatient setting. ASCs are seizing the opportunity by becoming specialized surgery centers — such as those specializing in spine, total or partial joint, or retina surgery — or by adding new specialty services lines such as cardiology into their mix.
Bundled pricing
To be more attractive to payers and Worker's Comp carriers, and differentiate from other outpatient providers, ASCs are offering bundled pricing for the pre-operative medical exam, surgery and anesthesia, as well as the surgeon's pre- and post-operative treatment and physical therapy. We have experienced bundling of anesthesia, surgeon and facility fees more commonly requested in mature managed care markets by third party administrators representing large or local self-insured employers.
For bundled pricing, fees must first be negotiated with the surgeon, anesthesiologist and surgery center. Then the bundled fee is negotiated with the TPA or medical management firm. Typically these arrangements are developed as a narrow network with the surgeons, anesthesiologists and surgery center as the preferred or only provider of specific services for a designated geographic area.
Bundled pricing eliminates several cost layers in medical management and in the payment model. The pricing is competitive and profitable for the providers, but gives the TPA and employer a predictable lower cost for an episode of care. This type of contracting is labor intensive on the front end, as it involves physician fees and education, as well as facility or technical fees.
TPAs are selective in the markets where they do business depending on state laws, rules and regulations. To gain market share and profit for our ASCs, our firm is working with TPAs and, where possible, their local employer clients to provide bundled services on an exclusive basis. We have negotiated bundled contracts with three national TPA and medical management companies. The majority of this business has been with self-funded employers, but it may expand eventually to Worker's Comp business.
Direct contracting
Many issues in health care are cyclical in nature. Popular in the 1980s, direct contracting with employers, — which our firm executed with hospitals and surgery centers — is returning with some variations. ASCs are finding more self-insured companies and Worker's Comp carriers amenable to cost effective direct contracting for services, especially for high-volume orthopedic, pain and spine procedures. Some of these arrangements are made directly with national Worker's Comp carriers; others with TPAs and/or medical management companies. These companies contract with employers and/or payers to manage certain types of procedures that can be commonly done on an outpatient basis.
Direct contracting removes the pricey administrative fees charged by market dominant payers, and it also moves cases out of expensive hospital-based, outpatient surgery departments. Our firm contacts these companies on behalf of our surgeons and anesthesiologists, and then negotiates a bundled fee that is acceptable to all parties including the medical management company, employer and payer.
The medical management company is involved with pre-surgical protocols and directs patients to our surgeon for their assessments and, if applicable, to our ASC for the outpatient surgical parts of the treatment. If an orthopedic group associated with our ASC provides physical therapy, occupational therapy, CT and/or MRI, we encourage the medical management firm to contract with our orthopedic group for all those services as well. This enables case managers to coordinate with a single provider group, and enhances accountability for a better and timelier patient outcome.
Implant reimbursement
In the last several years, a contentious issue in managed care contracting has been implants and carve-outs for costly procedures. These are two different topics, both relative to payer negotiations. "Carve-outs" are defined as procedures categorized in one payment level by Medicare and/or a payer level of reimbursement, but due to cost concern, a provider wishes to carve out that procedure and increase its reimbursement. This is commonly done in an ASC specialized with well-known physicians in a market where the inflated procedure costs at local hospitals greatly increases "the spend" by payers or employers. Many payers will negotiate these carve-outs on a limited basis.
Implant reimbursement has become sensitive in contract negotiations because implants are an unpredictable cost to the payer. Frequently used in orthopedic, neurosurgery and hand surgery, implant costs will continue to increase until some implants come off trademark. Generic or off-trademark companies have made inroads competing with well-known manufacturers, reducing the cost of certain implants. But implants will continue to be expensive, and managing their costs is a major concern for ASC administrators and managers.
On the reimbursement side, payers are using third parties with consolidated purchasing power so they can make a profit by buying implants in bulk and receive reimbursement by insurance companies. Many national payers are now contracting with these firms, as it makes the implant cost more predictable for their budgets.
From a payer contracting perspective, it is now common for payers to negotiate a minimum threshold based on the implant cost. For ASCs, this threshold can range from $250 to $5,000. Once the cost threshold is achieved, the payer will reimburse the cost of the implant based on the invoice. The provider absorbs some of the implant cost.
Continuing change ahead
As the Patient Protection and Affordable Care Act matures and most likely becomes modified by Congress — as was Medicare when it first was established — there will be continued modifications to ambulatory care and surgery reimbursement. Management companies, physician executives and administrators will have to pay constant attention to proposed changes in reimbursement from both the government and commercial payers. Frequent reimbursement changes and potential reductions require ASC managers to be resourceful and creative in an effort to maintain fair reimbursement for their ASC.
ASCs continue to be the most cost-effective, high-quality outpatient delivery system. Patients, employers and payers have come to appreciate the ASC contribution to a healthcare system that is, and will continue to be, under considerable strain.
____________________________________
Robert J. Zasa, MSHHA, FACMPE is a Co-founder and Managing Partner of ASD Management.
rzasa@asdmanagement.com
Randy Todorovich, BSRN, CASC is Senior Vice President Managed Care of ASD Management.
randyt@asdmanagement.com
Learn more at ASDManagement.com