ASCs interested in billing commercial or private payers may need a managed
care contract. The first step to securing a managed care contract is for
an ASC to identify those payers in its market that it's interested
in contracting with to secure coverage for surgical procedures. The second
step is to negotiate and agree to a managed care contract.
Sounds pretty straightforward, right? But like essentially everything in
healthcare, managed care contracting is easier said than done. It's
one thing to agree to a managed care contract — payers are increasingly
interested in contracting with surgery centers. It's another thing
to agree to a contract that's beneficial for the ASC. Payers are generally
not eager to give providers favorable reimbursement rates and terms. If
an ASC comes to the negotiating table unprepared, it can leave with a
managed care contract that actually limits or may even stifle growth and
Managed Care Contracting Problems
How is it possible for a managed care contract to work against an ASC?
These are some of the most common and significant problems associated
with suboptimal ASC managed care contracting.
Inability to secure appropriate coverage
ASCs cannot assume payers will agree to cover all the procedures a surgery
center wants covered and do so at a fair reimbursement rate. Surgery centers
must be prepared to explain — and sometimes demonstrate with clinical
and financial data — why its procedures are worthy of coverage and
should be covered at an appropriate rate.
Missed opportunities to maximize negotiations
Before going into a managed care contract negotiation, ASCs should perform
a cost analysis and determine what they need to be paid per case based
on their costs (e.g., building, supplies, administrative). From there,
the goal is typically to end with a contract that ensures at least a slight
profit for procedures and always getting paid above Medicare rates.
Unfortunately, negotiating rates that ensure a profit on all procedures
is often difficult. Negotiations tend to require a little give and take,
with the ASC "winning" on some rates and the payer "winning"
on others. That's why it's imperative for centers to approach
the negotiating table having looked at their revenue in aggregate and
understanding the balance that will be deemed acceptable for a negotiated
contract. This typically means there are some procedures where the ASC
takes a loss, some procedures where it breaks even, and then a high enough
number of procedures generating a profit that leads to profitable months
One way to quickly wipe out the potential profitability of a covered procedure
is to miss carve-out opportunities. ASCs must know how to carve out those
procedures that are performed most frequently and secure higher reimbursement
while leaving lower volume procedures in grouper or base rates.
In addition, if an ASC is performing procedures requiring high-cost implants
(e.g., spine, total joints), it will want to ensure the contract reimburses
for those devices. When an ASC carves out a procedure, it's typically
all-inclusive, which includes the implant. An ASC should not assume it
will be separately reimbursed for implants as part of a carve-out.
Balancing the carve-out rate while maintaining reimbursement for the implant
is essential. Implants should be payable at cost or 5-10% above cost.
In addition, ASCs should ensure implant thresholds are reasonable and
Negotiating appropriate carve-outs is tricky but increasingly essential
for growth and profitability. If an ASC misses appropriate carve-out opportunities
or does not secure appropriate carved out reimbursement, performing the
procedures — at lower reimbursement rates and/or without implants
covered — could cause the center to break even or lose money on
Suboptimal contract language
Managed care contracts are long and cover a host of issues that go beyond
what procedures are covered and at what reimbursement rates. If an ASC
doesn't carefully review the contract language and know what potential
red flags to look for, a center can end up with contract clauses that
put it at a disadvantage and potentially hurt the bottom line.
For example, if a payer is seeking a multi-year contract, an ASC should
negotiate at least an annual cost-of-living increase to its payments.
Escape clauses are another area where ASCs can get tripped up. Centers
should not agree to a contract with a lengthy opt-out clause or a contract
that provides the payer with better opt-out terms. Another contract clause
to watch out for concerns timely payments. It's not unusual to see
managed care contract drafts pushing for payment of clean claims within
60 days or more. This is a long and unnecessary amount of time to wait
for payments, especially now that payments can be made electronically.
There are a host of other potential red flags, e.g., contracts that only
pay a few procedure codes, verbiage that implements penalties if the case
provider is not in-network, language that bundles the provider and/or
anesthesia fee into the facility reimbursement.
A more recent contracting language development that ASCs need to beware
of concerns authorization penalties. Payers are increasingly putting in
contract verbiage that gives ASCs a tight window (e.g., 4 to 14 days)
from the date of service to update a required authorization (when necessary).
If an ASC fails to update the authorization with the correct CPT, a center
can experience a 50% reimbursement penalty or even non-payment, with no
way to pursue the overturning of a denial.
Poor key performance indicator (KPI) metrics and financial data
ASCs must take contract renegotiations just as seriously as they do initial
contract negotiations. First and foremost, that means actually renegotiating
contracts. Contract renegotiations must be a routine process for an ASC
or else the value of the contract (i.e., profitability) will inevitably
decline with the rise in costs.
A bad renegotiation can also greatly dimmish the value of a contract. An
ASC can find itself in an uphill renegotiating battle with a payer if
it comes to the table without
KPI metrics and financial data to support its arguments for changes to a contract.
Accurate KPIs for metrics like days to pay and denial rate will allow an
ASC to better hold a payer accountable to terms agreed upon in the contract
and a payer's responsibility to be a good-faith partner. Financial
data can support an ASC's arguments for reimbursement increases, carve-outs,
and expanded coverage.
Quality data can also help with managed care negotiations. If an ASC can
present data demonstrating that its physicians can safely perform procedures
and deliver high-quality outcomes for procedures not presently covered
by the contract, a center will be in a better position to secure coverage.
Improperly loaded contracts
Once a contract is negotiated and agreed to, an ASC's work isn't
done. A center must ensure that new and revised contracts and their terms
are properly loaded into its practice management system. Failure to properly
load a contract can lead to everything from increased denials, to missed
billing opportunities, to getting paid lower rates than negotiated.
Outsourcing Revenue Cycle Operations: An ASC Managed Care Contracting Difference-Maker
When ASCs can overcome the challenges identified above and others associated
with managed care contracting, there's good news: Successfully negotiated
contracts can serve as a significant driver of growth and increased profitability.
Good contracts can boost reimbursement for existing procedures; allow
an ASC to bring in and perform new, well-paying procedures; open the doors
to new payment models; and increase patient satisfaction by allowing the
ASC to perform safe, high-quality surgical procedures outside the confines
of a hospital.
Unfortunately, managed care contracting has become more difficult. Staffing
shortages are further straining the time and resources available and necessary
to effectively prepare for contract negotiations and renegotiations. Contracts
have become longer and include more complex language. And payer representatives
have become more hesitant to provide ASCs with good reimbursement rates
and terms, particularly when centers are unable to support their requests
Fortunately, ASCs looking to reap the bottom-line benefits of effective
managed care contracting do not need to do all the heavy lifting on their
own. When centers outsource their revenue cycle operations to a company
that provides managed care contracting within its suite of services, the
likelihood of securing "better" managed care contracts increases
What does a better managed care contract look like? An ASC billing company
with experience negotiating managed care contracts in conjunction with
its surgery center partners can secure more appropriate reimbursement
for current procedures, year-over-year increases to better reflect rising
costs, carve-outs of high-cost procedures and devices, and fairer terms.
One approach a billing company will take to achieve these goals is to
take rates proposed by a payer and model them against a full year of an
ASC's historical data. This will permit the company and ASC to determine
the true financial impact of a proposed contract. In addition, experienced
contract negotiators are more likely to obtain coverage for new procedures
and identify and renegotiate undesirable terms.
The benefits don't end there. A good ASC revenue cycle outsourcing
company will help its surgery center partners ensure they properly load
managed care contracts. The company will also help produce the data —
KPIs and financial information — that can help an ASC strengthen
its negotiating and renegotiating position and hold a payer accountable
to the terms of a managed care contract.
Once a contract is negotiated and loaded properly, the work of the ASC
billing company shifts toward ensuring the center remains compliant with
the contract terms, gets bills out in a timely manner, and ultimately
gets paid what it deserves. The company also helps hold the payer accountable,
performing outreach with payers when actions, such as slow payment and
improper denials, violate the contract and spirit of a good ASC-payer
partnership. The ASC billing company will also take the lead on handling
issues of payments coming in below contracted rates (i.e., underpayments).
Through this ongoing work and collaboration, an ASC can see its long-term
payer relationships improve. The payers will know the center is being
supported by a team of ASC coding, billing, and managed care experts who
are working to make the billing process as consistent and accurate as
possible — a benefit for the center and payer. When it's time
for contract renegotiations, the payer knows the ASC will come to the
table with the data and information needed to hash out a contract that's
fair for both parties.
In summation, ASCs can negotiate their managed care contracts on their
own. In fact, some do, and do so fairly well. But for an increasing number
of centers looking to ensure their managed care contracts play the pivotal
role they can and should in helping grow the bottom line, outsourcing
to an ASC billing company that provides managed care contracting services
is becoming a practical and highly effective option.