Achieve Bottom-Line Growth Through Better Managed Care Contracting
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 profitability.
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 and years.
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 in aggregate.
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 the procedures.
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 with data.
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 significantly.
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.