Reviewing Your ASC's 2023 Performance: 10 Areas of Focus
Ambulatory surgery centers aiming to achieve a successful year should review their ASC's financial performance from the prior year. Such an analysis can identify worthwhile opportunities for improvement, successes to build on, and areas to dedicate more resources.
Below I identify 10 areas ASCs should focus on when examining their 2023 performance and planning 2024 activities. If your surgery center hasn't already conducted this analysis, don't wait much longer. If you performed an analysis, I recommend reviewing the areas I highlight to determine whether there are metrics, activities, or areas of focus you may have overlooked or did not provide adequate attention.
1. Chargemaster increases
Ensure all planned chargemaster increases occurred. This is sometimes an overlooked activity. When adjusting your chargemaster, stay within the allowance per your contract, which is usually a 3%-5% annual increase. Although this increase may not affect many of your contracts, it will for any paying based off a percentage of charges. Failing to implement increases will lose revenue.
2. Managed care contract renegotiations
It's a best practice for ASCs to examine their managed care contracts at the conclusion of a year. When reviewing contracts, one area to pay close attention to is the contract renewal date in the upcoming year. If you intend to renegotiate your contracts, build in time to adequately prepare for and engage in the renegotiations. Beginning your preparation as far as six months in advance is worthwhile.
The use of next-generation analytics and the robust reports they generate can help you determine what reimbursement rates to target during renegotiations by allowing to you perform more detailed and accurate case costing. Reports will also provide insight into your revenue in aggregate, so you more clearly understand the balance that should be deemed acceptable for a negotiated contract.
3. New specialties/procedures
When evaluating your contracts, other areas to focus on concern whether you have appropriate coverage for specialties or procedures added during the previous year. This information is critical during renegotiations and new contract negotiations.
For example, if your ASC started performing total joint replacement procedures in 2023, do your contracts include total joints and include them with fair reimbursement? Do the contracts also provide fair reimbursement for implants?
If your ASC added a pain management physician who performs a high volume of neurostimulator procedures, those bring with them high out-of-pocket costs for centers. If neurostimulator procedures are included in your contracts but fall into a grouper, look at carving out those procedures to better ensure adequate payment that more than covers your costs.
4. Payer mix
Did your payer mix change in 2023? Was there an increase in out-of-network cases? A spike in commercial cases? An increase in managed care cases? Examining your payer mix should empower you to take any number of steps, including modifying the types of cases performed in your ASC, focusing more on specific case/payer types, and starting negotiations with a payer.
5. Case volume
When reviewing year-over-year changes, look at case volume. If your volume increased, that's likely good news, but it also raises questions. If you're performing billing in-house, how are your staffing levels? Are you appropriately staffed or contracted with an ASC billing company like Surgical Notes to support this increase and case volume projections for the upcoming year?
On the other hand, if case volume decreased, where and why? Is it decreasing because you lost a provider? Is it declining because you're not getting as many referrals? Is it declining because you replaced high-volume procedures with low-volume procedures? Determine the cause(s) for your volume decline and what you need to do to get that volume back up … assuming the high-volume cases are profitable. Why do I say assuming? Read on.
6. Payer and specialty influence on volume
When looking at case volume changes year over year, two areas to look closely at are the payers and specialties involved. If your data reveals you performed significantly fewer pain management cases for Medicare patients but performed more large orthopedic cases, a drop in overall case volume might be acceptable. You may have a more positive outcome with your cash since those orthopedic cases likely paid well, especially in comparison to the Medicare pain cases.
Which brings us to the importance of reviewing your…
Changes in payments are typically going to be in line with how you ended up year over year with your case volume. If your volume decreased, you are likely to see a decrease in payments and overall cash for that year. However, depending on your case mix, as was just discussed, your case volume could decline while payments increased.
What matters most here is determining how your payments changed, what caused the change(s), and what you need to do to make sure payments trend in the right direction. Actions you may want or need to take include adjusting certain specialty/case types, recruiting more providers, addressing business office shortcomings, and partnering with an ASC billing company.
8. Accounts receivable
As part of your payments review, ensure you haven't experienced an increase in accounts receivable (AR). When looking at your AR, review key performance indicators such as "days in AR" and "AR > 90." If those metrics increased but payments are down and your case volume is consistent, then you are likely looking at issues concerning the work on your AR. Are these issues caused by a lack of resources (e.g., staff)? A lack of aggressiveness? Did you hire staff who aren't fully trained or not qualified for the position? Is their productivity low? These are important questions to ask and answer as you examine your ASC revenue cycle management processes and the individuals tasked with responsibilities affecting AR.
9. Commercial payer issues
As you review your 2023 performance, identify any commercial payer problems you experienced that still need to be resolved. Did you add a new procedure and are now experiencing denials you weren't experiencing before? Are payers not paying according to their contracts? Are you seeing more medical necessity issues or payers requesting medical records that weren't previously requesting them? The longer problems go unresolved, the more likely it is that you will experience cash flow issues.
Another important issue to check is how your ASC was affected by authorizations. If you noticed an uptick over the last year of authorizations impacting your cash and AR, that would be in line with what's been transpiring in the industry. Over the past couple of years, many payers greatly changed how they approached penalties if a procedure(s) was determined to be unauthorized.
In the past, if a case wasn't authorized, the Surgical Notes team could appeal it and explain why the case was unauthorized. A typical reason cited was a change in CPT code, such as a simple arthroscopy changing from CPT 29880 to CPT 29881. We would typically be successful with that appeal and receive full payment. Now we're seeing many payers applying a penalty — sometimes a significant penalty that eats up a large portion of the reimbursement — if you do not authorize the correct code.
Other authorizations issues that challenge ASCs in 2023 include "failing" to update payers that require the change or addition of a final code to the authorization or obtain a retro authorization by the payer's deadline. If that update of the authorization with the final code, including implants, is not performed within the payer's statute (typically 7 to 14 days from the date of service), you could face a large penalty or a denial that cannot be overturned. Determine whether your ASC is being affected by changing and stricter authorization rules and what rules you must follow to best avoid these obstacles to payment.
Learning From 2023 To Achieve a Great 2024
The areas and actions covered in this column should give you information that can help you identify weaknesses, strengths, problems, and opportunities for improvement. Taking the time to closely review your ASC's 2023 performance now and then building a plan to aggressively act upon what you learn will be critical if you hope to improve upon last year, which may include pursuing growth avenues.
Looking for more tips and best practices to help you grow your ASC and set it up for success in 2024? Download our popular "ASC Growth Playbook" e-book.