Demystifying Managed Care Contracts to Keep Your ASC Profitable Part 1

Getting a handle on managed care contracts can be a mind-boggling task for ambulatory surgery center (ASC) leaders, but it is critical to profitable operations. Andrea Woodell, Regent RCM’s vice president of managed care, has extensive experience negotiating payer contracts. In this first blog in a 3-part series, she explores key payer contracting questions that impact profitability. Part 2 will offer “red flag” language to watch out for in negotiations with health plans, and the third blog will address specialty-specific contract tips.

According to Woodell, a center’s primary specialty is an overall driving force for payer contract negotiations. “And when a center adds a new line of business, it’s important to update contracts accordingly,” she says. “Each specialty has unique requirements that mandate how you structure a fee schedule in order to safeguard that specialty.”

When negotiating payer contracts, three key questions can have a big impact on ASC profitability:

How is your center performing overall by payer by service line?

“If you’re a single specialty ASC, this will be a fairly simple exercise,” Woodell says. “For example, if you’re doing GI or ophthalmology, you can evaluate as a percent of Medicare how each of the health plans is paying you for that specialty. In addition, you should always take into consideration the payer mix, prioritizing those contracts that you can influence.”

Beyond specialty and payer prioritization, factors influencing contract negotiations include what carve outs you can negotiate, how multiple surgeries and implants are paid, and how non-grouped procedures are paid.

“As a rule, there’s going to be an established rate baseline of what payers think they can contract in your community,” Woodell explains. “And they’re going to come in low. It’s important that you reply with an objective, logical approach to why their offer is not adequate. You want to give them little snippets of what the cost of the case is, by providing implant invoices or data on operating room time, associated recovery, disposables. Work with your partners to quantify outcomes, recovery or back to work and share this data with the payers. Member satisfaction remains a priority for carriers. All are important as you evaluate your service lines and how each payer reimburses.”

Once you’ve identified a health plan that’s reimbursing well, that contract can become your target for others. Woodell recommends a focus on best price, best customer to avoid enabling other payers to pay lower than a good customer.

How does performance by service line and payer affect operational margins?

“If you’re not making money, that’s the operational impact,” Woodell says. “You could have a contract that reimburses GI great, but if you also start doing general surgery and your implants aren’t covered you have a problem. For example, general surgery uses implants, hernias require mesh. Laparoscopic cholecystectomy uses a great deal of disposables that are expensive. When you negotiated your contract for just GI cases, you didn’t care if implants were covered, because you didn’t use them. But now you’re broadening the scope of your ASC and there’s no margin on the general surgery. Margin is driven by reimbursement by product line

What data should you be tracking for each payer?

Woodell suggests ASCs collect data on timely payment, payment accuracy, and data to ensure implants are being paid at the contracted rate. For instance, if a payer is late paying claims, are they paying the state penalty? And while there’s very little ASCs can do if payers stall, Woodell suggests they appeal and be sure to collect the interest. In addition, she says having patients call the health plan can help: “Health plans don’t like member complaints. If you have patients who are good advocates for themselves and for the surgeon, the health plan won’t hesitate to pay – with the shift in payment responsibility, patients pay a lot for their healthcare, and will be eager to step up to ensure the health plan is paying their share as dictated by benefit structure.

Another data point Woodell recommends: make sure payers are not inadvertently transferring the balance of what they owe to a patient responsibility. She says such transfers can happen within payer systems for several reasons.

Want to know more about demystifying the payer contracting process? Watch for the next two blogs in this series, or contact Woodell here.