Demystifying Managed Care Contracts, Part Two: 5 Contract Language ‘Watch Outs’ for ASCs

In any negotiation, both parties come to the table with their own list of terms they’d like to see in the final agreement. In this second blog in a 3-part series on demystifying the process ambulatory surgery centers (ASCS) go though in negotiating contracts with health plans, Regent RCM Vice President of Managed Care Andrea Woodell shares language “red flags” to help ASCs leaders avoid common pitfalls in payer contracts.

“In our work with ASCs across the country, we see hundreds of contracts – that’s one of the benefits Regent RCM brings to the table as a management partner,” says Woodell. “A local ASC leadership team doesn’t always have that perspective, but the health plans they’re negotiating with do. So it’s really helpful to know some of the language to watch out for, and to be armed with the ammunition you’ll need to come to agreement on payer contracts that allow you to stay profitable.”

Woodell outlines five areas where ASC leaders should be on the lookout for sub-optimal contract language:

Term of the contract: If the contract extends more than one year, have you successfully negotiated a cost-of-living increase for each subsequent year?

“Lesser of” language: You’ll see this with TPAs or national PPOs. They’ll negotiate 65% of bill charge for example, and the ASC may say ‘great, I’ll take that all day.’ But then the language goes on to read ‘or the lesser of’ xyz. Any time you see the language ‘or the lesser of, ‘buyer beware. I’ve seen commercial business get repriced to 100% of Medicare or 100% of Medicaid. This happens regardless of what you’ve negotiated, because they have ‘the lessor of’ language allowing default to a lower state or federal mandated fee schedule.

Escape clause: What’s your ability to get out of the contract? Most contracts will read that you’re unable to cancel within the initial term of the contract, typically 3 years. It’s important to be certain that you can get out of a contract when you need to — a 90- or a 120-day out clause is ideal.

Indemnification: If they want to be indemnified, we get to be indemnified. It’s reciprocal, or not at all.

Timely payment: Strong contracts stipulate payment of a clean claim within 30 days. One metric driving margin is how quickly you collect your money. But often, you’ll see 45 or 60 days in a draft contract. Be on the lookout for that.

For more help with negotiating you next contract, contact Woodell here. And, watch for the final installment in this series, focused on specialty-specific contract tips.

How to Improve Your Revenue Cycle Audits through Coding Accuracy

Disorganized revenue cycle management practices are damaging to an ambulatory surgery center’s (ASC’s) financial performance. A flawed process can lead to lost staff productivity and worse – missed revenue.

An efficient revenue cycle is established when all the details of coding, billing, and collections are submitted on time and correctly the first time. ASCs can improve how they manage their revenue cycle by implementing a few simple but effective steps to recognize problems and determine solutions.

Regent Revenue Cycle Management released a new guide uncovers three regular audits ASCs can perform to analyze inefficiencies and enhance revenue cycle performance. The latest guide recommends analyzing these three areas:

  • Denied claim cause and management
  • Coding accuracy
  • Payer contract adhesion

Coding Accuracy

In our second installment of a three part series, we focus on how coding accuracy is critical for an ASC to minimize denied claims that result in wasted staff time and lost revenue. A center should set an aggressive goal for coding accuracy – Regent RCM’s gold standard is 97% – but first, it must understand its baseline.

A coding audit reviews codes submitted to payers and compares them to what is supported in the documentation. A successful audit identifies problem areas and creates an opportunity to regulate coding compliance and potentially enhance revenue.

Regent recommends following these steps to ensure coding accuracy:

  • Conduct an audit twice a year. Catching errors early gives better odds of rebilling or appealing claims.
  • Use a third party. An external auditor can more objectively examine data and information.
  • Analyze and understand trends. Familiarize staff with common procedures and best billing practices to be able to catch any errors on coding.

Learn more about the other audits and how to perform to improve your ASC’s revenue cycle management. Download the guide here.

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.