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What ASC’s Need to Know About Bundled Payments in a Value-Based Setting


Low cost and high-quality service delivery are the hallmarks of outpatient care in today’s value-based setting. Patients are out searching for providers that offer the best care at the lowest possible cost while payers are also driving care in-network due to the high financial burden of out-of-network arrangements.

To remain competitive, surgery centers must come up with strategies to increase reimbursements that will also be beneficial to patients and payers. One game-changing strategy that ASC’s can use is bundled payments. Unlike the traditional fee-for-service model, bundled payments are well suited for care delivered in today’s value-based environment.   

Bundled payments provide greater incentive for patients to approach ASC’s for surgeries and for payers to move more patients to surgery centers. Patients can avoid having to bear extra financial burden in the form of co-pays, deductibles, and high out-of-pocket payments connected to typical fee-for-service payment arrangements. Payers also get to enjoy significant cost reductions from bundled payments compared to the fee-for-service model.

Surgery centers will experience an increase in case volumes as more companies move into the bundled payments markets, especially if insurance companies decide to adopt it as an alternative payment strategy. 

However, bundled payment arrangements are yet to gain significant traction in the ASC space. The trend is poised to become mainstream as an alternative reimbursement strategy. Alternative payment models, which include those bundled, currently account for 30 percent of industry-wide payments made by Medicare.

Bundled payments could be retrospective or prospective. For prospective bundles, the provider is paid a fixed amount upfront by the insurer for all services to be rendered to the patient. The provider is therefore responsible for any additional cost incurred during administering treatment.  

But the most widely-adopted model used by hospitals is retrospective bundled payment. This operates in a similar fashion to the fee-for-service payment in that payers reimburse providers for the claims raised for the services offered to patients under their program. The payment made by the payers is then compared to the agreed bundled target price and any discrepancy is adjusted for. Providers will be reimbursed for payments made below the target price while payments made by payers above the target price will be retrieved.

ASC’s are better positioned to offer bundled payment arrangements than hospitals. This is because they can provide procedures offered at hospitals at high prices for a much lower rate. Also, it is easier for them to monitor their costs unlike hospitals who deal with a larger number of patients; complicating the task of tracking their cost. 

How ASC’s Can Protect Patients from Surprise Medical Bills

  • July 25, 2018
  • Published in Billing

Exorbitant medical bills have become a new reality for patients. Even when patients receive care in an environment characterized by low co-pays and deductibles, they find it difficult to adjust to high medical bills where out-of-network payments are becoming increasingly normal. 

It is now common for patients to receive additional bills from out-of-network providers, even after settling their co-pays and deductibles. These additional charges come as a surprise as they believe their insurance companies should have settled what they owe to providers.

With surprise medical bills now attracting attention nationally, ASC’s want to develop strategies to protect their patients from them.

Growing Popularity of Surprise Medical Bills

Surprise medical bills arise because patients receive care from providers outside their networks, either in an emergency or for a procedure not offered by their in-network providers. Since these providers have no prior contracts with their insurance companies, they typically send additional bills to patients. In other words, patients are being balance billed. 

Patients are however becoming increasingly aware of surprise bills and are not being quiet about it. This is evidenced in the growing media coverage on the subject which has created public awareness to protect other unsuspecting patients.

There is an increasing need for ASC’s to operate with patients within their network. This comes because of pressures from insurance companies who are also compelling their patients to receive care from providers that they have prior relationships with, to avoid high out-of-network payments.  

The Complexity of Surprise Medical Bills  

Despite these reactions, surprise medical billing has become more complicated and this calls for a proactive response from surgery centers to protect their patients. 

Initially, surprise medical bills would only arise when emergency treatments from providers took place outside of the patient’s carrier network. This is no longer the case as patients today can still receive surprise bills even when their care comes from providers within their network. 

This is because an ASC can be in-network while some of its medical staff are out-of-network. Providers can decide whether they want to be in or out-of-network.  Take for instance an anesthesiologist who decides to stay out-of-network to receive higher payments than he would if he operated within the patient’s network.  

These type of providers are referred to as “invisible providers”. They include anesthesia, pathology, and lab professionals. Patients typically pay less attention to the involvement of these professionals in their surgical care because they are more likely to build relationships with their surgeons or physical therapists when having surgery.

Even though ASC’s are making effort to ensure that these “invisible providers” are brought in-network, some remain out-of-network. This can pose a challenge for a surgery center as patients often hold surgeons and facility owners responsible for any surprise medical bills they might receive.

ASC’s must therefore be proactive to ensure that most of their ancillary professionals are brought in-network. Services rendered by those that can’t be brought in-network should be clearly communicated to patients.

Understanding the Legal Rules

Because of the public clamoring for protection against surprise medical bills, five states including California and New York have passed laws aimed at protecting patients. This trend is poised to increase in scope as two other states, Pennsylvania and New Jersey, are also on the verge of passing laws against surprise bills.

These laws have important features that ASC’s need to pay attention to. Laws can restrict what providers are permitted to charge patients for an out-of-network service. They can also require that patients be fully aware and give consent to receiving care from an out-of-network provider. In the event of disputes between providers and patients, the laws also make provision for the resolution of such disputes.

Providers operating in these states should ensure they understand these laws to avoid lawsuits. Even providers that do not have facilities in these states ought to take steps to ensure that patients are protected from surprise bills. Since ASC’s are known for providing high-quality low- cost treatment, a facility can easily lose patronage from patients if surprise billing is normal and not occasional.

How ASC’s Can Negotiate for Higher Out-of-Network Reimbursements

In recent times, ambulatory surgery centers (ASC’s) have been confronted with the challenge of effectively negotiating for the highest reimbursement rates on services rendered out-of-network (OON). This was not the case decades ago, specifically in the early 1990s, when providers didn’t have to negotiate on out-of-network services as they were fully reimbursed by payers.

Today, reimbursements for out-of-network services have become very complex. Payers have now developed many tactics to make it difficult for providers to receive their full compensation.

Amongst other tactics adopted, payers now hire vendors to negotiate the lowest reimbursement rates from providers. This has made it possible for providers to be paid very low rates, as low as 20 percent of the compensation due to them, if they fail to actively negotiate for the best rates.

Providers will therefore have to develop strategies to ensure they receive 100 percent of their reimbursements. Here are 2 tips to consider for a successful negotiation:

Be Deliberate and Persistent in Negotiations

When it comes to negotiating for out-of-network reimbursements with payers, providers must be both deliberate and persistent. Vendors hired by payers will do their best to discourage providers from receiving their reimbursements in full.

Vendors receive higher commissions when they successfully negotiate lower reimbursement rates for payers; as such, they would normally develop tactics to out-smart unsuspecting providers when negotiating on behalf of payers. 

Providers must therefore be proactive in the negotiation process. An experienced staff is well-versed in contract negotiation and should see to out-of-network negotiations with vendors. Your center can also recruit experienced out-of-network negotiators to join the company or be contracted to serve as agents for your ASC to negotiate with payers or vendors. 

No matter how long it takes, responding to each counteroffer and following up with appealed underpayments will make a big difference. Be persistent in the negotiation process by making multiple calls, sending emails, and even scheduling meetings to ensure that the highest possible reimbursement rates are received. This strong negotiation process should be employed even if your center has low volume of out-of-network patients.

Appropriate Use of Data

The effective use of data is another strategy that ASC’s need to consider adopting in order to effectively negotiate for higher reimbursement rates. One tactic that payers employ to give the lowest reimbursement rates to providers is offering a different rate for the same procedure previously handled by the provider.

For example, an insurance company that paid 70 percent on a similar case a year ago might want to now offer 40 percent. An ASC can negotiate for the same rate, or maybe even a higher one, if it has data on the previous transaction. 

Payers are often more proactive in collecting and keeping data than providers. Third-party vendors manage their data effectively and use it to negotiate the lowest reimbursements from providers.

Most providers however do not keep track of the data from their previous negotiations; hence the lower reimbursement rates. 

Therefore, if you want to increase your bottom line, learn to be a persistent negotiator and back your strategy with data. When this is done, out-of-network reimbursements can be higher than in-network reimbursements. Your center has the flexibility and opportunity to set higher reimbursement rates that can make up for low rates set by government payers.


Top 3 Reasons Why Some ASC’s Fail

In today’s value-based setting, ambulatory surgery centers (ASC’s) are fast emerging as the preferred choice for outpatient surgical procedures. However, research by the Advisory Board shows that since 2009, nearly half of new ASC’s that open also close. 

The reality is that many surgery centers can falter if they fail to pay attention to critical areas of inefficiencies and risk.

Here are 3 common reasons why some ASC’s fail and how they can be avoided: 

1. Failure to Attract Cases with High Reimbursements

The ability of ASC’s to drive high case volume to their facilities has been identified as crucial to their long-term growth. In order to remain competitive in an environment with low reimbursements, ASC’s will need to target more cases with higher profits. 

Relying solely on procedures with low reimbursement rates will not position a center to stay ahead of the competition. ASC’s will need to expand their areas of specialization by adding new procedures with high reimbursements. For instance, procedures such as major spine cases and total joint replacements (TJR) have the potential to generate higher profits.

2. Failure to Prioritize Patient Care

The quality of care delivered to patients must be a major concern for ASC’s. This is becoming more important today considering the shift towards consumerism in healthcare. More than ever before, patient care is taking center stage as being one of the most crucial factors contributing to the success of a surgery center.  

A strong culture of patient care is required in centers to prevent infections, complications and low patient satisfaction ratings. According to Aziz Berjis, DPM, Founder and Director of Glendale Outpatient Surgery Center; the “patient care has to come first.” As long as ASC’s stick with a high level of quality in patient care they will continue to attract more patients.

3. Poorly Managed Contracts

Effectively managing payor contracts is crucial to the growth of a surgery center. However, centers face numerous challenges in successfully managing the contracts they have with payors. 

A common challenge is that ASC administrators are overly burdened with so many tasks that they are unable to dedicate the time and focus needed to effectively manage payor contracts, especially those that are soon expiring.

With careful planning, ASC’s can allocate more time to negotiating payor contracts. This can be done by either forming a team in the organization saddled with the responsibility of payor contract negotiation or by recruiting more hands if the present staff strength is low.

By paying more attention to payor relationships, ASC’s can negotiate contracts that will lead to significant cost reduction. This will in turn enable them to save more money to fund the growth of their centers.

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