Becker's Hospital Review

43 Executive Briefing: Building a Surgery Center Strategy Sponsored by: L ower operating costs, higher quality of care and increased patient satisfaction have fostered the creation of ambulato- ry surgery centers in almost every area of the nation. Over 5,000 ASCs operate in the U.S. today. Most major cities have multiple ASCs, and most hospitals or physician groups either sponsor or participate in a center. While a few markets still have out-of-network ASCs, which do not contract with major or multiple insurers or other payers, this contracting approach is diminishing as hospitals, physicians and insurance companies form their own provider networks. ASCs have saved Medicare and payers millions of dollars, and saved patients millions out-of-pocket through reduced deduct- ibles, co-payments and coinsurance. Despite this success and because ASCs are so ubiquitous in many markets, payers of all types use their leverage to continue downward pressure on pricing. This has dramatically reduced reimbursement for ASCs over the last 5 years, while ASC operating costs have naturally risen. Contracting with payers has become very competitive among existing ASCs and potentially challenging for new ASCs due to pricing driven by dominant payers or provider panels in their market. Thus, ASCs have been forced to seek new avenues of reimburse- ment and ways of differentiating themselves in their markets. This has been aided by many new surgical procedures clinically ac- cepted into outpatient delivery over the last five years. Advances in anesthesia agents, technology for minimally invasive surgery, and innovative surgical techniques and instrumentation are en- abling many procedures to be safely and more cost effectively delivered in the outpatient setting. ASCs are seizing the oppor- tunity by becoming specialized surgery centers — such as those specializing in spine, total or partial joint, or retina surgery — or by adding new specialty services lines such as cardiology into their mix. Bundled pricing To be more attractive to payers and worker's comp carriers, and differentiate from other outpatient providers, ASCs are offer- ing bundled pricing for the pre-operative medical exam, surgery and anesthesia, as well as the surgeon's pre- and post-operative treatment and physical therapy. We have experienced bundling of anesthesia, surgeon and facility fees more commonly requested in mature managed care markets by third party administrators representing large or local self-insured employers. For bundled pricing, fees must first be negotiated with the sur- geon, anesthesiologist and surgery center. Then the bundled fee is negotiated with the TPA or medical management firm. Typi- cally these arrangements are developed as a narrow network with the surgeons, anesthesiologists and surgery center as the preferred or only provider of specific services for a designated geographic area. Bundled pricing eliminates several cost layers in medical man- agement and in the payment model. The pricing is competitive and profitable for the providers, but gives the TPA and employer a predictable lower cost for an episode of care. This type of con- tracting is labor intensive on the front end, as it involves physician fees and education, as well as facility or technical fees. TPAs are selective in the markets where they do business de- pending on state laws, rules and regulations. To gain market share and profit for our ASCs, our firm is working with TPAs and, where possible, their local employer clients to provide bundled services on an exclusive basis. We have negotiated bundled contracts with three national TPA and medical manage- ment companies. The majority of this business has been with self-funded employers, but it may expand eventually to worker's comp business. Direct contracting Many issues in healthcare are cyclical in nature. Popular in the 1980s, direct contracting with employers, — which our firm executed with hospitals and surgery centers — is return- ing with some variations. ASCs are finding more self-insured companies and worker's comp carriers amenable to cost ef- fective direct contracting for services, especially for high-vol- ume orthopedic, pain and spine procedures. Some of these arrangements are made directly with national worker's comp carriers; others with TPAs and/or medical management compa- nies. These companies contract with employers and/or payers to manage certain types of procedures that can be commonly done on an outpatient basis. Direct contracting removes the pricey administrative fees charged by market dominant payers, and it also moves cases out of ex- pensive hospital-based, outpatient surgery departments. Our firm contacts these companies on behalf of our surgeons and anes- thesiologists, and then negotiates a bundled fee that is accept- able to all parties including the medical management company, employer and payer. The medical management company is involved with pre-surgical protocols and directs patients to our surgeon for their assess- ments and, if applicable, to our ASC for the outpatient surgi- cal parts of the treatment. If an orthopedic group associated with our ASC provides physical therapy, occupational therapy, Trends and Relevant Strategies for ASC Contracting By Robert Zasa, MSHHA, FACMPE and Randy Todorovich, BSRN, CASC

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