An upsurge has been noted recently in orthopedic and multispecialty surgery centers interested in adding high acuity cases — total joint replacements, for example — to their current case mix. Since shifting more complex procedures from the acute care arena to an ambulatory setting is relatively new, the window of opportunity is open for ASCs to negotiate beneficial reimbursement terms for these cases in their existing payor contracts.
“We are seeing payors in most markets are pretty interested in looking at the migration of total joint replacement into the ASC setting,” says Rob Carrera, president of Pinnacle III. “In some cases, they are more flexible in pricing and terms for total joints than they are for the more traditional ASC procedures. In markets where outpatient total joint replacement is considered new, or where payors aren’t familiar with these procedures, we are tapping into opportunities to secure some excellent margins.”
Here, industry experts discuss how surgery centers can optimize reimbursement for total joint replacement during payor negotiations.
Surgery centers are contemplating whether to go in-network or stay out-of-network for their procedures, and total joint replacements are no exception. Kim White, a consultant with Numerof & Associates, Inc. says there is a larger percentage of ASCs than hospitals with out-of-network contracts for total joint replacements; however there could be opportunities for these centers to go in-network in the future.
“The in-network or out-of-network status will vary by location and the center’s ability to demonstrate their effectiveness to the payors,” says Ms. White. “Sometimes surgery centers are able to be more cost effective and they are able to move in-network in certain cases.”
Lisa Rock, president of National Medical Billing Services, recommends going in-network to maximize reimbursement from total joint replacements. “I think it’s very risky to do the procedure out-of-network from a reimbursement standpoint because out-of-network contracts have higher deductibles and more patient responsibilities,” she says. “Instead, the best bet is to negotiate a managed care contract.”
Payors are anxious to see data on the success of total joint replacements in your surgery center before negotiating a higher reimbursement rate, especially when they don’t consider total joint replacement an outpatient surgery.
“Payors want positive patient outcomes and to know you are providing the right patient with the right procedure at the right time,” says Ms. White. “They are demanding more and more data from providers. Along with defining the procedure, administrators should show payors historical data across the continuum of care to present a stronger case for reimbursement.”
It can be difficult to negotiate contracts for the first few cases at the center because you don’t have outcomes data. However, you can still present information about the patient selection process.
“If you’ve never engaged in a certain procedure in the past, show payors the evidence-based guidelines you are going to follow for patient selection,” says Ms. White. “Payors want to know that there are protocols and procedures in place so the appropriate patient is identified and receives the right treatment.”
Insurance companies are feeling pressure to lower cost for care and they will be interested in the cost-savings presented by the surgery center setting. “Administrators should have data on how they stack up on price compared with their contemporaries, such as the local hospital,” says Ms. White. “If they are lower than that facility for the same procedures, they should be able to take the appropriate cases to the ASC.”
She stresses the importance of understanding what payors are looking for going into contract negotiations and presenting them with a mutually beneficial situation. “They are under pressure to reduce costs, so if you can show them how you will be able to reduce costs for total joint replacements or associated care, that can help your case for coverage with that payor,” she says. “It’s a matter of really speaking in terms of things insurers care about. ASCs need to present information in a way that makes sense to payors.”
Gathering cost savings data also provides you with the opportunity to work with surgeons to maximize savings strategies before the negotiations. “Pull the cost data together and tap into all your available resources before meeting with the payor,” says Mr. Carrera. “If you tell the payors they are saving 50 percent by taking cases to the surgery center — which is a good deal for both parties — back it up with supporting documentation. Being prepared allows you to speak intelligently and establish credibility.”
If the payor still refuses to work with you, even though you are the lowest cost provider, don’t be afraid to ask why. “You don’t want to create an adversarial dialogue, but when you come in armed with your data and give them your story, you can ask what you need to do to gain more of their business,” says Ms. White.
You may run into a situation where the payor says you aren’t the lowest cost provider for them — perhaps because they brokered a better deal with another surgery center or have identified that your use of more expensive equipment has elevated your cost per case.
“If you are more expensive than the competition, help payors understand why,” says Ms. White. “There might be a good reason you have a higher cost; you might include more in total services or use a newer approach or tools that cost more but provide a better outcome. We found that if you are able to demonstrate that the procedure is quicker and patients are able to recover and return to work sooner and minimize additional medical needs, payors are more willing to reimburse for that. If you can justify why the cost is higher, they might work with you, but there needs to be a benefit for the payor.”
Other times, you’ll be undercut by other surgery centers contracting with the provider, but those surgery centers most likely don’t bring any total joint replacement cases into their facility. “Reimbursement issues can arise when payors have established really low contract rates in a competing outpatient surgery center. If that’s the case, ask them how many joint replacements are done in that center each month,” suggests Mr. Carrera. “Usually we find very few cases, if any, are being performed there because reimbursement is too low to make it worthwhile for the center.”
Negotiate contracts at fair rates that ensure you are receiving favorable margins. You might have to sit down with your nurse manager or materials coordinator to get a sense of what each case truly costs.
“When you have the essential information available, you can focus on establishing a case rate that will cover your costs and provide you with a reasonable margin,” says Mr. Carrera. “Payors need to experience savings when moving these cases into the ASC setting, but it won’t make any sense for you to save them 70 percent if you aren’t actually covering your costs. Avoid accepting a low ball payment; the facility deserves to be rewarded for creating savings for the payor.”
Depending on the situation, you may also need to fight for implant reimbursement. Payors have historically resisted separate reimbursement for implants; that stance has become more common now than ever. “Have a good understanding of which procedures utilize implants and know what those implants cost,” Mr. Carrera advises. “If the payors aren’t willing to compensate for implants via carve-outs, build implant reimbursement into the overall procedure cost. If you gather all this information prior to proceeding with negotiations, you are much more likely to obtain the best reimbursement possible for those procedures.
One of the biggest expenses in total joint replacements are the implants, so make sure you go over those prices and explain your device choices to the payor. Newer implants that last longer might be more beneficial for younger patients while other technology might help older patients heal in the short term more quickly.
“Make sure you justify your device selection to the payor,” says Ms. White. “Also look at the other factors that are driving costs. The more information you can give them about the implant — and show that you are avoiding additional costs by using the most appropriate implant — the more successful you will be.”
Ensure the payor will cover implants by having them authorized prior to the procedure. “The implants for total joint replacement are very expensive and you must have those authorized before they are used,” says Ms. Rock.
Surgery center administrators should have an ongoing dialogue with payors to build a good working relationship. As you learn more about the payor’s preferences, you can structure contract negotiations and data presentations in the most beneficial way for your center.
“Reaching out to payors to find out how they would like to structure negotiations can serve as another way to build your relationships with payors,” says Ms. White. “If you are able to build a casual, informal dialogue with the payer, the more insight you’ll have and your relationship will be stronger when you are discussing the contract formally.”
In some markets, payors remain reluctant to accept a big procedure like a total hip or knee replacement as suitable for an outpatient setting.
“When you recognize some payors are hesitant to consider total joint replacements as outpatient procedures, your initial challenge is to effectively deal with the perception issue,” notes Mr. Carrera. “Administrators need to gather data from national associations and local facilities that provide facts about why these types of procedures are becoming more common in ASCs. Draw on the expertise of the surgeons performing these procedures to outline the efficacy of treating their total joint patients in an ambulatory setting.”
There are studies available showing total joint replacements can be done safely in the outpatient setting and several surgery centers across the United States are already performing them. “By adhering to evidence-based clinical practice guidelines developed by professional societies, ASCs can demonstrate the likelihood of success at their facility,” says Ms. White.
If the payor remains skeptical of taking total joint replacements into an outpatient surgery setting, invite them into your ASC to see your space and watch how effectively the procedure can be done there.
“Offer tours of the facility to demonstrate firsthand to payors which patients are suitable candidates and how your environment is set up to safely and effectively obtain the desired outcomes,” says Mr. Carrera. “This will help the payors become comfortable with having the procedures performed in this type of setting. Some payors are savvy; others are not. If you can get payors to meet with you at the center, introduce them to the qualified physicians and support staff working there, see the types of procedures you are bringing in, and get a feel for how you operate, they will better understand what types of extended services you provide.”
When you consider bringing total joint replacement into your surgery center, know the limitations of regulatory and payor guideline standpoints. Medicare does not reimburse for total hip, knee or shoulder joint replacements and for commercial payors, make sure the patient isn’t staying at the surgery center for more than 23 hours and 59 minutes.
“Medicare payment rules state that ASC coverage of surgical procedures would not typically be expected to require active medical monitoring and care at midnight following the procedure,” says Ms. Rock. “If you are going to start the procedure at 2 p.m. in the afternoon, you can’t keep the patient past midnight and be paid for it.”
Some patients spend time at a rehabilitation facility after the total joint replacement, which can also become tricky. Since the rehabilitation facility is a separate entity, the surgery center isn’t reimbursed for the patient’s stay.
Ref. Becker’s Healthcare
This post was first published August 29, 2012 and was updated July 29, 2020.