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Surgery Revenue Cycle: Don’t Go it Alone

Surgery Revenue Cycle: Don’t Go it Alone

The concept was a success virtually from the outset. Today, there are approximately 5,500 ASCs across the United States, and these outpatient facilities increasingly play host to an ever-sophisticated array of surgical procedures made possible by clinical advances in anesthesia and medical technology.
The business of ASCs also has changed dramatically in the more than four decades since Drs. Reed and Ford opened the first ASC. Once overwhelmingly dominated by independent physician operators and a few large management companies, the industry is now the darling of its former chief adversary — hospitals — which are highly motivated in the post-Affordable Care Act landscape to cut costs and improve quality for surgery that does not require an overnight stay.

Sound familiar?

To achieve these goals, hospital-physician joint venture ASC partnerships are becoming a predominant growth strategy among hospitals, creating a win-win for both the physicians as well as the hospitals. Existing physician owners benefit by gaining more referrals from the hospital and often improve reimbursement rates due to this newfound affiliation. Health systems gain the opportunity to participate in the growing Surgery Market while still providing sufficient incentives to their physician partners, ultimately leading to increased profitability, physician morale, patient satisfaction and clinical outcomes.

Recent public policy changes also are expected to be a major near-term driver of the hospital-physician joint venture model. A provision in the 2015 budget deal signed by President Barack Obama in November removed a significant incentive for hospitals to acquire off-campus ASCs and convert them into hospital outpatient departments. Specifically, the provision states that an ASC acquired outright by a hospital must remain an ASC from a reimbursement perspective unless the ASC is located within 250 yards of the hospital’s main buildings. This is important since ASCs today are reimbursed at approximately 60 percent of the rate of hospital outpatient departments.

Facilities acquired before Nov. 2, 2015, are exempt from the new reimbursement rules, which become effective Jan. 1, 2017. Given that the primary benefit of converting ASCs to HOPDs is disappearing, many hospitals and health systems will pursue a hospital-physician joint venture ASC strategy with the thousands of still-independent domestic ASCs that constitute over 60 percent of the U.S. surgery center market. While ASCs offer considerable upside for providers today, it’s important for hospitals and health systems to recognize that ASCs are distinct enterprises that often require a specialized business approach. In this first of a two-part series, hospital leaders will learn about the critical differences between ASC and hospital coding and billing, and unique factors that hospitals should consider during the due diligence process.


Hospital coding typically resembles a laundry list, with every pill, bandage, and stitch spelled out related to a patient encounter. ASC coding is typically procedure-based, with a list of approved procedures that can be performed in that setting. ASCs use both CMS 1500 forms and UB forms. ASCs also utilize CPT codes, revenue codes and HCPCS codes.

Medicare and a few of the large commercial carriers utilize NCCI edits and many commercial carriers use other edit systems. There is no standardization of edit systems, which makes ASC coding very complex.


There are two primary differences between hospital and ASC reimbursements. The first difference is the rate. ASCs are reimbursed at roughly 60 percent of the rate of hospitals for a similar procedure, which was a primary motivating factor for hospitals in acquiring off-campus ASCs.

The second major difference is the reimbursement methodology. Procedures performed at hospitals and ASCs are classified under different coding groups. ASCs utilize complex arrangements of “groupers” and percent billed, while hospitals employ a combination of per diem, case rates, revenue codes, as well as some CPT codes — more traditional, straightforward billing and coding techniques. Unlike hospitals, scant data exists for procedures performed in ASCs, creating difficulties when claims are underpaid.

Managed care contracting

The Affordable Care Act gave rise to a dramatic expansion of network agreements between providers and payers that create patient volume for hospitals and health systems and stabilize costs for insurance companies.

Managed care contracts are negotiated directly with ASCs, a process that requires knowledge of and experience with the Surgery Revenue cycle, as well as considerable research to ensure procedures are reimbursed at the correct rates; if not, facilities may wind up accepting cases that have no chance of turning a profit.

Poorly negotiated managed care contracts for hospitals and ASCs are frequently the source of financially underperforming facilities. Understanding how the contract applies to the entire revenue cycle, and experience negotiating with commercial payers helps prevent a significant loss of revenue. While ASCs use a complex combination of CPT codes and “percent billed” arrangements, hospital outpatient departments frequently use ambulatory payment categories to receive reimbursements from managed care contracts.

Staffing specialization

Revenue cycle management has become increasingly complex for hospitals, physicians and surgery centers alike. RCM specialization is the key to achieving success for increasingly diversified hospitals and health systems, and few if any providers today are staffed to handle all of the unique billing and coding requirements associated with their growing rosters of facilities and practices.

Outside ASC RCM specialists possess these best practices and key performance indicators, which enable new ASC owners to assess and improve financial performance. This specialization also extends to implementing the best technology for each step of the revenue cycle, as well as business office processes and functions. Taken together, a trusted ASC RCM advisor provides new hospital and health system ASC owners with the best opportunity to improve compliance, maximize reimbursement, and create happy patients and physicians.
Written by Lewis Custer, Senior Vice President of Operations, and Scott Allen, Vice President of Managed Care Contracts, National Medical Billing Services

Source: Becker’s Healthcare

This post was first published June 22, 2016 and was updated July 29, 2020.

ASC, Revenue Cycle, National Medical, Managed Care Contracting, Reimbursement, Coding, Joint venture, HOPD,



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