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Improving the Surgical Revenue Cycle: Where to Start

Improving the Surgical Revenue Cycle: Where to Start

Three Managed Care Contracting Tips for Surgical Organizations

Maximizing your surgery center’s revenue requires a comprehensive approach to examine the accuracy of coding, billing, and reimbursement practices, leaving no stone unturned. How do you know if you’re on track to improving your financial health and where do you even start?

We talked to Scott Allen, National Medical’s Managed Care Contracting Senior Vice President, about how surgical organizations can get a closer look at improving their revenue cycle functions. He explained the best place to start is to focus on three key areas of payer contracts: contract management, chargemaster analysis, and case costing.

Step One: Contract Management

 

Let’s start with Contract Management. In your experience, what do surgery centers need to know about managed care contracting to improve their revenue cycle? 

We find contract management as a whole is often overlooked. Many outpatient facilities don’t have a complete copy of each payer contract on file. When the billing team doesn’t have access to the full contract, it’s extremely difficult for them to know how to bill and what the correct reimbursement should be. The first step is to ask: do I have complete payer contracts on file and do I have a clear understanding of the contract language? This first step will help you take ownership of your revenue. Without contract management, you could be leaving significant reimbursement opportunities uncaptured. 

 

What should surgery centers do to confirm contracts are current and complete? 

After a thorough review of your contracts, you may need to contact your payer representative to obtain the complete contract to move forward. Once you can dissect all amendments and all relevant data, the next step is to apply those key points to your revenue cycle. Organize the information in a format that is accessible and easy to understand to ensure your administrative team interprets the payer contract terms correctly.

When you introduce new specialties to your surgery center, such as spine or total joints, you should review your contracts again to determine if existing rates address your new services or if your contracts need to be updated.

 

How complex is navigating payer contract language? Do you have any tips for applying this language to coding and billing? 

The contracts for ASCs and outpatient surgery centers are complex. Aside from billing rules, they also contain information on administrative obligations and legal guidelines. As you explore each contract, you’ll encounter similar elements, but they may be organized differently due to the payer’s methodology and formatting. Look for detailed language around coding edits to determine:

  • How the payer handles implant markup 
  • If the payer uses NCCI edits
  • If the payer utilizes a proprietary edit system

After gathering and preparing the information for your staff, confirm that everyone has the same understanding of the payer contract. Utilize a methodology to ensure your team is coding and billing the same way every time. This avoids errors that could lead to payer denials and delayed reimbursement. 

 

Step 2: Chargemaster Analysis

 

You state completing a chargemaster analysis is the next essential step. What does the term chargemaster mean? What role does the chargemaster play in the revenue cycle?

The term chargemaster refers to the value set for services performed at your surgery center. Completing a chargemaster analysis is crucial to ensure the charges you set maximize your facility’s revenue potential. An annual chargemaster analysis is recommended to capture any contractual updates or new services you provide. One of the key contractual elements that is the main driver for reviewing your chargemaster is the “lesser of” language. For example, if the bill charged going to the payer is less than the allowed amount, then you’ll typically be paid less than your maximum reimbursement. By reviewing the fee for each procedure and comparing those fees to the allowed amount, you’ll ensure that you’re not missing out on any revenue.

What’s the best way to calculate chargemaster fees? How do you know if you’re setting a reasonable rate in your chargemaster?
In addition to allowed amounts and overhead costs, surgery centers can employ several tools to set their chargemaster including private label, state, and federal fee schedules. Since payer reimbursement methodologies are not standard in the ambulatory surgery industry, we must go back to contract management and understand each carrier’s reimbursement methodology. Data collection companies also offer usual and customary information, which may be helpful to determine if your rate is reasonable based on your facility’s location.

Step 3: Case Costing

The third essential step is case costing. What makes this level of analysis so important? 

Case costing analysis is an accounting method that compares the total cost of a procedure to the amount that a payer will reimburse for the whole case. Through effective case costing, surgery centers can pinpoint the exact expenses for each procedure performed at their facility. An in-depth comparison can determine if combined overhead costs and supplies exceed the allowed payer rates for a particular procedure, and if overall costs are too high, if a case should remain in the hospital setting. 

How do surgical organizations ensure the case costing analysis is as accurate as possible?

Every detail counts. The more data you have, the easier it will be to determine where adjustments need to be made. Track your inventory and indirect costs, such as OR time, to account for costs associated with each case.

You can also determine the costs of your overhead per case based on how often the operating room is in use. Medical records should give an accurate reflection of how long each procedure takes, and from there you can drill down the operating room’s cost per minute. You can also share this data with your staff, so they have a full understanding of what each surgery costs based on time and resources.

What role do these three steps play in renegotiating payer contract rates?

Outpatient surgery centers can be a cost-effective solution for payers and for patients, especially on high acuity procedures, such as spine and total joints. Contract management, chargemaster analysis, and case costing provide a foundation for surgery centers to determine if the right cases are being moved to the outpatient setting. These three steps also provide data comparisons between payer reimbursement rates and overall costs per procedure. Knowing which cases are profitable and which cases are losing money by payer puts surgical organizations in a stronger position to drive better reimbursement rates during contract negotiations. Successfully executing these three steps is essential for maximizing profitability and improving the financial performance of your surgery center. 


This post was first published August 26, 2022 and was updated August 29, 2022.

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