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PPACA implementation heightens importance of managed care contracts

PPACA implementation heightens importance of managed care contracts

Are managed care contracts complicating your ambulatory surgery center’s cash flow?

Answering this question confidently is a prerequisite for success in today’s competitive Surgery Marketplace. In the past, managed care contracts were often filed away once the ink was dry, only to be unearthed again when it came time for renewal. Few, if any, staff were familiar with the agreement, its language or, many times, its very existence.

Patient Protection and Affordable Care Act implementation is changing that practice. Lower reimbursements and higher patient volume mean that ASC staff must now acquire a deep fluency in the logic and framework of their managed care contracts, particularly in three important areas.

Multiple procedure discounting

When ASCs sign a managed care contract, they often assume the agreement follows the standard Centers for Medicare and Medicaid Services methodology, coding and reimbursement schedules, if not stated otherwise. That assumption is not always correct. And making matters worse, contractual language, especially for multiple procedures, can be ambiguous and complex.

For example, a contract may offer to reimburse at 200 percent of the Medicare rate. At first glance, this appears to be a more than fair rate — that is, until you read the fine print. In many cases, these seemingly competitive reimbursement rates may only apply to the first line of a claim. After that, the reimbursement for the second line may decrease to 25 percent, while the third and subsequent lines drop to zero.

As a comparison, the standard Medicare reimbursement methodology is 100 percent for the first procedure and 50 percent for each subsequent procedure.

While it’s typical practice for payers to alter multiple procedure logic or cap the total amount of reimbursements for a single patient, understanding a carrier’s reimbursement methodology when multiple procedures are performed will help you negotiate a fair deal before the contract is signed.

Proper claims submission

Submitting claims improperly also can constrain an ASC’s cash flow. ASCs should never standardize claims filings across the board for all payers and the appropriate payer-designated form should always be used. Failing to do so may mean payment processing delays, revenue cycle disruptions or even outright claim denials. Claim submission on the wrong claim form could also result in the payer paying the claim at the professional rate, which may be lower than the facility rate.

These requirements are often set forth in the pages of a managed care contract, and most carriers even specify the precise type of claim form that must be used. If this information is not included in the contract language, it’s best to call the carrier directly to understand the proper claims submission.

For example, some Medicare Advantage products require a UB form rather than the CMS 1500 form for claims submissions. In this common situation, following the typical Medicare process — rather than the process set forth in the contract — would result in an unnecessary denial and the loss of revenue.

Fluency in a contract’s language also is very important when billing for implants. For example, implants are not always billed at cost. In some cases, a specified multiple over the invoice cost can be used to increase a reimbursement. In addition, payers often alter these requirements unannounced, which also may result in incorrectly submitted claims. ASCs must fully understand their responsibilities for submitting proper claims under the contract.


When it comes to managed care contracts, coding discrepancies are a common source of heartburn for ASCs. The primary reason is the industry-wide deviation from CMS’ National Correct Coding Initiative, the federally recognized edit system methodology utilized by Medicare for editing procedure codes.

Today, payers may utilize NCCI edits or use proprietary edit system methods to adjudicate claims. Even more, many large carriers are working with private companies to edit their claims, a practice itself that is frequently spelled out in managed care contracts. Large carriers also are applying additional terminology to the contract that allows payers to adjudicate and bundle based on their own proprietary edit systems. Unclear or overly broad contract language also allows the payer to reduce reimbursements by simply claiming that a specific procedure was not covered by the agreement.

Payers are continuously trying to find ways to reduce ASC reimbursement through complicated language and loopholes. Acquiring a deep comprehension of your managed care contracts will help your ASC increase its cash flow and generate the commensurate revenue. And understanding these agreements fully also ensures any shortcomings are addressed when the contract comes up for renewal.

Written by Scott Allen, Vice President, Managed Care Contracting, National Medical Billing Services

Ref. Becker’s Healthcare

This post was first published January 16, 2015 and was updated July 29, 2020.



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