Serbin Special Report:
Managed Care Negotiation Best Practices for Surgery Centers
Reimbursement from private healthcare payers usually represent a significant percentage of an ambulatory surgery center's (ASC's) revenue. Therefore, effective managed care negotiation that yields strong and equitable contracts are critical for surgery center billing and an essential part of financial planning.
Reaching an agreement with a managed care organization (MCO) requires your ambulatory surgery center contract negotiator to establish a relationship with the payer based on understanding each party's needs and through collaboration and compromise. Follow these five managed care negotiation best practices to improve your likelihood for surgery center billing success.
Surgery Center Managed Care Negotiation Best Practice #1: Preparation
Plan on building a relationship with managed care organization representatives and educating them on what procedures can be performed in your ambulatory surgery center and how your ASC can save their organization money. Before managed care negotiation begins, evaluate the following key areas:
Know your case cost (direct and indirect). Prepare a list of your 10 most common procedures by CPT code to provide to the managed care organization, requesting their proposed reimbursement rates for each.
Define your specialties and sub-specialties.
Identify your competitive advantages (e.g., only ambulatory surgery center within X miles, specialty focus, lower cost/better outcomes than hospitals).
Know your market and define your market share.
Understand the difference in health plans offered by the payer (e.g., HMO, PPO, POS, EPO).
You will also want to research and understand the requirements of each individual managed care organization. The internet is a great place to obtain information on specific healthcare payers. Don't neglect or diminish the importance of doing your homework before you sit down with the MCO.
Surgery Center Managed Care Negotiation Best Practice #2: Defining Terms and Terminology — Covered Services and Reimbursement
Contracts are written in legal terminology, which is sometimes difficult to understand. Due to the number of terms covered during managed care negotiation and included in a managed care contract, we felt it best to divide this subject matter into two parts. The first part is covered in this best practice discussion and the second part is covered in best practice #3. This part addresses covered services and how an ambulatory surgery center billing is reimbursed.
First and foremost, all terms should have detailed, explicit definitions that are understood and agreed upon by both parties.
Surgery Center Covered Services
The contract should specify in detail:
what patients are covered;
what services are covered;
what services are not covered; and
what requirements must be met by policyholder to be eligible for benefits (ie.eg., pre-existing condition, date of initial coverage, dependents).
Surgery Center Billing Reimbursement
The contract should provide sufficient information to allow an accurate determination of reimbursement. It should include:
a comprehensive fee schedule with detailed information on rates and payment methodology;
specific information on repricing, if applicable;
guidelines regarding procedural and supply codes;
procedure reimbursement groups — make sure CPTs have not been reclassified into lower groupers;
implant reimbursement;
carve-out possibilities for high-ticket procedures;
how CPT codes without an assigned group are paid;
explanation of how multiple procedures per case are covered (e.g., unlimited amount, multiple procedure discounts);
what is included in reimbursement — make sure this does not include the professional (surgeon's) fee or anesthesia fee;
reimbursement guidelines (i.e., length of time for reimbursement upon submission of a "clean claim" as defined in the contract);
prompt payment clauses that meet state regulations and are enforceable;
no reduction of payment if other providers working in the center are not in-network with the payer (e.g., anesthesia, pathology, radiology); and
an outline of what penalties and interest will accrue in the event the prompt payment guidelines are not met.
When evaluating a managed care contract proposal, remember that most contracts are written to protect the interests of the payer. Therefore, it is important to take the time to review each proposed contract carefully, scrutinizing specific areas to determine if they meet your surgery center's requirements. Highlight areas you do not understand and request explanations.
Surgery Center Managed Care Negotiation Best Practice #3: Defining Terms and Terminology — Miscellaneous Contract Terms
Our second part covering managed care contracting terms and terminology covers other areas of ambulatory surgery center contract language that require scrutiny. As noted, all terms should have detailed, explicit definitions that are understood and agreed upon by both parties to help ensure surgery center billing success. These include the following:
Timely Filing
The contract should specify a definitive time limit for filing claims. The best option for this clause is one year, which is the same as Medicare allows.
Appeal Guidelines
Provisions for ambulatory surgery center billing to appeal include time limits and detailed requirements. Due to the many timely complications that may occur in providing requested information for the appeal, negotiate as long a period as possible.
Prompt Payments
The contract should contain a clause specifying the managed care company's responsibility for prompt payments that follow state regulations and are enforceable.
Overpayments
Clarification is needed to determine how overpayments to an ambulatory surgery center will be recouped by the managed care company (e.g., refunds, "take-backs").
Terms
The managed care contract should clearly indicate the duration of the agreement, amendment guidelines, and renewal options.
Termination of Contract
Determine the time required for notification of termination, including clauses covering termination with or without cause for both parties.
Hold Harmless Clause
In the event of the managed care company's dissolution, the contract should specify whether the ambulatory surgery center can bill the patient/policyholder for payment of services provided.
Records and Confidentiality
The contract should be specific about expectations of patient confidentiality and HIPAA compliance for both parties.
Quality Assurance and Utilization Review Process
The contract should outline what audits are performed, by whom, and their frequency.
Accreditation Requirements
The contract should specify whether the managed care company requires the ambulatory surgery center be accredited prior to issuing a contract. It should also specify what accrediting agencies it accepts (e.g., AAAHC, The Joint Commission).
Special Requirements or Clauses to Avoid
Avoid unfavorable terms such as affiliate clauses, high malpractice requirements, requests for your surgery center's financials, and capitation.
Note: The two best practice discussions covering terms and terminology will help you recognize the most common terms and clauses you will encounter when negotiating your ambulatory surgery center's managed care contracts. Keep in mind that most contracts are written to favor payers and that their negotiators are very experienced. After carefully reviewing the contract terms/terminology and receiving adequate explanations of any questions, you are ready to begin managed care negotiations.
Surgery Center Managed Care Negotiation Best Practice #4: Research Areas of Focus
When contracting with managed care organizations, remember that they have an entire legal department specializing in obtaining the best financial outcome for their company. That's why it is essential that your ambulatory surgery center have, at a minimum, an experienced managed care negotiator in your corner. This will help ensure your surgery center billing needs are met.
Before moving ahead with a managed care contract negotiation, conduct extensive research on the MCO. The following is a list of important areas to focus on:
Managed Care Company Information
Obtain as much of this information as possible prior to negotiation, including:
Number and name of states covered
Types of contracts offered
Litigation history
Accreditation status
Licensure status
Financially stability
Managed Care Contract Information
Examine the following clauses and key terms in a proposed managed care contract closely:
Termination clause and notice requirements. The termination clause should be mutual, including with or without cause and length of written notice (calendar or business days). If you cannot secure termination without cause, then request a short contract term (e.g., one year).
Contract renewal terms. The "term of the contract" is the time for which it is to be in effect. Most plans are two- to three-year contracts which are then renegotiated if both parties wish to continue the relationship. Contracts often have provisions for automatic renewals ("evergreen") if neither party exercises the right to terminate. It is important that ambulatory surgery centers understand that the contract cannot be renegotiated until about six months prior to renewal date.
Mutual indemnification/hold-harmless agreement. An indemnification provision, also known as a "hold harmless" provision, is a clause used in contracts to shift potential costs from one party to the other. In a mutual indemnification, both parties agree to compensate the other party for losses arising out of the agreement to the extent those losses are caused by the indemnifying party's breach of the contract.
Contract changes. Any changes to the managed care contract should be in writing and only after agreement by both parties.
Covered services. The managed care contract should list all the services the ambulatory surgery center is expected to provide. It should also list which services are excluded from coverage.
Provider directory. The contract should guarantee that the ambulatory surgery center be listed in the managed care organization's print and electronic provider directories as quickly as possible and the ASC should have preapproval of the descriptions used in the directories.
Arbitration. Request an arbitration provision in the contract, specifically that the arbitration be held in the same geographic area as your ambulatory surgery center. This is the best way to sue for monies that have not been paid by managed care organizations on legitimate claims.
Compliance with provider's state laws. The contract should contain language that states the managed care organization agrees to comply with all ambulatory surgery center's applicable federal, state, and local laws and regulations.
Methodology of payment. Each managed care organization has its own methodology of determining ambulatory surgery center reimbursement rates. It is important to know what basis the MCO uses. Payer fee schedules are often based on the outdated grouper system, which typically produces rates lower than Medicare rates. The preferred methodology for ASCs is the updated Outpatient Prospective Payment System (OPPS) based on CPT codes. The MCO may also have a pre-determined fee schedule and the surgery center has the option to accept it or see if there is any room for negotiation.
Bundling. Ambulatory surgery centers already offer bundled pricing for the pre-operative medical exam and ASC facility fee, which includes supply cost (including anesthesia supplies). However, as fee bundling becomes more prevalent, your ASC may have to negotiate with the surgeon and anesthesiologist to provide pre- and postoperative care.
Timely filing limit on claims submission. Request 12 months as the claim submission period (same as Medicare requirements).
Time guarantee claims payment. Request 30 days or minimum required by your ambulatory surgery center's state prompt-payment laws.
Definition of clean claim. A clean claim is defined as a complete and accurate claim form that includes all provider and member information as well as records and additional information or documents needed from the member or provider to enable the managed care organization to process the claim. Require that the MCO notify your ambulatory surgery center of any deficiencies within 15 days of receipt. If no notification is received, the claim is deemed to be a clean claim and must meet the time guarantee. Also, if additional information is requested from your ASC, the MCO must pay the claim within 15 days after receipt of information from provider.
Adjustments for incorrect payments. Ambulatory surgery centers should attempt to remove clauses in their managed care contracts that allow MCOs to offset prior overpayments against current payments as this method often causes confusion in an ASC's accounting. If there is a clear obligation to refund, request that your surgery center can remit a separate check to MCO for overpayments. Also, any obligated refund by your ASC should apply only to "undisputed" duplicate or erroneous claim payment.
Requirements for prior authorization and eligibility verification. Ambulatory surgery centers are responsible for verifying eligibility and health plan enrollment prior to providing non-emergency services. Verification requirements vary between MCOs. These should clearly be outlined in your managed care contract.
These are just a few of the many terms and clauses contained in most managed care contracts. Legal language is often difficult to interpret, which is why it is important that you ask for explanations of any areas that you do not understand. It may also be prudent to have your ASC managed care contract reviewed by an experienced managed care attorney.
Surgery Center Managed Care Negotiation Best Practice #5: The Art of Negotiating
This is where the contest begins. Your opponent is well-versed in negotiation and already knows what points can be conceded or modified. Your ambulatory surgery center is well-prepared with facts and figures and knowledge of what you need for the managed care contract to be financially feasible for your ASC.
The following is a list of the basic methods and tactics that may assist you in successful managed care contract negotiation.
Managed Care Negotiation Methods and Approaches
To be successful in your discussions, you need to be:
Prepared. Here is where all your ambulatory surgery center's advance research and preparation pays off. Rehearse.
Organized. Have all your information easily accessible
Confident. Be convincing and persuasive.
Ambitious. Have high expectations for your ambulatory surgery center and don't be afraid to voice them.
Determined. Ask for what you want. Be persistent.
Positive. If your attitude is confident and you show conviction in what you say, your professionalism will impress your opponent.
Courteous. Be polite, show respect, and use good manners.
Reasonable. Know what points you can concede. Strive for reciprocity.
Managed Care Negotiation Tactics/Strategies
The following list describes some areas that may work to your ambulatory surgery center's advantage in managed care negotiation:
1. Take the initiative. Be the discussion leader. Choose issues you wish to discuss. Make recommendations as to length of time available, break times, etc.
2. Open channels of communication. Request to speak with a representative who can make decisions. Use verbal interaction negotiation, only progressing to e-mail communication for final, straightforward communications.
3. Leverage joint venture. If your ambulatory surgery center is in a joint venture with a hospital or health system, leverage the relationship the hospital has with the payers and managed care organization representatives. Request inclusion in the current hospital contract, rates, benefits, etc.
4. Know your market and define market share. Have your data ready:
provide case costs;
show how ambulatory surgery centers are more efficient and save money compared to hospitals;
demonstrate how managed care organization's large contracted employee groups would benefit from using your ambulatory surgery center (e.g., lower costs, personalized care, faster turnarounds, improved patient satisfaction); and
explain what makes your ambulatory surgery center unique in your market (e.g., special services performed only in your ASC, you are the only ASC in 50 miles, list of specialties and sub-specialties performed in your ASC, roster of well-respected physicians on staff).
5. Highlight common objectives. Working together for the best patient outcome, reasonable reimbursement of cost with some profit, etc.
6. Present ambulatory surgery center billing needs. Carve outs for high-cost cases, implant reimbursement.
7. Use questions and hypothetical cases. This often helps with detecting opponent's needs and areas of impasse.
8. Use restraint. Know when to stay silent. Be brief, never interrupt
9. Make notes. It is important to remember what was said. This also gives you time to think.
10. Know concessions. What are the issues you can comfortably concede? Understand the difference between concession and compromise.
11. Plan oppositions. What contract terms are unacceptable to your ambulatory surgery center (e.g., inequitable rates, non-specific timely reimbursement clause).
12. Do not accept boilerplate contracts. There are still some areas you may be able to negotiate.
Closing Thoughts: Achieving Surgery Center Managed Care Negotiation Success
Although there is currently a growing "take-it-or-leave-it" trend in managed care negotiation, if your ambulatory surgery center has conducted the necessary research, asked the important questions, worked with an experienced negotiator, and then comes to the managed care negotiation table prepared by knowing what goals you need to achieve and having rehearsed the strategies reviewed above, then you will be in a better position to secure a solid managed care contract with the best reimbursement possible for your ASC.