Be prepared: Some payers are taking hard-core stance with their rates

Peers offer tips on working with payers to boost rates

At a time when surgery centers are facing Medicare changes and proposed freezes that are causing a seemingly endless financial struggle, a standoff that developed between a private payer and a surgery center chain in Ohio is causing some centers to call foul. At the same time, some hospitals are mourning the general loss of outpatient procedures to surgery centers and President Bush's proposed freeze on annual updates for them as well as surgery centers through 2011.

The standoff between Humana and surgery centers in Ohio will be repeated elsewhere in the country where Humana dominates the market, sources warn. Other payers are trying to determine how to transition to a reimbursement system based on Medicare's new payments, while some are taking a no-negotiation stance on their rates, says Randy Leffler, executive director of the Ohio Association of Ambulatory Surgery Centers, Columbus.

"Humana seems to be the one percolating the most," Leffler says.

The situation with Humana developed when they offered Cincinnati-based Prexus Health Care, which operates four surgery centers, double-digit decreases and took a "take-it-or-leave-it" attitude, according to Prexus officials. Since that time, Humana has returned to negotiations.

Prexus pointed out in a released statement that these decreases in reimbursement follow Humana's posting of higher-than-anticipated earnings in 2007 and their signal of even higher profits in 2008.

"Humana has taken this action at a time when they are posting better than projected, high-level earnings and at a time when employer premiums and patient deductibles are rising," says Donald J. Jansen, MHA, vice president of marketing and development for Prexus. "Humana is taking action knowing that ambulatory surgery centers are a proven, high-quality, lower-cost option and that Humana will be paying more to community hospitals for identical services."

At Prexus' Surgery Center of Evendale (OH), Humana's initial proposed 2008 payment schedule would have reduced Humana's reimbursement by 12.9%. "Accepting such a significant decrease in reimbursement jeopardizes our facilities' ability to provide quality care, cover operating costs, including our highly qualified clinical team, and continue to invest in new technologies and state-of-the-art equipment," said Robyne Finnegan, vice president for managed care for Prexus. Humana took this action despite high levels of patient satisfaction and physician satisfaction at Prexus facilities, according to the provider. Initially, Humana indicated that surgery providers who didn't accept the decreases would be shut out of Humana's system, according to Prexus. Humana did not respond to Same-Day Surgery's request for an interview.

Kathy Bryant, president of the Ambulatory Surgery Center Association, was quoted in the Business Journal of Cincinnati as saying double-digit decreases aren't acceptable in any business and indicate that a payer doesn't want that group in their network. Hospitals usually cannot offer a better price than surgery centers on those procedures, so they may offer an arrangement to the payer to receive better rates on inpatient procedures if the payer gives all of its outpatient business to the hospital, Bryant said.

That position is backed up by Leffler, who has heard that Humana wants to cut the number of surgery centers in their network by one-third. Or they may be reducing the number of ASCs to get leverage with them, Leffler says. "No one is showing their cards in terms of what their strategy is," he says.

The strategy doesn't make sense in terms of reducing employee's choices "on lower-cost options when premiums for employers are going up by double digits by almost every year, and out-of-pocket costs for patients are going up all the time," Leffler says. "The rationale doesn't make sense, unless there are other negotiation factors, such as leveraging a group of ASCs, for example."

In a Business Journal of Cincinnati story, Humana spokesman Jeff Blunt said the company is not trying to remove surgery centers from its network. He wouldn't comment on specific rates, negotiations, or whether markets beyond Cincinnati would be affected.

3 tips for best reimbursement rates

Consider these suggestions from your peers on how to put yourself in the best position for negotiating the highest rates:

Develop good working relationship with payers.

Know which provider representatives handle contracting, and develop a positive relationship with them, Leffler advises. "Raise concerns early in the process to allow plenty of time to negotiate," he suggests. Obtain solid documentation that supports your case, Leffler says. "Don't be afraid to get physicians involved in the process of negotiating terms," he says.

Even as payers are offering lower rates and showing little interest in negotiating, don't burn your bridges, sources advise.

"This is one of our goals as an association: First and foremost, develop a good working relationship with the insurer to begin with," Leffler says. Developing such a relationship isn't always easy, he acknowledges. "Each one is in business to do business and make certain their books look good," Leffler says. "As an organization and as individual ASCs, we are really trying to get the lines of communication open as much as possible."

Invite the top leaders at the insurance company to tour your center, advises Anne Dean Schilling, RN, BSN, consultant with The ADA Group in DeLand, FL.

Know what's in your contracts.

Be an educated consumer about the contracting side, Leffler advises. His association is compiling resources to help surgery centers representatives review their contracts and know what's in them. "This is about really trying to get the best contracts they can get before signing," he says. Most payers are willing to negotiate, he says.

For ASCs that do have issues with what is being proposed, make sure you're raising those issues with the payer, rather than accepting them and moving on, Leffler says. If a surgery centers signs off on what the payer offers, then the insurer obviously thinks every surgery center should be able to do that, Leffler warns. "In the collective, it ends up impacting the system as a whole," he says.

Increase utilization with new procedures and marketing.

The most significant step a surgery center can take is to increase utilization with new programs and effective marketing, says Dean Schilling. For example, some ophthalmology centers have decided to make up lost revenue by performing LASIK at their facility, she says. Some ophthalmologists don't want to move LASIK to surgery centers, where there are increased staffing costs, because it's private pay, Dean Schilling says, "but on the other hand, it is one of the few procedures that we can do to increase revenue," she says.

Medicare requires a preoperative and recovery component to the procedure, and don't try to skip these steps, Dean Schilling warns. One surgery center she knows about had a separate room, leased by physicians, for LASIK, she recalls. Those patients bypassed preoperative and recovery care, and there was no RN in the room because it was an "office procedure."

"The state came in [to do a Medicare survey] and threatened to close them down," Dean Schilling says.