Ambulatory Care Quarterly

Will centers make money with the move to APCs?

Start analyzing now to prepare for change

As surgery centers begin to analyze how a new reimbursement system, if passed, would affect their income and bottom line, they are finding that future changes will be a mixed bag.

The Department of Health and Human Services (HHS) previously announced that HHS will propose including all outpatient surgical procedures on the list of approved procedures for ambulatory surgery centers (ASCs), except for those that department officials think would pose a significant safety risk in a center and those that would require an overnight stay. The change would come as part of the implementation of a new ASC payment system in 2008.

In other action, a bill was proposed that would expand Medicare coverage for ASC services and revamp the ASC payment system. It would set the ASC reimbursement rate at 75% of the hospital outpatient department (HOPD) rate with transition provisions so that payments for specific procedures would not decrease.

Generally, ASCs would be paid in the same manner and for the same things as HOPDs, including implants. However, ASCs would not be paid for outliers, graduate medical education, or capital.

On one hand, some specialties may experience significant reimbursement decreases. On the other hand, cases that previously were performed at a loss or were borderline may actually be profitable with new APC rates, says Caryl A. Serbin, RN, BSN, LHRM, president and founder of Surgery Consultants of America and Serbin Surgery Center Billing, both in Fort Myers, FL.

"An increased number of groups lead to more equitable reimbursement in most cases," she says. Instead of nine payment groups for surgery center procedures, they will be reimbursed under hundreds of ambulatory payment classifications. Serbin spoke on preparing for the new reimbursement system at the most recent annual meeting of the American Association of Ambulatory Surgery Centers.

The current nine payments groups aren't very logical because so many different types of procedures are put into the same group and reimbursed at the same rate, Serbin says. "This is one of those rare times that what the hospital is doing makes more sense," she says. "We don't want to follow all that they do, but we'd like to follow right behind them" with this.

To analyze the effect of a new system, which takes effect in 2008, consider the following suggestions:

• Determine future direction for cases that wouldn't be profitable.

For those cases whose profit appears threatened under the new reimbursement system, work with your physicians, suggests Mike Pankey, RN, MBA, administrator at Ambulatory Surgery Center of Spartanburg (SC). "We're trying to get them to get their costs down so we can continue to do the procedures," he says.

For those procedures that won't be able to become profitable, Pankey is working to move those cases to the hospital that is in a joint venture with the center. "I hate to lose cases, but if I do 100 cases where I've lost money on every case, I can't continue to do that," he says.

Surgery centers can't bill for some outliers that hospitals can, Pankey says. "Hospitals are seeing an increase of approximately 3% a year, so the distance between hospital reimbursement and ASC reimbursement is now increasing," he says.

Pankey points out that ASC reimbursement is flat until 2008 due to a freeze on Medicare rates. "We want to market to new physicians where [proposed] changes have brought some procedures into the positive area for us and expand our services in those areas, and we want to minimize those areas where we may be losing money in cases," he says.

• Determine impact with managed care.

Serbin is putting together spreadsheets for every managed care contract to determine where they are paying in comparison to 75% of the HOPD rate. "On paper, it looks like significant increases for many procedures we're doing," she reports.

One of the biggest changes will be the types of cases her centers can perform, Serbin says. "It will in the long run allow us to do more procedures, including ones we always knew we should do, such as lap chole, which weren't cost-effective to do in an ASC," she explains.

Orthopedics is another example, Serbin notes. She and other managers have been upset about how they've been reimbursed in terms of supplies and overall time. With the proposed system, "it's going to end up making it a fairer payment system for us," Serbin says. If surgery centers are able to charge for implants and other orthopedic items, as hospitals are, this will help some surgery centers to receive more reimbursement per cases, sources say.

While you can begin discussions with managed care companies about the new system, they are ill-prepared to deal with it now, Serbin warns. "There's no commitment one way or another," she says.

Centers that currently are reimbursed based on group rates will see a huge impact that will make their rates more equitable when the system changes, Serbin reports. If you have contracts that will continue into 2008, you must open the dialogue with payers, she says. Be sure you know your case cost prior to beginning negotiations, Serbin advises. "Say, ‘We suspect a new system is coming. How will you handle it?'" she suggests. "Put language in there that says, ‘When we have a change, you will follow Medicare guidelines.'"

The centers reimbursed on a percentage of charges won't see an impact, Serbin points out. "If you're in a percentage of billed charges, you don't want to have that conversation," she says. "You're better off, and you hope they will ignore it."

Pankey uses a physician-hospital organization to contract with managed care organizations. "I'm meeting with my rep to make sure she's aware of the changes coming and having her get in touch with payers regarding any changes to contracts," he says.

• Update your fee schedule.

Similar to her analysis of managed care rates, Serbin is beginning to look at how HOPD rates are paid, what expenses are grouped, and how she might begin to make a fee schedule based on these items. While surgery centers currently seek 350%-500% of Medicare rates, this range will have to be adjusted under HOPD rates, probably to a 350% markup of HOPD rates, she predicts, "Five hundred percent would be way too high," Serbin says.

Pankey says he hopes his contracts will hold up in under the new system, "but if Medicare goes down, the contract goes down," he says. "You can't just look at Medicare. You have to look at the whole payer mix and fee schedule."