Increasingly, people who need surgery have to pay for large chunks of the costs as employers and payers shift cost burdens to patients through high deductibles. This means ambulatory surgery centers (ASCs) need to know their costs and be transparent with what patients will pay out of pocket.
- Payer consolidations also are disrupting the industry, leading ASCs to conduct more research before negotiating new contracts.
- ASCs can benefit from these trends, but only if they are smart financially.
- Consumers and payers will study both costs and quality comparisons before making a selection of where to do business.
The trends of increasingly higher deductibles and payer consolidation are forcing surgery centers to change the way they negotiate contracts and handle costs. For ambulatory surgery centers (ASCs) that go about business as usual, there likely will be the day when administrators find they lose business to more efficient and contract-savvy competitors.
“Both trends put a lot of pressure on ambulatory surgery centers to control costs,” says Raymond Hino, MPA, FACHE, corporate director of operations for Surgery Partners, a nationwide operator of surgical facilities and ancillary services. Hino also serves as administrator at Skyway Surgery Center in Chico, CA. “Payer consolidation and high-deductible plans are nothing new, but there’s been a lot of recent activity. It is a concern for us out in the field. High-deductible plans are causing some disruption in the industry.”
So far, ASCs are the beneficiaries of much of that disruption as consumers choose these lower-cost settings over hospital surgeries, Hino notes.
“We’re seeing a lot of patients that are paying out of pocket because of their high-deductible plans — more so than in the past,” he says. “It can work in our favor. I know, for example, a recent case where there was a gentleman that was comparison shopping for surgery. He had a high-deductible plan, got a price quote from the local hospital in our area, and then came to us for a price quote. We were much lower.”
This man told his doctor that he wanted to undergo surgery at Skyway Surgery Center instead of the hospital, Hino reports. In California, hospitals are required to make their charge masters accessible to the public. It is common for patients to know how much their surgery will cost and to check out price options, Hino explains.
The problem for ASCs is that deductibles, which once ranged up to $1,500, now range from $3,000 to $10,000. This means some patients will pay for same-day surgeries entirely out of pocket, says Amy Coletti, MHA, senior manager of ECG Management Consultants in Seattle. Coletti and Hino spoke about these payer trends at Becker’s ASC 25th Annual Meeting: The Business and Operations of ASCs in October.
“I hope deductibles will stabilize,” Coletti says. “In talking with people in the community, a $10,000 deductible from their perspective means they don’t have benefits because everything is out of pocket until that point.” Even when a procedure is negotiated to a lower price by the payer, patients still feel the financial pain of that high deductible cost. Higher deductibles will help shift more patients from the hospital surgery setting to the ASC setting. But this also could mean that more people delay undergoing elective surgeries. This is where a new trend could make a difference: Some payers and self-insured employers are giving patients incentives to undergo surgery in the ASC as that is the lower-cost alternative.
“Some plans encourage use of an ASC by having lower copay if the outpatient surgery is done in an ASC versus a hospital,” Coletti explains. “It’s important to understand what payers are offering and collaborate with payers.”
Consumers are becoming more savvy about comparison shopping, even in healthcare, Hino notes.
“With the times we live in, Uber and online shopping and Amazon, I think the population is getting used to comparison shopping,” he says. “It’s part of the culture.”
The new consumer culture wants low costs, but also high quality. These priorities favor ASCs.
“Hospitals will have a bit to be concerned about with the high-deductible plans and payer consolidation, but it positions ASCs well to be able to compete,” Hino says. “Although, as low-cost providers, they also receive lower reimbursements. For us to be successful, we need to keep our costs down because we’re going to be paid less well than local hospitals.”
This means ASCs with higher costs could run into problems. Even those with lower costs might not be doing enough to attract more patients and better payer contracts.
“Payers know ASCs are less expensive than hospitals, but what else can an ASC offer?” Coletti asks. “Can they move more cases? Do they have good quality scores? They need to do more than just sit back and say, ‘Yes, we’re a lower-cost setting.’” Payer consolidation also affects ASCs and their bottom lines. “As we look forward to more payer consolidation, I see pros and cons of that type of movement,” Hino says. “On the positive side, it means fewer payers to deal with and negotiate with. On the negative side, it puts a lot more pressure on us to be successful in our contract negotiations so that we can continue to be an in-network provider for the major health plans.”
Every contract with payers is important, Coletti notes. With consolidations occurring among payers, an ASC’s contract with even a smaller payer could cause a big headache. For instance, suppose an ASC signed a contract with a small payer that was much more favorable to the payer than its contracts with larger payers. Since it was a small contract, the ASC administrator or business officer had signed it without looking closely at the details. But then a large payer consolidates with the small payer. Now, the large payer has access to that contract and its terms, and the large payer might decide to apply those same terms to all its contracts with the ASC, Coletti explains.
“It will be a negotiation issue after that,” she says. “Read every contract before you sign, and don’t just sign a contract that comes in the mail.”