When It Comes to Negotiating Sustainable Contracts, Know Your Costs
Tips for navigating challenging territory
EXECUTIVE SUMMARY
Data collection is an important first step to take when surgery centers start to cut costs and become more efficient.
- The supply chain is a key target area for cost cutting. Surgery centers can work with vendors and doctors to find the best supplies at the optimal cost.
- To negotiate the most favorable terms, a surgery center administrator needs to learn more about what payers want.
- With high deductibles the new reality, surgery centers should collect patients’ copays up front.
ASCs are entering a new era of higher deductibles and payer consolidation that will result in the survival of the fittest, centers that can cut costs to be more competitive and negotiate sustainable contracts with payers. Insiders offer some potentially useful tactics for making the most of the new payer environment:
• Collect data. “Be prepared to talk about the cases you are prepared to move to the surgery center and how you are prepared to expand your services,” says Amy Coletti, MHA, senior manager of ECG Management Consultants in Seattle.
ASC leaders should talk about whether they plan to expand their offerings to include total joints, spine, or gynecological procedures currently performed at the local hospital. ASCs need to collaborate with payers, engage in meaningful discussions about reimbursement for these procedures, and decide whether there are surgeons on staff who are ready to move the cases. “Payers will want to know who is going to bring the cases — and not just that the ASC has a good idea, but how many cases can move to the ASC,” Coletti says. “Some cases involving older or sicker patients with comorbidities will have to stay in the hospital. The ASC should talk about how many cases it can move to show volume to the payer.”
• Trim costs where possible. “Over the last couple of years, one of the biggest opportunities for us to cut costs is in the supply chain: materials management and supply costs,” says Raymond Hino, MPA, FACHE, director of operations for Surgery Partners and administrator at Skyway Surgery Center in Chico, CA. “We work with vendors and our doctors to negotiate best practices with our vendors so that we’re able to take advantage of volume purchasing and group purchasing contracts and also maintain local control.” The ASC shares prices with surgeons so they can compare different costs from the various vendors, Hino adds.
Staffing is another area where cost efficiency can work. “We’re lean-staffed at our facility,” Hino says. “We have actually reduced our management positions at this facility so that we have fewer managers and more bedside staff.”
When the surgery center’s patient volume fluctuates, the ASC monitors activity and adjusts staffing accordingly.
• Negotiate favorable terms. “Understand payer opportunities,” Coletti suggests. “If a payer is willing to offer a case rate that covers the day of surgery with surgeon fees, are you ready to have that discussion?” Know the answers to these questions:
- Will payment depend on CMS quality scores?
- Does the ASC administrator understand the payer’s business well enough to engage in discussions with payers about case rates?
- What do the ASC’s quality measures look like?
When looking to improve contracts, ASCs should consider negotiating with employer groups as well as payers. Increasingly, employer groups are pushing back against costs and shopping for the lowest cost providers. If employer groups do not believe their payer is negotiating the best rates, they will move on, Coletti says.
“A lot of employer groups used to have really rich benefits, but around the time of the recession, they started pushing more costs to their employees through high-deductible plans,” she explains.
Often, employers and payers are open to incentive plans that encourage their insured populations to choose cheaper medical settings. For this reason, employers and payers could be open to entering into preferred provider contracts with ASCs that are less costly and maintain good quality scores, Coletti says. “It might be worth talking with the employer’s human resources director about having a good, lower-cost surgical option for employees,” she offers. “The more ASCs can collaborate with the payer or local employer group, the more it would bring business to the ASC.”
• Collect deductibles up front. “We are very careful to collect the patient’s responsibility for the cost of surgery,” Hino says. “We ask for the entire amount that the patient is responsible for upfront.”
Hino’s ASC accepts credit cards and works with patients on financing the costs through lending institutions. When potential patients call to obtain an estimate on the costs, the business office manager is transparent with pricing and can give them a price range, Hino adds.
ASCs are entering a new era of higher deductibles and payer consolidation that will result in the survival of the fittest, centers that can cut costs to be more competitive and negotiate sustainable contracts with payers. Insiders offer some potentially useful tactics for making the most of the new payer environment.
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