Surgery Centers Dive Into Bundled Payment Models
Bundled payments for surgical procedures could work well for ambulatory surgery centers (ASCs) and also provide patients and employers/payers with lower costs.
- With bundled payments, surgery centers typically are paid faster and they do not have to deal with lengthy collections hassles.
- One ASC handled about 200 to 250 cases through bundled payment plans over the past few years.
- Bundled payments can be published online, providing greater transparency and fairness in surgical costs.
In one way, ambulatory surgery centers (ASCs) are perfectly positioned to attract savvy consumers, based on their quality, price, and convenience.
ASCs can be the low-cost, most efficient, and high-quality alternative to surgeries performed in hospitals. These facilities specialize and can offer patients a more affordable option, sometimes one-fifth the cost of surgery elsewhere.
But it is not that simple. Patients and payers do not always pay close enough attention to their cost options, and ASCs might struggle making their attributes well known and understood. This is where bundled payment contracts can help. These offer consumers the benefit of one affordable price for surgery, from start to finish. They can help a surgery center attract a slice of the market that is growing — employers who want low-cost options for workers.
The bundled payment model, providing one price that covers all aspects of a surgery, is slowly catching on. Its growth is helped, in part, by companies that are matchmaking for ASCs, pairing a surgery center with a payer. One such company is PriceMDs of Oldsmar, FL.
“What we have is a directory with hundreds of outpatient surgery centers that give bundled pricing for their elective outpatient procedures. These are an all-inclusive pricing,” says Marc Grossman, MD, FACS, co-founder and CEO of PriceMDs, a healthcare service company that matches surgery centers with consumers and payers in a bundled payment environment.
Pricing is not negotiated, although there are limits to what is considered feasible for a bundled contract. “Surgery centers state their prices. If the bundles are too expensive, then we just tell them they’re too high,” Grossman explains. “We’re not there to negotiate, but our clients — third-party payers — are looking for a deal.”
Payers, including third-party administrators and self-insured employers, pay PriceMDs on a capitated basis for its service, and they pay surgery centers directly. Insurers and employers pay surgery centers directly, usually quickly, and no part of this fee goes to PriceMDs. From the payers’ perspective, their costs per surgery might be one-half as much as they typically pay. From the ASC’s viewpoint, there is an uptick in business, along with simpler and faster repayments.
“The wins for the providers are several,” Grossman says. “They know they’re going to get paid and don’t have to collect from patients. They choose how to divide the bundled fee, based on their own agreements, and they get paid timely, usually within seven to 10 days after the procedure is performed.”
Patients benefit from little-to-no copays or out-of-pocket costs, and they have a choice. They can stay with the usual plan where they pay hefty copays and deductibles for the procedure, or they can go to a specific surgery center, where the patient pays nothing or a nominal fee of a few hundred dollars, Grossman says.
Bundled payments have worked well for Rockford Ambulatory Surgery Center in Rockford, IL, says Steve Gunderson, DO, FACA, DABA, CASC, CEO and medical director. His ASC has handled about 200 to 250 cases through bundled plans over the past few years. “We’re saving money for all companies participating in the bundled plans, and we’re making money on the cases that we do,” Gunderson says.
Rockford ASC’s work with three different bundled payment organizations has improved price transparency and made surgical procedures, financially, more fair and equal, Gunderson explains. “The thing we’re doing is taking out some of the middleman stuff.”
For some surgery centers, bundled payments can be a lifeline in competitive marketplaces. “I first got into bundled contracts when I was an administrator for a surgery center where we were struggling with bringing in new cases due to an oversaturated market,” says Chris Markford, CASC, administrator at New Tampa Surgery Center in Wesley Chapel, FL. “There were multiple single specialty surgery centers in the area. The old method of relying on doctors to bring us cases wasn’t doing it, so I wanted to find patients myself and turn this around.”
There also was a problem in Florida with surgery centers focusing primarily on an out-of-network approach. These centers charged exorbitant amounts that patients presumably would have to cover at a high percentage since the ASCs were out of network. But while payers would only cover half the surgery’s cost, the surgery centers could make more from that 50% collection than they would if they had negotiated a market-based rate that the insurer would pay at 90% or 80%.“[ASCs] don’t want to scare the patient with the high 50% shared cost, so they tell them, with a wink and a nod, to not worry about it, that they can throw the bill away,” Markford explains.
“They have to make an effort to collect the unpaid half of the bill, but they give up and write it off as bad debt. I’ve seen them being paid $100,000 for total knee replacement, whereas most insurance companies will pay $15,000 to $20,000 for a total knee. No one plays with Medicare, which sets a standard rate, but these guys are making money off commercial insurance companies.”
This trend has been seen in major regions for the past few years, but some insurance companies have caught on and are making changes that prevent out-of-network ASCs from overcharging. For example, Oregon-based Providence Health Plan changed the way it pays out-of-network surgery centers, acknowledging that some patients might have to spend more out of their own pocket.1
“Many surgery centers made a lot of money with out-of-network charges, but insurance companies caught on,” Gunderson says. “Insurance companies started saying, ‘If you do out-of-network billing, we’ll reimburse you at Medicare rates,’ and that’s the way insurance companies can fight that.”
From Markford’s perspective, the solution was to maintain efficiency and quality while attracting new customers through a bundled payment model. “The early model for all of this was a Travelocity-type model where patients can go online, look up prices, and shop for healthcare. But that was a dead end for everyone,” Markford says. “Patients didn’t have enough skin in the game to get interested.”
Then, Markford heard about an alternative model through PriceMDs at an association meeting. “These were like-minded people who believed in transparency and thought that cost and quality go hand in hand and will reduce the cost of healthcare in this country,” Markford says. “I got involved, and came up with the prices they needed.”
Gunderson also was drawn to a bundling payment model because it can bring more price transparency into healthcare and influence consumers in how they purchase such services. When he first heard about bundled payments at a national surgery center conference about a decade ago, he was intrigued. “I thought it was a cool idea, and I thought it would never happen in our environment,” Gunderson recalls. But he decided to develop a bundled fee schedule for various procedures, just in case bundled payments came to Rockford. Then, it happened. “Out of the blue, I got a call from an organization called the Zero Card, and they were interested in having us participate in a bundled payment arrangement,” Gunderson says. “This outfit would market the plan to self-insured employers in the community to save money on outpatient surgery services for their employees. They were only interested in the outpatient surgery market.”
Gunderson put together 80 to 100 procedures that Rockford ASC could perform as bundled payments. Patients would pay zero out-of-pocket costs, and local employers were saving money with the bundled payments. Soon after starting bundled payments with the one organization, several more groups contacted Gunderson about bundled payments for their networks.
Rockford ASC joined some of these and has found the bundled payment model to be a success, Gunderson says. “It’s value-added and profitable,” he says. “Generally, we get paid within 30 days.”
In one way, ambulatory surgery centers are perfectly positioned to attract savvy consumers, based on their quality, price, and convenience. But it is not that simple.
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