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To begin bundling payments, surgery centers need to set a fair market price for particular procedures.
Any ASC could conduct the preliminary work needed to create a bundled payment plan. It involves setting a fair market price for the procedure and breaking down the total between everyone who receives a piece, says Chris Markford, CASC, administrator at New Tampa Surgery Center in Wesley Chapel, FL.
• Compare rates with other ASCs. Before setting a price, an ASC administrator should compare market prices used by other surgery centers, he suggests. “I looked at five facilities in the country that had all-inclusive bundled rates,” Markford says. “I took their rates and created a spreadsheet with my top procedure codes and found out what they were charging for their rates.”
Then, Markford used those numbers to create his own potential bundled price based on this comparison. He took into account the ASC’s location, population, income level, and other comparisons. “In the end, my price was significantly less than Orange City, CA, and New York City, but 5% higher than Oklahoma City, and pretty much on par with South Carolina’s rates,” Markford shares.
The Free Market Medical Association publishes online prices for various medical procedures in its ShopHealth Marketplace. For example, the website lists total hip arthroplasty for $17,500 at one ASC. Consumers and ASC directors can search for prices available for any procedure in the ShopHealth search engine.1
• Determine what fee each party will receive. The second step is to decide how the bundled price should be broken down per provider and vendor.
Steve Gunderson, DO, FACA, DABA, CASC, medical director and CEO at Rockford Ambulatory Surgery Center in Rockford, IL, spoke with another ASC director who uses bundled payments and chose to negotiate generous bundled payment rates for surgeons and anesthesiologists.
“My fees are usually higher than they’d get from any insurance company,” Gunderson says. “Most insurance companies pay a low multiple of the Medicare fee schedule, and I pay a more handsome multiple to get their attention.”
Markford looked at what the surgery center, anesthesiologists, surgeons, physician assistants, durable medical equipment, and implant vendors might need. “All of these were part of the bundle, but for us it was easier to get buy-in from surgeons,” he says.
The bundled fee can include the initial consultation with the doctor to determine whether surgery is necessary. It also can include laboratory fees and the cost of drugs used during surgery. “The anesthesia group was a contracted group. We went to them first to negotiate,” Markford says. “Once we figured out what their price was, we knew how to work with the rest of the pie.”
The key was to convince anesthesiologists to agree to a fair but reasonable price that would remain the same whether a surgery case took one hour or four-plus hours. “If the case takes longer than expected, they don’t get any more money,” Markford says. “If it takes less time, then they get the same amount we agreed to.”
Anesthesiologists are used to fluctuation in 15-minute increments in what they’re paid, Markford notes. “There’s a price they negotiate with insurance companies for each of those 15-minute units, and Medicare pays them horribly for it,” he says. “But if they’re treating it like a self-pay patient, then it’s a price they have to stand by.”
These negotiations took a few weeks. Markford made sure he was speaking with the right people who could make a decision about a bundled price. “I gave them codes, the average OR time, and I gave it to them in blocks,” he explains. “They came back with an initial price that was way too high, and I think we got them to understand what it was we were trying to do. It was like self-pay patients, and I needed to negotiate a self-pay rate. Then, he came significantly down in price.”
Once the agreement was made with anesthesiologists, Markford moved on to speak with surgeons and others.
• Secure pragmatic prices for implants. Implants in orthopedics are expensive, so including them in a bundled price is challenging. “We had to negotiate with our implant vendors to come up with prices,” Markford says.
An ASC should tell vendors how much it is paid for the bundled fee and show how unreasonable it would be to pay so much for the implant, which would lead to a loss in each case. ASCs already are negotiating with vendors for Medicare cases where prices also are kept low, Markford notes. “We don’t want to walk away losing money because we pay more for implants than we’re being paid by Medicare,” he says. “We go to a vendor and say, ‘You know that all we’re paid by Medicare is $3,500, so you can’t expect us to pay you $4,000 in implants. We need a better solution.’”
Negotiating with vendors for bundled cases was similar. “It wasn’t that hard to do it on self-pay cases,” Markford says. ASC directors also can tell surgeons that if they choose a premium-priced implant, then those surgeons will have to take the procedure to the hospital.
But if they use an implant priced at the rate that works for the ASC’s bundled payment, surgeons can perform the procedure at the ASC, Gunderson offers. “We also deal with vendors and try to negotiate for a better price,” he adds.
Financial Disclosure: Consulting Editor Mark Mayo, CASC, MS, reports he is a consultant for ASD Management. Nurse Planner Kay Ball, PhD, RN, CNOR, FAAN, reports she is a consultant for Ethicon USA and Mobile Instrument Service and Repair. Editor Jonathan Springston, Editor Jill Drachenberg, Author Melinda Young, Physician Editor Steven A. Gunderson, DO, FACA, DABA, CASC, Author Stephen W. Earnhart, RN, CRNA, MA, Accreditations Manager Amy M. Johnson, MSN, RN, CPN, and Editorial Group Manager Leslie Coplin report no consultant, stockholder, speaker’s bureau, research, or other financial relationships with companies having ties to this field of study.