Plan carefully before adding new procedures

(Editor’s note: In this second part of a two-part series on financial nightmares, we tell you about providers who have added new procedures and made them profitable. Last month, we told you about some providers who have had their payment methodologies changed without their knowledge.)

Can you imagine spending almost three years renegotiating a payer contract? That’s exactly what the administrator did at Amherst-based Ambulatory Surgery Center of Western New York, with the help of a consultant. The center opened as a single specialty center (ophthalmology), but wanted to become multiple specialty. However, the center’s payer contracts didn’t allow for secondary procedures or implants, which was particularly troublesome because the center wanted to add orthopedic procedures.

The result? "My new contract accommodates for secondary and third procedures," says Joan Dispenza, RN, MSN, CASC, the administrator. "They accommodated for an alternate payment methodology and accommodated separately for the cost of the implants." Some payers were not willing to allow carve-outs, Dispenza says. In those cases, she asked the payers to pay particular attention to groups 3, 5, and 7, which include the orthopedic procedures. The payers worked out amenable rates with the center.

When adding new procedures, such planning is critical, according to Joni M. Steinman, managing principal in AUSMS Healthcare Consultants in San Diego.

Don’t assume that adding new procedures is always a wonderful opportunity, she warns. "More is not always better if what you’re bringing in, in terms of new procedures, changes the way in which you can allocate costs within your organization or assume new costs within your organization, or if you aren’t clear as to the payer mix you’re going to be incorporating and the associated reimbursement for all procedures."

Sometimes, new procedures can wreak havoc on your cost and reimbursement structure, warns Steinman. "Be strategic in how you add new procedures by ramping up your diversification effort over time," she suggests. "In this way, you will be able to monitor the impact of each new addition and mitigate against effects that may damage ongoing operations."

For example, an ear, nose, and throat (ENT) center may want to add orthopedics, says I. Naya Kehayes, MPH, CEO and principal for Millennium Health Consulting in Issaquah, WA. She spoke on adding new procedures at the most recent annual meeting of the Federated Ambulatory Surgery Association (FASA).

Managers may assume that their contracts will generate the same profitability for orthopedics as they did for ENT cases, but that belief may not be accurate, notes Kehayes.

Orthopedic cases have the most disproportionate assignment with respect to the low-paying reimbursement groups, she says. "If you’re not used to that, you’ll lose your shirt," she warns.

Knee and arthroscopy cases are predominantly in groups 3 and 4. "The cost of those codes can be two to three times other CPT codes in much higher groups," Kehayes says.

If your contract keeps those procedures in groups 3 and 4 and doesn’t carve them out, you may need a 300% payment increase to profitably add those cases, she advises.

When adding a specialty, surgeons, or a particular case, it is imperative that adequate research and planning are done before making these changes, says Dawn Q. McLane-Kinzie, RN, MSA, CASC, CNOR, vice president of National Surgical Care Aspen in Niwot, CO. "I would say 75% planning, 25% implementation is the first rule," she says.

Analyze the staffing and the cost of the supplies and equipment, McLane-Kinzie suggests. If you’re adding a new specialty, visit a surgery center that already performs that specialty, she adds. Ask what stumbling blocks they faced and how they handled those, McLane-Kinzie advises.

"When I ask other centers how this works for [them], I’m as much interested in what didn’t work as what did," she says. "That’s where you learn and make your changes."

When physicians are adding a new service, call the facilities where they worked formerly, or their residence program if they are newly trained, to ensure that the case estimate from the physicians is accurate, suggests Vanessa Vu, MD, PhD, chief operating officer and medical director at ORegon Surgicenter in Roseburg, OR. Two physicians at her center recently wanted to perform gastrointestinal endoscopy.

"If you know they want to do 100 cases a month, but it takes them an hour to do a case, that’s not feasible over the time period that they think they’ll do it," she says.

Payers typically are open to facilities offering new services if it will save them money, Kehayes explains. You have to disclose some information about which physicians are interested and which reimbursement codes correspond to the cases they will be doing, so they payers can perform their own research, she says.

If you’ve recruited the physicians and they’re working already at your facility, look at the CPT codes that are high cost and delay starting those cases until your contracts are negotiated, Kehayes suggests.

When Ambulatory Surgery Center of Western New York wanted to become a multispecialty facility and asked for carve-outs, the payer officials couldn’t or wouldn’t adapt their systems, Dispenza says. To have the payers work with them, administrators had to show national Medicare data and demonstrate the cost savings of moving the procedures to their facility.

"What I was asking for was clearly a cost savings for them," she says. The most important tip? Do your homework ahead of time, Dispenza says. "Be persistent with payers," she adds. "If I wasn’t persistent for 2½ to three years, I would have thrown up my hands."


  • Dawn Q. McLane-Kinzie, RN, MSA, CASC, CNOR, Vice President, National Surgical Care Aspen, 7107 LaVista Place, Suite 200, Niwot, CO 80503. Phone: (720) 320-6577. Fax: (303) 828-1210. E-mail:
  • Joni M. Steinman, Managing Principal, AUSMS Healthcare Consultants, P.O. Box 16948, San Diego, CA 92176. Phone/fax: (619) 283-0245. E-mail: