8 Quick Tips for Better Payor Contracts at Orthopedic & Spine CentersWritten by Laura Miller | December 12, 2011
Here are eight fast tips on how to negotiate better payor contracts for orthopedics and spine.
1. Evaluate your payor contracts regularly. Spine is a device and implant-intensive specialty and the contracts you have with private payors for general surgery or orthopedics may not be adequate for spine. "Many times, if you are looking to add spine to your center, the representative from the payor might be resistant to allowing changes in the contract to ensure you are fully reimbursed for your expenses," says Dan Beuerlein, regional vice president of operations at Symbion Healthcare. "Many payors will have a maximum amount of what they will pay for a procedure. If your implants and hardware aren't covered as a separate line in the contract, you could find that you're doing those cases at a loss." Surgery centers can spend months negotiating carve-outs for spine surgery or renegotiating existing contracts to get spine cases into the center.
2. Know your center data. When going into payor negotiations, know the practice's statistical data to prove that the practice is maximizing return on the payor's premium dollars. This data includes, but is not limited to, the number of x-rays and MRIs the physicians order, the number of rehabilitation days and the number of days patients spend at hospitals for inpatient procedures. Practice administrators should also be able to explain how the physicians work with hospital staff to make sure patients are spending the least number of days in the hospital within the appropriate standards of care. "This forces the insurance companies to go back and look at their own data if they haven't done that already and that puts the administrator in a strong position," says Patrick Hinton, executive director of the Jacksonville (Fla.) Orthopaedic Institute.
The administrator should also know how his or her statistics match up against other area practices. If the practice costs are higher than they are at others, know how to explain these circumstances to the payor. "Say we have higher costs compared to other orthopedic providers, but we have a higher concentration of subspecialists, so we see a lot of orthopedic complications other physicians wouldn't see, which drives the cost up," says Mr. Hinton. "This helps make the case that the companies are getting value for what they pay for."
3. Meet payor representatives in person. If possible, meet payor representatives in person for the negotiations. "We get so much better results when we meet together," says Jim Odom of The C/N Group. "We can read their body language and see where they are coming from. If they are saying 'no' to something, you can read their body language to see if there might still be an opportunity there." Additionally, take the time to let them know who you are and what your facility does. You can invite the representative to your facility so they can see where you operate every day. This forms a deeper relationship and can help the representative connect the finances to the actual healthcare provided.
4. Discuss implant prices. Some pain procedures require expensive implants and if payor contracts don't reflect a competitive rate, you won't make money on those procedures. This might include carving out these procedures or implant rates within the contract, says Bill Gilbert, vice president of marketing for AdvantEdge Healthcare Solutions. "Make sure that expensive items like implants are appropriately reflected in the rate that is being paid by the payor," he says.
For example, you might have a contract for $10,000 with a payor for a particular procedure, but they don't carve out an implant that costs $7,000, which means your actual revenue is much less than the amount reimbursed. A contract with another payor that does carve out $8,000 for implants might be more attractive.
5. Share goals with the payor. Set financial goals for the surgery center and be prepared to discuss them with the payor. Share how you plan on meeting those goals, such as through rate adjustments across the board or through multiple rate adjustments distributed across certain groups. You can also discuss the efforts you have undertaken to control costs, says Mr. Odom, such as switching a group purchasing organization or standardizing supplies. Sharing these goals lets the payor know you are partners in keeping the cost of healthcare down. However, don't get caught in a philosophical discussion about the state of the healthcare industry, inflation or how much the last rate hike was. These discussions waste time and don't push forward with the ultimate goal.
6. Emphasize that payors will lose money by sending patients to the hospital. David Schlactus, CEO of Hope Orthopedics of Oregon and Willamette Surgery Center in Salem, says in this economy and healthcare climate, ASCs cannot afford to back down in payor negotiations. If a payor won't negotiate contracts that benefit the ASC, the surgery center must walk away from the contract and let the payor representatives weigh their options.
"Like most ASCs today, we've walked away from contracts, and then at the 11th hour, the payor comes back and asks for a compromise," Mr. Schlactus says. Make sure the insurance company knows that you understand the price difference between the hospital and the surgery center; if the payor thinks you are unaware of the potential cost savings in the ASC, you will probably receive a poorer contract than you deserve. The insurance company will benefit from sending cases to the ASC, so make sure to emphasize that fact when negotiating. "We win more often than not because their other option is to take patients to the hospital, and they know the hospital is significantly more expensive," Mr. Schlactus says.
7. Understand the payors and cater to what they want. Find out what is important to the payor, either during the previous negotiations or through ongoing dialogue, and focus on those areas to show improvement. "When we did that back in 2003, we learned a payor was very interested in pay-for-performance," says Tom Faith of The C/N Group. "We offered a pay-for-performance component. One of our contracts boosted our reimbursement rate by 2 percent." The surgery continued to set quality goals and changed the criteria depending on what the payor was focused on at the time. They have been successful in keeping the rate increase for the past several years.
8. Think twice before depending on out of network contracts. As it becomes more difficult to bill for out-of-network claims, the value of ASCs with a high proportion of OON cases has been sinking. "Buyers are assuming that out-of-network centers will have to go in-network in the future," says Jon Vick, president of ASCs Inc. in Valley Center, Calif.. Going in-network means accepting a substantially lower reimbursement than was possible out-of-network. For example, a case that is paid $15,000-$20,000 at an OON center might get only $8,000-$10,000, or even less, at a contracted in-network rate.
Buyers see reliance on out-of-network volume as one of the most important risk factors for perceived ASC value. In a recent survey of buyers by VMG Health, 93 percent said heavy reliance on out-of-network payors had a "very high" impact on the ASC's value, resulting in a reduction in the multiple, and 7 percent said it had a "high" impact. "In other words, fully 100 percent of buyers thought out-of-network had at least a high impact on value," Mr. Vick says.
Related Articles on Orthopedics:
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