How to Effectively and Profitably Move Spine into Your ASC
In Part I of this article series, we discussed the trends that are driving numerous spinal procedures to the ambulatory surgery center (ASC) setting, as the spine ASC market is projected to grow by 200% over the next few years. In this Part II of the series, we are going to discuss the operational steps required to properly and effectively incorporate spinal procedures into your ASC, as well as the financial implications of doing so.
Overview
As mentioned in the Part I article, certain spinal procedures such as lumbar decompressions, lumbar discectomies, one level anterior cervical discectomies with interbody fusion, lumbar posterior inter-body fusions, cervical disk arthroplasties, interspinous process distraction devices with open decompression procedures, among others, have been rapidly migrating from the hospital setting to ASCs. This movement is being driven due to the ASC setting providing numerous advantages to patients, health care providers, and payers – creating a rare win-win-win situation.
Spine ASCs, or multi-specialty ASCs, looking to incorporate spine into their overall case mix must be highly methodical and diligent in their approach to setting up the spine program given the complexity and higher cost structure involved in this specialty. While the financial upside is undoubtedly significant, it requires proper business planning to fully capture the financial benefits. The key steps to take are as follows:
1: Get payers on board. Convincing payers that the more complex spinal procedures belong in the ASC is critical. To accomplish this, you should provide payers with real-world examples of cost savings. For example, 50 inpatient lumbar posterior inter-body fusion surgeries costing $50,000 apiece performed in an inpatient setting costs a payer $2.5 million per year, compared to just $1.0 million per year for the same number at $20,000 per surgery performed in an ASC, representing a cost savings of 60%.
2: Establish favorable managed care contracts. While it’s important to convince payers of the value of outpatient spinal surgeries, it’s also important to make sure the managed care contracts allow for adequate reimbursement, implants and other surgery related costs. Understanding inpatient costs in the local market, as well as how much it costs to build and operate a spine program in your ASC, can help you get a handle on total costs. With this information, you can then negotiate contracts that produce a margin that positions your ASC to grow.
3: Bring employers into the fray. Entering into direct-to-employer contracts with specific companies could help bring more spinal surgeries to your facility. Approach larger employers and offer them a discount for employees in need of spine surgeries in exchange for encouraging employees to choose your ASC. Given the significant cost of spine procedures, this will be very attractive to employers, and will provide employees with a high-quality destination for their surgeries.
4: Pay careful attention to implant billing. How implants are paid for varies from contract to contract. For instance, a contract could pay your ASC a certain amount for the spine procedure and would include the cost of the implant in that reimbursement. However, another might pay a certain amount for the procedure, but will separately reimburse the implant, as well as shipping, handling and tax.
It's also important for ASC billing staff to be aware of the implant billing requirements of each managed care contract for example. Some payers will stipulate that they want to be billed electronically and then subsequently request the implant invoice, if needed. Others will provide a portal where the ASC will need to upload the implant invoice for each case or request a paper copy of the invoice for submission.
5: Negotiate the best deals for implants. Negotiating with implant vendors for the best prices will prove beneficial for your ASC. Sometimes, using the same vendor for all implants makes it possible to negotiate a lower price based on volume.
6: Market the program. To successfully bring patients into your ASC, you need to make sure your surgeons, and their financial counselors and schedulers, are aware of the benefits of outpatient spine surgery – and are ready to talk up these advantages with patients. In addition, you should develop marketing materials such as brochures and websites that clearly explain outpatient spinal surgery benefits. And finally, reach out to implant companies to see if they can partner with you in your marketing efforts as well.
7: Recruit the right patients. Selecting the right patients from a clinical perspective is key. Patient selection is a crucial process for ASCs to address when performing spinal surgeries. With more data at our disposal, healthcare facilities can—and should—follow stricter guidelines while deciding which individuals are appropriate candidates for the procedure.
Outpatient spine surgery is a viable option for middle aged, non-obese patients who do not suffer other, significant medical conditions and who have strong at-home support systems in place.
Patients with the following contraindications, however, should be carefully screened before making the decision to perform their surgery in an ASC: BMI greater than 35, age over 60, chronic obstructive pulmonary disorder, diabetes, cardiovascular disease, smoker, high risk of history of deep vein thrombosis/pulmonary embolism, anticoagulant therapy, anemia and difficult surgery due to deformity, among others.
8: Make sure patients are covered – financially. Private payers have been covering certain spinal procedures in ASCs, starting a few years ago, and are continuing to add more and more cases every year. Medicare is behind the private payers but is also allowing each year numerous additional spine cases to be on the ASC approved list. Given the rapid changes in this area, your registration staff should check to ensure that each patient’s health plan covers the specific spinal surgery that you are planning to perform.
9: Pay attention to revenue cycle details. It is also important that your staff members know exactly what actions to take to ensure that the revenue cycle is optimized for outpatient spinal surgeries:
• Front desk personnel need to ensure that patients meet pre-surgery requirements; provide an estimate of the patient’s financial responsibility; and collect the deductible, co-pay or co-insurance in advance or on the day of surgery. As such, front desk staff need to be thoroughly trained in financial counseling, the pre-authorization process, insurance verification and eligibility.
• Medical coders must understand the ins and outs of each patient’s health insurance contract. Not only do they need to know the relevant codes for each surgery, but how particular implants and procedures are reimbursed. Every contract uses the same common procedural terminology (CPT) codes but how they determine implant reimbursement will likely be different depending on the contract. Creating summaries of pertinent information from each contract can enable coders to easily and quickly find needed information.
• Revenue cycle staff members need to understand the documentation each payer requires for different implant charges. When the payments are received, they need to ensure that the payments match the amount stipulated in the contracts. Most importantly, they need to flag underpayments. For example, when a payment was received for $16,000 but the contract stipulated $20,000, staff members need to note this underpayment and follow up.
• Staff should conduct a monthly audit to ensure that each procedure was coded, billed and paid correctly. If they uncover any discrepancies, they should drill down to see where the mistake originated, and then file an appeal if warranted.
The importance of paying attention to the revenue cycle details cannot be underestimated. Even a seemingly insignificant mistake could lead to denials, incorrect payments, underpayments or even no payment at all.
Financial Impact
As mentioned above, incorporating spine procedures into your ASC can be highly impactful from a financial perspective. Consider, for example, a multi-specialty surgery center that performs 300 cases per month (3,600 cases annually), with an average cash per case of $2,000. This center would generate $600,000 per month in revenue ($7,200,000 annually). Using a 20% EBITDA profit margin, this center would have $120,000 per month of EBITDA ($1,440,000 annually). If that ASC adds 15 lumbar fusions per month, which represents only a 5% increase in overall case volume, at an average cash per case of $20,000 per procedure and a 50% EBITDA margin, then that ASC would have increased its overall revenue by 50% while more than doubling its profitability. Simply put, in this example, the ASC more than doubled its value by adding a small number of spinal fusions per month.
In the final analysis, the movement of spinal procedures from hospitals to ASCs creates tremendous benefits for patients, health care providers and payers, and can be one of the most financially impactful initiatives your surgery center can undertake.