Session: Course Correction—Negotiating Payor Rates in the ASC Setting

Editor's Note

Negotiating pay rates in the ambulatory surgery center (ASC) setting is a complex and evolving process that requires strategic planning, data-driven decision-making, and strong payer relationships, noted the speakers Amy Coletti, principal, ASC practice, and Matt Kilton, partner, at ECG Management Consultants at this year’s OR Business Management Conference. This session provided an in-depth guide to best practices in contract negotiations, payer trends, and strategies for long-term financial sustainability in the ASC environment.

Some key takeaways include:

1. Importance of a strategic approach to contract negotiation

• ASC leaders must develop a comprehensive plan before engaging in negotiations, aligning financial goals with organizational strategy.
• Define acceptable rate targets and identify growth opportunities early to ensure negotiations align with future service expansions.
• Avoid a blanket approach to contracting; selective contracting ensures better leverage and financial viability.
• Aligning contracts between ASCs and their affiliated physicians is essential to maintaining continuity and preventing operational conflicts.
• High volume does not always equate to high priority in payer negotiations; financial sustainability must be the primary focus.

2. Understanding the payer environment and market dynamics

• The payer landscape is dynamic; ASCs must stay updated on contract methodologies, payer mix, and reimbursement models.
• No two payer contracts are identical; even when based on Medicare rates, variations exist, requiring careful contract review.
• Payer reimbursement methodologies vary, including groupers, APC-based payments, and percentage-of-Medicare models. (Each has implications for revenue and operational planning.)
• Site of service policies incentivize payers to shift cases to ASCs, benefiting both cost control and volume; however, rates must be properly negotiated to ensure sustainability.
• Mergers and acquisitions in the payer market can impact contracts, making it critical to review agreements regularly.

3. Role of data in negotiation

• Successful negotiations rely on detailed market data, including payer fee schedules, competitor rates, and transparency data from third-party tools.
• ASCs should benchmark their rates against hospitals and other ASCs to demonstrate cost-effectiveness and present a compelling business case to payers.
• Tracking payer reimbursement changes is crucial; some payers unilaterally update groupers and remap codes, altering reimbursement without direct renegotiation.
• Utilization and cost data should inform negotiations, particularly for high-cost procedures and implant-heavy services.

4. Negotiation best practices

• Build a compelling case by highlighting market positioning, cost advantages, and expected volume shifts to justify rate increases.
• Prioritize payers strategically, often starting with the largest ones to establish market-standard rates before addressing smaller contracts.
• Avoid performing services at a loss to satisfy surgeons or to establish payer relationships. (Doing so sets a precedent that reimbursement is adequate.)
• Payers rarely give their best offer first—counter offers are essential, and ASCs must be prepared for multiple negotiation rounds.
• Establish rate parity across payers where possible to standardize revenue expectations and maintain financial stability.
• Ensure contracts include provisions for periodic rate escalations to counteract inflation and reimbursement stagnation.

The speakers concluded by offering tips on managing ongoing contract performance and future adjustments, such as conducting regular audits of payer reimbursements to catch discrepancies and correct underpayments. Successful ASC contract negotiation requires strategic foresight, meticulous data analysis, and strong payer relationships, they said. By proactively aligning payer contracts with business goals, ASCs can optimize reimbursement, improve financial sustainability, and effectively navigate the ever-changing healthcare landscape.