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00:00:01
Payor Contracts: Leveraging Data for Negotiations
2 Plays6 minutes ago
Rita Reyes-Williamson is the Senior Director of Managed Care at Surgery Partners, and she joins us today for part 2 of our payor contract series to talk about Leveraging Data for Negotiations. Rita has great tips and ideas for what data you should bring to your payor negotiations, such as physician case volume data, case migration from inpatient to outpatient, how you’ll improve access to care for their memberships, and so many more creative ideas for how you can gain leverage and get the best rates possible.
After my conversation with Rita, we’ll switch to our Data & Insights segment. Today I’ll share with you case volume trends per specialty from 2023 to 2024 and then tips for how you can increase your case volume if you’re looking to do so.
Plus - we’re offering a $50 gift card to the first 30 listeners who complete our Podcast Survey! It only takes a few minutes of your time, and you’ll be able to share your feedback and ideas. Start the survey here: https://www.cognitoforms.com/hstpathways1/podcastsurvey
Access HST’s State of the Industry Report: https://www.hstpathways.com/resources/surgery-center-industry-report/
Brought to you by HST Pathways.
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Transcript
Introduction to the Podcast
00:00:01
Speaker
Welcome to This Week in Surgery Centers. If you're in the ASC industry, then you're in the right place. Every week, we'll start the episode off by sharing an interesting conversation we had with our featured guests, and then we'll close the episode by recapping the latest news impacting surgery centers. We're excited to share with you what we have, so let's get started and see what the industry's been up to.
Payer Contract Negotiation with Rita Reyes Williamson
00:00:27
Speaker
Hi, everyone. Here's what you can expect on today's episode. Rita Reyes Williamson is the Senior Director of Managed Care at Surgery Partners, and she joins us today for part two of our payer contract series to talk about leveraging data for negotiations.
00:00:43
Speaker
Rita has really great tips and ideas for what data you should bring to your payer negotiations, such as physician case volume data, case migration from inpatient to outpatient, how you'll improve access to care for their members, and so many more creative ideas for how you can gain leverage and get the best rates possible.
00:01:01
Speaker
After my conversation with Rita, we will switch to our data and insight segments. HST released our annual State of the Industry report in September, which analyzed client data from 590 surgery centers. So today I'll share with you case volume trends per specialty from 2023 to 2024, and then tips for how you can increase your case volume if you are looking to do so.
00:01:24
Speaker
But before we dive into today's discussion, I wanted to remind you again about our podcast survey. We are giving a $50 gift card to listeners who take just a few minutes to share their feedback with us. We want to know what you love about the podcast, what we could do better, and any segments or topics you'd like to hear.
00:01:41
Speaker
The gift cards are limited to the first 30 responses though. So don't wait, head to the link in the episode notes and let us know your thoughts and a huge thank you to everyone who has already participated. We truly appreciate your input. Hope everyone enjoys the episode and here's what's going on this week in surgery centers.
Experience in ASC Operations and Managed Care
00:02:03
Speaker
Hi, Rita. Welcome to the podcast. Thanks Erica. Great to be here. Can you please share a little bit about yourself and your ASC experience? Sure. I've been in this space for a long time for about 26 years. Started out actually in operations. So I've worked pretty much every nonclinical role in a surgery center that there can be. And then from there, I moved on to being an administrator for surgery centers and being a regional oversight person. And then also getting into the business of building surgery centers, taking over failing surgery centers.
00:02:33
Speaker
And at that one point in my career, I switched over to focusing on managed care. So managed care is really my passion. It's how do we get paid well for the services that we provide? And we provide an amazing service. So it's always been something that's the near and dear to my heart. So I've been doing that pretty much exclusively for about the last, I would say about nine years.
00:02:53
Speaker
Very cool. Thank you. And all of that experience and your passion is exactly why we wanted to have you on today. This is, this episode will be part two of our payer contract series. And last week we really covered just some general tips for effective contract management. And then today with you, we're going to dive into something a little bit more specific, which is how to leverage data for negotiations.
00:03:16
Speaker
So let's actually start with negotiating that first contract.
Market Averages and Negotiation Strategies
00:03:20
Speaker
So whether someone is opening up a new facility or just looking to add a new payer, what data can you bring to that meeting? Yeah, I think number one, the most important thing is that whoever's negotiating contracts for you, that they understand what the market averages, right? For whatever type of product we're talking about. So each contract could be.
00:03:41
Speaker
commercial lives, it could be senior lives, it could be Medicaid. So depending on what it is that they're negotiating, they should have a sense for this area of the state. This is what the average going rate is for a commercial product, for example, versus an MA or Medicaid. So without that, you're really flying blind or anything. You don't want to just take whatever it is that the insurance plan offers you. You should have a sense for what your worth is in that area.
00:04:07
Speaker
but You get that in different ways. Certainly when you work in one area, one market for a long time, it becomes pretty clear over a span of many contracts that this is what the health plan industry is willing to pay for services in this particular area. And it can really vary depending on where you are. If you're in a metropolitan area, there's more likely going to be more surgery centers, more competition versus say like in a rural area.
00:04:32
Speaker
where you're the only gig in town, in which case that rural area might actually be able to get better rates than the city ASC. So for if we're just starting out in a new area of the state, that's the first thing that we do is that we research what is the going rate? What do the hospitals fetch in those areas? What's your competition look like
Cost Savings by Transitioning Procedures to ASCs
00:04:53
Speaker
in the area? Are there other surgery centers next door or not for 20 miles? And that's really going to impact what you should be able to get on those contracts.
00:05:03
Speaker
perfect. And how can you acquire those data points that you're ah you referred to? I think in different ways. if you If it's the first time that you're in an area in the market, you're going to be negotiating several contracts, I imagine, at the same time. And you'll get a sense for, okay, it seems like everyone is settling on 125% of Medicare or something to that effect. And let me just take a step back When we assess contract performance, one of the easiest ways to do that is to look at it as a percentage of Medicare. right Everybody has an idea of what Medicare is for them, and it's a very consistent benchmark, and we like to look at it as a percentage of Medicare. So if I go into a new area of the country and I have no idea what the going rate is, I'm going to shoot high, and I'm going to be doing this probably for
00:05:52
Speaker
three to five different contracts at the same time because they're usually the big book as we call them, Blue Cross, Blue Shield, UnitedHealthcare, Cigna, Aetna. They're prevalent in most areas of the ah country. So we get a sense for, okay, everyone seems to be settling in at this value of Medicare. So it's most likely the going rate. Then you have to start talking about your own value propositions. Okay, that might be the going rate, but we really don't want that amount. We would like something better. And how are you going to pitch it?
00:06:20
Speaker
to the health plan that you're worth that additional premium. And what are some of those ways you can outside of kind of the going rates? What else can you leverage during those negotiations?
Data Utilization for Savings and Collaboration
00:06:34
Speaker
Really depends on what the services are that you offer. So for example, most surgery centers in the nineties did gastroenterology or ophthalmology and things like that. Those are very common things to be done in ASCs over the last 10, 15 years though.
00:06:50
Speaker
We're doing things like total joint replacement, spine surgery, urology. And now even we're seeing women's health procedures coming out, um vascular, cardiology. So what makes us valuable as an industry is what we can do for the health plans. And that is to be able to move cases that historically are done at the hospital where the cost is much greater and move them into the surgery center where we can save them quite a bit of money. So there's a balance though, right? They're not going to pay as the same as a hospital because it makes no sense.
00:07:19
Speaker
So we have to be able to price ourselves a little bit lower than the hospital, but not so low that it doesn't make sense for us either because there are a lot of costs that go into launching those more advanced service lines.
00:07:31
Speaker
Sure, and I'm going to oversimplify this, but let's say you're when you're talking to the payer, you're saying to them, okay, per procedure, I can save you $1,000 by bringing it to an outpatient setting, and we're projecting 150 cases per month, so that's X amount that i'm able that we're going to be able to save you if you contract with us at this negotiated rate.
00:07:54
Speaker
is that Yeah, that's exactly right. We try to do the math for them. So we would do exactly that. The hospital data is out there. It's public. You can get a sense for what hospitals are getting paid for certain types of procedures. And so you can go to them and just say exactly that. This is what I think you should pay us, which is significantly lower than the hospital. If we were able to convert even 50% of those cases that that happened at the hospital last year to our surgery center, this could be whatever, millions of dollars of savings. So we try to make it easy because the person on the other side of that email or whatever, they need to be able to pitch it for you to their superiors. So the more information that you can give to them to make their life easier, the better. The other thing you could talk about too is like, hey, we're recruiting these new procedures and what have you. So the more unique procedure, it the better. And certainly you can even ask the health plans, hey,
00:08:51
Speaker
What would be helpful for you if we were able to take these out of the hospital? What would be helpful for you? And you can have those kind of collaborations where I could go back and just say, hey guys, the health plan is saying that the total joint replacement work that they do at the hospital is just really outrageous and you'd really like us to convert some of those and we can work together to try to identify which doctors might be interested and try to go after those folks and get them on staff.
00:09:17
Speaker
Interesting. Yeah, that's a great angle. so When you're negotiating, we mentioned some of these data points you can bring to the table and you had mentioned to aim high, assuming that while you're negotiating, it'll it might be lowered or will likely be lowered.
Contract Negotiation Methods and Cost Impacts
00:09:30
Speaker
What else when you're negotiating? Any other tips that you've seen really work or or tactics that you've used? Yeah, I will say so. There's different ways that you can negotiate any contract with any health plan. and so there just because they've done it one way in the past doesn't mean that you necessarily have to stick with that. So let me give you an example, like with Aetna Healthcare, they traditionally have used groupers with um carve outs for certain procedures and they would pay you for implants at whatever cost or cost plus. They are now
00:10:02
Speaker
across the country starting to move to a more inclusive percentage of Medicare. You can negotiate it with or without the ability to get paid for implants separately or sometimes you can use a third party procurement company. So if you understand your numbers, that can work to your advantage, right? so What the health plans don't know is what it costs you to do the care. But as a surgery center, you should know, and should is a quotation, you should know what your costs are to do um a case. And if you can control those costs by flipping to a situation where the surgery center basically takes on the risk of negotiating rates without implants, where meaning you have to control that cost, you can actually do very well. I would suggest definitely
00:10:47
Speaker
look at the different ways that your surgery centers are willing to contract. I will say I've seen that trend with Edna. I've seen that trend with Cigna and to a lesser degree, some of the blues. But all the health plans are tired of paying for um implants separately because they can't control that. They just assume, gosh, that's what the doctor needed and I guess I have to pay for it. And it's hard for them to budget.
00:11:11
Speaker
right so What's appealing to going to a percentage of Medicare methodology is that they can budget. They know, okay, I'm in for this percentage of Medicare on this case and I don't have to pay anything extra. Before they would say, well I know what I have to pay for the procedure, but the implants are an unknown. I'm not exactly sure. It could be $1,000. It could be $10,000. We have no idea.
00:11:32
Speaker
Um, so it's hard for them to know whether it's going to be a reasonable case for them or not. So that would be a suggestion is look at different ways each of the plans are willing to contract with you, not just the traditional way. Sure. All right. Let's switch to someone who may be renegotiating an
Preparing for Contract Renewal with Data
00:11:52
Speaker
existing contract. It sounds like a lot of these tips you already gave might be useful as well, but what should a surgery center be analyzing in advance and in preparing for that meeting?
00:12:04
Speaker
Sure. And I alluded to this in my last answer too, is that surgery centers really need to get a grasp on what it costs them to do a case. And by that, I mean the implants or any extraordinary supplies or equipment that they have to pay for a case, right? So when we model a contract, we always look at, okay, what is our baseline performance? We did 500 cases for Aetna or whatever. And we look at one product, we'll look at the commercial product, for example, and we'll say, okay, how did that fare benchmarked against Medicare?
00:12:34
Speaker
And so even a small independent surgery center should be able to do this. Medicare rates are public. You should be able to see what it is in your wage index. And so you should be able to reprice in a model and this can be XL based and they can reprice every case that they did for Aetna against what would a Medicare pay down to the fact that they don't pay implants. But, and then from there you come up with a percentage. So say you, you benchmark all your Aetna commercial cases and it looks like.
00:13:04
Speaker
you're performing, I'd say 130% of Medicare. From there, you can start playing around with the model. Okay, oh gosh, what do we want to get for a renewal? Part of that depends on like, how long ago did you renew this contract? If you're very good and you stay on top of it right away, that's going to happen every three years. But say you have a small surgery center, they haven't renewed it for 10 years. So you're probably going to ask for a little bit bigger lift.
00:13:31
Speaker
At the same time, you have to understand that the health plans have their budgetary constraints as well. I would say most health plans will tell you that they're relegated to like a 3% year over year increase. And so sometimes they have to give more to somebody, which means that sometimes they'll have to give less to somebody, be able to average out to about a 3% lift. So the analytics, I think, is very important. So without that, you really know have no sense for what you're going to put forth as a proposal, how it will do for you.
00:14:01
Speaker
right So by doing the analytics that way, you'll also be able to see hey what kinds of cases really move the needle for us and which ones are really hurting. If you've got something where you're in a traditional grouper situation and you have this one case that you do all the time and it's just terrible and you're always underwater, those might be the kinds of things that you identify when it is tender or new.
00:14:23
Speaker
and just be honest with the health plan and just say, we would love a general lift, but at the same time I need an extraordinary lift on this. And this is why I need to give them the information. We're paid well below Medicare on this particular case, and this costs me $1,200 to do. And I'm not going to be able to afford to do that for you guys in the future if I can't get some sort of consideration. So those kinds of things where you have um additional carve outs, certainly How do you deal with implants if you're a small center and you don't have a lot of leverage in terms of buying power? Maybe you want to stable the cost plus methodology versus if you're a bigger, more sophisticated center and you have control over your implant costs, maybe you're willing to take more risk, in which case you move to a scenario where you get paid more, but you don't get paid separately for the implants. So there's all kinds of things that the data will show you.
00:15:18
Speaker
The other thing is important to know is, will your case mix look the same over the next three years as they have historically, right? Because if we do the analytics, it's always based off of historical data, right? We're never going to do exactly the same cases in the next term. But the people that run those surgery centers will say, I'm losing that doctor. He's retiring. So all of these cases that made us a ton of money are now going away.
00:15:46
Speaker
So we may need to shift and look and see, okay, we need to start putting more money towards a different specialty that we know is solid and we'll be there in the next term. So those are the kinds of things. And again, the health plans don't know that, but the surgery center should know that. So that would impact how we're going to approach the renewal.
00:16:06
Speaker
Yeah, that's all great advice. and would you recommend I'm trying to think, would you recommend the renegotiating every year so that you can look at your data and and renegotiate every year? Or would you recommend a multi-year agreement with that blanket increase of 3% and then maybe room to negotiate that five CPT codes? What would you recommend in terms of the length of the contracts?
Multi-Year Contracts and Auto Escalations
00:16:34
Speaker
Yeah, I think it depends. most Contracts are for a minimum year of two to three years typically. good I've seen longer and I've seen shorter Certainly whenever the end of the term is you want to make sure that you're renegotiating and you really can start like six months and in advance of that to try to get a lift for the next term because the health plans are experts at delaying and They won't get to you right away. And so you have to give yourself a little room wiggle room so, you know as far as
00:17:04
Speaker
So say you have a contract that's performing pretty decently. It's within fair market value. You're pretty happy with it, but you want it to keep kind of going. What I would probably recommend is that you negotiate whatever your renewal is for year one and then do auto escalations for year two. So that means like, okay, we're going to agree to this for the next renewal year one. And then the next year we're going to do whatever a three to 4% auto lift. And that way they don't have to deal with you in years two and three.
00:17:32
Speaker
The other thing that you can do, and this is very common if you negotiated as a percentage of Medicare, is that you can have, say you start year one at 135% of Medicare, you can say in year two, I'm going to go to 140 and year or three, I'm going to go to 145. That way it creeps up automatically. Again, the contractors on the health plan side are extremely busy, so it helps them because they don't have to hear from you for three years. At the same time, everyone's happy because we have this step up.
00:17:59
Speaker
approach and we're still staying with the times in years two and three. All right, Rita, we do this every week with our guests. What is one thing our listeners can do this week to improve their surgery centers? I would say double check to make sure that you understand what your costs are per case. And so that involves the cost of implants because that's something that we can get paid back on. Just making sure that your surgery center staff are capturing implant costs properly is going to be really critical.
00:18:28
Speaker
to negotiating proper contracts going forward. Love it. Thank you so much for coming on today. We appreciate it. Thanks. It was my pleasure. Take care.
HSC Pathways Report on ASC Best Practices
00:18:40
Speaker
HSC Pathways released an updated version of our State of the Industry report in September, highlighting best practices, key process steps, and KPIs for every step of the patient journey and for nearly every recurring administrative duty. Most importantly, using our own unique data set from our clients, we were able to extract data points so that anyone in the industry could compare themselves to their peers. We only pulled data from clients who gave us permission and we omitted any extreme outliers.
00:19:07
Speaker
So today we're going to take a look at case volume trends broken down by specialty from 2023 to 2024. And then we'll cover how you can increase case volume if you're looking to do so. All right, let's look at the year-over-year trends. So from 2023 to 2024, we looked at 12 specialties to see how their monthly case volume changed. Four specialties increased with urology seeing the largest jump with 13.8% The other three specialties that increased were GI, ophthalmology, and dental. Four specialties saw no significant change, and those were cardio, general, ortho, and pain. And then four specialties decreased, with podiatry seeing the largest decrease with 20%.
00:19:52
Speaker
The other three specialties that also decreased were ENT, gynecology, and plastic. Across the board though, if we average all 12 specialties, ASCs did see a 1.1% decrease in monthly case volume.
00:20:07
Speaker
So those are the trends that we saw. Now let's talk about how you can increase your case volume. You may know you want to, or maybe you need to increase your case volume, but it could be really hard to know where to start. So my advice to you is to focus on the following three metrics.
00:20:23
Speaker
The first is OR utilization percentage. This is going to tell you how efficiently you are using your most valuable resource, which is the operating room. By finding the percent of unutilized OR time, you know how much room you even have to grow. The second metric is revenue per OR r minute.
00:20:43
Speaker
and This metric is exactly how it sounds and strives to tell you how much revenue you generate for each minute the OR is in use. Now, if you are multi-specialty, I would recommend breaking this metric down by specialty, or if you're a single specialty, you could break it down even further by CPT code. This number is important so you can understand if you did increase your OR utilization, exactly what would the financial output be. The third and final metric is average net revenue per case.
00:21:14
Speaker
Knowing this will help you focus your efforts on the most profitable areas. So if you have your OR utilization, you can back into how many minutes that you have available to grow. And then using that revenue per OR minute, you can tell exactly what your financial output would be if you did backfill. And then the average net revenue per case is really going to tell you, you know, which specialties and which CPT codes you should be focusing on because those are your highest revenue generating procedures.
00:21:44
Speaker
So let's walk through a quick example. Let's say you're an orthopedic facility. You first determine your OR utilization and realize you have 40% of your block time is going unused. You can then look at all your procedures from the last year and average net revenue per CPT code.
00:22:02
Speaker
So let's say you determine that CPT code 29889 for a knee arthroscopy is your highest revenue generating procedure, and you average $5,000 per
Increasing Case Volume in ASCs
00:22:12
Speaker
case. Since you know your unused R time, you know that you have the white space to add three knee arthroscopies per day, and that would bring in $15,000 per day if you did so. So now you know what you need to do.
00:22:26
Speaker
And now you're saying, that's great, Erica, but it's not that easy to just whip up three new cases per day. And you're totally right. So here are three tips to help you backfill with the procedures you know that you need to. The first is to prioritize your top procedures during the scheduling process. So once you know which procedures generate the most revenue, you can prioritize scheduling them or consider expanding capacity for these high revenue cases by adjusting your block scheduling.
00:22:55
Speaker
The second is to seek partnerships or referrals. So you can build partnerships with physicians or practices that specialize in your most profitable procedures. You should also tap into your existing physicians to collaborate and brainstorm and help point you in the right direction. They might have colleagues at the hospital. They might have people in their network that they know, whatever it might be, tap into your physicians. They could absolutely help.
00:23:19
Speaker
And then lastly, engage in targeted marketing efforts. So this could include digital marketing campaigns, community outreach, or partnerships. I've seen some really powerful case studies for surgery centers who have run targeted local marketing ads for total joints programs specifically, and they were able to increase case volume by 10% after only six months. So it's definitely effective and worth looking into. It's also not an endeavor you need to take on by yourself. There are plenty of marketing agencies out there who specialize in things like this that could help you.
00:23:51
Speaker
So to recap, ASC is on average, so a 1.1% decrease in monthly case volume from 2023 to 2024. And if you're looking to increase case volume, you do have levers you can pull in order to do so. And if you're interested in more data points and use cases, subscribe to our podcast so that you don't miss any upcoming segments, or head to our website to check out the full State of the Industry report to get your hands on even more data.
00:24:18
Speaker
And that officially wraps up this week's podcast. Thank you as always for spending a few minutes of your week with us. Make sure to subscribe or leave a review on whichever platform you're listening from. I hope you have a great day and we will see you again next week.