When outsourced surgical implant provider Access Mediquip LLC closed its device operations in May, many ambulatory surgery centers, hospitals and patients were left in the lurch. Before shuttering its doors, Access Mediquip worked with manufacturers, payers and providers to manage the acquisition, financing, delivery and reimbursement of orthopedic and spinal implants and implantable drug pumps. The company allowed ASCs to outsource price fluctuation risks, while allowing physicians to choose the best devices for their patients. Many ASCs are now forced to go it alone, procuring medical devices on the open market or through other vendors — often at a steep premium. Some payers simply moved on to IPG, which fixed an immediate problem, but did not pay Access Mediquip’s unpaid claims. Also, should IPG go out of business, this solution fails to indemnify the facilities from future losses. Managed care contracting is an important piece of a facility’s overall revenue pie — and a key growth opportunity in the years to come. The following strategies can ensure that ASCs do not expose themselves to unnecessary risks to their bottom lines when negotiating new managed care contracts:
Cost-plus contracting
When creating new agreements, contracting for cost-plus is a good method to consider. Cost-plus contracts fully reimburse vendors for the cost of materials, in addition to providing ASCs with money to cover the total cost of an operation. An ideal situation to use cost-plus contracting is when trying to shift risk of successful contract performance from the provider to the payer. Cost-plus contracting takes the middle man out of managed care contracting, effectively removing the associated risks. Cost-plus contracting has several advantages:
- It allows focus to remain on quality instead of cost.
- It minimizes facility risk.
Unfortunately, payers often set a threshold of payment or request an invoice resulting in unaligned incentives or inefficient billing practices.
Enlist experts, scrutinize terms
Successful negotiation of a managed care contract requires attention to detail. Providers must work with payers to create specific language that offers protection when entering into managed care contracts. If a bankruptcy were to occur, a properly structured agreement can ensure that surgery centers will avoid financial responsibility and receive full reimbursement. It is important to determine the exact terms of the agreement and to closely examine the contract’s definitional section. All terms of the contract, including delivery agreements and financial responsibilities, must be listed clearly. Physicians should only be bound to policies that are stated in the final contract. Most contracts reference and incorporate payer policies and procedures. The P&P incorporates medical policies, which can include the medical criteria in which a routine case or associated implant will be paid. Common mistakes occur when a facility:
- Signs an agreement for a longer period of time than they thought. Many standard payer templates have a three-year time frame.
- When a TPA offers a high payment, it probably is too good to be true. Look for the “lessor of” language.
- What is your ability to get out of a contract?
- Is it 180 days prior to the anniversary date? A facility could find itself locked into a contract for another year.
- Does the contract require your guarantee to assign terms to a new owner?
- Are any professional services bundled into your facility fee?
- Is there a penalty to facility fees if Anesthesia, Lab and Rad are subpar?
While proposed contracts may seem set in stone, there is always room for negotiation. It is much easier to fix contract problems before an agreement goes live than it is to deal with them at a later time. To ensure negotiations go as smoothly as possible, both providers and payers must approach the contracting process as an opportunity to join forces. Before agreeing to a contract, several questions must be considered:
- What are your appeal rights?
- How are disputes resolved?
- What are the payment timelines?
- How will underpayments and overpayments be handled?
- How does the organization’s relationship with each payer relate to overall business goals?
Contracting for Medicare
Contracting for a percent of Medicare rates is another way to help with covering implant costs, as long as you achieve a high enough Medicare multiplier. Moving managed care contracts from the grouper system to a Medicare-based system is now a common practice. When contracting for a percent of Medicare rates, providers must be aware of how agreements change when new codes are released. Usually, changes are not made immediately — it often takes payers weeks or months to update their systems. New versions of CMS’ published rates can be radically different. It’s important to clarify the specific terms of the payer’s proposed contract in order to determine the exact amount an ASC will be reimbursed. No two Medicare-based contracts are structured the same way — checking details and asking about a contract’s fine print is a must.
For more information about managed care contracting, please contact awoodell@regentsh.com.
