Average reimbursement: Is it really $550 per case?
By Stephen W. Earnhart, MS
President and CEO
Earnhart and Associates Dallas
A couple of years ago, I received a call from a Texas administrator. She said her physician investors were crawling all over her about the bottom line. We walked through the numbers and were shocked when simple mathematics revealed her average reimbursement was only $550 per case. This was a multi-specialty facility that should be getting close to $1,100 average reimbursement. If it were a single-specialty facility such as ophthalmology, I would expect it to be about $950.
Today, I receive so many similar calls that I don’t freak as much as I used to but it’s more troubling because it’s becoming so widespread.
How did this happen? In most cases, we have abused, neglected, and delegated the process of contract negotiation to someone else or have been too busy with other issues to give it the attention it deserves. Reimbursement is the lifeblood of any surgery center the business equivalent of a soul mate.
Is it your fault? Probably not there are some plans that reimburse "X" percent of Medicare groupings. There are some Blue Cross plans out there paying 80% and 90% of Medicare.
How can you survive? Clearly, action must be taken on your contracting. Contact your reimbursers and tell them you need to review your plan with them -– now! Once you get their attention, you can start to deal with this year’s contract while you discuss next year’s.
Avoid creative negotiations’
Work with your local state’s same-day surgery organization. How are other centers in your state or region making out? Often the biggest culprit in accepting low reimbursement contracts are hospitals just getting into the freestanding business. They often do not understand the industry and will delegate the task to someone not qualified to do big contracting.
If this is your situation, make sure the individual(s) contracting for your ambulatory surgery center (ASC) realize that your center is a stand-alone facility and should not be subjected to "creative negotiations." Often, these types of contracts only serve the inpatient component of the contractual relationship and broad-brush the ASC codes. This inattention to contracting is especially harmful when you have physician investors in the facility who are going to scrutinize your profit and loss statement each month.
In the meantime . . .
There are 5,400 hospitals in the United States, and every one of them is going to be required to have its own freestanding ASC over the next few years. We need to start educating them. That’s one reason we’re at the $550 reimbursement level. How do we fix it (if we can fix it) until a better plan is put in place?
Cost containment! You know what you may have to do. But there might be an additional solution. Check out your specialty mix and payer mix. Sometimes the easiest way to approach a low-reimbursement problem is to restructure your business line.
The issue is how? You probably will ruffle a few political feathers, so do your homework and check your numbers before you mention your plan to anyone.
Check your traditionally lower-reimbursed procedures and specialties. Are you doing a lot of low-end urology procedures, dental cases, and lumps and bumps types of cases that don’t contribute much to your overhead but eat up valuable staffing, equipment, and supply resources? Sometimes you have to make difficult decisions in this business. You hate to bring everyone down for unprofitable procedures.
Guaranteed success
Recruit in the following areas: ophthalmology, plastics (aesthetics), pain management procedures, and surgery. Don’t tell me you can’t make money from cataracts! It takes a little work and cooperation, but I guarantee that you can make it profitable. Cataracts are one of the highest reimbursed procedures out there for many facilities.
Most plastic surgeons have their own facility but often are interested in the occasional use of a larger, more intensive ASC for some patients. Be receptive to their ideas. Be careful of their negotiating skills, however. Most are masters at negotiating the absolute lowest charge for your ORs. Be sensible in your contracting, but remember, it’s cash upfront (do not extend payments), and it will be higher than $550. Consider making it time-based after a certain time limit.
Pain management is still a much sought after plum if you can get it. I agree that the reimbursement is drifting slowly south, but it’s usually staffing- and supply cost-friendly and can be done in a treatment room or recovery bed. Try to get a program established at your center as opposed to just doing the occasional procedure or two per day.
Get out of the "box" and look around you. There is much that can be done if you allow yourself the time to think about it.
[Editor’s note: Earnhart can be contacted at Earnhart and Associates, 5905 Tree Shadow Place, Suite 1200, Dallas, TX 75252. E-mail: surgery@ onramp.net. World Wide Web: http://rampages. onramp.net/~surgery.]