Payer changes are a hot-button issue. In fact, in a recent presentation, “What’s Happening in the Insurance World,” an expert panel discussed payer changes and their impact on ophthalmic practices. The panel members all have practices and ambulatory surgery centers that have gone through payer negotiations that included alternative payment options (rather than traditional fee-for-service).

These panel members aren’t the only ones voicing their concerns. In fact, I’ve had several strategic planning sessions in recent months with practice and ASC clients, discussing how current and future changes will impact ophthalmic surgery centers. This is a summary of my proposed recommendations on how ASC owners and managers can best prepare for the evolving payer systems.

External Forces Affecting ASCs

Understanding external forces is an important first step when conducting ASC strategic planning. There are several major changes brought about by the Affordable Care Act and market-driven forces that are aimed at curtailing healthcare costs while also covering more people. These include:

• Payer consolidation. Driven by ACA requirements, the past several years have seen many major insurers merging and smaller healthcare insurers being gobbled up or disappearing. When competition is reduced, the expected result is less flexibility in negotiating better rates.
• Emergence of accountable care organizations (ACOs). The number of hospital/provider groups created to share in patient care management has skyrocketed. Because of the significant capital required to form these organizations, most are hospital driven. These ACOs are assigned patient populations and are incentivized to reduce expenses for professional and facility fees. ACOs are assigned members through affiliated primary care physicians. As ACOs attempt to control costs, access to patients may be restricted, possibly reducing available surgical procedures at your ASC. Furthermore, even if the physicians have access to the patients, they may be forced to use the ACO hospital for surgical services, potentially reducing surgical volumes in the ophthalmic ASC.
• Increase in Medicaid-covered lives. Also ACA driven, more patients are covered through Medicaid programs, which, historically, have low reimbursement rates.
• Increase in patients selecting Medicare Part C (aka Medicare Advantage Programs). In these programs, Medicare beneficiaries assign their benefits to a selected health maintenance organization (HMO). In managed care plans, patients no longer have the freedom to select a specialist, are restricted to the HMO’s provider panel, and must obtain referrals and/or authorization for care by a specialist. A patient’s ability to access ophthalmic practices and ASCs may be limited.
• Transparency and reporting requirements. Though payers have been using the Healthcare Effectiveness Data and Information Set (HEDIS) quality measure in some form since 1991, payers are gathering more information today with the sophistication in technology and a move toward showing evidence of quality. This information is being made public to encourage members (i.e., employer groups or employees making a selection during open enrollment) to select a payer/health system based on these ratings. These measures will be critical components of value-based payment methodologies in the future. Understanding the reporting requirements of payers and having the technology to easily meet these needs will be vital to contracting.

Develop a Strategy

The above global circumstances are also driving activity in local markets. Thus far, most healthcare delivery is determined on a market-by-market basis. Urban areas, where there are more potential “member lives,” are usually impacted first.

Below are several action steps to help develop a meaningful strategy to best position your ASC for payer contracting.

1. Gather information. In any strategic planning process, it is critical to have good data to make the best decisions. This includes regularly gathering the following information:
• Market demographics
• Market payer systems
• Financial data about your ASC
• Your current payer mix
• Operational efficiency/systems
  Also, conduct interviews with area experts to learn about changes coming in your specific market.
2. Conduct a SWOT analysis from the payer’s perspective. Although you don’t want to forego your vision for the center, you must consider the payers’ goals and how your center might be perceived as a potential future partner. When analyzing how you might “fit” with a payer, consider the following:
• Geographic coverage. Is your surgery center and/or the surgeons who use your center convenient for most of the payers’ members?
• Reporting requirements. Do you understand the HEDIS measures? How can your center provide data to help the payer improve its quality reporting?
• Patient satisfaction. Do you currently report patient satisfaction through a measured benchmarking program that demonstrates high levels of patient satisfaction? Is your online reputation intact?
• Quality. Do you have measured evidence of quality outcomes? Is your center certified by a recognized accreditor?
• Services. Do you offer a variety of services that can reduce the payer’s contracting needs? Do you have unique, cash-pay services that may be attractive to payers if you partner with them for discounted member benefits (i.e., offering a discount on LASIK to members of those insurers)?
• Operations/reporting. Are you easy to work with? Are your IT systems such that you can easily report all requested items?
• Affordability. Can you show how contracting with your center will save the payer money? All evidence shows that surgery centers are much more affordable than hospital outpatient departments.
3. Develop a comprehensive payer strategy. This includes making decisions about your flexibility in contracting and payment options. Important questions to answer when developing your strategy include:
• What are the services you want to focus on?
• What payment rates can you accept for these services?
• What payment methods are you willing to consider (e.g., capitation, pay for performance, bundled, shared savings programs)?
• What IT or other operational capabilities do you need to meet the demands? Are you willing to invest in these?
• What payers are important to your surgeons and what will keep them loyal to your center?
• What are the potential deal breakers?
• What is the financial impact of losing a payer and/or accepting new reimbursement options?

Create a payer-specific strategy. Knowing your financial situation and payer mix is critical to creating a payer-specific strategy. Because Medicare typically makes up about 60% of revenues in ophthalmic ASCs, a shift of patients to Medicare Part C may have a significant impact on your center. Prioritizing the payers that need your time and attention is critical to keep you focused on the right payer negotiation activities.

Prepare to Negotiate

With a strategy in place — and as relationships develop — your negotiating tactics will evolve. This may include:

• Preparation of relevant materials. Promote items that differentiate your facility, such as: A simple, clean provider directory with pictures; photos of your facility and staff members; graphs or reports on patient satisfaction; graphs or tables that show quality performance (e.g., low complication rates, low re-admit rates, etc.); demonstration of affordability; and a track record of being a good partner.
• Determination of communication methods. Face-to-face meetings are preferred, but aren’t always necessary. After you prioritize payers, it will become evident which payers will require more attention.
• Representation decisions. The person(s) with the best relationship with a specific payer should represent the ASC. If this person has never experienced contract negotiations, he or she will need a veteran manager, consultant, or physician available during the process.

Be Active

Proactive preparations will prevent a fire-drill approach that could occur if the payer contacts you first. Managers and surgeons should get involved with various hospital committees, ACO committees, primary care physician groups, and payers (i.e., serve as the medical director for ophthalmology case management) so you can stay informed of payer changes. Also, building relationships is an important step toward successful negotiations. Educating yourself now is the best way to prepare for evolving payer requirements. ■

Maureen Waddle, MBA, is a principal and senior consultant at BSM Consulting.