Well-negotiated payer contracts substantially impact an ASC’s bottom line. As a result, every detail in negotiations with in-network payers matters. A solid contract makes way for better reimbursement rates and thus ensures the most financial viability for your facility.
Contracting: An Ongoing Project
Contracting isn’t a one-time event. Evolving factors such as fluctuating Medicare and Medicaid rates, changing regulations, costs for new equipment and technology, and considerations with new treatments make it necessary to review contracts periodically. And the payoff can be huge: even getting a 2% to 3% increase from a highly utilized payer can result in as much as a $500,000 increase, maximizing revenue.1
However, most insurance companies don’t proactively renegotiate contracts since it’s in their best interest not to raise reimbursement rates. Contracts generally have an evergreen clause in their terms, which are auto-renewed unless the provider initiates a renegotiation.
Regardless of the type of contract you are negotiating, you must have case data that supports the need for higher reimbursement, including if you are performing case types/procedures not previously available to market members. It’s essential to show a value-add to be considered for that increase.
Providers/ASCs need to provide case volume projections, by procedure, for the upcoming fiscal year and the added benefits to the payer’s members. In other words, show them how much your ASC is saving a payer by moving members to the ASC from the hospitals.
Many contract negotiation consultants will tell you that contract negotiations need to begin six months before the end of your term and be renewed annually. However, it’s important to be strategic about when to renegotiate your contracts depending on the terms of reimbursement.
Negotiating Fee-for-service Rates
It’s very common to renegotiate fee-for-service (FFS) contracts. That’s because the rates are based on the payer’s Usual and Customary terms.
We recommend reviewing FFS contracts every few years to ensure that they’re still a fit for your business. For example, your ASC may have grown to perform procedures that weren’t included in the original contract. You may also be able to create carve-outs of procedures that have a higher cost and need to be negotiated separately.
Negotiating Rates Based on Medicare or Medicaid
Compared to FFS rates, contracts based on Medicare or Medicaid rates are much more difficult to negotiate.
Before you attempt to renegotiate reimbursement rates established by the Centers for Medicare and Medicaid Services (CMS), or groupers, it pays to do your homework. You must be prepared to thoroughly demonstrate the value and cause for the increase you’re bringing to the table.
Always Include Chargemasters and Fee Schedules in Negotiations
In addition to committing to a regular renewal timeline, providers should always approach contract renegotiations strategically. At every negotiation, be prepared to discuss two key contract components, given their heavy impact on reimbursement rates:
- Chargemaster: A chargemaster is a comprehensive, internal price list of all services and items a hospital provides to patients. By outlining the standard charges for procedures, tests, medications, supplies, and other services, it serves as a foundational document for billing.2
- Fee schedule: A fee schedule is a list of negotiated fees or payments for specific provider services or supplies and should be included in every payer contract. If it’s not included, ASCs should push payers to provide a complete fee schedule that defines all covered services and the negotiated rates for each service.3
in2itive: A Trusted Partner for Renegotiation
By working with in2itive to examine your fee schedules and chargemasters, understand what’s typically negotiable and what isn’t, and harness our long-standing experience, you’ll be well prepared to drive the greatest impact for your bottom line.
If you need help negotiating your contracts or think it’s time for a contract review, contact us for a consultation.
Sources:
- Shryock, T. (2023). Negotiating payer contracts. Www.medicaleconomics.com, 100. https://www.medicaleconomics.com/view/negotiating-payer-contracts
- What Is a Chargemaster? (2019, April 12). George Washington University. https://healthcaremba.gwu.edu/blog/chargemaster-hospital-administrators-need-know
- Law Office of Kevin P. O’Mahony. (2021). Kevin P. O’Mahony. https://www.komahonylaw.com/healthcare-provider-provider-provider-payer-disputes/