ASCs can secure fair, timely reimbursement from their commercial insurers by strategically preparing for negotiations, building strong payer relationships, and actively managing contract performance.
Securing fair managed care contracts is a key to optimizing revenue cycle performance for ambulatory surgery centers (ASCs), but doing so requires working with commercial insurers, not against them. Fostering a healthy relationship with these third-party payers can help ASCs enter productive contract negotiations that result in fair and acceptable terms for both parties.
Let's explore strategies ASC leadership can employ to set their surgery centers up for greater success concerning negotiating ASC payment terms and building fruitful, long-term partnerships with their commercial insurers.
Thorough preparation is essential before any negotiation, especially for ASCs entering contract discussions with commercial payers. Securing strong rates with insurers helps ensure your most common and high-value procedures generate meaningful profit, better supporting ASC sustainability and growth.
Here are some tips to help you prepare for managed care contract negotiations:
Before negotiating, you need an in-depth understanding of your ASC's expenses. This includes direct and indirect case costs, overhead, and how those costs vary by procedure. Establishing a financial baseline allows you to identify where reimbursement for procedures needs to land or be improved to protect margins. Knowing costs can also help you prioritize coverage for procedures that drive your center's profitability.
Why should a payer want to contract with your ASC? While insurers aim to manage their costs, they also seek reliable partners positioned for success. Be prepared to highlight what sets your center apart, such as strong outcomes, high patient satisfaction, and/or operational efficiency.
Nothing is as informative — or convincing — as hard data. Gather internal metrics to demonstrate your ASC's value, including clinical outcomes, patient satisfaction, OAS CAHPS scores (when available), and detailed case cost data to support reimbursement discussions. External benchmarks on ASC outcomes and cost savings can further strengthen your case for coverage and the migration of procedures to the surgery center setting.
Go into negotiations knowing as much about the payer as possible. Start by researching all its plan types (e.g., HMO, PPO, EPO), then research the payer's market and reimbursement methodology. This can help you understand the payer's priorities and issues, such as what carve-outs may be allowed, how it views out-of-network payments, and more important negotiation details.
Once your research is complete, map out the highest priorities for your ASC and compromises you're willing to make (must-haves versus nice-to-haves). Remember, contract agreements should be mutually beneficial, so you'll come away with some wins and the payer will leave with some wins, too.
Completing this prep work before entering negotiations with commercial insurers can help make informed, persuasive arguments and negotiate what your ASC requires most for financial success.
As you prepare to negotiate a managed care contract, you may feel pressured to make decisions on the spot. You might be tempted to agree to less-than-favorable ASC payment terms to secure some form of revenue, but don't rush to sign an agreement, especially without looking over the complete terms, as you may be agreeing to something you will regret.
Instead, take the time you need to think through decisions. Thoroughly review the proposed contract terms, then use your data to make a clear, evidence-based case for adjusting ASC payment rates to fairly cover costs and ensure a sustainable return.
Where possible, frame your requests around key issues such as covering case costs and maintaining reasonable profit. Emphasize how fair reimbursement not only supports your ASC's sustainability but also enables the payer to reduce overall costs by safely shifting volume from more expensive inpatient settings. A measured approach like this can help the payer understand expected savings and encourage an agreement that leads to more favorable ASC reimbursement rates.
At the negotiation table, it's all about strategy. Where can you concede? Where can you push for more? How quickly should you agree to terms? When should you walk away?
Create a plan beforehand that considers many possible topics of discussion and directions for the conversation. Determine your priorities, understand your non-negotiables, and plan concessions that you can control. Having a clear vision of your core objectives and where you can give up ground can help you design a strategy that will cater to your needs and still hopefully satisfy what the payer is hoping to get out of the negotiation.
If a payer is unwilling to budge on ASC reimbursement rates that you deem too low, you can also consider tactics like staying out of network. All options should be carefully weighed to land on a managed care contracting plan that will best benefit your surgery center and revenue cycle performance in the long run.
Agreeing to ASC payment rates is only part of the negotiation; you also must make sure the language in the contract is fair, concrete, and clear. Vague payment terms can leave room for denials, delayed payments, and other avoidable developments, which can strain cash flow and create other challenges.
Keep an eye on the language used to define ASC payment terms. This includes payment amounts, due dates, late payment penalties, coding rules, limited liabilities, and fee schedules, among others. Pay particular attention to clauses within the managed care contract that may impact payment terms and timelines, and ask for clarification on details that are lacking or missing entirely. If you find a certain condition is not ideal, explain how adjusting it could provide favorable results for both parties.
If you're seeking carve-out exclusions, go into the negotiation with the number and types you desire as well as the reimbursement amounts you're looking for. Preparing hard data that supports why these carve-outs are a necessity can only help you make your case.
Once terms are agreed upon, leveraging an ASC software solution can help you ensure proper fee schedule loading and collections and enable you to track important revenue cycle metrics and benchmarks, like days in accounts receivable (A/R), denial rate, profit by procedure/CPT code, and many others.
Ongoing monitoring and auditing of commercial contract performance can help you understand where terms are coming up short. For example, you may find some procedures, despite expectations, are covered at a loss or break even. Or you may discover you missed some important supplies or certain carve-outs have increased in priority since you agreed to the last contract.
This type of oversight often requires leveraging a solution that can enable contract management. For example, modern ASC systems can allow you to upload contracts and fee schedules and make it easy to align terms with accurate billing and payment workflows. Such tools can also regularly monitor and audit workflows to uncover improvements, providing in-depth insights into revenue cycle performance that can inform future contract negotiations.
It may be worth partnering with an expert if you find significant discrepancies or cannot identify how to improve performance after reviewing auditing results. A company with an extensive history of successfully supporting ASCs and experience providing services to ASCs with your specialties and with your payers can help recognize ways to improve your contracts and financial performance, including where you should target increases in ASC payment rates.
ASC payment negotiations can be tense, but if you can ease some of that tension, you may be more successful in achieving better contract terms. How can you do this? Make it a point to understand your payer and treat them like a partner, not an adversary.
Like any other relationship, small gestures can go a long way. Always be polite, patient, punctual, and thankful when communicating and interacting with payer representatives. Recognize when to push harder for the things you really need and when to stop pushing before you go too far.
Transparency is also key. Ask what the payer is looking for and work to align your goals with theirs to create common objectives you can both work toward. For example, neither side wants to deal with extensive payment delays or claims denials, so demonstrate how your team is taking steps to improve accuracy and completeness and file clean claims in a timely manner.
In addition, don't wait to initiate contact when it comes time for renewal. A study published in Negotiation and Conflict Management Research suggests that initiating a negotiation is fundamental to bargaining success and achieving organizational goals. As such, contact your representatives as soon as possible when you are approaching the contract renewal date, and review all correspondence from payers to stay current with major announcements or changes. This will showcase that you're current on what matters and ready to start a productive conversation.
While it may feel tempting to sign a contract that auto-renews, as this eliminates one more to-do, such a clause is not an ideal option for ASCs. It's important to review contract performance on a regular basis and work to adjust future ASC payment terms and agreements to benefit your center. Don't settle for the convenience of "setting and forgetting" your payer contracts.
Renegotiations are also a routine opportunity to build stronger relationships with your payers. This means you'll meet more often, communicate more frequently, and feel more comfortable discussing terms and developments with each other. Fostering that rapport is key to ensuring your ASC is getting favorable reimbursement rates and can help optimize operational efficiency.
It's also wise to include a termination clause in all contracts. Doing so provides some flexibility to your ASC in situations where you may need to exit a contract before its natural end. Think through what conditions or reasons for termination may make sense for your ASC and negotiate those circumstances into your contract. This can help minimize legal disputes or penalties and fees if you must end a contract early due to unforeseen events.
In an evolving healthcare landscape that's seeing reimbursement tightening and expenses rising, it's more important than ever for ASCs to pursue opportunities to strengthen revenue cycle and financial performance. Working more collaboratively with commercial insurers, building beneficial partnerships with these payers, and negotiating contracts built around delivering fair terms and outcomes for everyone involved can help ASCs secure faster and more favorable reimbursement for services provided to patients covered by managed care plans.
Looking for more contract negotiation guidance from ASC revenue cycle experts? Check out this managed care contracting webinar.