July 2002
Volume 66 |
Number 7
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PRACTICE MANAGEMENT
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| Reimbursement
Negotiations: A Few Practical Suggestions |
Karin Bierstein, J.D.
Assistant Director of Governmental Affairs (Regulatory)
Negotiating payer contracts is an exercise that some anesthesiologists
and their practice managers are coming to enjoy. The confidence
that permits them to enjoy the process is based on solid preparation
and knowledge. In last month's "Practice Management"
column, we provided a list of key contract elements other than
the anesthesia conversion factor. This month, two practice managers,
Michael J. Monea, President, Central Anesthesia Services, Inc.
(Kentucky) and W. David Ackley, C.P.A., M.B.A., President, Medical
Account Services, Inc. (Ohio) have summarized their well-organized
approach to contracting for higher reimbursement.
Approximately two years ago, reimbursement rates in our market
appeared to be among the lowest in the region and, in fact, the
country. We were losing good recruits to other regions in the
country with superior rates. Given stagnating and/or declining
income for our services and ever-rising costs, the practices that
we represent decided to negotiate higher reimbursement for their
services forcefully. We have achieved some significant successes.
The following information outlines some of the negotiating strategies
used by our team of physicians and practice managers.
Working With Your Hospital Administrator
We recommend communication with your hospital administrator
prior to entering into contract negotiations with third-party
payers. These discussions can include:
- Review of pertinent details of reimbursement rates from other
payers of similar size subject to any confidentiality clauses
to which you may have agreed;
- Information from published sources on average reimbursement
rates for your region;
- Range of reimbursement levels the group is planning to request;
- Assurance that any reasonable offer will be seriously considered;
- Information regarding escalating costs associated with malpractice,
health insurance, the employment of nurse anesthetists or anesthesiologist
assistants, etc.;
- Clear understanding that should the payer fail to propose
and implement reasonable rates, the group may be forced either
to decline participation or to initiate the process that will
eventually result in departicipation. (This assumes that your
agreement with the hospital does not require participation.)
Whether or not the group has an exclusive contract with the hospital,
such communication can have the impact of isolating the payer
should it try to convince your hospital facility that the anesthesia
group is being unreasonable in its demands for increased reimbursement.
What Information Should Be Shared With the Payer?
The anesthesia group is under no obligation to share details
of other contracts during negotiations. Such information might
result in an agreement at an unnecessarily low rate. Conversely,
there may be occasions where it will be beneficial to share this
information. (Always make sure that you are not subject to any
confidentiality clauses.) For example, if you have successfully
negotiated a rate of $5X.00 with Payer A, you may be able to use
that information with Payer B, which is of similar size with the
same approximate number of subscribers but has offered you $4X.00.
Demonstrating that Payer A has offered $5X.00 is a valuable tool
to pressure Payer B to submit a competitive rate.
Success may create a domino effect among other third-party payers
in your region. While we were recently negotiating with one of
the three largest commercial payers in our area, a smaller network
approached us with an offer that represented an increase in unit
rates from the previous year's contract. We informed the network
that we were concluding negotiations with another larger payer
that had agreed to rates much higher than those offered by the
network. The network eventually agreed to rates that turned out
to be higher than the ones negotiated with the larger payer.
In another instance, after informing the hospital administration
of the need for an increase in rates with the assurance that any
reasonable offer would be carefully considered, we sent a 90-day
letter terminating our participation to one of the three major
payers. Eventually, we signed a one-year agreement with rates
significantly higher than previously paid. After further discussions
with the hospital, we approached the other two major payers with
rate demands that at least equaled their competitor's. New two-year
contracts were then negotiated and signed with significantly higher
rates than those we had previously received.
Items to Negotiate
In addition to the unit rate and such other fundamentals as the
term of the contract, we recommend specifically negotiating the
following items:
Time Unit
Some nongovernmental payers are attempting to follow the Medicare
model and to pay for fractions of time units. That is, 20 minutes
would equal 1 + 5/15 or 1.3 time units instead of two time units.
Anesthesia contracts more typically provide that a "unit"
consists of "15 minutes or any fraction thereof." Other
payers will round up only from six or eight minutes. If you are
not able to secure the "any fraction thereof" language
– and such a definition of time units is one of the most
important items in the contract – recognize that the partial
unit can have the effect of lowering the realizable unit rate,
which you would want to have adjusted.
To illustrate, if Payer X uses fractional units, a 95-minute
hysterectomy (6.33 time units) and a nominal $48 conversion factor
would result in a realizable rate of just $45.53 per unit ($591.84
13 total units). An 82-minute laparotomy, which has the same
number of base units, would yield $45.88. Details are provided
in Table 1.
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Table 1: Effect of Fractional Time
Units
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| Procedure |
|
Total
Units |
Conversion
Factor |
Reimbursement |
Realizable
Rate |
Hysterectomy
6 base units,
95 minutes |
Payor X
Payor Y |
12.33
13 |
$48.00
$48.00 |
$591.84
$624.00 |
$45.53
$48.00 |
Laparotomy
6 base units,
82 minutes |
Payor X
Payor Y |
11.47
12 |
$48.00
$48.00 |
$550.56
$576.00 |
$45.88
$48.00 |
Thus Payer X's system of fractionating time units for services
has the net impact of lowering reimbursement from $48/unit to
less than $46/unit. Similar calculations could be performed for
systems that round minutes up and down, assuming reasonably reliable
data on average procedure times. This information might be used
to negotiate the unit rate upward.
Reimbursement for OB Services
As stated in the ASA Relative Value Guide, "there is
no single, widely accepted method of accounting for time for neuraxial
labor analgesia." We prefer the single-fee or case rate method
by which each delivery is paid a set amount. By using case rates,
one bypasses the discussions and arguments relative to face-to-face
time, how many time units to reimburse per hour, etc. In the Midwest,
the majority of payers now use case rates.
Here is an example of successful case-rate negotiation from
our own experience. One major payer's system of obstetric anesthesia
reimbursement resulted in the lowest payment rates of any payer
with the exception of Medicaid. Prior to initiating discussions,
we calculated the following:
- Average length of time per delivery broken down by type,
i.e., cesarean section and vaginal delivery, for all patients.
- Average reimbursement by type of delivery for all commercial
payers.
- Average reimbursement by type of delivery for the payer with
whom we were negotiating.
With this information, we developed and proposed case rates for
cesarean section and vaginal deliveries that more realistically
reflected reimbursement received from other payers, excluding,
of course, Medicaid. As a component of our discussions, we informed
the payer that this system would have the benefit of helping it
predict more accurately the cost of obstetrical services while
providing us with a level of reimbursement sufficient for us to
continue our participation with them. The net result was a near
doubling of income from obstetric anesthesia services from this
particular payer.
We then used these rates as our base level of reimbursement in
negotiations with other payers. This system, with some minor variations,
was adopted by at least two other major third-party payers in
this region, resulting in an overall increase in obstetric anesthesia
reimbursement.
Use of the ASA Relative Value Guide (RVG)
We attempt to ensure that our payers accept claims with the
anesthesia (0XXXX) codes instead of the surgical Current Procedural
Terminology (CPT) codes. There are two reasons for this. First,
remember that surgical codes do not have anesthesia base values
assigned to them. Base values for the surgical codes are determined
by utilizing the ASA CROSSWALK, which will link to the ASA RVG
base values. A few surgical codes link to more than one ASA code
with differing base values. Here are two examples:
CPT
Code |
Description
|
Crosswalk™
Anesthesia
Code #1 |
Crosswalk™
Anesthesia
Code #2 |
| 49420 |
Insertion of cannula intraperitoneal
or catheter for drainage of dialysis temporary |
00800
4 base units |
00480
6 base units |
| 52320 |
Cystourethroscopy including ureteral catheter
with removal of uretal calculus |
00918
5 base units |
00910
3 base units |
Sometimes the payers will "crosswalk" to the anesthesia
code with the lower value and pay for the service at a lower level
than anticipated. Contract language will not necessarily prevent
errors or the need for appeals.
Note: HIPAA-compliant electronic claims will require the anesthesia
code; reporting the surgical code in addition will depend upon
payer contracts or practices.
Miscellaneous
- Try to include language related to time for processing clean
claims, both electronic and the paper. The payer should be willing
to define a time frame in which a claim is declared clean or
in which they will inform the practice of any problem. With
our electronic clearinghouses, we can often determine that a
claim has been rejected one day after submission.
- Sometimes the payer will consider providing separate and additional
payment for the use of long-acting narcotics such as Duramorph.
For those that have refused, we have been able to negotiate
a higher reimbursement for epidural follow-up service (code
01996).
- It is common for payers to seek to offset amounts that they
believe should be refunded to them against payments due to the
anesthesia group. Contract language can exclude such offsets.
- In a multiyear contract, it is worth asking for an annual
escalator clause that will increase rates automatically.
Given the growing shortage of anesthesia providers as well as
skyrocketing expenses for malpractice, health insurance and personnel
(especially nurse anesthetist) costs, it is extremely important
that full and complete effort be given to contracting for the
maximum reimbursement. It is our hope that these few suggestions
will help you prepare for your next negotiating session.
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