EVEIAHEALTH Consulting & Management

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1 1 The 8th Annual Orthopedic, Spine and Pain Management-Driven ASC Conference Managed Care Negotiation Strategies for For Orthopedic & Spine Surgery in ASCs 10 Key Concepts I. Naya Kehayes, MPH CEO & Managing Principal EVEIA HEALTH Consulting & Management EVEIAHEALTH Consulting & Management Chicago, IL June 11, 2010 Overview Higher acuity cases Orthopedics Spine Pain Management Cases that are not traditionally performed in the ASC Cases that can move from the hospital setting Impact of change in reimbursement methodology 10 Key Concepts 1) Payor due diligence Are you out of network? Does the payor have the codes on their approved list for ASC setting under contract? Why can you do the cases out of network? Is the payor interested in having the ASC as an alternative site for services?

2 2 2) Identify Spine, Orthopedic & Pain Management cases and present to payor Laminectomy/Lamintomy ACDF PLIF Kyphoplasty Uni Knees Total Knees Total Shoulders ACLs Rotator Cuff Repairs Trial stimulators Permanent stimulators / generators 3) Data Hospital based volume ASC volume with other payors Cost information Prosthetics & Implants Community / National Standards Literature 4) Approved CPT Codes Payor Defined List ASC HOPD approved list

3 3 5) Credentialing Medical Director review & approval Payor criteria Should you have a surgeon representative meet with the payor? 6) Reimbursement methodologies APCs/APGs 2007 Medicare groupers Carve Out / Case Rate Payor defined methodology Percent of billed charge Negotiated rate Prosthetics & Implants paid separately 8) Market competition Is the only alternative the hospital? Does the payor need the hospital in their network? Are there other ASCs performing the cases?

4 4 9) Demonstrate contract value What is the value to the payor? How is this defined? ASC budget vs. Hospital budget 10) Payor Education Cost savings to Payor ASC Outcomes Community and national standards Patient satisfaction Payor Reactions in Current Environment

5 5 Current Environment Economic pressure Payors looking to save money Payors transitioning from speculative to supportive Payor experience is increasing nationally with spine and orthopedics Spine and Ortho present opportunities Payor interested if clinical outcomes support ASC setting Payor Concerns What are the obstacles payors are faced with? Credentialing criteria How will the market react? How will this impact the payor / hospital relationship? Does the ASC really represent a cost savings opportunity in your market? Complex Spine Cases How much does the ASC really save the Payor? Complex Cases Cost to Payor Volume Total Cost ASC $ 15, $ 375,000 Hospital $ 30, $ 750,000 Totals Savings $ 375,000 Total Cost of Hospital Contract to Payor $ 5,000, Hospital demands 10% increase on contract $ 500, Total Cost to Payor resulting from ASC shift in Volume $ 125,000.00

6 6 Negotiation Strategy Reimbursement Methodologies Identify Reimbursement Options Available with Payor: Modified Medicare Groupers APCs Prosthetic and Implant Provisions for Coverage Does the ASC have the ability to outsource to a third party supplier for provision of prosthetics and implants without interference with contract terms? Reimbursement Methodologies Identify Reimbursement Options Available with Payor: Carve outs Case Rates When? Why? 1) non grouped 2) default rate 3) mis-allocation of payor grouper

7 7 Reimbursement Methodologies Case Rates -- How do they work? Includes all Multiple Procedures Includes or excludes Prosthetics & Implants When can a case rate be advantageous? What are the risks with case rates? Negotiation Strategy Negotiation Strategy Process: Show payor value of the relationship Value = Cost savings by moving cases out of Hospital Extract hospital reimbursement information and compare to payor rate proposal and ASC rate proposal Negotiation Strategy Showing Value of Relationship ACL - General Orthopedic Example: Average Hospital Payment from EOB $12, Payor Initial Proposal (Medicare Group 3) $ (no prosthetics & implants) ASC proposed Rate $2, Implant (allograft) $1, Total Compensation $4, Savings to Payor $8, Potential Savings to Patient at 10% Co-Insurance $830.40

8 8 Things to Remember Maximize negotiating power and revenue opportunities by understanding the payment methodology Collect cost and hospital data Hospital relationships are important to the payor Don t assume your ASC will save the payor money Conduct payor due diligence prior to making significant investments in spine and orthopedic development Combine ASC with practice contract negotiations when opportunity exists Develop a positive relationship with the payor and demonstrate how your relationship can be a win-win!