Achieving Success with Value-Based Contracting in an ASC

Value-based contracting has been slowly making its way into the ASC space for some time. It was picking up steam in the industry and nationwide, but then the pandemic hit. Now it’s back on an upward trajectory. Commercial payers are increasingly pushing value-based care in ASC specialties such as orthopedics and cardiology, largely in the form of bundled payments. Large, self-insured employers are also increasingly pursuing bundled payments (direct-to-employer contracting).

ASCs interested in bundled payments or expecting they will need to move toward bundles soon must know how to successfully negotiate a value-based contract. Ineffective negotiation can lead to a bundled payment that does not deliver the reimbursement required to cover all expenses and provide a reasonable profit to participants in the bundle. This can not only hurt an ASC’s bottom line but also raises the risk of alienating participants. On the flipside, a fair bundled payment achieved through successful negotiation can help an ASC strengthen its financial performance and more rapidly grow a total joint or cardiovascular program. Leading up to contract negotiations, ASCs will want to:

  • Ensure participants understand the difference between fee-for-service and bundled payments
  • Ensure participants understand what will be expected of them for bundled payment success (keep costs low, keep quality high, maintain high levels of efficiency)
  • Ensure buy-in from all participants
  • Calculate all costs associated with a procedure/episode of care (transition from estimated expenses to exact expenses)
  • Identify and eliminate unnecessary expenses
  • Identify opportunities for standardization that can reduce costs without harming quality
  • Identify opportunities to improve purchasing that can reduce costs while still ensuring an ASC has the supplies and devices it needs
  • Identify a surgeon champion(s) who will participate in negotiations
  • Come to the negotiating table prepared with a target bundled payment in mind while also knowing the lowest it would be willing to/should accept for a payment that can cover costs and achieve an acceptable level of profitability.

After securing a contract:

  • Monitor procedure/episode-of-care cost data closely and investigate any increases
  • Continue pursuing opportunities to reduce costs and streamline operations
  • Leverage data to make more timely purchasing changes and payment decisions.

While it can be a lot of work to get started with value-based contracting, that work can be well worth it. A good bundled payment arrangement can prove more profitable than fee-for-service, help an ASC identify opportunities for improvement for procedures and specialties not included in the bundle, and make the surgery center more attractive to payers, self-insured employers, and others interested in pursuing value-based care.

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