Advancing Surgical Care Podcast
Essential news and information for ambulatory surgery centers (ASCs)
Advancing Surgical Care Podcast
A Conversation with Leading ASC Operational Expert Naya Kehayes
In this episode of the Advancing Surgical Care Podcast, ASCA Chief Executive Officer Bill Prentice talks with Naya Kehayes about her presentation “Pro Tips for Successful ASC Payer Contract Negotiations” at ASCA’s annual conference in Denver this past May. Kehayes, a national speaker on ASC business strategy and current member of the ASCA Government Affairs Committee, covers highlights from her presentation and provides practical and insightful advice that can benefit every ASC.
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Bill Prentice:Hello and welcome to the Advancing Surgical Care Podcast. My name is Bill Prentice. I'm the CEO of the Ambulatory Surgery Center Association and host of this episode. We're recording this at ASCA's annual convention and expo in Denver, Colorado. And my guest today is Naya Kehayes, someone well-known in the ASC community. She is an entrepreneur, national speaker, and guest lecturer at Yale School of Public Health. Naya spent more than 35 years in healthcare and the majority of her career in consulting. She's recently moved on from doing that and now spends her time speaking and providing education pertaining to the business of ASCs. Naya is also a member of the ASCA Government Affairs Committee, and we rely on her insights and expertise on a wide range of issues. As she often does, Naya was presenting at our annual meeting here in Denver, and she kindly agreed to join me on a podcast to talk about her breakout session on ASC payer contract negotiations. Naya, welcome back to the podcast.
Naya Kehayes:Great. Thank you. It's so nice to be here, Bill.
Bill Prentice:Thanks. So let's set the table for our discussion by talking broadly about the current healthcare environment and the trends that you're seeing in terms of both the challenges and opportunities facing surgery centers today. Specifically, what kind of reimbursement pressures are they facing and what opportunities are you seeing from surgery migration?
Naya Kehayes:Well, I think some of the biggest challenges are dependent upon what market you're in. If you're in a saturated market, you're seeing more and more payers really holding on rate and not willing to negotiate. However, some of those the opportunities that exist is where there are surgery centers that have the ability to migrate surgery. And especially if they have a hospital JV partner, they've got more support for that migration. And there's a whole lot more data that enables them to demonstrate that value. So payers are interested in that.
Bill Prentice:Got it. Can you also discuss some of the key drivers and activities in the current environment relative to hospitals and health systems, employers and commercial payers, recognizing the value that our surgery centers provide?
Naya Kehayes:I think there's a couple of more obstacles, I think, that are creating some challenges for ASCs, regardless of what types of markets they're in. The cost for providing services is increasing at a faster pace than what the rate increases are. We see that with Medicare, along with the commercial payers. And then also, the Medicare population is growing. So the payer mix of the ASC is changing. And they'll typically have more Medicare mix now today than they've had before. And that does impact what the needs are from the commercial payers, especially if they are in a situation where they're losing money on that government business. So whether it's Medicare, Medicaid and other government business. And then in markets where there is limited access to hospitals, hospitals are a very important part of the payers network. They may not be the payer may not be as. interested in migration because they need that hospital in their network. And sometimes, you know, ASCs will be, well, why, you know, why are they so apprehensive to work with me while they care about keeping that hospital open and available to their network?
Bill Prentice:Yeah, and I imagine very currently the concern about tariffs and the impact that's going to have on the cost of supplies is not going to match up with obviously the payment negotiations that were made last year or two years ago.
Naya Kehayes:Absolutely. And I think that is a very real issue. And I think we're going to see a lot of ASCs concerned, as well as hospitals and health systems, about where their reimbursement aligns with their new cost as a result of tariffs that may impact supplies, equipment, and so forth.
Bill Prentice:That's great. Can you also discuss some of the key drivers and activities in the current environment relative to hospitals and health systems, employers and commercial payers, in terms of recognizing the value that surgery centers provide?
Naya Kehayes:Absolutely. On the flip side, there's increased opportunity there, especially if you've got the opportunity to migrate that volume. And hospitals who are working with ASCs are typically more aligned also is the data that's available. There's so much more transparency data now available, it's easier to demonstrate savings to the payers. In the past, it would be really difficult, and we talk about the savings that ASC represents, but with all the transparency data that's available, it's amplified for your success because it's there. The other component I think that's a driving force is the increased rate of consolidation. with respect to ASCs that are not in a position to get good rate. They then are looking at, should I consolidate? Should I do a hospital JV? Should I go into a joint venture with a management company? Because maybe that's going to help with their rates. And it does help. There's definitely a differential between the independent ASC, management company ASC, at a hospital, JV, in many, many markets. And so sometimes that can create an opportunity.
Bill Prentice:Yeah, I guess what you're saying is that regrettably, scale matters.
Naya Kehayes:It absolutely does matter. And I think one of the opportunities for payers, in some markets, payers have had this happen where they'll see an ASC get shut down because they didn't consolidate. But then all that volume moves back to the hospital and they've learned from that negative experience and then more willing to to work with ASCs in the future. I've had that experience as well.
Bill Prentice:Great to hear that that can occur.
Naya Kehayes:Yep.
Bill Prentice:So, Naya, in your presentation, you go into considerable detail about reimbursement methodologies, both on the commercial payer side as well as with Medicare and government payers. Time doesn't allow for all the observations and recommendations that you made in your session, but it would be helpful if you could touch on a few of the more consequential factors for ASCs to consider when evaluating their reimbursement methodology.
Naya Kehayes:Yeah, absolutely. First and utmost important is to truly confirm the payment methodology that the payer is offering you in the contract. Sometimes it's not fully transparent what it is. So if it's a Medicare-based contract, what year is the contract on? Is it current or is it a prior year? Is it based on national rates or is it based upon area-adjusted rates? Clarify the multiple procedure logic because many times the payer will say it follows Medicare, but it doesn't. They have their own multiple procedure logic. Are they willing to pay for implants or not, even though it's on a Medicare methodology? If you have a proprietary fee schedule or a grouper-based fee schedule, it is absolutely critical to obtain the complete fee schedule. Many times, payers will give you a sample of that fee schedule and not the whole fee schedule and make sure you have the most current one. Some of the other key components are assessing the ASC's case mix relative, you know, based on volume and CPT and look at where those rates fall within the payer's methodology and absolutely evaluate The incident rate of multiple procedures, many payers will not pay on all of them. So if you have a surgery center that, let's say, does a lot of ENT procedures, they will quite often do more than three or four codes. And if the payer is only paying you on two, that can have a significant impact on the overall value of the contract. And finally, I think it's talking to the payer and determining whether or not there's an opportunity to change the payment system. Many payers will have more than one alternative for the ASCs. And sometimes, you know, especially if your case mix has changed, you can move off of an older methodology and update to a newer methodology. And just changing that methodology can have a significant impact on your success.
Bill Prentice:That's a really great observation. I can see that have been great value to so many surgery centers. Now, if you don't mind, we're going to take a pause to hear a message from our podcast sponsor.
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Bill Prentice:Now, you also make a compelling case for the power of information, particularly data collection and how ASCs can use that data to their advantage in contract negotiations. And that makes perfect sense. I have no doubt that our larger management companies have a pretty firm handle on their data and how they're doing it. Maybe not, but I know that the smaller operators and standalone facilities probably have greater challenges in that regard. What are the best approaches for ASCs in terms of harnessing data and be able to use it to their advantage?
Naya Kehayes:Well, that's a great question because you're 100% spot on when you have smaller ASCs that are independent. They do have limited resources, and sometimes they also have limited data IT systems, so their data is more limited. It's really important. When I see an ASC that doesn't actually have an ASC IT system, the value of the differences in the data that comes out of it. But assuming that they have an ASC IT system, they typically can, without having a whole lot of expertise, run an AR report that shows you the average net receipts by payer and dividing it by the volume to figure out what your net receipts per case is. and not going into this huge analytics, but then also looking at their P&Ls to look at what is their total cost per case and comparing it to each payer, Medicare and your commercial payers. And so when you look at the difference between obviously your average receipts per case versus your cost per case, if you're with a negative value, you can look at the ranking of those payers and see who's a winner and who's a loser. And that helps you determine where's your priority for contract negotiations. The other thing I would suggest for those smaller independent ASCs is looking at the top 10 highest volume codes, right? And looking at what your reimbursement rates are by payer. And then also looking at how do you compare to the hospital rates with the transparency data, which is often available online. It's not really hard to get it these days. And looking at does your ASC save the payer money and showing the payer the value that you're creating in the market. If you have surgeons that can migrate volume from the hospital before you migrate that volume, put that hospital volume list together, the names of the surgeons, as well as the hospitals they can move them from. And also finally, just one last thing, is if you have a rate target that you need to achieve with the payer, calculate that difference compared to that hospital rate, but also set your negotiating rates targets higher because you have to leave room to negotiate. the payer's not going to just give you the rate that you asked for. So you really have to leave that room to negotiate.
Bill Prentice:Great advice. That makes total sense. So let's talk a little bit about managed care plans. Again, great deal of knowledge and detail required to engage and succeed in attaining a favorable contract, which we're just talking about. You spelled it out very clearly in your presentation that dealing with managed care is its own thing. Can you share your thoughts?
Naya Kehayes:Yeah, absolutely. Well, we just ended on kind of the rate targets, that's number one, right? Develop rate targets based upon contracts that are undervalued and go after those first. If they're undervalued for the services that you're providing, you have to look at your costs compared to that and develop new rates. Create a timeline for negotiation. If you've got really old contracts, I can tell you, don't expect the payer to resolve your issues in one year. You may have to address poor rates with a payer over multiple years and look at that timeline and rank those payers. It is also important to negotiate the small payers as well as the large payers. A lot of ASCs won't negotiate small payers so they think, oh, they're not a lot of value. But every payer is looking at coordination of benefits. And if they see, a bigger payer sees that a smaller payer has a better rate, that concerns them. Why are there, is there a big differential? And that is something that you want to factor into your plan, that it's not just about negotiating with the big payers, it's negotiating with all of them, especially managed Medicare and managed Medicaid as well, because it's really simple to show the value on managed Medicare. And sometimes in Medicaid, you can you can actually negotiate that with commercial payers, especially if you're migrating surgery. And then if the payer's value represents a significant loss, you may have to consider termination as part of that managed care plan. A lot of payers do not want to see termination of contracts, but there's no guarantee that they won't let the contract terminate. So you have to be prepared for that, but that also depends upon the market. Finally, I think one of the most important things is to establish a very strong relationship with the payer. The payer relationship is really important and critical to your success and educate the payer about the services, the surgeons, and the value that you provide. I cannot say enough and stress enough about the relationship with the payer.
Bill Prentice:That's great. Well, listen, in a very short amount of time, you gave a lot of great advice and counsel about contracting strategies. Let's boil it down for our listeners. And so my last question is, what final wisdom would you share with about avoiding an adverse outcome in terms of a contract negotiation and what can maximize the likelihood of success?
Naya Kehayes:I think the biggest mistake that ASCs make is they perform cases with inadequate reimbursement and then they expect the payer to come to the table, especially a new ASC that is wanting to open up fast and get the volume through the door. If you're a new ASC, that first contract is the most important. And if A plus B is negative C, you're probably not going to make it up on volume. So it's well worth the wait to get the contract rate set up before either migrating surgery or a new center opening. The first contract negotiation is typically the most important and actually presents usually the most important to achieve the biggest rate differential from their opening proposal to where you land. Also, allow ample time to negotiate. It takes a long time to get payers to move. It will typically take nine to 12 months and three to four rounds of negotiation, if not more, to get to the final rate that you're looking for and or to get to a favorable contract. That's not a loser. Request annual escalators and multiple year contracts so that you're getting annual increases and you're not having to go back to the table every year because it's it's going to drag out. And as soon as you finish one, you'll be calling them up for a new negotiation. If you have an old contract, there may be opportunities to change the payment system. I mentioned that before. So before you go after just renegotiation of an existing contract, check with the payer and say, do you have any new methodologies available? Because it may be advantageous and a lot faster to change the methodology. And then if you're in a saturated market and you are a commodity buyer, you may not have a lot of negotiating power. And you may have to think about, is it better if you're being courted by a hospital or a management company to join up with a larger entity that gives you the opportunity to negotiate? And finally, always ask for more. You won't get more unless you ask.
Bill Prentice:What a great thing to end on, Naya. This has always been an amazing amount of information in a very short podcast. So thank you for that. Thank you for being a presenter at our annual convention again this year. and for the support you've provided ASCA throughout the year and for years on end. It's been a pleasure talking with you today and I'm sure we'll have you back.
Naya Kehayes:Thank you so much, Phil. It's always a pleasure to be here.
Bill Prentice:Thanks. So before concluding, I'd like to acknowledge the support of our podcast sponsor, Surgery Partners, a leading operator of surgical facilities and ancillary services with more than 200 locations in 33 states. Surgery Partners offers multiple types of healthcare services that deliver high quality healthcare in a convenient and cost-effective manner. To learn more, visit surgerypartners.com.