Looking to Experience Financial Success with an Outpatient Total Joint Replacement Program? Clear These Nine Hurdles First

Outpatient total joint replacement (TJR) procedures are decidedly good for many patients. Instead of spending time in the hospital, outpatient TJR patients are typically discharged three to four hours after the surgery and recover in the comfort of their own homes.

Because surgeons typically use a general anesthetic during these procedures, patients exit surgery prepared to walk. And, the cost of outpatient TJR procedures is significantly less than inpatient ones, making the alternative particularly attractive for patients who are now assuming more financial responsibility for their care.

These outpatient procedures could be good for your ambulatory surgery center (ASC) as well as they represent significant financial opportunity. While only 15%, or 165,000 TJR procedures, were performed in an outpatient setting in 2016, this number will rise to 51%, or 969,000 total procedures, by 2026. This represents an increase of 487% over just ten years, according to Sg2 Research.1 With all this growth, your ASC can potentially experience considerable financial benefits.

But financial success is not a given. To make good on the promise of outpatient TJR procedures, your ASC needs to clear a variety of hurdles such as:

1: Getting payers on board. Convincing payers that total joint procedures belong in the ASC is job number one. To accomplish this, you should provide payers with real-world examples of cost savings. For example, 80 inpatient TJR surgeries costing $50,000 apiece performed in an inpatient setting costs a payer $4 million per year, compared to just $1.6 million per year for the same number at $20,000 each performed in an ASC, representing a cost savings of 60%.

2: Establishing favorable managed care contracts. While it’s important to convince payers of the value of outpatient TJR surgeries, it’s also important to make sure the managed care contracts allow for adequate reimbursement, implants and other surgery related costs. Understanding inpatient costs in the local market, as well as how much it costs to build and operate a total joint program in your ASC, can help you get a handle on total costs. With this information, you can then negotiate contracts that produce a margin that positions your ASC to grow.

3: Bringing employers into the fray. Entering into direct-to-employer contracts with specific companies could help bring more total joint procedures to your facility. Approach larger employers and offer them a discount for employees in need of total joint surgery in exchange for encouraging employees to choose your ASC.

4: Paying careful attention to implant billing. How implants are paid for varies from contract to contract. For instance, a contract could pay your ASC a certain amount for the total joint procedure and would include the cost of the implant in that reimbursement. However, another might pay a certain amount for the procedure, but will separately reimburse the implant, as well as shipping, handling and tax.

It's also important for ASC billing staff to be aware of the implant billing requirements of each managed care contract for example. Some payers will stipulate that they want to be billed electronically and then subsequently request the implant invoice, if needed. Others will provide a portal where the ASC will need to upload the implant invoice for each case or request a paper copy of the invoice for submission.

5: Getting the best deals on implants. Negotiating with implant vendors for the best prices can prove beneficial for your ASC. Sometimes, using the same vendor for all implants makes it possible to negotiate a lower price based on volume.

6: Marketing the program. To successfully bring patients into your ASC, you need to make sure surgeons are aware of the benefits of outpatient TJR surgery – and are ready to talk up these advantages with patients. In addition, you should develop marketing materials such as brochures and websites that clearly explain outpatient TJR surgery benefits. And finally, reach out to implant companies to see if they can partner with you in your marketing efforts as well.

7: Recruiting the right patients. Selecting the right patients from a clinical perspective is key. Patient selection is a crucial process for ASCs to address when practicing TJRs. With more data at our disposal, healthcare facilities can—and should—follow stricter guidelines while deciding which individuals are appropriate candidates for the procedure.

Outpatient TJR surgery is a viable option for middle aged, non-obese patients who do not suffer other, significant medical conditions and who have strong at-home support systems in place.

Patients with the following contraindications, however, should not be considered for outpatient joint replacement surgery: BMI greater than 35, age over 60, chronic obstructive pulmonary disorder, diabetes, cardiovascular disease, smoker, high risk of history of deep vein thrombosis/pulmonary embolism, anticoagulant therapy, anemia and difficult surgery due to deformity.

8: Making sure patients are covered – financially. Medicare started covering TJR knee surgeries in hospital outpatient facilities in 2018 and have proposed to cover them in ASCs beginning in 2020 – and many private payers are now reimbursing these procedures in ASCs as well. Your registration staff should check to ensure that each patient’s health plan covers outpatient TJR surgery.

9: Paying attention to revenue cycle details. It is also important that your staff members know exactly what actions to take to ensure that the revenue cycle is optimized for outpatient TJR surgeries:

  • Front desk personnel need to ensure that patients meet pre-surgery requirements; provide an estimate of the patient’s financial responsibility; and collect the deductible, co-pay or co-insurance in advance or on the day of surgery. As such, front desk staff need to be thoroughly trained in financial counseling, the pre-authorization process, insurance verification and eligibility.
  • Medical coders must understand the ins and outs of each patient’s health insurance contract. Not only do they need to know the relevant codes for each surgery, but how particular implants and procedures are reimbursed. Every contract uses the same common procedural terminology (CPT) codes but how they determine implant reimbursement will likely be different depending on the contract. Creating summaries of pertinent information from each contract can enable coders to easily and quickly find needed information.
  • Revenue cycle staff members need to understand the documentation each payer requires for different implant charges. When the payments are received, they need to ensure that the payments match the amount stipulated in the contracts. Most importantly, they need to flag underpayments. For example, when a payment was received for $16,000 but the contract stipulated $20,000, staff members need to note this underpayment and follow up.
  • Staff should conduct a monthly audit to ensure that each procedure was coded, billed and paid correctly. If they uncover any discrepancies, they should drill down to see where the mistake originated, and then file an appeal if warranted.

In the final analysis, the importance of paying attention to the revenue cycle details cannot be underestimated. Even a seemingly insignificant mistake could lead to denials, incorrect payments, underpayments or even no payment at all. When details have been addressed, though, your ASC stands to reap considerable financial rewards. 

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1Vizient. Outpatient Joint Replacement: An Unnecessary Concern or Market Reality? https://newsroom.vizientinc.com/newsletter/research-and-insights-news/outpatient-joint-replacement-unnecessary-concern-or-market-research

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