How to calculate a bundled-price surgery quote

So many ambulatory surgery facility and hospital executives call us to say they want to be listed but aren't sure how to price their procedures.

So in this rather lengthy but instructional article, Dr. Maria Todd, our internal expert and a former ASC administrator and OR nurse shows you what goes into the calculations to build a surgery price.  Build five to start and add one per week until you are done with all your CPT codes. If you need a little help, call her at (800) 727.4160 or call SurgeryShopper at 800 209.7263 and we’ll get in touch with her to all you back.

How to Begin

  • Assemble your cost data per CPT code (instrumentation, overhead, staffing, supplies, consumables, technology, implants, etc.).
  • Contract a rate with your surgeon and anesthesiologist and first assist if applicable.
  • Determine your markup percentage.
  • Make sure you build in business development, marketing and direct contract templates and other activities not usually accounted for in most ASCs and hospitals as this is a separate and new product you’ll be marketing, promoting, and advertising to an entirely new audience of brokers, TPAs, employers, unions, municipalities and consumers.
  • Be sure your contract with payors does not prohibit this option or say in the provider manual that the price for unbundled procedures is your price for all time and eternity. You must be able to segregate regular traditional priced surgery from this bundled price surgery and carve out this bundled-priced surgery to a different contract with different terms and conditions. 
Where to Find the Data 

You must have a handle on your costs for each case. If you know how to use pivot tables, you can create master tables for use in the pivot table.

Staffing costs

This table lists the staff involved in each procedure from walking in the pre-op area to walking out the door, post op. Break that down by the hour, and then down to minute increments.  Remember to revisit if you add a new staffer, award a raise, or you add a step in workflow that adds and changes or subtracts time. Otherwise your calculations will become worthless and inaccurate over time.

Technology costs

Using a Mako or a Hana® table? Add the cost of this and things like fluoroscopic xray, or specialty equipment not used all the time. Add on a cost per case basis. 

Medication /biologicals costs

Using opioid alternatives? High cost medications? antibiotics? Coagulation factors? Stem cells? Botox®? Don’t forget to add these in.

If you aren’t set up for hemophilia and Von Willebrand disease patients in your ASC, filter them out in your price quote verification phase. Coagulation factor costs are in the $20k to $30k price range. They may be more appropriate to manage as inpatients in the hospital. If you are negotiating with managed care plans, make an exception on your bundled case rates or face a quick and painful loss on these cases. They must be managed as exceptions!  These can be listed in the master table per CPT for the cost of supplies, but again, if they change in price or product, keep your table updated or it will be inaccurate and obsolete before you know it.

Overnight stay

Some states license ASCs for 23-hour stay while others do not. If you believe a case will routinely require 23-hour stay and you have the license for it, you’ll need to cover costs of food, beverage, and nursing care.

An optimal alternative is to transfer the patient to a local SNF for a night at a cost of about $500. If you do this, make sure you mention to your hotel partners that you need to be excused from first night post-op as soon as you know if the patient and companion will bunk in the SNF unit that first night.

If the companion will sleep at the hotel or they checked in a few days before surgery (often the case) the companion will likely welcome the option to traipse off to the hotel and relax and the reserved night will still be utilized. Then they’ll go back to the SNF to pick up your patient at discharge the next morning and recover at the hotel the remaining time in town.

Anesthesiologist / CRNA pay
The most popular way to pay Anesthesia and CRNAs in bundled-priced surgery is by the hour. Break down the contract rate to pre-op through anesthesia end time and include time for the face-to-face consult, and paperwork, not just the in-OR times. 
The meds for the anesthesia and syringe and IV supply costs are all calculated as the OR supply costs. Not in the anesthesia professional fees. (Col K)
Surgeon pay
Your surgeon will be expected to speak with the patient during initial interview for 10-15 minutes, and will be expected to speak with the hometown or referring physician for a handoff to their service. They will also be expected to offer an initial face-to-face consult on arrival, a day or two prior to surgery. Then there’s the actual time in the OR, and the post operative consult to discharge as fit to travel as applicable, and a quick courtesy handoff call to the hometown physician or follow up physician. Then there’s time for charting.  None of this should be expected to be performed without compensation. If you are bringing in surgeons from out of town a few times a month to cover a rural area, will you be paying their flights, accommodation and ground transfers around town? Will that be a separate charge? One location rents a house by the month with two bedrooms as a crash pad for these surgeons instead of paying hotel rates and resort fees, and the like. Housekeeping cost runs $60-80 per week, plus rent and utilities. Compare this to $150+ per night and the added comfort and there’s no real comparison. Groceries can be delivered or your visiting docs can eat out or order in. Buy extra sheets and towels so that the cleaning service can do the laundry on arrival and always have fresh linens available for each crash pad occupant. Roll up these expenses into your composite master worksheet for your pivot table! These all tally up as you see in Column E.

Unlike traditional billings where the surgery price includes up to 90-days of post op follow up at no additional charge, in many cases, especially those involving medical travel, we cut the episode of care down to uncomplicated follow up for a day or two post-op until the patient leaves the area, but this can also apply if the patient is local. Determine and declare your episode of care parameters and boundaries. The surgeon may then negotiate their own fee for service pricing for the additional follow up visits in their office along with supplies, casting materials, bandaging, xrays, etc.
Medical Travel Coordination
You’ll need a phone line (dedicated 800?) a desk and one or two humans. They will need training. If they leave, the new hires will need training. All these costs are incremental direct costs associated with your bundled-price surgery program. You can choose to hire this out to our concierge team or do it internally. Candidates need not be “certified” by any certifier. Most certification programs don’t cover what’s needed in skills and job knowledge. They certify appointment schedulers and little else. 

This job requires more in terms of skills, anatomy, physiology, altitude physiology, terminology, HIPAA, medical records, how to use the EMR, faxing, emailing, and travel arrangements  taking ownership of a case and customer service skills.  They must be trained in where to stop and hand off to a higher authority, rather than exceed their scope and create liability. It is not an entry level position.
 
Here at SurgeryShopper, Maria Todd has trained all our concierge team members and established the policies and procedures, protocols, standards and criteria and job descriptions for each role. These policies and procedures have been developed and refined over a period of almost 12 years. We figured out a flat fee per hour for the medical travel coordination and rolled that up into a composite rate for all team members that we account for on a per-case basis.
Financing

In order to make payment possible for most people, a no-interest financing arrangement, preferably without recourse is a great addition. Most people are going to pay something to carry the account, to a lender, a credit card issuer, or a finance company. Other means are HSA savings, employer-funded HRAs, insurance plans, and more. You don’t want to get into hot water spreading payments over more than 4 payments, and ideally, these cases pay in advance or on the day of surgery or pre-op visit.  

But here’s the thing: The finance companies who purchase the account outright take about 20-30% to cover their risk on the non-recourse arrangements. You must account for that in your pricing. One way to do this is bump up the price as a standard and give a discount for cash in full at the time of service. The lender we use charges nothing to set up your account, approves 97% of applicants, does a soft credit pull, does not report to the credit bureaus and doesn’t come back to you for recourse. Ask us about how you can get set up. 

Billing and Invoices and Receipts

For cash pay patients, you’ll need a receipt they can use for tax purposes. For employers and TPAs, you’l need to submit a UB or CMS 1500 form, with a single line item (the CPT code) and nothing else. You’ll need a contract that gives you the permission to bill this way. You’ll need a backup contingency in your contract if on occasion there are extra charges or multiple procedures. Don’t forget to figure those out and add them into your master tables.  If you allow a payer to pay later than the day of service, add in the labor, costs of follow up and revenue cycle and time value of money. 

Margins
What profit margin will you add? This is the one place where you are the king or queen of your castle. Your terms and conditions are limited by your brand value and what your market will bear and consideration of your competitive advantage and your customer’s perception of what they are getting in value, service and savings.

Attend a workshop with Maria Todd to learn more!

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August 28, 2019
St George, Utah

Nearest airports are Cedar City (CDC) and Las Vegas (LAS)

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