Is your Anesthesia Group Worth its Subsidy?
Anesthesia subsidies – this is a hot topic of discussion for many hospitals and anesthesia groups today. Anesthesia groups are seeking to maintain or increase their subsidies to compensate for supply-demand imbalances and decreasing reimbursements. Hospitals, focused on overall profitability and stakeholder satisfaction, are seeking to decrease subsidies while improving their return on investment. Anesthesia subsidies are often the hospital’s single largest provider-related line item cost. But a properly negotiated anesthesia contract can increase hospital revenues and reduce overall costs, making the anesthesia subsidy well worth the investment.
So, how can hospitals negotiate optimal contract terms?
Hospital administrators should first understand what drives the need for anesthesia subsidies(1) and evaluate the impact of these drivers in their own hospital setting:
1. Fair Market Value Compensation: Anesthesiologist compensation has steadily increased over the last 10 years, reportedly as high as $423,500 in some areas/specialties(2), due to basic supply and demand factors – not enough anesthesiologists to meet current anesthesia needs. Hospital administrators should compare their own anesthesiologists’ compensation with the local and national averages, and introduce performance-based incentives.
2. Anesthetizing Locations: The number of anesthetizing locations a hospital system requires can have a direct impact on anesthesia subsidy requests. With each added location, O.R. staffing costs increase, yet the number of surgical minutes performed per location typically declines. A reduction in surgical minutes results in a reduction in productivity and billable hours per anesthesia provider. While there are strategic reasons for increasing the number of anesthetizing locations, hospital administrators should consider its impact on anesthesia subsidies.
3. Staffing Matrix: The staffing model utilized by the anesthesia group, whether it’s a physician-only or some mix of anesthesiologists and CRNAs, has a direct impact on anesthesia costs and subsidy requirements. An appropriate staffing matrix will reflect the unique variables of each anesthetizing location, including case volume and complexity, subspecialty coverage requirements, and after-hours workload.
4. Billing/Contracting Performance: Anesthesia revenue cycle management is a critical component in any subsidy negotiation. Hospital administrators need to regularly monitor for billing performance, including accurate coding and documentation, payer negotiations, denial management, and collection process efficiencies.
By evaluating these four drivers, hospital administrators and anesthesia group leaders may find opportunities to increase collections and reduce costs, allowing for a natural reduction in subsidy requirements.
But as with any subsidy payment, hospital administrators should also define their expectations for value and return on investment. Hospitals should introduce incentives to anesthesiologists to motivate their support of hospital priorities. A true hospital-anesthesia partnership, backed by performance metrics and strong anesthesia leadership, can improve patient care, increase surgeon satisfaction and surgical volume, optimize O.R. efficiency and improve the hospital’s bottom line - a Win-Win for all!
Analyzing anesthesia subsidies and O.R. performance is a complex process, requiring subject matter expertise and peri-operative experience. Third-party consulting companies bring to the hospital the resources and expertise to set goals, identify opportunities and drive change. Experts can add validity to analysis and work with both hospital executives and staff to implement change.
Healthcare Performance Strategies (HPS) is a consulting services company delivering anesthesia and O.R. solutions to hospitals. Its core management team has more than 120 years of combined anesthesia and O.R. experience. With experience in both clinical and business aspects of healthcare, HPS drives bottom line results by aligning hospital and provider incentives and optimizing performance. HPS data products link peri-operative process with efficiency and financial performance, providing fact-based decision support. HPS is a division of Healthcare Performance Companies. For more information, visit Healthcare Performance Strategies’ website at www.hpsllc.com.
Elfriede Lynch-Willson, Corporate Marketing Director, Healthcare Performance Companies, can be reached at (954) 566-7590 or info@drivinghp.com.
Resources
(1) Healthcare Performance Strategies White Paper The Four Steps to a Successful Anesthesia Subsidy Contract Negotiation, available at http://www.hpsllc.com/pubs/anesthesia-contract-negotiations.pdf
(2) Robeznieks, Andis (2010, July 19) “Slow Growing,” Modern Healthcare, 22