The Future As Seen From the Anesthesia Administration Assembly Conference


March 28, 2011

Anesthesia Business Consultants
is proud to announce
a series of one-hour lectures (webinars)

Jointly sponsored with
Tulane University School of Medicine, Department of Anesthesiology
The Center for Continuing Education, Tulane University Health Sciences Center

Webinar 1:  The Fraud and Abuse Environment for Anesthesiologists
Speaker:  Abby Pendleton, Esq., The Health Law Partners, LLC
Tuesday, April 26, 2011, 5:00 - 6:00 p.m. CST

This activity has  been approved for AMA PRA Category 1 CreditTM.
You can register for this program by emailing This email address is being protected from spambots. You need JavaScript enabled to view it. . Log in information will be forwarded to you prior to the event.


This year’s Medical Group Management Association-Anesthesia Administration Assembly (MGMA-AAA) Practice Management Conference took place in Baltimore between March 20 and March 23. To those readers who have not yet attended an AAA conference, we highly recommend that you place it on your agenda for 2012. The conference has always been valuable in moving anesthesia practice administrators to the next level of competence and the 2011 version was typically successful in covering billing, compliance, compensation and people management. It was exceptionally strong in preparing attendees for the new environment in which single specialty, independent anesthesia groups will integrate themselves into health systems. Can you spell “Accountable Care Organizations?”

Yes, ACOs are the topic again. The concept remains very broad and indefinite, occupying just a few paragraphs of the 2,000-page Affordable Care Act (ACA). Because it is so broad and indefinite, it has generated hundreds of health policy articles, many of them very thoughtful, since the term “accountable care organization” first surfaced in a meeting of the Medicare Payment Advisory Commission in 2006. Integrated Delivery Systems (IDSs) like Geisinger or Intermountain Health are already functioning as ACOs in many respects. Most of the healthcare industry is waiting for the federal government to publish the regulations that will describe the type of ACO that it plans to launch in 2012. The regulations are also expected to indicate how providers can participate in Medicare shared savings programs when the federal anti-kickback law, the Stark law prohibition on physician self-referrals, and the Civil Monetary Penalty statute, which bars payment to physicians to limit services to Medicare or Medicaid patients, are all serious impediments. The buzz from Washington is that the proposed regulations are going to appear any day, and when they do, yet another Alert will feature ACOs.

The question on our minds is whether anesthesiologists should be doing anything to prepare for the proliferation of ACOs, and if so, what.

While few anesthesia groups will be in a position to create and develop ACOs, they should prepare to play an important role in the ACOs that hospitals and health insurers will launch. Below is our first set of suggested preparatory steps.

1. Understand ACOs in the ACA

Understanding just what the ACA provides regarding ACOs is generally useful, but understanding what the law does not require will allow anesthesiologists to know whether the inflexibility they may encounter in negotiations is based on the law or on business goals. (As an example of strategic distortion of the law, recall the hospital and ASC administrators who used to insist that the anti-kickback law prevented them from paying for medical director services or idle staff time.)

  • ACOs are one form of the “shared savings” mandated by the ACA. Other forms are patient-centered medical homes and episode of care/bundled payment models.
  • The ACA definition of an ACO is operational rather than structural: “Groups of providers of services and suppliers meeting specific criteria may work together to manage and coordinate care for Medicare fee-for-service beneficiaries through an ACO. ACOs that meet quality performance standards are eligible to receive payments for shared savings.”
  • The statute only requires the Secretary of Health and Human Services “to establish a shared savings program that promotes accountability for a patient population and coordinates items and services under Medicare parts A and B, and encourages investment in infrastructure and redesigned care processes for high quality and efficient service delivery.”
  • Under the shared savings program, ACO participating providers will continue to be paid by Medicare on a fee-for-service basis. If annual Medicare payments for the ACO patients are a set percentage below past averages, and the quality performance standards are met, the ACO will be eligible for part of the differential in overall Medicare spending on its patients.
  • The Department of Justice and the Federal Trade Commission will have to give providers assurance that they will not be prosecuted for violating the antitrust laws through shared savings programs. Similarly, the IRS will need to explain how nonprofit hospitals will be able to participate.
  • ACO models, present and potential, lie on a continuum ranging from ad hoc contractual relationships for the coordination of care through Physician-Hospital Organizations and multispecialty groups to fully integrated healthcare delivery systems.
  • The concept of accountability, i.e., the transfer of financial risk to the providers of care, is going to permeate private payment systems even in the unlikely event that Congress repeals or denies funding for the ACA.

2. Align Your Group With Future Partners

What was once the desirable state of “independence” of providers has become the dangerous “fragmentation” of health care. Fee-for-service is obsolescent, to be replaced by payment methods that reward coordinated care and accountability, not just for one’s own results but also for those of the other providers in one’s delivery system.

Anesthesiologists are already very familiar with the benefits of strategic partnerships and alliances with hospitals and surgery centers and those institutions’ prime customers, the surgeons. It is because they can add value that anesthesia groups have been so successful in obtaining hospital stipends. A hospital gearing up to launch an ACO should be ready to discuss sharing the savings with the anesthesiology group if the group leadership has demonstrated that it is willing and understands how to coordinate high quality, cost-effective perioperative services.

3. Make Sure That the Infrastructure is Adequate for the Task

Your information systems and your revenue cycle operations must allow you to track and analyze income, practice costs and performance relative to quality measures. All of the ACO participants must be able to share patient records; care coordination between the various providers depends on accurate and timely information flow. If the ACOs that you might consider joining propose to implement episode of care payment methodologies, you will need to be able to price out your own case rate for all the services that you provide across the episode.

The partners and employees of the anesthesia group, both clinical and administrative, must be committed and equipped to achieve the goals.

4. Decide on the Initial Cost-Savings Measures You Will Implement

Anesthesia knows how to run an efficient OR and schedule cases and staff so as to produce greater throughput and higher net earnings. OR efficiency can save the hospital a good deal of money.

The “shared savings” of the Medicare program returns the dollars saved not just to the providers, but in part to Medicare itself. In the Medicare model, there would not be a penalty for costing the program as much as previous averages, but the ACO participants would forego the savings that they could have shared.

ACOs are intended to reduce spending on unnecessary or avoidable health care services while maintaining high quality standards. The concept would shift the economic risk of preventable complications and readmissions, for example, and of extra inpatient days from the patient or third-party payer to physicians and hospitals. According to the Advisory Board, 25 percent of total potential savings would come from reductions in complications and length of stay (LOS). The greatest source of potential savings would be the standardization of medical devices (55 percent), with reductions in ancillaries and other supplies yielding 20 percent of the total.

In a tour-de-force presentation entitled “Healthcare Reform: How Will We Be Paid in the Future,” Stanley W. Stead, M.D., M.B.A. identified several ways in which anesthesiologists can help contain spending while improving clinical quality:

1. Preoperative consultation and medical intervention
  • Reduced (LOS)
2. Pain management techniques
  • Early ambulation
  • Fewer thromboembolic events
  • Reduced LOS, morbidity and mortality
3. Intraoperative techniques to control blood loss
  • Reduced use of blood products
  • Reduced infection rates

Not on the list in the table above, but implicit, are the expenditures avoided through compliance with the Surgical Care Improvement Project (SCIP) and Physician Quality Reporting System (PQRS) measures. Avoiding surgical wound and catheter-related bloodstream infections saves money as well as patient well-being. This brings up a very important point made throughout the AAA conference: reporting on “quality” is no longer enough to impress negotiating partners. High quality is expected. The payer and policy-maker worlds are now focused on costs.

5. Figure Out the Dollars

Before beginning to negotiate your role in a hospital-led ACO, you should be able to place a dollar value on the savings that you expect to generate.

An article in the Archives of Internal Medicine (A Population-Based Study of Anesthesia Consultation Before Major Noncardiac Surgery, Arch Intern Med Vol. 169 (No.6), Mar. 23, 2009) showed that preoperative anesthesia consultations reduced LOS by 0.35 days. Multiply your hospital’s cost of an inpatient day by 0.35 to show the dollar savings that accrue – or will accrue – from your preoperative clinic. If you don’t have access to your hospital’s cost data, as may well be the case, use average values from sources such as the National Hospital Cost Utilization Project Core Data (Agency for Healthcare Research and Quality). According to that data set, the average cost per patient day was $1,369 in 2008. Multiplied by 0.35, the savings to the hospital would be $479.14.

Compare your group’s complication rates by procedure to national or regional benchmarks. Search the literature to determine the costs of complications – or ask a friendly hospital administrator for the data.

Make sure that you have in hand the best available anesthesia cost data: MGMA’s Cost Survey for Anesthesia Practices 2010 Report Based on 2009 Data. To obtain a discount on this year’s Cost Survey Report, complete the survey for your own practice. You don’t need to be an MGMA member. Contact MGMA’s Survey Operations team at 877.ASK.MGMA (275-6462), extension 1895, or by e-mail at This email address is being protected from spambots. You need JavaScript enabled to view it. . The deadline is April 22nd–you have several weeks. The survey data are obviously strengthened by the participation of each additional practice. We encourage you to contribute your own data.

With best wishes,

Tony Mira
President and CEO