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Anesthesia Practice Cost and Revenue Data

ANESTHESIA PRACTICE COST AND REVENUE DATA

April 4, 2011

Finally...Some More Information About the ACOs

On Thursday, March 31, 2011, the Centers for Medicare & Medicaid Services (CMS) provided the health care community with some much needed guidance by publishing its Proposed Rule regarding the Medicare Shared Savings Program and its Accountable Care Organizations (ACOs). There is a 60-day public comment period and CMS has encouraged members of the public to submit comments for consideration while the final regulations are being developed. During that period, CMS will hold a series of open-door forums and listening sessions to help the public understand what it proposes to do regarding the ACO program.

The Proposed Rule was one of several helpful publications simultaneously issued by Federal agencies, including the U.S. Department of Health and Human Services Office of Inspector General, the Federal Trade Commission, the Department of Justice and the Internal Revenue Service, in a coordinated effort to address barriers and resolve ambiguities with respect to the operation of the Shared Savings Program under health care fraud and abuse, anti-trust and tax exempt laws. Additional information regarding each of these developments and the Proposed Rule itself can be found at http://www.cms.gov/sharedsavingsprogram/.

For the past year, despite uncertainly surrounding federal health care reform, health physicians have dedicated tremendous resources to building the strategic relationships and corporate structures necessary to thrive under a new federal health care reimbursement regime designed to pay, more than ever before, for value. ASA put in place a dedicated ACO Task Force, which has its own section on the ASA website (www.asahq.org). Many of these efforts have been focused on or preparing to develop or participate in organizations poised to become ACOs, which will focus on patient-centered planning, care coordination, appropriate and beneficial data sharing, evidence-based medicine, and other key components to yield cost-savings through the efficient delivery of high quality health care services.

The Proposed Rule provides important new information regarding the payments that ACOs will receive from CMS. Notably, the Proposed Rule would not only allow ACOs to receive a share of the cost savings that it generates based upon a benchmark set by CMS but would also require ACOs, at least eventually, to accept downside risk by requiring the ACOs to repay Medicare expenditures above the CMS benchmarks. The Proposed Rule discusses two types of payment models: (1) “one-sided” models under which ACOs would not accept risk and (2) “two-sided” models under which ACOs would be accountable for and share in any losses. CMS has proposed that ACOs initially either enter into a two-sided model with the Shared Savings Program, or, alternatively, enter into a one-sided model and then transition to the two-sided model after two years of participating in the Shared Savings Program. Those ACOs that initially elect the two-sided model would be eligible for higher sharing rates under the Shared Savings Program.

Within its almost 500 pages of text, the Proposed Rule sets forth an abundance of specific requirements that the ACOs will likely need to satisfy. As an example, the Proposed Rule promotes transparency by requiring providers to notify patients if they are participating in an ACO and to make explicit that the patient’s data may be shared with the ACO. Furthermore, the Proposed Rule would require ACOs to publicly report certain aspects of their performance and operations.

The health care community is just beginning to digest the Proposed Rule and analyze its implications. We will be publishing more information on the newly issued federal guidance surrounding the Shared Savings Program and ACOs within the next few weeks.


Whether you are negotiating a contract or developing a new compensation model – or preparing to participate in an ACO – you need evidence to support your business decisions. You may derive information from a number of different sources including colleagues, conferences, industry journals and internal information systems as well as external benchmarking reports. All resources complement one another yet few match the credibility of the Medical Group Management Association’s annual Cost Survey for Anesthesiology and Pain Management Practices (conducted in collaboration with the American Society of Anesthesiologists, and featured in a number of presentations at the recent MGMA-Anesthesia Administration Assembly [AAA] Annual Conference).

The MGMA Cost Survey report contains a wealth of information designed to meet the needs of today’s professional administrators – not just anesthesia practice CEOs and administrators, but also hospital, surgery center and even health plan administrators. It is familiar to many managers, executives and consultants. Everyone who engages in contract negotiations or strategic planning for anesthesia services should be aware of this resource. You may gain insights from a variety of performance metrics including:

  1. Provider Compensation
  2. Production (ASA Base and Time Units)
  3. Staffing Costs and FTE
  4. General Operating Costs (such as professional liability insurance)
  5. Profitability
  6. Days Gross FFS Charges in A/R
  7. Stipends per Hospital/Anesthetizing Location

MGMA-AAA and ASA collaborated to determine the most significant drivers of anesthesia practice performance. As a result, the data are segmented into several meaningful categories such as size (FTE physicians), staffing model (care team versus physician only) and geographic region as well as the level of governmental payer revenue relative to the total practice revenue. This means you can identify more discrete comparisons and make better decisions. If you are considering whether to change your staffing model, for instance, the data in Figure 1 below could validate and place a benchmark value on your sense of the differential in net revenues when the ratio of CRNAs/AAs to anesthesiologists changes. Supplement that information with the geographic differences shown in Table 1, and it is clear that a West Coast anesthesia practice in which the physicians never or rarely medically direct nurse anesthetists should not be expected to be generating the same income as a Southern practice in which the anesthesiologists normally oversee four concurrent cases.

All of the data cited here are from the most recent Report, which was published in 2010 based on 2009 data. Some of the values are much more robust than others, based on the number of respondents for each question, and their geographic locations. No other reported survey results represent as many anesthesia practices as does the MGMA Cost Survey Report.

Figure 1

 

Table 1

Collections for Anesthesiologists' Professional Charges by Geographic Section
Eastern Midwest Southern Western
Median Median Median Median
$565,730 $606,393 $744,000 $437,165

These external benchmark data may be deployed in a number of different ways. Consider the activities that have a significant impact upon the group’s ability to provide quality and cost-effective care while maintaining practice profitability. On the cost side, it is intuitively apparent that larger groups should benefit from the efficiencies of size, and the survey bears this out (Table 2):

Table 2

Total Operating Cost as a Percentage of Total Medical Revenue
10 or Fewer
FTE Physicians
11 to 30
FTE Physicians
31 or More
FTE Physicians
Median Median Median
12.38% 11.13% 10.31%

You may be in the midst of contract negotiations. Data contained within the MGMA report may be used to bolster your position in these efforts. For example, ASA base and time units may be used to measure productivity and thereby be deployed to calculate figures such as total medical revenue per ASA unit. In turn, the Cost Survey report provides external benchmarks that allow comparisons. Armed with this information you may easily calculate expected total medical revenue (MGMA’s total medical revenue per ASA unit benchmark multiplied by your practice’s ASA unit production) versus your actual total medical revenue. This may indicate a shortfall relative to your peers and aid in advocating for additional for remuneration for services and coverage. See Table 3 below for an example.

Table 3: National Average and Actual Revenues

Practice Data
Actual Revenue $4,062,500      
ASA Units 125,000      
Rev/Unit (Including
Medicare/Medicaid)*
$32.50      
 
MGMA Benchmark
Rev/Unit
 
$36.48
     
 
Practice
Production
125,000 Units
Multiplied
By
x
MGMA Median
Rev/ASA Unit
$36.48
Equals
=
Expected
Revenue
$4,560,000
 
Expected Revenue
Actual Revenue
$4,560,000
$4,062,500
     
Shortfall $497,500      

* While the MGMA-AAA Cost Survey Report gives the median revenue per unit across all payers, with Medicare and in some states Medicaid dragging down the statistics, many anesthesia groups use the managed care conversion factors reported annually in ASA’s commercial fee survey for a similar comparison, or for use in payer negotiations. The national medians in the 2010 ASA survey ranged between $60.77 and $64.00. Regional statistics vary, of course. (Byrd JR, Singh L. Survey Results for Commercial Fees Paid for Anesthesia Services – 2010. ASA Newsl. 2010; 74(10):44-47).

The MGMA Cost Survey report retails for $560 (to non-MGMA members), but any anesthesia administrator, MGMA member or not, can obtain a free copy of the results of this year’s survey by completing the questionnaire for your practice now. Beyond the cost savings, the benefits of participating include obtaining an online ranking report that compares your practice’s data to that of your peers, and receiving the survey data up to six weeks before they are available to non-participants for purchase.

To complete the survey before the deadline of April 22, 2011, go to MGMA’s online survey portal at www6.mgma.com. Once you register with the site, you will locate the 2011 Cost Survey Questionnaire under the “Available Surveys” section heading. Many administrators choose the option of printing the online questionnaire, collecting the data offline, and the returning to the survey to enter the data into appropriate fields.

The information for the survey will come from different sources within your practice. Much of it may be entered directly from your Income Statement. The questionnaire asks for data such as Revenue; Staffing FTE and Cost; General Operating Costs, Provider FTE and Cost; as well as various demographic data points. If you have any questions, contact the MGMA staff at 1-877-275-6462 Ext. 1895 or This email address is being protected from spambots. You need JavaScript enabled to view it. .

We are giving you the survey participation information again, and strongly encouraging you to complete the questionnaire, because it is important to have as many responses as possible. We use the Cost Survey report ourselves and we know that you will find the information valuable too. Enough said!

Sincerely,

Tony Mira
President and CEO

 

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
and
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.