Anesthesia Business Consultants

Weekly eAlerts Covering Regulatory Changes, Compliance Reminders &
Other Changes in the Anesthesia Industry

Ipad menu

Anesthesia Industry eAlerts

Sent to subscribers every Monday morning, our eAlerts deliver timely updates on regulatory, legislative and practice management developments of interest to anesthesia professionals.

Complete the simple form below to subscribe.

May 7, 2018


A growing body of evidence shows that implementing a perioperative surgical home (PSH) can yield important quality improvements, operational efficiencies and cost savings for hospitals, including reductions in length of stay and readmissions.  However, many anesthesia groups have questions regarding the payment aspects of this model.  One option is the creation of a co-management agreement between the physicians and the hospital in which physicians receive both fixed and variable portions of compensation.  We offer an overview of a presentation on the monetization of the PSH at the recent Advanced Institute for Anesthesia Practice Management.

Evidence has been building about the clinical and operational value of the collaborative, patient-centered care model known as the perioperative surgical home (PSH).  The interdisciplinary PSH is gaining standing within anesthesia and healthcare as a whole, with the American Society of Anesthesiologists’ PSH Learning Collaborative now entering its third iteration (also see the article by Roseanne M. Fischoff, MPP, in the spring 2018 issue of our quarterly newsletter, Communiqué).  In our view, the model’s inherent compatibility with the goals of the Quality Payment Program’s alternative payment models, notably bundled payments, bodes well for the PSH’s, and, by extension, the specialty’s future.

However, our sense is that many anesthesiologists still have reservations about pursuing a PSH at their institutions, and that much of this hesitation stems from concerns regarding payment.  It is hard to argue with the potential clinical and operational benefits of assuming expanded leadership and responsibility for patient care in the innovative and value-based fashion that defines the PSH.  But implementing a PSH is also a major time and energy commitment.  How are anesthesiologists and other clinicians compensated in this model, and is this compensation reasonable and fair?

A presentation on monetization of the PSH at the recent Advanced Institute for Anesthesia Practice Management (AIAPM) in Las Vegas shed some light on this issue.  Rob M. Shakar, MD, an anesthesiologist at the University of North Carolina School of Medicine and New Hanover Regional Medical Center, Wilmington, NC, said that what has worked in implementing successful PSHs across several service lines at his institution (and for several other health systems as well) is the use of co-management agreements between the physicians (anesthesiologists and surgeons) and the hospital.

Co-management agreements are contractual arrangements through which hospitals engage independent or employed physician groups to manage the quality aspects of one or more service lines.  (The Office of Inspector General’s Advisory Opinion on one cardiology practice’s co-management agreement provides useful background.)

Generally, co-management agreements are structured as contracts between a hospital and a separate management company that may be wholly owned by the physicians or co-owned by physicians and the hospital itself (Physicians Practice, August 24, 2014).  Dr. Shakar noted that co-management agreements can be used to engage anesthesiologists and surgeons in service-line-specific as well as OR-wide PSH initiatives. 

Co-management agreements are structured to provide both fixed and variable portions of compensation.  A disinterested third party—a fair market valuator—formulates a value for what the physicians will manage.

Physicians receive fixed compensation for clinical care management, committee participation, strategic and budget planning, day-to-day operations and staff oversight, and materials management.  They also receive variable incentive payments based on how well they meet specific pre-established performance targets that are aligned with the hospital’s goals.  These incentive payments are tied directly to results in operational efficiency, quality, clinical outcomes, cost savings and program development.  The performance-based incentives that are part of the co-management agreement motivate physicians “to want to work harder on top of what their standard clinical practice is,” Dr. Shakar said.

“It’s a flexible structure. It’s not ‘one and done,’” he added.  “Our initial agreement is for three years, and each year we evaluate the metrics.  You don’t want to find a metric you’re going to top out on; you want to find something that’s sustainable.”

At Dr. Shakar’s institution, the journey that eventually led to a co-management agreement with the hospital began when the anesthesiologists, orthopedic surgeons, hospitalists and hospital administration joined forces to develop a PSH for the total joint replacement program.

The PSH saved the hospital $4.2 million in its first year through such PSH and quality improvement cornerstones as the standardization of intraoperative care, use of an enhanced recovery after surgery (ERAS) protocol, patient risk stratification, prehabilitation that typically began soon after the decision to have surgery was made, coordinated care transitions, early discharge planning, development of an educational “Roadmap to Surgery and Recovery” for patients, immediate postoperative feeding and ambulation, and multimodal pain management with minimal use of narcotics.

Cost savings came from significant reductions in case cancellations, use of OR time, length of stay, complications, transfusions, readmissions, discharges to skilled nursing facilities and supply costs per case, as well as from increases in first case on-time starts and the number of total joint procedures performed each month.

The physicians used these results to propose the development of a three-year co-management agreement with the hospital for the total joint program.  The hospital has also since implemented a colorectal surgery PSH in 2016 and expanded across the bariatric, spine, coronary artery bypass graft (CABG), gynecologic oncology and nephrectomy service lines as well.  Operational efficiencies and quality improvements achieved through the PSH in various service lines enabled the hospital to save 1,291 bed days in 2017.

The PSH has become the vehicle through which the hospital incentivizes physicians and gains buy-in for its Hospital Quality and Efficiency Programs (HQEPs) and works toward the Triple Aim of better outcomes and improved patient satisfaction at reduced cost.

In 2013, when Dr. Shakar and his colleagues saw that anesthesia was going to receive only two percent of the total payment for an episode of care under bundled payment arrangements, “we knew we needed to show that we could help achieve the goals of population health through the PSH.”  They then took the measurable results they achieved to drive a co-management agreement for the service line.  “We believe the PSH is the best way to show value to the hospital,” Dr. Shakar said.

The ASA PSH Learning Collaborative provides resources and assistance to program participants with co-management agreements and other payment arrangements for the perioperative surgical home.

With best wishes,

Tony Mira
President and CEO