January 26, 2009

Anesthesiologists’ relationships with their hospitals were the focus of several excellent presentations at this year’s ASA Practice Management Conference, from which we have just returned. Contracting with hospitals, perennially a hot topic, is commanding even greater attention in this time of economic contraction. ABC Vice Presidents Jody Locke, Craig Van Valkenburg, Jackie Popiela and Karin Bierstein covered numerous sessions and hope to extend some of what they learned to those of you who were unable to attend the Conference.

The Constant: Be Your Hospitals’ Willing Partners

Knowing and understanding your hospital and sharing its goals are more important than ever to a group’s longevity, said John F. DiCapua, M.D., Chair, Department of Anesthesia at North Shore University Hospital and Long Island Jewish Medical Center (Manhasset, NY) in his lecture entitled “Making Your Group Indispensable.”

This means respecting the pressures on the hospital and making its problems your problems. Recognize that hospital margins in general have now dipped into the negative numbers while uncompensated care has increased by as much as 8 percent. Physicians’ requests for income support (stipends) have increased. Meanwhile, of course, the financial markets including government bond issues have shrunk in the hospital sector along with virtually every other sector. It is not surprising that more hospitals are combining efforts with anesthesia management companies to maximize revenue opportunities for anesthesia departments. The most significant of these advantages represent “added value” that anesthesiology groups can also offer, particularly if the groups are (or are becoming) large enough to benefit from economies of scale: leadership, effective management, and coverage.

Anesthesiologists may not be in a position to help the hospital with its funding, but the group may be able to bring in new revenues by partnering with the hospital to develop and/or grow pain management services.

There are cost saving strategies that benefit both the practice and the hospital: if the case cancellation rate is high, for instance, and you are not already providing the type of preoperative screening that will reduce the number of cancellations measurably, this might be a good time to consider that option.

You can make yourselves indispensable or at least prized by managing your group and the O.R. supremely well. As noted in many other lectures at the Conference as well, you can play a significant role in ensuring that the hospital meets some of the quality and performance standards on which some of the hospital’s third-party payment may depend. You can also help the administration in non-traditional areas such as championing initiatives to reduce unnecessary spending or fostering compliance with accreditation standards, e.g. those of the Joint Commission. Be open to new clinical and operational ideas from the administration or other sources.

Hospitals may have a surprising dearth of data needed for sound management. it is imperative that anesthesia groups not only have access to real-time data, but more importantly are able to translate the data into powerful information which they can provide to hospital administration in an ongoing effort to reach a common goal. This information should include reports such as productivity, OR utilization and efficiencies, market and payor analyses, pro-formas for evaluating business expansion, and evaluation of current service line, to showcase value-added resources to allow the hospital to realize full benefits of the partnership with their anesthesia group. The anesthesiology group should be capable of showing administration data on the numbers and types of cases performed by the individual surgeons – believe it or not, all hospitals do not already collect this information. Be creative in identifying hospital weaknesses for which you may have a solution. You might even be able to be the “good brokers” when different services butt heads, if you have established your credibility with physicians in the relevant specialties as well as with the hospital.

If you do any of these things, be sure to provide the hospital, your partner, with data showing the value that you have added.

Changing the Framework through Which Hospitals Value the Group

For those among us who like to reason inductively, Stan Stead, M.D., M.B.A. of the Stead Health Group (Encino, CA) presented a masterful explanation of the need to conceptualize anesthesiology services as a differentiated service and not as a commodity – and gave a concrete example of how one group did successfully differentiate itself. The measure of success there was stipend support above the 75th percentile.

A commodity is generic, not differentiated by quality. Citing examples such as generic pharmaceuticals and silicon chips, Dr. Stead argued that anesthesiologists have commoditized themselves; the services that they provide are measured quantitatively rather than qualitatively. Hospitals contract for hours of coverage. Health plans pay a set conversion factor for units of service. Clinicians are valued in terms of hours worked so that it is possible to think of an anesthesiologist as a fractional being, e.g. a 3.5 FTE. The quantification permits benchmarking against averages and percentiles for the specialty.

We are used to thinking of benchmarking as a valuable tool in negotiations for compensation – but market forces will drive the averages down if anesthesiology services are valued on the numbers alone.

The better alternative is for anesthesiologists to differentiate their services by “branding” so that the total value of a particular group is more than the sum of its measurable parts. By “branding” Dr. Stead means more than a name or logo: “A brand creates a symbolic embodiment of all the information connected to the service and creates associations and examples.”

And here comes the concrete example. Recognizing that patients and physicians select hospitals on the basis of nonclinical factors such as convenience and amenities, and that patients place great emphasis on information and communication, the group in the example branded itself in three domains: good communication, reinforcement that its physicians were “caring,” and pre- and post-operative availability. The group:

1. Gave patients “simple, but fun information on stressful subjects” including privacy, awareness and fees;
2. Spent time with each patient and family, with any anesthesiologist stopping by to talk throughout the day;
3. Contacted the patient through such means as get well cards sent before the bill, which itself was explained the services provides and the expected insurance payment in addition to the price, and
4. The anesthesiologist personally called the patient or family – after the bill should have been received – and answered questions, including any about the bill.

The result of these communications, combined with consistently outstanding service, was requests for this particular anesthesiology group from patients and surgeons alike. The tangible reward from the hospital was the opportunity to participate in the planning for a new facility – and, as noted above, stipend support exceeding the 75th percentile.

Legal Limits on Compensation for Anesthesiologists’ Services

Judith Jurin Semo, Esq. gave the third presentation in the “Added-Value Services” series. Ms. Semo’s lecture “But Can You Get Paid For It?” was a necessary, albeit painful, summary of federal statutes and regulations that inhibit gainsharing arrangements.

In these incentive compensation arrangements, the physicians help the hospitals control costs and receive a share of the savings. For example, incentives to reduce O.R. turnover time could be seen as rewarding anesthesiologists for reducing time spent with patients, which would violate the Civil Monetary Penalty statute. Anti-kickback and Stark self-referral prohibitions also come into play.

We are all waiting to see whether and how CMS finalizes its November 2008 proposed rule creating an exception from Stark enforcement for gainsharing arrangements that meet 16 (!) criteria. CMS’ decision is expected in several months. Until then, consider this treacherous area in flux. We will publish information as it develops.

ABC clients with questions about the above synopses, or who are interested in how our consulting services might help you partner with your hospitals and negotiate compensation, should contact us directly.

Kudos to the American Society of Anesthesiologists on a superb Practice Management Conference, which included sessions on compliance, “practice management M&M,” perioperative patient registries (a new frontier in quality and performance measurement, and payer perspectives. ABC is proud to provide financial support for this annual event and we strongly encourage you to attend the 2010 Conference.