Chronic Pain Management Update
Many of our clients have not made a significant commitment to the management of chronic pain, but it is a constant topic of conversation during strategic planning sessions. For many anesthesiologists, chronic pain is perceived as a logical line of care extension. Afterall, the specialty of anesthesia focuses on spinal and nerve anatomy and the use of powerful analgesics. The problem is that the management of chronic pain patients presents an entirely different set of challenges from surgical and obstetric patients. Moreover, the management requirements of a chronic pain practice are entirely different from those of an anesthesia practice. Today's question focuses on the impact of the dramatic events of the past few years on chronic pain. In other words, is the potential of getting more involved in chronic pain an option that practices should still be considering?
Pain Paradigms
The first thing to note is that there are three modes of chronic pain. Some providers perform a limited number of nerve blocks during free blocks of time. This "block shop" approach can be reasonably profitable on a per-hour basis but has limited potential, especially given CPT requirements that patients undergoing nerve block treatments should have an initial evaluation appropriately documented and billed with a visit or consult code. Then, there are practices that have a dedicated clinic and team of chronic pain providers who are responsible for a much more comprehensive scope of services. Sometimes, this type of practice is provided at the request of the facility in a clinic provided by the hospital. This is probably the most typical anesthesia group pain practice. Sometimes, the pain providers eventually break away to set up a free-standing pain clinic. This can be a risky proposition, but a well-managed clinic can be quite profitable.
A Look at the Numbers
We reviewed the activity for six chronic pain practices across the country from 2018 to 2022. These are all hospital-based practices managed by multiple providers who spend some portion of their time in the pain clinic. The activity of these practices is representative of the sub-specialty as a whole. Our focus was on volume of activity, which we divided into patient workups and visits, procedural interventions and the use of fluoroscopy and ultrasonic guidance (USG).
The volume of patient encounters, new and established patients, was clearly impacted by Covid in 2020 but recovered substantially in 2021 and appears to be on a steady rate of increase in 2022. The average practice saw volume drop 15 percent in 2020, although the drop was most significant from April through July and started to recover at the end of the year. By the end of 2021, most practices were back to 97 percent of their 2019 volume.
Kinds of Encounters
Revenue potential for chronic pain practices is determined by the number of patient encounters multiplied by the average yield per encounter. While it is easy to determine the average yield per patient encounter by dividing the total collections received by the number of encounters performed, it must be noted that this is an aggregation of various factors. Patient encounters fall into three categories, each with very distinct revenue potential. The initial patient workup is billed as a new patient visit or consult. Procedural encounters involve the administration of one or more procedural intervention and may involve the use of fluoroscopy or USG and are the most profitable encounters. Non-procedural follow-up visits are billed with subsequent visit codes and are the least profitable of all encounters. As a result, the mix of these types of encounters can dramatically impact the net yield per encounter and the overall profitability of the practice. It is this distinction that encourages many practices to use non-physician providers for much of the follow-up activity.
Revenue Potential
The overall impact of these various factors has been dramatic. As the chart below indicates, the average practice saw revenue drop nine percent from 2018 to 2019, 23 percent from 2019 to 2020, with a recovery of 30 percent into 2021. However, there was a further drop of 14 percent in 2022. While it is difficult to predict what the overall net impact will be in 2023, it is safe to assume that the average yield per encounter will continue to gradually erode as a result of payer mix changes and, especially, an increasing Medicare population.
And with this, we return to the initial question, does it make sense for anesthesia practices to explore a possible expansion into chronic pain? The answer is that it depends. Although the revenue potential of chronic pain is declining, it may still offer potential revenue enhancement for a practice where surgical volume is declining and where the impact of payer mix changes is most dramatic. If you have any questions, please contact your account executive or reach out to us at info@anesthesiallc.com.