Managing Risk in an Anesthesia Practice

Summary: The practice of anesthesia is preeminently clinical, but few practices can sustain themselves without adhering to sound financial and contract management principles. What are the risk areas faced by today's anesthesia groups and how can they be safely navigated? Addressing these concerns is more imperative than ever.

Anesthesia providers have been trained to manage the risks associated with a patient's response to the trauma of surgery. They are familiar with virtually all the decision trees necessary to guide them safely through both anticipated and unanticipated physiologic responses to the entire surgical experience. It is because of this training and the timely and reliable data provided by all the monitors, that morbidity and mortality is so low in the United States. Many providers even like to remind patients that they are at greater risk driving to the facility than undergoing anesthesia. The problem is that the same tools and skills that allow for consistent management of surgical and obstetric patients do not ensure consistent management of the practice as a whole.

Is There a Manager in the House?

Today's economic reality makes it necessary to transition from the physiological to the financial. It is no longer sufficient to limit one's focus to what happens within the four walls of the operating room; the success or failure of a practice is now determined by what happens outside the operating room, and even outside the facility. It has often been said that the greatest challenge facing today's anesthesia practices is the ability to generate enough revenue to recruit and retain a sufficient staff of well-qualified providers to meet the service expectations of the facility.

Let us not minimize the challenges of providing consistent anesthesia care; it is just that managing the myriad dimensions of a clinical practice is often unique and unpredictable. While the impact of administering a particular agent to a patient should be fairly predictable, choosing an appropriate management strategy is not always so. In fact, given the interactions between a practice and its customers, common-sense solutions are often counter-productive. The path of least resistance is often the most perilous.

Management Metrics

Three aspects of practice management can be particularly frustrating to anticipate and manage: case volume, payer mix and hospital financial support. Consider the overall impact of the Covid pandemic on anesthesia practices over the past two years. Not only did case volumes drop significantly from April 2020 to the end of the year; but, in many cases, payer mix also changed as Medicare patients refrained from undergoing elective procedures, such as colonoscopies. In some cases, there was governmental relief, but even so, most practices had to make dramatic adjustments to their staffing. We now see that this had some long-term implications such as a national anesthesia manpower shortage. The Covid pandemic was an example of practice risk that few practices had anticipated, and which caused many to fail.

Managing Relationships

Perhaps the most difficult challenge has been the relationship with the facility. While there was a time, decades ago, when anesthesia practices generated enough fee-for-service revenue to cover the cost of the necessary staff, those days are long-gone. More than 75 percent of all hospital-based practices now need some level of financial support to stay afloat. Convincing the facility of the necessary level needed has become one of the most frustrating exercises most practices engage in. Sharing the financial data of the practice and justifying costs often exposes practices in ways they never anticipated or thought possible. There is a saying often used by lawyers and consultants in determining subsidies: anyone can get the number right today, but will it be right tomorrow? In one of her famous ASA talks, Judy Semo, Esq., sometimes shared the story of a contract that took six months to negotiate. Soon after it was finally executed, the client called her to see how he could get out of it. Such is a clear example of the risk all practices potentially face once they put pen to paper.

The fundamental problem is this: hospital administrators think in terms of annual budgets. They want to define the terms of a subsidy that limits their risk. Anesthesia practices, by contrast, are constantly juggling fixed and variable costs. They determine their staffing based on facility coverage requirements, which can be somewhat of a wish list. The reality is that not all covered venues are equally or consistently profitable. The current anesthesia manpower shortage only makes the situation worse. The ideal contract would be formula driven and flexible. Unfortunately, such contracts are now the exception rather than the rule. Increasingly, hospital administrators want the anesthesia department to shoulder most of the risk.

If you have any questions or comments, feel free to contact your account executive or reach us at info@anesthesiallc.com.

With best wishes,

Tony Mira
President and CEO