Measuring Profitability: The New Anesthesia Reality
Data is key to a successful anesthesia practice; but what good is data if it is not being reviewed, properly understood and effectively utilized? Today's article addresses the history and future of anesthesia metrics.
Conventional wisdom holds that anesthesia practices are captive to the facilities they serve. It is the location of the facility that determines the payer mix of its patients, which is the critical determinant of the effective yield per unit billed. It is the effectiveness of the facility's strategic plan that determines the nature and consistency of surgical and obstetric procedures performed. It is also the facility's philosophy and commitment to its surgeons that determines the productivity of the operating rooms; many stretch the staff thin trying to provide OR availability. More often than not, it is the desire to provide 7:30 starts that drives down OR productivity, especially when the facility does not consistently get the to-follow cases. Changing corporate philosophy and behavior is never easy, especially when the anesthesia team is focused on providing a professional service. It has often been said about anesthesia that when the surgeons say jump, their response is "how high?" The beliefs and strategies that got us to where we are today will not get us to where we need to be tomorrow to survive. Nothing could be more accurately descriptive of the anesthesia specialty.
The Rise of Metrics
Admittedly, management reporting for anesthesia has come a long way. There was a time when it used to be defined as management by ATM card: all was well if collections were strong. Practice managers encouraged software vendors and billing companies to provide more granularity. They wanted to be able to track and monitor production trends and measure their impact on collections. The decision to outsource the billing and collections usually stemmed from a desire to optimize revenue cycle performance. Little by little, many practices have started tracking actual operating room utilization. Fortuitously, anesthesia billing systems, by definition, have a wealth of specific data with regard to where and when cases are performed and how long they take. The development of normalized data standards has provided some very useful benchmarks. Many practices now track average cases, units billed and hours of anesthesia time per anesthetizing location. The value of such metrics cannot be understated. Trending utilization metrics is useful to identify unproductive venues or venues in which an unreasonable amount of activity occurs at night and on weekends, the 'so called' misery index.
The Targeted Data
The problem with most management reporting, however, is that it is limited by the data that is readily available from the software and doesn't necessarily answer the management questions that need to be addressed. Too often, the most useful information is the most difficult to obtain and validate. Consider this simple example. It is one thing to know how much was deposited in a month, which is easy to tally, but quite another to identify which lines of business or venues generated the highest yield per hour, a calculation that requires normalizing collections by the hours performed. This might not seem so complicated, which it isn't, but now imagine we need to know the hourly rate per day of week or per provider. Understand that such calculations require the analyst to decide if the numerator is billed hours or coverage hours. What is it we are really trying to measure? Not only is the calculation a bit more complex, but it needs to be validated. Incorrect data can be worse than no data. The point is that such calculations go beyond what most standard system reports can provide. Today's relational database tools are very powerful, but they require staff with an analytical orientation to master them.
The real challenge comes when system data needs to be correlated with non-system data. Ultimately what practices need to evaluate the profitability of a given service line or venue is the ability to compare the cost of the necessary hours of coverage with the actual yield per hour. It used to be said that if a physician anesthesiologist consistently generated 50 ASA units per clinical day and if the yield per unit was reasonable, then he or she would make a good living. Those were the good old days. As clinical venues become more diverse and more variable and as payer mixes evolve by line of business, the ability to determine profitability becomes more relevant but also more complex. This is a perfect example of the kind of management reporting challenges most practices are now facing.
The Value of Measurement
The value of such calculations falls into three distinct categories. On the one hand such metrics provide invaluable trend patterns. Every practice would like to know that each line of business is growing and supporting the overall profitability of the practice, but this is often not the case. Being able to spot loss leaders, especially when they are independent surgi-centers, will support critical strategic decision-making. On the other hand, such information may prove essential for staffing considerations. The launching of new lines of business often involves a considerable amount of wishful thinking. Making sure staffing is appropriate to each venue is a key to ongoing success. Ultimately, such data allows the practice to demonstrate to the facility why a subsidy is needed or why the facility's coverage expectations are simply unrealistic. As an ever-larger portion of practice revenue comes from facility support, this is an essential means of resetting customer expectations.
The reality is that anesthesia practices have always had more and better data about what actually happens in the OR than any other source. The anesthesia billing database is an amazing repository of relevant data that is invaluable. The fact is that, in the current environment, the value of a good billing solution is less about collections and more about management data. While success used to be based on revenue generation, it is now based on cost management. The practices with the greatest likelihood of survival and success are those with the most timely and effective decision-making.