Anesthesia Business Consultants

Discover Practical & Tangible Professional Articles &
Advice Dedicated to the Anesthesia Community

Ipad menu

Winter 2011

Where Do We Fit In The Alphabet Soup?

Moe Madore
Vice President for Practice Management, ABC

For the last several months the literature on Accountable Care Organizations (ACOs) has flourished. So has the volume of workshops, seminars and webinars, all with the intent of educating providers on what the future will look like, and many addressing how physicians might participate. Independent anesthesia groups are trying to not only understand the ACO rules but are also working hard to determine how they will function in any of the possible structures that emerge in their communities.

There are various traditional obstacles to the formation of multispecialty groups, such as those posed by the antitrust and antikickback laws. The Patient Protection and Affordable Health Care Act calls upon the Secretary of Health and Human Services (HHS) to adopt regulations that will foster the development of ACOs, and that includes resolving potential conflicts between the antitrust, antikickback and Stark laws and the efficiencies expected to result from the formation of ACOs.

Given that ACOs will emerge, anesthesia groups will need to be prepared to decide with whom to align themselves. In some medical communities there may already be some partnerships due to pre- existing relationships.

Independent Practice Associations (IPAs) typically encompass all specialties, but an IPA can be limited to primary care or another single specialty. IPAs can be formed as LLCs, S corporations, C corporations or other stock entities. Their purpose is not to generate a profit for the shareholders, although this can be done. The IPA assembles physicians in self-directed groups within a geographic region to invent and implement healthcare solutions, form collaborative efforts among physicians to implement these programs and to exert political influence upward within the medical community to effect positive change.

The legislation allows for other types of structures to implement the health care delivery models. These include the:

  • PHO (Physician Hospital Organization), a joint venture between one or more hospitals and a group or groups of physicians. The PHO acts as the single agent for managed care contracting, presenting a united front to payers. In some cases, the PHO provides administrative services, credentials physicians and monitors utilization.
  • MSO (Management Services Organization), a freestanding corporation that is owned by a hospital or PHO. It provides management services to one or more medical practices and serves as a framework for joint planning and decision making. Often, the MSO employs all non-physician staff and provides administrative systems, in exchange for either a flat fee or a set percentage of group revenues.

Then there are groups that have developed agreements between IPAs and PHOs to set up risk sharing arrangements. The common theme from these will be to set up measurable and attainable quantitative and qualitative patient and fiscal goals.

The goals of an ACO should include:

  • Ensuring integrity in federal health care program participation
  • Promoting economy and efficiency in program operations
  • Promoting positive patient care and outcome

The incentive to participate in an ACO is based on meeting quality performance standards (yet to be determined) and sharing in the cost savings (yet to be determined). For providers the ability to provide a high level of care, reduce cost by eliminating waste and continue to be paid fairly sounds like an admirable goal. The challenges within the ACO will include how the various groups are compensated and also how individuals will be compensated. The revenue earned will be distributed to specialists and primary care providers and, in some cases, hospitals. The type of organization will influence the formulas used and will ultimately determine how this restructuring will impact each anesthesiologist’s compensation. Will the budgeted savings materialize? How will the bonuses be distributed among the providers (facility, surgeons, primary care, and anesthesiologists)?

One concern is what happens if your group has worked with a health care system and has already achieved some improvements—will the new baselines established take these into consideration? Another area of concern is how non- physician revenues (Hospital) will be allowed to flow to physicians without some changes in current legal barriers.

Every group will need to assess its position in the health care delivery system in its community and determine what kind of opportunities may exist. The reality is that this shift is part of payment reform trend and you will be judged on your ability to participate in a patient centered, physician-led health care delivery model. Each group will be asked to decide who you will partner with and will that mean aligning with a hospital or multiple facilities, larger groups or IPAs. What will be the right structure for you and your group?

There are some key points that you should always evaluate as the opportunities present themselves. When the goal is to reduce cost, does that translate into reducing the income to providers or to eliminate overhead cost? Who will be making decisions? Does the structure have physician involvement in key decisions or will these be left to the newly-formed members who may not be physicians? What kind of support staff does the new entity have? Look for projected reductions that may or may not be realistic when measured against your experience as these may not meet the objectives which will require changes in other areas. One area requiring anesthesiologists’ attention may be the forecasted volumes, productivity and number of locations (OR rooms and facilities). If these numbers are overstated, the impact will affect the income and lifestyles of all involved. Lastly, a group must understand the legal barriers that currently exist in a plan if non-physician revenue (hospital revenue) is to be shared. The alphabet soup is part of the health care system. The challenge is to become educated and review the information you gain with trusted advisors. Our objective is to keep you apprised of changes and clarifications to the rules as they emerge. In the meantime, stay tuned to the efforts in your community and ask questions about structure, membership, payment system and distribution of shared savings as these will impact your compensation.

Maurice (Moe) Madore, MBA, CPC, serves as Vice President of Practice Management for ABC. Mr. Madore has over 20 years of experience in the healthcare field and business administration; including operations of billing centers, management, strategic healthcare planning, business financial planning, marketing new business development and physician recruiting and practice management. Prior work experience included 6 years as a Vice President of Medical Affairs at a regional medical center in Maine. He can be reached at