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Summer 2010

Scoping out Endoscopy

Jody Locke, CPC, Vice President for Practice Management, Anesthesia Business Consultants
Hal Nelson, CPC, Director of Compliance and Client Services, Anesthesia Business Consultants

As the use of diagnostic endoscopy for the evaluation of upper and lower gastrointestinal anatomy continues to increase across the country, anesthesia providers find themselves caught on the horns of a dilemma. On the one hand, public policy is clearly encouraging increased use of endoscopy for early detection of a variety of intestinal disorders, and most Americans prefer to be well sedated given the potential for significant discomfort associated with these procedures. On the other hand, some payer policies appear to threaten the availability of anesthesia for these valuable preventative procedures. While endoscopy has proven a great boon to many anesthesia practices, there is a growing concern for the future financial viability of such services. In the meantime, the economics of anesthesia for endoscopy represent a fascinating case study in the intersection of public health and the interests of the payers who must ultimately underwrite such policies with appropriate payment guidelines.

Currently endoscopy represents the fastest growing and most profitable line of business for a significant number of anesthesia practices in the United States. In Table 1 below, the three-year trend for an outpatient endoscopy service in the Mid-Atlantic region reveals consistent growth from January 2007 through December 2009, in both volume of cases performed and collections posted. Perhaps even more significant is the fact that, despite a general state of economic recession, key performance metrics such as average cases performed per provider day and the reimbursement per case have also been consistently strong in this example.

From a productivity perspective, endoscopy also has a very positive impact on this practice’s overall financial picture. For calendar year 2009, revenue from endoscopy services represented 31% of total practice revenue for this practice. More significant though, is the impact on provider compensation. If, as shown in Figure 1, $2,000 per provider day is the target necessary to generate an MGMA median compensation, then at $3,500 per day, endoscopy is obviously a significant profit center.

From an anesthetic perspective, there are several issues facing the anesthesia provider in considering each patient scheduled for endoscopy. The first is what level of anesthesia care is necessary for a given patient. Clinical studies have shown that the degree of sedation can affect the outcome of the examination, such that polyp identification often increases with the use of anesthesia. Higher levels of sedation increase the comfort of the patient and minimize the impact of the procedure.

The second set of considerations pertains to the agent(s) that will provide the appropriate level of sedation and pain relief for the procedure. Increasingly, propofol has become the drug of choice for a number of simple and compelling reasons, such as faster turnaround time and higher patient satisfaction. Theoretically, a better patient experience leads to a higher volume of elective screening procedures, thus lowering overall healthcare costs.

The final consideration has to do with the best person to provide the anesthesia care. Payer policy tends to assume that if certain risk factors have not been identified pre-operatively, only a moderate level of sedation will be required. Practitioners in the field know all too well that this an unrealistic approach. Anesthesiology has evolved as a discipline that anticipates the unexpected. The role and value of the anesthesiologist or CRNA is to manage an unexpected patientreaction to a particular drug, agent, or aspect of the procedure.

As so often happens in the evolution of clinical techniques, practitioners drive the process with their use of new drugs and protocols. Over time, payers respond as they monitor the incidence of new services. Typically, providers look to CMS to provide the definitive policy guidelines, but this is not always the case. Perhaps the most dramatic development in the history of anesthesia for endoscopy was written by Aetna, when it published its now infamous policy in early 2009. As the following excerpt makes clear, Aetna is determined to limit the anesthesia provider’s role in the endoscopy clinic:

“Aetna considers moderate sedation/analgesia, provided by or under the direction of the endoscopist, to be appropriate and adequate for average risk individuals undergoing standard upper or lower endoscopic procedures. Consequently, Aetna considers not medically necessary the attendance of an anesthesiologist or anesthetist for average risk individuals undergoing standard upper or lower endoscopic procedures.”

It is significant that in its background discussion, Aetna questions the value of propofol as the anesthetic agent of choice for endoscopy, citing various studies that have looked at the benefits of propofol as having “conflicting results.” Their argument plays the policy of the ASA against that of the American Society of Gastrointestinal Endoscopy and argues that only in limited cases of patients with clearly identified risk factors is reimbursement for a separate anesthesia provider justified. It is an argument that is finely tuned to the economics of the issue as Aetna sees it. There is no doubt that economic interests may influence clinical judgment in such matters.

Ultimately, a discussion about a particular line of business must focus on the financial viability of providing the service. This aspect of endoscopy can be particularly tricky to assess for several reasons. The number of facilities covered can greatly affect the overall profitability of the service. Since the key to profitability is directly related to productivity metrics, these must be carefully monitored to ensure a reasonable level of return; variability in yield and average daily productivity can be significant. There is also the question of staffing and the potential for financial leverage through medical direction of nurse anesthetists. The fundamental calculation of profitability is tied directly to the cost of providing the professional service as compared to the revenue generated by that service. The essential metric in this calculation is activity normalized per provider day. In simple terms, if it costs a practice $2,000 per day to cover the cost of a full-time anesthesiologist with benefits and the service generates more than $2,000 in revenue per clinical day, then the service is, by definition, profitable.

It is a very common phenomenon in business and medicine that embarking on a new service will take a practice from profitability to unprofitability. Chronic pain practices are often good examples of this. The administration of nerve blocks in the recovery room typically stimulates an interest in developing a full-blown pain practice, but, almost always, yield per procedure and yield per hour of work goes down with the expansion of the service. The same is often true of endoscopy.

Many physician-only practices will look at the productivity and profitability of their endoscopy business and conclude that the revenue potential for this line of business easily justifies their mode of delivery. Such practices will find they are effectively relying on endoscopy revenue to offset other, less profitable, lines of business. This raises a significant strategic question. Is endoscopy best served by a physician or a “care team” model? A strong argument could be made that endoscopy services provide the perfect setting for a care team practice: regular hours, essentially healthy patients and cases of consistent duration and difficulty. Strictly viewing endoscopy from a financial perspective, one could conclude that the positive financial aspects of this service should be leveraged in every way possible, including an aggressive approach to staffing costs.

Ultimately, payer reimbursement policy determines the profit potential for an endoscopy service. Thus far, the position of commercial insurers and the government has been favorable. However, these policies are constantly evolving based on a variety of patient-specific factors, such as ASA status and underlying conditions and co-morbidities.

When looking at Medicare coverage criteria, one must consider the individual state Local Coverage Determinations (LCDs) that provide payable diagnosis codes of anesthesia for colonoscopy and EGD procedures. See Table 2. Currently, only 19 of the 50 states have such LCDs for this type of anesthesia (AK, AZ, CO, DC, DE, MD, MT, ND, NJ, NM, OK, OR, PA, SD, TX, UT, VA, WA and WY). All 19 states will pay anesthesia for GI procedures if there is a diagnosis code submitted for morbid obesity (ICD9-CM 278.01) or anxiety (300.00), which are common underlying conditions in many patients. Fourteen of the states cover anesthesia when the patient has a diagnosis code submitted for asthma (493.90). Four states in particular (DC, MD, NJ and PA) will also consider coverage for this service when documentation shows “low threshold for pain”, “combative patient”, “pediatric patient” or “use of Propofol/Diprivan” (V58.83). It is crucial for anesthesia groups to be familiar with their states’ LCD policies and to incorporate common underlying conditions onto their superbill. All too often, patients have co-morbidities that could generate payment for the anesthesia service, but the group only bills out the diagnosis code for the surgical procedure, and not the covered diagnosis code representing the patient’s underlying condition.

Conversely, it is also interesting to note the most commonly denied diagnosis codes by all insurance companies. Just like submitting a claim for any other anesthesia procedure, the greater the specificity of the diagnosis, the greater the chance for reimbursement. Generic ICD-9 codes like 535.50 (Unspecified Gastritis), 530.81 (Esophageal Refulx), 455.6 (Unspecified Hemorrhoids), 578.9 (Unspecified Gastric Hemorrhage) and 789.7 (Unspecified Abdominal Pain – Colon) make up five of the top ten diagnosis denials across the country. Routine screening codes V76.51 and V58.83 are also problematic if a pre-authorization has not been obtained and the patient has not signed an Advanced Beneficiary Notice, which typically allows you to bill the patient directly when a medical necessity denial occurs. See Figure 2.

Rarely do anesthesia practices have the flexibility to pick and choose which types of surgical cases they will cover and endoscopy is no exception to this. While there may be some endoscopy clinics that will approach anesthesia practices soliciting coverage agreements, these are the exception rather than the norm. For the most part a facility has one or two rooms dedicated to endoscopy and these must be covered as part of the overall anesthesia contract with the hospital or surgery center. So why perform a detailed analysis of just one line of business if there are no strategic options to be discussed? The answer, based on this review, is that each line of business may entail its own unique set of financial, compliance and staffing challenges. Practices should always be grateful for lines of business that are consistently profitable. They also need to know the likelihood that they will remain profitable into the future. Because specific types of cases may require greater attention to governmental and private payer policies than others, this becomes critical and useful information for the effective management of the billing process. When put in the context of the practice as a whole, the staffing requirements of one line of business may have a significant impact on the overall staffing requirements of the practice. This could be especially significant for a practice considering modifications to its staffing model, such as the ratio of physicians to CRNAs.

In conclusion, anesthesia for GI endoscopy has been and continues to be a viable income source for anesthesia groups. The key to success is understanding your payer policies, indicating underlying conditions and co-morbidities, and using advanced beneficiary notices so that you can balance bill the patient, when appropriate. Due to this fact, clinical coverage of endoscopy is likely to become more competitive in the future, especially between that of traditional anesthesia practices and CRNA services. Proposals for coverage may also start to involve more aggressive pricing and lower margins.

The key to this discussion is not whether an anesthesia practice should pursue clinical opportunities to provide anesthesia for endoscopy (as this answer seems quite clear), but rather how to manage those coverage requirements that have already been committed to. In this sense, the complexity of variables associated with providing anesthesia for endoscopy is a preview of coming attractions and a reminder that today’s larger and more complex practices must manage each line of business appropriately and with caution. It is not enough to look at the overall bottom line of the practice, but rather the specific factors that impact that bottom line. Endoscopy has proven to be a windfall for many practices over the past few years, but this bonus must be evaluated in terms of the value of its offset to other lines of business that may not be so profitable. In this sense endoscopy is a case study, and the same analytical criteria for this line of business should be applied to all other aspects of the practice in order to achieve success.

Jody Locke, CPC, serves as Vice President for Practice Managmenet for ABC, and as such is responsible for the scope and focus of services provided to ABC’s largest clients. He is also responsible for oversight and management of the company’s pain management billing team. He will be a key executive contact for the group should it enter into a contract for services with ABC. He may be reached at

Hal Nelson, CPC, serves as Director of Compliance and Client Services for ABC and is a nationally-known expert in the field of anesthesia, Nelson brings a variety of expertise to ABC clients in helping medical practices resolve anesthesia coding, billing and compliance challenges. His experience navigating through Medicare billing regulations, anesthesia and pain coding, payer audit defense, charge ticket review, compliance plan development and physician documentation analysis ensures ABC clients have a safety net for these challenging issues. He has 20 years experience on both the payer and billing side and is one of the specialty executives in charge of supporting sales, marketing, operations, auditing and compliance initiatives.