Demystifying the Anesthesia Stipend: Achieving More Coverage and Better Quality for Less Cost

October 27, 2009 2:15 p.m. EST

ACHIEVING MORE COVERAGE

& BETTER QUALITY

FOR LESS COST

Demystifying the Anesthesia Stipend


The Problem


75%75% 66%66%75% of hospitals are experiencing an increase in surgery wait times

66% of hospitals are limiting access to operating rooms

Effects of the Rising Subsidy

2º anesthesia staffing issues--American Society of Anesthesiologists


Effects of the Rising Subsidy

47% of hospital administrators are reducing or re-directing operating room procedures due to anesthesia staffing issues.

- ASA Hospital Study


Why? Cost of Current Staffing Model


Why? Salaries Above FMV


Why Are Salaries Rising? Supply & Demand


The Anesthesia Supply/Demand Gap

Retirees Outnumber Graduates

Residents entering anesthesiology practice between 1990 and 2002 declined by 15%. – AMA

Practicing anesthesiologists AMA study of 30,000 Anesthesiologists:

Approx. 60% are age 45 or olderMore than 25% are 55 or olderOnly 12% are residents

Practicing CRNA Shortage is more than 5000 – US Dept. of Health


Common Stipend Solutions

Scenario 1 – Pay more for same coveragePay doctors more

Provide more robust perquisites

Scenario 2 – Cut-back on coverageSacrifice efficiency, surgeon, nurse and patient satisfaction

Reducing or re-directing operating room procedures due to anesthesia staffing issues

Scenario 3 – Demand Anesthesia Cover its CostsAttract less qualified anesthetists

Sacrifice efficiency, surgeon, nurse and patient satisfaction

Scenario 4 – Make your problem someone else's problem Anesthesia is #1 outsourced service – Waller Landsen


de-mys-ti-fy :-(verb) to rid of mystery or obscurity; clarify

www.somniainc.com

Anesthesia Subsidy TrendsExpected to Continue Growing

Resulting In:

Decreasing OR Coverage

Decreasing OR Revenue

Increasing Stipend

Dissatisfied:

Surgeons

Patients

Hospital Leaders


de-mys-ti-fy :-(verb) to rid of mystery or obscurity; clarify

www.somniainc.com

Anesthesia Subsidy Solutions

Today’s Agenda:Lower Anesthesia ExpensesIncrease Anesthesia RevenueIncrease OR CoverageIncrease Surgeons, Patient & Leadership SatisfactionText Questions to be Answered at End of Presentation


Dr. Marc E. KochDr. Marc E. Koch Dr. Larry SchecterDr. Larry Schecter

Co-Founder & CEO Somnia AnesthesiaNational Provider of Anesthesia Services Including Leadership, Recruiting, Revenue Cycle Mgmt., Payor Contracting & QAYale University School of Medicine: AnesthesiaFordham University: MBA

CMO Providence Regional Medical Center EverettMedical Degree from Hahnemann Medical College in Philadelphia and surgical training at UCLA and West Los Angeles Veterans HospitalFormer Medical Director of Santa Monica-UCLA Medical Center 30 year career as a General Surgeon in Santa Monica, CA

Presenters


Dr. Marc E. KochDr. Marc E. Koch Dr. Larry SchecterDr. Larry Schecter

Strategies to

Reduce Your Subsidy & Increase Coverage

Managing the

Subsidy/Service

Balance

Presenters


Presented By:

Dr. Larry Schecter

CMO

Providence Regional Medical Center Everett, WA

www.providence.org

Managing the Anesthesia Subsidy & Service Balance

Achieving Quality, Cost

& Satisfaction


Background

#1 in Washington for cardiac and critical care, stroke, and general surgery.

www.providence.org

Providence Regional Medical Center Everett

Everett, Washington

372 Bed Acute Care Hospital

14 ORs

Approx 12,000 surgical cases/yr.

Approx 4000 OB deliveries

Cardiac, Thoracic, Vascular, Neurology, Ortho, Urology, General, ENT

Top 100 Hospital (Thomson/Reuters)

Distinguished Hospital for Clinical Excellence (4 yrs. Running)


Achieving the Right Balance


Achieving the Right Balance

Subsidy ExpectationsIn Synch with Hospital Goals

Formal QA Program to Prove Results

Professional Behavior

Active Citizens of Larger Organization

Service ExpectationsCoverage at or Near 100%

On-Time Starts

Quick Turnover

Avoidance of Pre & Post-Op Bottlenecks

Thorough Pre-Op Evaluation


The Balanced Scorecard



QualityImportance of Quality Management Data

Anesthesia Company Should ProvideAlso Do it Yourself (the Anesthesia Scorecard)

CompatibilityFocused on Same Goals as HospitalCitizens of Larger Hospital CommunitySame Professionalism as Hospital Leadership

OtherCollective data for groupIndividual data by providerShould drive process improvement



Cost (Stipend)Compensation Competitive with Region based on FMV

Based on Performance Objectives

Not Based on Physician Salaries



Satisfaction100% Coverage

On-Time Starts

Pre-Op Interviews

Post-Op Examinations

Avoidance of Post-Op PONV

Meeting Attendance

Patient and Surgeon perception


ADVICE: GET IT RIGHT THE FIRST TIME – YOU DON’T

WANT TO DO THIS TWICE.

The Challenge: Replace the Incumbent Group


The Challenge:

Replace the Incumbent Anesthesia Group

The NeedsMore Robust Level of Service

Ability to Demonstrate Superior Quality Outcomes

Group Compatibility with Hospital

Work Collaboratively to Reduce the Subsidy


The Challenge:


Timeline & TasksLess than 90 days to get a new solution in place

Understand & Define our Needs

Solicit RFPs

Interview Top Prospects

Negotiate Contract

Attract 30 clinicians in 30 days!!


The Challenge:


The Early ResultsClinicians Successfully Recruited

Starting to See Competencies of Each Provider

Noticeable Dedication, Attitude, Behavior

Anesthesia Leadership both Local & National are Major Components of Successful Transition

Implementing MD/CRNA Mix Challenging but Rewarding


The Challenge:

Prove Anesthesia Results

PRMCE’s Anesthesia Scorecard:OR Efficiency

Available ORs

Turn-Around Time

On-Time Starts

Obstetrics

C-Section Delays

Epidural Timeliness

Epidural Success

Quality & Citizenship

SCIP Standards

Meeting Attendance

Med Staff Participation

And Many More…


Lessons Learned

Get as much information as possible prior to transition-Don’t hesitate to visit the OR!

Do It Right the First Time – Transitions are Tough on the Facility and Tough on Staff

Anticipate credentialing challenges

Expect attrition and turnover

Be Totally Honest With Your Customers

There is No Substitute for Being in the Trenches

“Hard Times Flush Out the Chumps”


Strategies to Reduce Your Subsidy &

Increase Coverage

Presented by :

Dr. Marc E. Koch

Co-Founder and CEO of Somnia Anesthesia

www.somniainc.com


Before Reducing Your Subsidy You Must First Understand It


Intervention possible but goals must be realistic. Deriving maximal value is

realistic. Low cost and high quality is magical.


Define Quality Nexus


Patient

• Unrushed /thorough Pre-Op• Attentive Post-Op • Avoidance of PONV • Limited Pain

• Physical• Financial


Surgical Leadership

Surgeon-Centric Schedule ≠ “Efficient” Schedule

On-time Starts = Abundance of anesthesia staff

Quick Turnover = Abundance of anesthesia staff

Good working chemistry/trust

Additional Anesthesia Services


Nursing Leadership

Surgeon-Centric Schedule

Support and assistance with challenging issues

Solve more headaches than they create

On-time Starts = Abundance of anesthesia staff

Quick Turnover = Abundance of anesthesia staff

Good working chemistry/trust

Additional Anesthesia Services


Administrative Leadership

“Efficient” Schedule (Note: ≠ Surgeon-Centric Schedule)

Exploration of cost efficient staffing models

No Subsidy or Subsidy supports

FMV Compensation

FMV Benefits

Savvy contracting with payors, to a point

Stellar revenue management

Pro-growth mindset


“Revenue”= Funds to Support Anesthesia Department

There are only 3 Sources of Funds

1. Patients

2. Insurance Companies

3. Facility (Stipends)


Anesthesia “Revenue” from Patients

1. Patient mindset makes it a difficult line to walk

2. Surgeon alienation limits utility

3. Hard to count on


Anesthesia “Revenue” from Payors

1. Out-of-network, a pyrrhic victory, since it interferes withHospital contractSurgeon Surgeon referral sources

2. In-network, battles can be wonMindful of co-insurance/deductible = from Patient Guile of payors: holdbacks, abrupt policy shiftsOptimal rates requires out-of-network intermediate step Stomach of hospital CFO predicates success


Indigenous Anesthesia “Revenue”

Nuts and Bolts• Compliantly obtain unit rates • Define sources of revenue (OP, IP, OB, GI, Lines, Etc.)

• Define units by revenue source

• Define reimbursement by unit

• Calculate revenue by payor

• Calculate net collections from gross revenue


INPATIENT CASES % OF PATIENTS UNITS UNIT RATE REV/PAYOR ACUTE PAIN REVENUE CASES % PATIENTS UNITS CASE RATE REV/PAYORAETNA 18 0.83% 229 $89.21 $20,428BLUE CROSS 297 13.67% 4,746 $65.30 $309,910 AETNA 6 0.94% $357.67 $2,146CDPHP 552 25.40% 8,392 $36.32 $304,760 BLUE CROSS 91 14.33% $145.47 $13,238CIGNA 9 0.41% 142 $89.67 $12,733 CDPHP 164 25.83% $100.15 $16,425COMMERCIAL 65 2.99% 1,032 $54.84 $56,599 CIGNA 6 0.94% $326.83 $1,961MEDICARE 756 34.79% 11,580 $19.00 $105,746 COMMERCIAL 21 3.31% $279.19 $5,863MEDICAID 129 5.94% 1,606 $14.13 $22,685 MEDICARE 264 41.57% $32.59 $8,603MVP 102 4.69% 1,668 $73.12 $121,962 MEDICAID 8 1.26% $35.38 $283SELF PAY 9 0.41% 162 $32.53 $5,270 MVP 22 3.46% $330.32 $7,267UH 101 4.65% 1,597 $96.96 $154,850 UH 27 4.25% $220.85 $5,963WC/NF 135 6.21% 2,499 $25.07 $62,647 WC/NF 26 4.09% $127.77 $3,322

TOTAL 2,173 100.00% 33,653 $34.99 $1,177,590 TOTAL 635 100.00% $102.47 $65,071

OUTPATIENT CASES % OF PATIENTS UNITS UNIT RATE REV/PAYOR Lines CASES % OF PATIENTS UNITS CASE RATE REV/PAYORAETNA 34 1.03% 342 $87.35 $29,875BLUE CROSS 694 21.09% 6,980 $54.38 $379,589 AETNA 1 1.19% $106.00 $106CDPHP 1,001 30.43% 9,761 $36.56 $356,854 BLUE CROSS 11 13.10% $96.36 $1,060CIGNA 15 0.46% 159 $97.31 $15,473 CDPHP 34 40.48% $76.85 $2,613COMMERCIAL 141 4.29% 1,396 $49.73 $69,420 CIGNA - 0.00% $0MEDICARE 694 21.09% 7,446 $19.00 $68,221 COMMERCIAL 3 3.57% $56.33 $169MEDICAID 182 5.53% 1,681 $30.20 $50,768 MEDICARE 24 28.57% $29.04 $697MVP 193 5.87% 1,916 $104.78 $200,759 MEDICAID 4 4.76% $25.00 $100SELF PAY 29 0.88% 232 $47.62 $11,047 MVP 3 3.57% $241.67 $725UH 226 6.87% 2,236 $84.62 $189,217 UH 2 2.38% $61.00 $122WC/NF 81 2.46% 904 $23.61 $21,340 WC/NF 2 2.38% $54.00 $108

TOTAL 3,290 100.00% 33,053 $42.13 $1,392,563 TOTAL 84 100.00% $67.86 $5,70010.0

OB REVENUE CASES % OF PATIENTS UNITS UNIT RATE REV/PAYOR GASTRO REVENUE CASES % OF PATIENTS UNITS UNIT RATE REV/PAYORAETNA 5 1.12% 136 $99.40 $13,518BLUE CROSS 92 20.67% 2,060 $62.43 $128,598 AETNA 1 1.12% 7 $102.86 $720CDPHP 209 46.97% 4,717 $42.88 $202,281 BLUE CROSS 16 17.98% 124 $65.00 $6,383CIGNA 2 0.45% 44 $74.80 $3,291 CDPHP 26 29.21% 208 $32.98 $6,860COMMERCIAL 20 4.49% 406 $72.65 $29,495 CIGNA 1 1.12% 8 $18.25 $146MEDICARE 6 1.35% 221 $19.00 $4,199 COMMERCIAL 2 2.25% 16 $28.88 $462MEDICAID 69 15.51% 1,229 $16.70 $20,528 MEDICARE 31 34.83% 258 $19.00 $4,602MVP 24 5.39% 463 $71.75 $33,219 MEDICAID 3 3.37% 23 $10.00 $230UH 18 4.04% 401 $78.29 $31,393 MVP 4 4.49% 38 $59.74 $2,270WC/NF - 0.00% - $0.00 $0 UH 5 5.62% 40 $87.63 $3,505

TOTAL 445 100.00% 9,677 $48.21 $466,522 TOTAL 89 100.00% 722 $25,178

$3,132,624$2,975,993

Total projected revenue Net Collections (95% of gross)

Identification and Quantification of Revenue SourcesInpatient assumes 13-15 Units per Case Outpatient assumes 9-11 Units per CaseGI Endo assumes 7-9 Units per Case

OB assumes 15-20 Units per CaseAcute Pain and Lines are $ per case


Revenue Augmentation Intervention

1. Sources of RevenueConversion of local cases to sedationCover GICover pediatric radiology

2. Calculate net collections from gross revenueConfirm historical figures benchmark to MGMA

Days AR0-30 Days AR Bucket30-60 Days AR Bucket60-90 Days AR Bucket90-120 Days AR Bucket>120 Days AR Bucket

Ensure actual verses contracted payments syncScanning, rapid charge entry, rapid coding, e-submissions, robust billing system, audits


“Expenses”= Costs to Run an Anesthesia Department

There are 2 Buckets of Expenses1. Direct Expenses

Clinical Staff, Equipment, Supplies 2. Indirect Expenses = Management Costs

Technology: Telephony, computers, servers, software (i.e. Billing System)

Credentialing with Payors and Hospital Payroll & Benefits Administration Scheduling Revenue Management and Collections Quality Assurance ProgramRisk Management LegalAccounting


Anesthesia Staffing (Direct) Expense: Nuts and Bolts

Management Fee 25% 1,316,214$ Total Direct & Indirect Expense 10,090,973$ Revenue 6,612,163$ Shortfall/Surplus (3,478,809)$ Shortfall per month (289,901)$

Coverage by hoursOR 1 OR 2 OR 3 OR 4 Float MD OB

Monday ‐MD 8 24Monday ‐ CRNA 12 12 10 8 24Tuesday ‐MD 8 24Tuesday ‐ CRNA 12 12 10 8 24Wednesday ‐MD 8 24Wednesday ‐ CRNA 12 12 10 8 24Thursday ‐MD 8 24Thursday ‐ CRNA 12 12 10 8 24Friday ‐MD 8 24Friday ‐ CRNA 12 12 10 8 24Saturday ‐MD 24Sunday ‐MD 24Total Hours ‐MD 40 168Total Hours ‐ CRNA 60 60 50 40 120Number of MD hours per week 376Number of MD hours per year 19,552Number of CRNA hours per week 330Number of OB hours per year 17,160

MD CRNAOR, Endo & OB CoverageTotal Hours (week) 526 630Total Hours (year) 27,352 32,760Per FTE Hours/Week 54 40Per FTE Hours/Year 2808 2080Required to cover OR 9.7 15.8Required to cover vacations 2.0 2.0Chief MD (incl as float)Site Director (incl as float) Total MD and CRNA on Staff 12 18Compensation 421,801$ 190,000$

Cost of OR Coverage 4,952,259$ 3,372,500$ Subspecialty Stipend ‐$ Chief of Anesthesia Stipend 100,000$ Vice Chief 50,000$ OB/Cardiac/Peds Stipends 50,000$ Administrative Costs 250,000$ Coverage Cost 5,402,259$ 3,372,500$ Total staffing expenses

24

General Hospital‐ In Patients and OB

Total Coverage Cost

24

2424

8,774,759$

24

24

24

Model with Expenses

168

2. Define staffing model & MD‐CRNAincluding ratios, break folks, etc

1. Define rooms & hours of coverage

3. Sum hours of work for MD and CRNA

4. Based on # of hours work per FTE calculate headcount

6. Add‐in premiums (Chief, directors, subspecialists, beeper call, etc.)

5. Calculate compensation per clinician


Survey Title: Midwest (US)Market - Northeast US (NY)Data Effective Date

25%ile 50%ile 75%ile Age Data Geograph Total 50% Median 25% 50% 75%Base $ Base $ Base $ Jul-09 Adjust. Base Comp. Incentive Total comp Total Comp. Total Comp.

Economic Research Institute Data 07/09 $223,386 $250,447 $285,571 100.00% 100.00% $250,447 $17,426 $248,785 $267,873 $415,421Anesthesiologist: DesMoines

Sullivan Cotter Physician Survey Data 03/08 $220,000 $259,000 $302,306 106.67% 101.00% $279,029 $65,357 $262,412 $344,386 $455,534Anesthesiology Staff Physician MidWest US

Sullivan Cotter Physician Survey 03/08 $234,662 $296,341 $349,100 106.67% 103.00% $325,580 $61,990 $284,691 $387,570 $501,545Anesthesiology Staff MD US Group Practice

Medical Group Mgt Assoc (MGMA) 01/08 $295,912 $364,758 $436,505 107.50% 103.00% $403,878 $327,649 $403,878 $483,320Anesthesiology: All Orgsm US Group Practice

Hospital & Healthcare Comp Svc (HHCS) Data 04/08 $269,000 $306,407 $390,000 106.25% 103.00% $335,324 $294,387 $335,324 $426,806Physician Survey: Anesthesiologist : Group Practice

Hospital & Healthcare Comp Svc (HHCS) Data 04/08 $237,844 $265,160 $313,425 104.58% 101.00% $280,086 $251,233 $280,086 $331,068Physician Survey: Anesthesiologist : All Groups

AAMC Data 06/07 $250,000 $296,250 $341,250 110.42% 103.00% $336,923 $284,323 $336,923 $388,101Clinical Science: Anesthesiology All Orgs

Averaged Results $247,258 $291,195 $345,451 106% 102% $315,895 $48,258 $315,623 $364,153 $421,801

INCENTIVE COMPENSATION Surveyed Data Adjustments

BASE SALARY

“Direct Expense” = Mostly Science …


“Direct Expense” = Some Art…

Aging DataLarge escalations

Local supply and demand idiosyncrasies

Regional COL variations run counter to compensation

Accounting for job stress, case volume, call stress, etc.


“Direct Expense”: Interventions to Lower

• Sophisticated determination of fair market value salary

• Sophisticated determination of fair market value benefits

• Explore alternative staffing models


Lower Expenses: Staffing Model Options


Direct Expense Management

Various Models to Cover 4 ORs

Model MD CRNA Rooms Covered Hands on Deck Gross $ Cost/Room

MD Only 4 0 4 4 people 1,600,000 400,000

CRNA Only 0 4 4 4 people 800,000 200,000

MD/CRNA 1 4 4 5 people 1,200,000 300,000

The CRNA Only model provides lowest cost per room. • Liability and Revenue Management Issues

The MD/CRNA model provides second lowest cost per room. • Avoids Liability or Revenue Management Issues


“Indirect Expenses”= Costs to Run an Anesthesia Department

Technology: Telephony, computers, servers, software (i.e. Billing System)

Credentialing with Payors and Hospital Payroll & Benefits Administration Scheduling Revenue Management and Collections Quality Assurance ProgramRisk Management LegalAccounting Insurances


Source: American Hospital Association, 2005

Percent of Revenue Allocated to Administration Functions

26.7%

13.9%

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

30.0%

35.0%

Percen

t of Reven

ue

Physician Groups

Total Administrative Costs Billing and Insurance Related Costs

“Indirect Expenses”=Costs to Run an Anesthesia Department


The average medical practice spends between 14 and 25% on administrative costs. Working with larger entities permits economies of scale and economies of scope and can drive down costs. Larger entities have access to the most effective technology and highly sophisticated human resources.

Indirect Expense Intervention


Review: The Anatomy of a Subsidy

Revenue - Expenses = Subsidy

• Patients

• Payors

• Clinicians • Management

• Fixed Amount• Revenue Threshold • Case/Payor Mix Guarantee• Cost Plus


Subsidy Forms

Fixed AmountHospital defers revenue/expense risk and reward

If sum proves insufficient, is insolvency an option?

Revenue Threshold Hospital on the hook for group’s billing

Due diligence on revenue management and contracting required

Contemplate bonus schedule to align interests

Case/Payor Mix GuaranteeHard to quantify impact of payor mix drift

Case guarantee relatively easy to quantify

Hospital avoids revenue management risk

Cost PlusHospital retains all revenue/expense risk and reward

Bonus schedule critical to align interests


Review: Interventions to Reduce Subsidy

Revenue - Expenses-Savvy Payor Contracting

-Pristine Revenue Management

-Leveraging technology

-Sophisticated compensation analysis

-Ensuring FMV salary and benefits

-Deploying cost-efficient staffing models

-Leveraging technology

SOUND ADMINISTRATION


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Is There Relief on the Horizon?

Growth in Number of New Anesthesia Graduates


33% 31% 29% 27% 25%

49% 49% 50% 50% 50%

18% 20% 21% 23% 25%

0%

20%

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2001 2002 2003 2004 2005

CRNA's Anesthesiologists Unfilled Demand

The Data is Not Encouraging…Note the unfilled demand


Closing Remarks: Defining Victory

Deriving the most value per dollar spentClinicians are paid a fair day’s wage for fair day’s work

Fair benefits

Obtaining a robust quality management program

Making sure that all potential revenue is capturedAll revenue streams explored

Contracts with payors are optimized

Revenue management is smooth, efficient and error-free


Questions

Marc E. Koch, MD MBASomnia President and Chief Executive Officer

877-476-6642 www.somniainc.com

Demystifying the Anesthesia Stipend: Achieving More Coverage and Better Quality for Less Cost

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Transcript of Demystifying the Anesthesia Stipend: Achieving More Coverage and Better Quality for Less Cost