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Anesthesia Financial

Models

KOAMA

San Juan

January 2007

Joe Laden

joeladen@aalouisville.com

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ABC Anesthesia - 2006

Patient Receipts Less Refunds 6,000,000

Hospital Stipend 1,200,000

Total Income 7,200,000

Billing and Collection Expense 360,000

Corporation Expense 75,000

CRNA Expense (14) 2,450,000

Non-shareholder MD Expense 360,000

Net to Shareholders 3.955.000

Shareholders 9

Shareholder Total Compensation 439,444

Insurance, Retirement, Tax, etc. 100,000

Shareholder W-2 339,444

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Anesthesia Metrics You Should Know

• Revenue per Unit ($20-$50)• Revenue per Hour ($200-$450)• Unit Reimbursement Rate of Major Payers• Revenue Per OR ($300k-$700k) • Average Shareholder MD W-2 ($250k-$400)• Total non-W-2 Costs per MD ($60K-$110k)• O.R. Utilization (40%-80%) Ye• Units Billed per MD per Year

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Anesthesia Metrics You Should Know

• % Work After Hours (0-30%)• CRNA Cost Per Hour Billed ($120-150)• CRNA Cost Per Unit Billed ($14-$18)• MD Hours In Hospital Per Week (40-55)• % Corporate Overhead & Administration (2%?) • % Billing Cost (3%-8%)• % Medicare Units (10%-60%)• Units Per Hour (7-10)

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Key Metrics• Revenue Per O.R.• Revenue Per Unit Billed• O.R. Utilization Rate• % Hours Billed/Worked After Normal OR Shift• CRNA Cost per Hour/Unit Billed• MD:CRNA Ratios (Concurrency)• Weeks Worked per Year• MD non-Salary Costs• Units per Hour• Units Billed per MD FTE

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CRNA Cost Per Hour/Unit Billed• Hourly Rate = $60• Hourly Rate with Benefits & Taxes

at 33.3% $80• Hourly Rate for Hours Worked (40 days PTO)

$95• Hourly Rate for Hours billed @ 70% Utilization

$135• Overtime, Shift Differential & Call May Increase• Converts to about $16-$17/unit• Can This Metric Be Controlled?

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MD:CRNA Ratios (concurrency)

• Nominal Ratio May Be 1:4, 1:3, 1:2 , However:

• Some MD-only O.R.’s• Different Ratios: (some O.R. 1:2, some 1:3)• Ratios Change As Cases Start and Stop• Floaters Should Be Counted

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MD:CRNA Ratios (concurrency)

• Practice Ratio

Average Number of MD’s Scheduled to Work

Divided by

Average Number of CRNA’s Scheduled to Work

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MD:CRNA Ratios (concurrency)Practice Ratio Example:

10 OR’s Normally Scheduled as Follows:

8 CRNA’s in 8 O.R.’s

2 M.D.-Only O.R.’s

6 O.R.’s @ 1:3

2 O.R.’s @ 1:2

Total M.D.’s 5

Practice Ratio 5:8 or 1:1.6

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MD:CRNA Ratios (concurrency)Cost Ratio

• Divide Total Revenue by Total CRNA Cost

Example: Total Revenue $12,000,000CRNA Cost $ 4,000,000Cost Ratio 33%

• Result – One Third of Revenue is Consumed by CRNA Costs.

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MD:CRNA Ratios (concurrency)Cost Ratio

• Therefore, 33.3% of Units Billed Per MD or Hours Billed Per MD or Revenue Per MD would need to be subtracted to compare to another practice with no CRNA’s or a differentratio of CRNA’s.

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MD:CRNA Ratios (concurrency)Summary

• The Effect of Concurrency is Difficult to Calculate

• It Makes Comparison to Surveys Problematic• However, the MD:CRNA is Controllable by the

Anesthesia Practice and Can Have a Significant Influence on MD Income.

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Weeks Worked Per Year• Eight Weeks Time Off is the Average • Significant Differences Will Be Reflected in

MD W-2 Wages.• Value of a Vacation Week Calculation:

Total MD Compensation/Cost Divided by

Number of Weeks Worked

$440,000/44 $10,000/week

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Anesthesia Financial Models

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Diagram Model

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MD Available in Hospital MD Administers Anesthesia

Units billed to Insurers & Patients

Revenue Received

Collection CostsSubtracted

Non-MD Costs Subtracted

MD Medically DirectsCRNA's

Income Division Formula

MD W-2

MD Overhead CostsSubtracted

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Spreadsheet Model

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Needed Per OR $550,000Percent Government 33.3%O.R. Utilization % 60.0%Government Unit Rate 17.00Non-Government Unit Rate 51.00Units Per Hour 8.0Percent Work After Hours 20%Available OR Hours/Yr. 2,016

Blended Unit Rate 39.68Rate Per Hour 317Potential Billable 639,927Revenue-Prime Time 383,956Total Revenue 460,747

Stipend Needed $89,253

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Adjusted Units Per Physican Three Practice modes, Same Practice

MD Only Mixed ACT 4:1 CRNA Cost per Unit 18.00Revenue per unit 40.50

Units Billed MD only 270,406 104,407 0 CRNA Unit Reduction 44.4%Units Billed ACT 166,000 270,406Total Units Billed 270,406 270,407 270,406

CRNA Cost Adjustment -73,778 -150,226

Net Units 270,406 196,629 120,180

MDs 28 19 10

Units Per MD 9,657 14,232 27,041Units Per MD (adjusted) 9,657 10,349 12,018

MD Only vs Mix/ACT 7.2% 24.4% Mixed vs ACT 4:1 16.1%

ACT 4:1 physicians should make 24.4% more than MD only physicians (Total Package) But they are working longer hours and taking more call

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01/01/2005 02/01/2005 31

AI BI CI DI EI FI GI HI II J I KI

Hospital Holidays % Room Total Total Period Total 8OR Start Stop Within After-Hour Turnover Cases Minutes O.R. Overtime Hr

Variation Date Date Time Frame Week-End Time For Period For Period Revenue Hours RmsHosp/Var #1 01/01/2004 12/31/2004 6 20.00% 20 9,389 1,304,305 $6,600,000 0 14Hosp/Var #2 01/01/2003 12/31/2003 6 24.00% 20 9,389 1,304,305 $6,600,000 0 14Hosp/Var #3Hosp/Var #4Hosp/Var #5Hosp/Var #6

AR BR CR DR ER FR GR HR IR JRTotal

Hospital Total Available OR's Unused OR's Average Daily Extra Potential Hourly OR OR OR Utilization 100% Unused Hours Cases Billable Revenue

Variation WeekDays Hours Percentage Utilization At Ideal Per Case At Ideal OR Hours RateHosp/Var #1 256 28,672 65.2% 4.87 1.83 2.32 4.40 2,608 $304Hosp/Var #2 255 28,560 62.0% 5.32 2.43 2.32 5.86 3,461 $304Hosp/Var #3 0 0 0.0% 0.00 0.00 0.00 0.00 0 $0Hosp/Var #4 0 0 0.0% 0.00 0.00 0.00 #DIV/0! #DIV/0! $0Hosp/Var #5 0 0 0.0% 0.00 0.00 0.00 0.00 0 $0Hosp/Var #6 0 0 0.0% 0.00 0.00 0.00 0.00 0 $0

TOTAL: 511 57232 10.19 4.25 4.63 #DIV/0! #DIV/0!

http://www.asahq.org/Newsletters/2004/09_04/pracMgmt09_04.html 2.489588881 2.489588881

$0#DIV/0!

Calculated Using Target Utilization (Column NI)

$0

$1,050,871$0

#DIV/0!

PotentialBillableRevenue

$791,783

KRR E S U L T S T A B L E

Enter OR Hour-Blocks

O.R. UTILIZATION BASED ON ANESTHESIA BILLING DATACOST OF O.R. UNDERUTILIZATION

I N P U T T A B L E

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MD Income Based on OR Revenue and Staffing2:1 coverage of team care OR's

OR Revenue $525,000 $525,000 $525,000 $525,000 $525,000 $525,000 $525,000 $525,000 $525,000Billing Cost/Corporate Overhead 8% 8% 8% 8% 8% 8% 8% 8% 8%MD Benefits, Taxes, Etc. $85,000 $85,000 $85,000 $85,000 $85,000 $85,000 $85,000 $85,000 $85,000MD Vacation Weeks 8 8 8 8 8 8 8 8 8MD's Off After Call 1 1 1 1 1 1 1 1 1MD Floaters 0 0 0 0 0 0 0 0 0

CRNA Package (Salary,OT,Call,Benefits) $175,000 $175,000 $175,000 $175,000 $175,000 $175,000 $175,000 $175,000 $175,000CRNA Paid Weeks Off 8 8 8 8 8 8 8 8 8

MD-Only OR's 8 7 6 5 4 3 2 1 0Anesthesia Care Team OR's 13 14 15 16 17 18 19 20 21ACT Staffing Ratio-CRNA's:1 M.D. 2 2 2 2 2 2 2 2 2Extra CRNA's for Late Coverage 2 2 2 2 2 2 2 2 2

Total OR's Covered 21 21 21 21 21 21 21 21 21MD's Needed Per ACT 1.24 1.24 1.24 1.24 1.24 1.24 1.24 1.24 1.24CRNA's Needed Per OR 1.36 1.35 1.34 1.33 1.32 1.31 1.31 1.30 1.29

Total MD's 18.68 18.12 17.56 17.00 16.43 15.87 15.31 14.74 14.18Total CRNA's 17.73 18.91 20.09 21.27 22.45 23.64 24.82 26.00 27.18

Total Revenue $11,025,000 $11,025,000 $11,025,000 $11,025,000 $11,025,000 $11,025,000 $11,025,000 $11,025,000 $11,025,000Revenue Less Overhead $10,143,000 $10,143,000 $10,143,000 $10,143,000 $10,143,000 $10,143,000 $10,143,000 $10,143,000 $10,143,000Total CRNA Cost $3,102,273 $3,309,091 $3,515,909 $3,722,727 $3,929,545 $4,136,364 $4,343,182 $4,550,000 $4,756,818Revenue Less CRNA Cost $7,040,727 $6,833,909 $6,627,091 $6,420,273 $6,213,455 $6,006,636 $5,799,818 $5,593,000 $5,386,182

MD Package $376,832 $377,122 $377,430 $377,759 $378,111 $378,487 $378,891 $379,326 $379,795MD W-2 $291,832 $292,122 $292,430 $292,759 $293,111 $293,487 $293,891 $294,326 $294,795

1st Call Days per Year 19.5 20.1 20.8 21.5 22.2 23.0 23.8 24.8 25.7

At 2:1 there is no financial advantage to MD's to adding CRNA coverage no floater and 1 day after call

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Increased Revenue Due to Increased OR Utilization

Current Revenue Per OR 500,000Current Utilization Rate 64.0%Prime OR hours / Day 8Annual Work Days 252 Total Prime Available 2,016Percent Non Prime Hours 15.0% Total Prime Used 1,290Hourly Revenue Rate 329

Target Utilization Rate 75.0%Total Prime @ Target 1,512

Additional Revenue @ Target 73,047 Additional Prime @ Target 222

Total OR's 20Total Additional Revenue 1,460,938

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Adjusted Units Per Physican Three Practice modes, Same Practice

MD Only Mixed ACT 4:1 CRNA Cost per Unit 18.00Revenue per unit 40.50

Units Billed MD only 270,406 104,407 0 CRNA Unit Reduction 44.4%Units Billed ACT 166,000 270,406Total 270,406 270,407 270,406

CRNA Cost Adjustment -73,778 -150,226

Net Units 270,406 196,629 120,180

MDs 28 19 10

Units Per MD 9,657 14,232 27,041Units Per MD (adjusted) 9,657 10,349 12,018

MD Only vs Mix/ACT 7.2% 24.4% Mixed vs ACT 4:1 16.1%

ACT 4:1 physicians should make 24.4% more than MD only physicians (Total Package) But they are working longer hours and taking more call

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Graphical Model

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Situations Were Models Are Useful• Evaluating Additional O.R. Coverage• Advocating for Improved O.R. Utilization• Analyzing Proposed Change in MD:CRNA Ratio• Additional Facility to Cover • Additional Personnel to Improve Lifestyle• Changes in Vacation for Some or All MD’s• Changes in Payer Mix • Changes in Payer Reimbursement• Stipend Requests (New and Changed)• Probable MD Income in Future

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Steps to Develop & Use a Model

• Objective• Inputs and Outputs• Determine Form • Gather Data• Validate• Compare to Surveys and Benchmarks• Project, Manipulate in Real time

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Model Software References

• http://www.modeladvisor.com

• http://www.xcelsius.com