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7/21/2019 Winter 2015 Communique by Anesthesia Business Consultants
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THE CO MMU NI Q U W I NT ER 2015 PAG E 2
FROMMONOLOGUETOCONVERSATION
Dear Readers,
We are entering the new year deter-mined to enhance our engagement with
you. Many o you have provided us with
comments and questions on articles in past
issues, opening the door to new topics and
new contributors and at the very least to
different perspectives.
I you have read previous issues o
the Communiqu, you know that more
and more o our content reflects recipro-
cal and ofen iterative learning. It is time
to open up this process. We want to hear
rom you. Beginning with the Spring issue,
we will add a Letters to the Editor section
and we hope that you will write to us
with your observations on any item that
has caught your interest. We will orward
all correspondence to the author(s) o the
article so that they may respond to your
comments or queries, and we will do our
best to supplement the authors responses
in uture Letters to the Editor pages wher-
ever our own replies are likely to contribute
to a useul discussion. Publication o your
letters in the Communiqu will remain
subject to our discretion, as were sure you
will understand.
You may have noticed an increasingly
conversational ormat in recent articles.
Te give-and-take between experts such as
Michael Hicks, MD, MBA, and Joe Laden in
their article Point-Counterpoint: Do Nation-
al Anesthesia Management Companies
Increase Revenues for Acquired Groups? is
a stellar example o the genre. Tis discus-
sion began in an electronic list serv on the
website o the Medical Group Manage-
ment Association-Anesthesia Administra-
tion Assembly, o which both Dr. Hicks
and Mr. Laden are members. When they
began exchanging views on the relative
benefits o exchanging cash flow today
or an equity stake or other potential or
wealth creation in the uture, it was not at
all clear that the conversation would turn
to the role and value o salary surveys, as it
did in their article. Tere is a strong disin-
centive or financially successul practicesto participate in such surveyswhich by
their nature show averages below the levels
achieved by the leaderswhen the surveys
are used or prospective salary-setting. As
Dr. Hicks says, the provision o anesthe-
sia services is now a regional and national
business and there are many valid business
and legal reasons or not sharing revenue
and expense inormation even in the
aggregate even though this inormation
has previously been willingly provided.
Tus the dialogue between Dr. Hicks andMr. Laden has ended up introducing an
important topic that has not been touched
on previously in the Communiquthe
inherent limitations o compensation
surveys in a consolidating marketplace.
Richard Dutton, MD, MBA and
Matthew Popovich, PhD also use a
conversational approach in their article
on the ASA-Anesthesia Quality Institutes
Quality Clinical Data Registry, QCDR
Made SimpleHa! Te conversation here,
however, is between an unseen interlocutor
who asks the questions so many o you are
raising about the QCDR, and the QCDRs
designers/managers, or example, What
are my options? and What measures can
I report on? It is a ormat that should
make it easier or readers to assess whether
and how to participate in reporting to the
QCDR, even as the registry and its require-
ments continue to develop.
In Phoenix Project: Reconstructing a
Local Group from the Ashes of its Predeces-
sor, Mark Weiss, JD uses his own hallmark
conversational style, notable or its direc
challenges to readers (Even i the hospita
hasnt expressed a preerence, you know
who shouldnt remain at the acility, so
why ool yoursel at the cost o your own
uture?) as well as its upbeat conclusions
(the death o an anesthesia group can be
leveraged into the birth o a new one.)
Some o the most useul materia
presented in our publications comes rom
the pragmatic conversations that our writers
have with our readers and other members othe anesthesiology community that morph
into ideas or more generalized education
Understanding the Impact of Individua
Exchange Plans on Anesthesia Practices by
ABCs own Jody Locke is one such article
Mr. Locke walks readers through the
mechanics o estimating the dollar impact o
participating in one or more o the Obam-
acare Exchanges. Te higher patient cost
sharing responsibilities under these health
plans drive not just accounts receivable
management but also contracting strategies
and even prepayment policies.
Still more inormation that you
can use in your practice throughout the
year are staff articles on Current Proce-
dural erminology (CP) code changes
or 2015, on ICD-10 coding and on the
National Practitioner Data Bank.
Please do send us your ideas on addi
tional topics you would like to see
addressedor to address your-
sel!as well as your comments
on any o the inormation,
suggestions or conclusions
contained in this issue. We
are looking orward to the
next stage in our ongoing
conversation with you.
With best wishes,
ony Mira
President and CEO
NEW! Lettersto the Editor
mailto:[email protected]:[email protected]7/21/2019 Winter 2015 Communique by Anesthesia Business Consultants
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THE CO MMU NI Q U W I NT ER 2015 PAG E 3
Te act is, olks, that the Qualified
Clinical Data Registry (QCDR)and pay
or perormance reporting in general
is ridiculously complex. And the rules
are changing every year. Tis article
will lay out some o the basics, using
simple lists and bullets, in the hope o
making the options more intuitive. We
wish to acknowledge also the editorial
assistance o Karin Bierstein, hersel an
expert, who will correct any inadvertent
misstatements we might make. Between
the three o us we should be able to lif the
og a little bit.
Lets begin with some Q&A:
Do I have to participate inperformance reporting?
Leaving aside the local advantages
o an effective quality management
program, external perormance
reporting is already required or
hospital and ambulatory surgery center
accreditation. Perormance reporting at
the ederal level is also required or every
eligible proessional (EP)physician,
certified registered nurse anesthetist
(CRNA) and anesthesiologist assistant
(AA)paid by Medicare, or else
payments will be docked. Te penalties
at this moment are small, but the
government is committed to increasing
them to as much as 10 percent o total
payments over the next five years. Many
anesthesiologists have already received
letters rom Medicare noting their ailure
to participate in perormance reporting
in 2013, and inorming them that their
payments will be decreased in 2015.
When?
Sooner than you think. For practiceswith minimal Medicare billing, the
financial penalties or not reporting will
be small at first. But Medicaid will soon
ollow, and private insurers likely afer
that. One way or another, every practice
will need to measure and report on
quality i it wants to stay in business or
the next decade.
What are my options?
Sixty-one percent o anesthesiologists
in 2012 reported quality measures to
the Physician Quality Reporting System
(PQRS). Most anesthesiologists report
via the claims-based reporting option.
Tis requires appending a code to each
case billed to Medicare, saying that the
antibiotics were given on time, that
you washed your hands beore placing
the central line, or that the patient was
normothermic when they hit the Post-
Anesthesia Care Unit (PACU). (Tese were
three o the five measures most commonly
reported by anesthesiologists in 2012.) In
2014 reporting these measures successully
yielded a 0.5 percent (hal o one percent!)
incentive rom Medicare, but beginning in
reporting year 2015, satisactorily reporting
will only prevent a -2.0 percent penalty
Worse still, the number o measures tha
must be reported has increased rom the
current three up to nine, with required
inclusion o at least one cross-cutting
measure or claims-based and traditional
qualified registry reporting. And yes, the
average anesthesia provider currently has
only a ew measures to choose rom when
using these mechanisms and no outcome
measures or cross-cutting measures. Moreon this below.
Tere are alternatives to the
individual claim reporting mechanism, as
Medicare attempts to phase it out. One
is the Group Practice Reporting Option
(GPRO), which allows groups to presen
their data through an aggregation service
Ofen involving the same measures
but through a different mechanism, i
allows or EPs to receive the 0.5 percen
incentive in 2014 while attempting to
avoid penalties in the uture. Anotheralternative is to be part o an Accountable
Care Organizationa consortium o
physicians and acilities accepting a
risk- and/or savings-sharing payment
rom Medicarein which case you are
probably a salaried employee o an HMO
like Kaiser or a large university system
and can saely stop reading nowyoure
most likely covered.
QCDR MADESIMPLE HA!Richard P. Dutton, MD, MBA
Chief Quality Officer, American Society of Anesthesiologists
Executive Director, Anesthesia Quality Institute, Schaumburg, IL
Matthew T. Popovich, Ph.D.
Director of Quality and Regulatory Affairs, American Society of Anesthesiologists, Washington, D.C.
Continued on page 4
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THE CO MMU NI Q U W I NT ER 2015 PAG E 4
QCDR MADESIMPLE HA!Continued from page 3
Te final, and newest, alternative is the
Qualified Clinical Data Registry (QCDR),
intended to give eligible providers
credit or participation in external
benchmarking or quality improvement.
While the reporting mechanism is similar
to other reporting mechanisms described
above, the set o measures that can be
reported is much broader. Medicare has
given these approved registries in each
specialty the autonomy to define their own
important quality metrics, in exchangeor doing the data capture, analysis and
reporting that Medicare used to have to do
itsel. We can expect Medicare to continue
to promote registries in order to offload
the data management burden onto private
entities.
Im already lostHelp!
OK, lets look at a glossary. Here is a
handy list o the critical acronyms:
CMSTe Centers or Medicare and
Medicaid Services. In round numbers
about 1/3 o all healthcare payments in the
US are rom Medicare, with another 1/6
through Medicaid. So about 50 percent
o all healthcare is bought by the ederal
or state government. Its a little less than
that or anesthesia, but this is still a big
hunk o our business.
P4PPay or Perormance. What
the government intends to do, instead o
paying or quantity or service or time. Te
burden o demonstratingperormance is
on us.
PQRSTe Physician Quality
Reporting System. Te first steps toward
P4Pin reality, Pay For Reporting and
not or Perormance in the sense o
outcomes or practitioners by CMS.
Now about eight years old, the program
began as a scheme o incentive paymentsto eligible providers who reported either
perorming or not perorming one or
more approved quality improvement
measures.
EPEligible Proessional. Any
individual who bills CMS or their
proessional clinical services to a patient.
Tis includes anesthesiologists, CRNAs,
AAs and others.
NQFTe National Quality
Forum. A not-or-profit, membership-
based organization created to endorsemeasures or use by CMS and others or
quality reporting. Highly bureaucratic
approval o a measure through NQF can
take years o effort and costs hundreds
o thousands o dollars. CMS-approved
measures ofen orm a subset o all
NQF-approved measures.
VMTe Value-Based Payment
Modifier. Te CMS companion program
to PQRS, just getting started. Uses the
same set o measures and combines PQRS
and QCDR measures with outcome and
cost measures. EPs not satisactorily
reporting PQRS will be penalized under
the VM program cumulatively; this
money will und an incentive pool or
those who meet all o the requirements.
Te VM system is already active in 2014,
with results to be applied in 2016.
MAVTe Measure Applicability
Validation process. Groups and providers
using the claims-based or traditional
qualified registry reporting mechanisms
who cannot find enough applicable
measures to report are subject to the
MAV test, which assesses whether more
measures would have been available
Assuming CMS agrees that there were
none, the EP will not be penalized under
PQRS.
QCDRTe Qualified Clinical Data
Registry. A new mechanism or practices
to report PQRS and that will, in the uture
impact their VM. QCDRs are developedand maintained by medical specialty
societies, and must seek to improve
quality within that specialty by means o
data aggregation and periodic eedback to
participants (benchmarking). Te QCDR
can use both approved PQRS measures
and its own non-PQRS measures. In
2015, the QCDR will be authorized to
include up to 30 o these non-PQRS
specialty-specific measures, thus allowing
any participant in a QCDR that takes
advantage o this authorization to find theminimum nine that must be reported.
GPROTe Group Practice
Reporting Option. Practices can send
their data to CMS as a group (all provider
using one ax Identification Number or
their business). Tis is different rom
the QCDR, as the GPRO only allows
reporting the existing PQRS measures
and requires different minimums.
OK, I get it. I have to report
performance on quality measures toCMS. What next?
alk to your office manager and you
practice management company. Tis is
complicated material and everyone should
get proessional advice. Ten consider
your exposurethe percent o cases your
eligible proessionals bill to CMS. Ten
decide what your practice posture will be
Do you want to do everything possible to
earn VM incentives? Or are you satisfied
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with avoiding penalties? Do you have an
existing system to capture clinical data,
or are you starting rom scratch? Once
youve answered these basic questions,
you should check out the ollowing
publicly available resources:
CMSTe definitive source, but not
always easy to understand! http://www.
cms.gov/Medicare/Quality-Initiatives-
Patient-Assessment-Instruments/PQRS/
index.html
Te AQI websiteInormation
on the QCDR. http://www.aqihq.org/
PQRSOverview.aspxTe ASA websitehttps://www.
asahq .org /For-Mem b ers/Qual i t y-
Management/QCDR.aspx (requires
member log-in).
ABC weekly e-Alerts on PQRS,
VM and QCDR topicshttp://www.
a n e s t h e s i a l l c . c o m / p u b l i c a t i o n s /
anesthesia-industry-ealerts
What measures can I report on?
Te ollowing currently approvedPQRS measures apply to most
anesthesiologists. Tese measures can be
reported through any mechanism: claims-
made, group-reporting or through the
QCDR. When reviewing the measures,
EPs should pay attention to the CP Codes
in the denominator o the measures. I the
specified denominator codes or a measure
are not included on the patients claim (or
the same date o service) as submitted
by the individual eligible proessional,
then the patient does not all into thedenominator population, and the PQRS
measure does not apply to the patient.
#30Perioperative Care: imely
Administration o Prophylactic
Parenteral Antibiotics (this measure has
been retired by CMS, and can no longer
be reported to PQRS in 2015)
#44Coronary Artery Bypass Graf
(CABG): Preoperative Beta-Blocker in
Patients with Isolated CABG Surgery
#76Prevention o Catheter-
Related Bloodstream Inections (CRBSI):
Use o a Central Venous Catheter (CVC)
Insertion Protocol
#130Documentation o Current
Medications in the Medical Record
(the denominator codes do not include
anesthesia codes)
#193Perioperative emperature
ManagementFor General anesthetics
> 60 minutes, the percentage o patients
reaching the PACU at greater than 36
degrees, or in whom active warming
devices were used
#226Preventive Care andScreening: obacco Use: Screening and
Cessation Intervention (non-anesthesia
codes)
#342Pain Brought Under Control
within 48 Hours o admission to palliative
care (non-anesthesia codes)
#358Patient-Centered Surgical
Risk Assessment and Communication:
Te Percent o Patients who Underwent
Non-Emergency Major Surgery Who
Received Preoperative Risk Assessmen
or Procedure-Specific Postoperative
Complications using a Data-Based, Patient
Specific Risk Calculator, and who also
Received a Personal Discussion o Risk
with the Surgeon (non-anesthesia codes)
How do I report?
Tis is the question you should
ask your practice managers. Te shor
version is that someone (possibly
including the provider at the point o
care) indicates in the medical record that
the patient is eligible and the measure has
been met. Someone else abstracts thi
inormation rom the medical recordor the billing documentation and turns
it into a code. Tat code is reported
directly to CMS with the bill or the case
(under claims made) or to the GPRO or
QCDR. Perormance on the measure is
calculated at the end o the year, based
on the rate o successul reporting over
all eligible cases.
THE CO MMU NI Q U W I NT ER 2015 PAG E 5
Continued on page 6
http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/PQRS/index.htmlhttp://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/PQRS/index.htmlhttp://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/PQRS/index.htmlhttp://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/PQRS/index.htmlhttp://www.aqihq.org/PQRSOverview.aspxhttp://www.aqihq.org/PQRSOverview.aspxhttps://www.asahq.org/For-Members/Quality-Management/QCDR.aspxhttps://www.asahq.org/For-Members/Quality-Management/QCDR.aspxhttps://www.asahq.org/For-Members/Quality-Management/QCDR.aspxhttp://www.anesthesiallc.com/publications/anesthesia-industry-ealerts/681-physician-payments-sunshine-act-anesthesiologists-should-register-and-review-their-informationhttp://www.anesthesiallc.com/publications/anesthesia-industry-ealerts/681-physician-payments-sunshine-act-anesthesiologists-should-register-and-review-their-informationhttp://www.anesthesiallc.com/publications/anesthesia-industry-ealerts/681-physician-payments-sunshine-act-anesthesiologists-should-register-and-review-their-informationhttp://www.anesthesiallc.com/publications/anesthesia-industry-ealerts/681-physician-payments-sunshine-act-anesthesiologists-should-register-and-review-their-informationhttp://www.anesthesiallc.com/publications/anesthesia-industry-ealerts/681-physician-payments-sunshine-act-anesthesiologists-should-register-and-review-their-informationhttp://www.anesthesiallc.com/publications/anesthesia-industry-ealerts/681-physician-payments-sunshine-act-anesthesiologists-should-register-and-review-their-informationhttps://www.asahq.org/For-Members/Quality-Management/QCDR.aspxhttps://www.asahq.org/For-Members/Quality-Management/QCDR.aspxhttps://www.asahq.org/For-Members/Quality-Management/QCDR.aspxhttp://www.aqihq.org/PQRSOverview.aspxhttp://www.aqihq.org/PQRSOverview.aspxhttp://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/PQRS/index.htmlhttp://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/PQRS/index.htmlhttp://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/PQRS/index.htmlhttp://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/PQRS/index.html7/21/2019 Winter 2015 Communique by Anesthesia Business Consultants
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Whats different about the QCDR?
EPs participating in the QCDR
report their perormance on a case-by-
case basis just as they would to CMS
under claims made. Te QCDR thenanalyzes perormance and reports on the
EPs behal to CMS. Te difference is that
the QCDR may measure other elements
than those reported to CMS (its a real
registry, not just a billing mechanism).
Te QCDR will provide regular eedback
to the provider throughout the year.
Andmost importantthe QCDR can
provide reporting credit or non-PQRS
measures.
Aha! Tats how I can find ninemeasures to report!
Exactly! Here are the 11 non-PQRS
measures available in the ASA-QCDR
(the National Anesthesia Clinical
Outcomes Registry, or "NACOR") or
2014. Even more will be added in 2015.
Anesthesiology: Post-Anesthetic
ranser o Care Measure: Proce-
dure Room to a Post Anesthesia
Care Unit
Post-Anesthetic ranser o Care:
Use o Checklist or Protocol or Di-
rect ranser o Care rom Procedure
Room to Intensive Care Unit (ICU)
Prevention o Post-Operative
Nausea and Vomiting (PONV)
Combination Terapy (Adults)
Prevention o Post-Operative
Vomiting (POV)Combination
Terapy (Pediatrics)
Composite Anesthesia SaetyTe percentage o all patients who
complete a scheduled procedure
without a major complication
Immediate Perioperative Cardiac
Arrest Rate
Immediate Perioperative Mortal-
ity Rate
PACU Reintubation Rate
Short-term Pain Management
Composite Procedural Saety or
Central Line Placement
Composite Patient Experience
OK, I know this is important, and Ihave to do it. How much is it goingto cost me to prevent penalties or earnincentives?
Costs will depend on the current
sophistication o your practice inormation
technology and on your billing or quality
capture vendor. alk with them first!
Participation in NACOR is open to anyanesthesia practice in America and is
free to ASA members. Te ASA-QCDR
service is also ree to ASA members
participating in NACOR. Non-member
EPs (i.e. your nurse anesthetists and AAs)
can use the ASA-QCDR service or $295
per EP per year, with discounts available
or large groups. Tis is likely a raction
o the penalty and incentive money at
risk, but each group will need to make this
assessment on their own.
Can I still participate in 2015?
Yes, although you need to ge
moving. CMS has threshold levels
of reporting required under each
mechanism, so you will need to have
your data flowing soon. For the QCDR
EPs using the QCDR option will need to
report at least nine measures covering
at least three National Quality Strategy
domains for at least 50 percent of their
patients seen during 2015.
I youre reading this at the ASA
Conerence on Practice Management
or the ulane-ABC-Medical Business
Solutions Advanced Institute or
Anesthesia Practice Managemen
(AIAPM), please stop by the AQI, ASA or
ABC exhibits to learn more. Tere wil
be presentations at each meeting on the
topic o PQRS reporting and the QCDR.
Te AQI is here to help you manage
ederal perormance reporting in our
brave new world o healthcare qualityComplicated, yes. But you can do it!
THE CO MMU NI Q U W I NT ER 2015 PAG E 6
QCDR MADESIMPLE HA!Continued from page 5
Richard P. Dutton,MD, MBA is VisitingProessor o Anesthe-siology, University oMaryland School oMedicine and AQIExecutive Director.o contact Dr. Dutton
or the AQI, visitwww.aqihq.org.
Matthew T. Popo-vich, Ph.D. is theDirector o Qualityand Regulatory Affairsor the AmericanSociety o Anesthesi-ologists. He is basedout o the ASA Wash-ington, D.C. officeand may be reached [email protected].
http://www.aqihq.org/mailto:qra%40asahq.org%3E?subject=mailto:qra%40asahq.org%3E?subject=http://www.aqihq.org/7/21/2019 Winter 2015 Communique by Anesthesia Business Consultants
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THE CO MMU NI Q U W I NT ER 2015 PAG E 7
unds now rather than in the uture, and
this money is taxed at the capital gains
rate rather than at the much higher W-2
income rate.
A question has arisen as to whether
the voluntary reduction in anesthesiologist
salaries through these types o acquisitions
will depress the overall air market value
o anesthesiologist salaries in a locale, a
region or even nationally. Tis is important
to independent anesthesiologists who
rely on air market anesthesiologist
compensation rates when negotiating with
acilities or financial support. Tere is
an assumption that anesthesiologist salary
surveys incorporate the reported beore
and afer W-2 wages o anesthesiologists
involved in these practice sales. An
additional assumption is that the salaries
o anesthesiologists who sell their practice
in this manner remain at their agreed to
lower level or the oreseeable uture.
Tere are a number o published
national physician compensation surveys
rom entities such as the Medical Group
Management Association, American
Medical Group Association, Merritt
Hawkins and Medscape. However, none
o these surveys are scientific and some
data are sel-reported by medical groups.
Hence, it is not known i anesthesia
groups that are acquired have participated
in surveys or whether their salary data
will be reported afer acquisition.
Dr. Hicks
Tere are a number o actors that can
lead an anesthesiology group to consider
merging or selling its practice. Tese include
the opportunity to trade uture income
potential or a cash payout today, a desire
to take an equity stake in an entity with a
perceived greater ability to provide income
and wealth creation in the uture, or on a
more pessimistic level, the sense that the
market or anesthesia services is peaking
and that the current groups situationbe
it structure, leadership or environment
does not permit it to make the necessary
changes to be successul in the uture.
Regardless o the motivation
however, the owners o large sophisticate
practices that do sell/merge/affiliate ar
replacing one orm o economic gai
(practice revenue distributed general
in the orm o W-2 income) or othe
types o economic gain such as a shar
o the sales price in a pure cash buyou
cash and equity in the new practic
and possibly different tax treatmen
o unds, as Mr. Laden points ou
However, I think there are som
other but less requently discusse
considerations that are important as we
First, many o the acquired platorm group
through better strategy and managemen
command higher commercial insuranc
rates than most other groups even withi
their home geographies. As a resul
when they take a "discount" off o the
pre-transaction income the end result
that their uture salary stream is reset to th
true prevailing market rate or their are
excluding their practice. In other word
post-transaction these physicians w
earn what their colleagues in other loc
practices earn and consider as "marke
rates. I know this is almost unbelievab
by many who work in smaller practice
but I am certain that no sophisticate
purchaser, whether in private equity or
strategic acquirer like the large physicia
practice management companies, is goin
to enter into a high dollar acquisition ancreate an artificially low labor expense t
get a deal done. Tis would be a significan
financial misstep and sophisticate
acquirers generally don't make thos
kinds o mistakes. Tis doesnt mea
that these companies are not sometime
overpaying or acquisitions but purchas
prices depend on a number o actor
and labor expense is only one o them
Tis is a topic or another time, thoug
POINT-COUNTERPOINT: DONATIONALANESTHESIAMANAGEMENTCOMPANIESINCREASEREVENUESFORACQUIREDGROUPS?Continued from page 1
Continued on page
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8/28
Secondly, some acquired practices,
even the sophisticated ones, immediately
begin to be the beneficiaries o even
better expertise, scale and technology
and as a result begin to repair their
"discounted" incomes. In other words,
the decrease in income resulting rom
the acquisition really becomes much
smaller as a result o improved contracts,
scheduling efficiencies and overhead
reduction while the benefits provided
in terms o equity and tax treatment
continue to accrue to the sellers.
Unortunately, consolidation in
anesthesia is requently portrayed in
terms o "selling out" or acting out o ear.
I am sure or some practices, possibly
smaller ones, that may be true. However,
I am certainrom multiple personal
experiencesthat or larger, more
sophisticated groups these transactions
occur not as a result o ear or even greedbut as a result o sound strategic planning
and sophisticated capital structure
decisions. Medical practices o all types,
not just anesthesia, requirenow and in
the utureassets that allow their leaders
the opportunities to make executable
decisions based on sound knowledge
and strategy. Tese transactions in
anesthesia are a path, but not necessarily
the only path, toward that goal.
Mr. Laden Dr. Hicks has made an excellent
point that anesthesiologists who merge
into or are acquired by a group with
better commercial payer rates can benefit
rom the higher rates. For example, rom
the ASA Commercial Fees Paid survey
in the Southern section the managed care
rate or all payers at the 25thpercentile is
$58 and at the 75thpercentile is $75, a 29.4
percent difference. Teoretically, i a group
at the 25thpercentile level in the Southern
Section joined a group in that section at
the 75th percentile and had 40 percent
o its patient revenue with contracted
managed care payers, patient revenue
would increase by 11 percent overall
afer joining the group with higher rates.
I the patient revenue per owner
anesthesiologist were $1,000,000 (see
MGMA 2014 Physician Compensation
Survey and MGMA 2014 Cost Survey
for representative data) or example,
afer joining the group with higher
rates the anesthesiologist's patient
revenue would increase by $110,000
annually in our example, replacing
much o the anesthesiologist's
income that was monetized in
the orm o capital gain proceeds.Whether or not physician income
can be increased afer an acquisition
may depend on the type o organization
the doctor joins. Doctors who sell must
examine their employment contracts
careully and determine i salary increases
and/or perormance bonuses are possible
and probable. For example, will the new
practice owners take additional practice
income or themselves or is there a
mechanism or additional revenue to be
shared with the anesthesiologists? It may
be better to sell to an organization that
has true physician representation in its
management structure.
Tere can be many paths to
increasing income afer acquisition
Te most immediate will occur i the
acquiring organization has higher payer
rates. However, the doctors need to find
out i the acquiring organization actually
has higher ees with their major payers
For example, a dominant local Blue Shield
may not care that the acquirer has great
Blue Shield contracts in other states. On
the other hand, the acquiring organization
may have a avorable national contract
with a nationwide payer.
Te acquiring organization may have
plans to expand the acquired practice to
nearby locations or to add a ree-standing
pain clinic. Depending on the deal
expansion revenue and profits may or maynot be shared with the anesthesiologists
who sold their practice.
Dr. Hicks
Our ideas are not dissimilaror any
group merger/acquisition/partnership
the devil is in the details. My view has
long been that anesthesia practices need
active strategy creation and decision
making with a view o creating additiona
value not only or their customers but also
or their own members. In the case o theintrinsic value to the practices members
this value can be in the orm o increased
W-2 income, or exchange o one orm
o equity or another or enhanced job
security. What doesnt work, as many in
the business unortunately know all too
well, is just sitting around and waiting/
ignoring/hoping that nothing changes
One thing that can be said concerning
income is that when a groups anesthesia
contract is acquired in a competitive
THE CO MMU NI Q U W I NT ER 2015 PAG E 8
POINT-COUNTERPOINT: DONATIONALANESTHESIAMANAGEMENTCOMPANIESINCREASEREVENUESFORACQUIREDGROUPS?Continued from page 7
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THE CO MMU NI Q U W I NT ER 2015 PAG E 9
bidding process by some other entity it is
nearly certain that physician incomes arenot going up or even likely to remain the
same.
Tat being said, however, there are
other salary related issues in any proposed
transaction. As Mr. Laden suggests,
income afer a transactionnow and in
the uturedoes depend on the type o
organization the physician joins. In this
regard, there are several different models.
raditionally most anesthesia
acquisitions were straight cash
transactionsthe seller gets cash and thebuyer gets the equity interest and control
o the practice. Te profit stream that the
buyer is acquiring comes rom a reduction
in income to the physicians since the
overwhelming majority o practices
distributed all monies afer meeting
overhead expenses to the physician
partners. Te physician sellers logic,
as alluded to previously, is that they are
trading uture earnings (and uncertainty)
or cash in the bank today that can be
used however they see fit (investment,
retirement, new boat or house, etc.). All
o the large strategic acquirers only did
this type o transaction and it remains the
most common orm.
Lately this has changed somewhat,
however, with the advent o a
partnership model wherein an equity
position in the acquiring company comes
with the cash. In this case the physicians
are now trading uture patient service
earnings or cash and possible capitalappreciation in the acquirers stock. Tese
transactions still require the creation o a
profit stream and this largely comes rom
the reduction in income o the physicians
(but not below market rates as mentioned
above). However, it creates opportunities
that other relationships may not. Not
surprisingly, it is always in the interest
o the acquirer to enhance the revenue
o any practice it acquires (or obvious
reasons). However, in partnership
models it is in both the acquirers and
the physicians interest to enhance
profitability since both parties stand to
gain as owners o the company. Part o
this gain can be provided in the orm o
W-2 income (income repair) while the
enhanced profitability leads to capital
appreciation o the companys stock. Tis
is proving to be a very attractive option in
the anesthesia M&A marketplace because
i the salaries are able to be brought
back near or at their level prior to the
acquisition then the physicians have
no decrease in real income and also the
benefit o an equity position that is likely
to increase aster and more appreciably
than their relatively illiquid ownership
position prior to selling.O course, this is an example o a major
deal point and not a devilish detail and is
indicative o some o the creativity that
can be exercised in creating a transaction.
As is always the case, physicians, whether
they are selling their practices or not, must
examine all o the transaction documents
including their employment contracts
careully and determine i salary increases
and/or perormance bonuses are even
possible or probable.
Mr. Laden
Based on the complexity o the
transactions that Dr. Hicks has described
it would be wise or anesthesiologists
considering an acquisition or partnering
deal to bring in experienced advisors
who can help navigate a pathway to a
avorable conclusion. While it may seem
straightorward to simply take cash-in
hand, the anesthesiologist should be
completely aware o his or her clinical and
financial path over the next 5-10 years. I
the doctor takes stock in the acquiring
organization, the uture plans o the
organization should be thoroughly vetted
by the doctor and the doctors financia
advisors.
Dr. Hicks
A key aspect o any substantia
transaction is the rigor applied to
the due diligence process. Key dea
points, and importantly the underlying
assumptions on which they are based
demand examination as to whether
they are sustainable post transaction
Some key assumptions involve whether
existing relationships that the buyer and
Continued on page 10
7/21/2019 Winter 2015 Communique by Anesthesia Business Consultants
10/28
seller have prior to the transaction will
continue and under what terms afer the
transaction is consummated. Examples
pertaining to anesthesia transactions
include the stability o service contracts
with acilities, employment terms o the
clinical staff and whether financial terms
o existing relationships will remain
in place or extend to newly acquired
clinicians or sites o services. Relative
to rate comparisons with payers, this
can be problematic or several reasons,
not the least o which include legal and
regulatory barriers to sharing this type o
inormation prior to a transaction. In my
experience this is difficult i not impossible
at the individual contract level but can be
reasonably approximated at the aggregate
level using third party organizations to
make comparisons and then blinding the
potential buyer and seller to actual payer
specific contract rates. In general, most payer contracts
remain at the regional or state level
but recently a ew major payers with
national ootprints have been agreeable
to national anesthesia rates. Tese appear
to be a mixed benefit with some parts o
the now larger practice getting minimal
or no increase in rates but other parts
being beneficiaries o significant positive
contributions. At a corporate level there
are ways to distribute this benefit to make
such a contract appealing to the entirepractice, however.
As Mr. Laden points out, some
groups do not have the benefit o
significant commercial rate contracts.
Tese groups are potentially in a difficult
position as they are the most likely to
require significant financial support and
are also less likely to be attractive merger
or acquisition targets. Tey are also the
most likely to depend on having valid
compensation data during negotiations.
Mr. Laden
I there are secrecy provisions in
acquisitions deals, wouldnt this prevent
the doctor and/or his group rom
reporting to Medical Group Management
Association (MGMA) and other surveying
organizations afer the acquisition?
Dr. Hicks
Obviously, proprietary inormation
should always be protected and treated
as the valuable asset that it is. Tat being
said, there are no secrecy provisions
outside those that are ound in all other
competitive business environments.
What may be different, however, is that
the provision o anesthesia services is now
a regional and national business and there
are many valid business and legal reasons
or not sharing revenue and expense
inormation even in the aggregate even
though this inormation has previouslybeen willingly provided.
For example, to whose benefit is it
or a large anesthesia practice to openly
report to the world its compensation
or that it has superior reimbursement
rates? Will doing so help those who have
managed their practice so as to achieve
superior rates or will it lead to a tougher
negotiation environment during the nex
round o negotiations afer groups with
lower rates have used the data to improve
their own rate structure? In my experience
the quality o inormation reported to
MGMA and other organizations is a
mixed bag. Some practices that have
better financial perormance choose no
to participate as there is little to be gained
by releasing that their rates are superior
to others and in act are only providing
competitors a rate target or their own
negotiations. In this context it can be
argued that smaller groups desiring
better rates can either join one o the
larger sophisticated groups, create their
own version o the same or develop the
expertise to get better rates on their dime
and their time.Tat being said, I understand the
value o surveys in general. However
their utility was greater and their need
more acceptable in a prior era when
groups were small, local and minimally
managed. In this era o nationa
competition their use may indeed be
problematic. For example, the payer rate
issue does indirectly come up in Request
For Proposal responses as hospitals
and health systems want to understand
why there may be differences in subsidyrequests among competitors or a service
contract. In act, I have been asked severa
times i I really had the correct subsidy
numbers in submitted pro orma budgets
as our submitted subsidy proposal was so
different (lower or higher) than those o
other bidders.
Mr. Laden
As anesthesia groups consolidate
through acquisition or merger, it appear
THE CO MMU NI Q U W I NT ER 2015 PAG E 10
POINT-COUNTERPOINT: DONATIONALANESTHESIAMANAGEMENTCOMPANIESINCREASEREVENUESFORACQUIREDGROUPS?Continued from page 9
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THE CO MMU NI Q U W I NT ER 2015 PAG E 11
that salary surveys may become less
useul than in the past. Anesthesiologists
may need to find other methods to
validate their compensation in situations
such as arranging financial support rom
healthcare acilities. Perhaps the true test
o air compensation is the amount it takesto attract quality anesthesia providers to
a particular geographic location. Tis
will vary with the desirability o the
geographic area, the current scarcity o
anesthesia providers and job specifics.
Dr. Hicks
Tis is an example o the nature o
the changing competitive landscape.
Many anesthesiologists and practice
leaders are troubled by this and with some
justification. However, it is a Catch-22situation. Many o the groups with high-
income clinicians are loathe to report
this data or the very reason that they
are above the reported averages and it is
to their benefit to have the world believe
that they make less than they really do. As
a result I believe the national surveys can
be airly inaccurate and this includes the
data produced by the ASA.
Unortunately, in my opinion hospitals
as well as practice leadership requently
rame the discussion incorrectly. It is
even more perversely ramed by outside
consultants who blur the compensation
requirement to hire an incremental or
additional clinician (the clinician at the
margin rom an economic perspective)
with the cost o an entire clinical staff. I
have even observed national consultants
attempt to (mis)use MGMA and other
data to justiy grossly underweighting the
services o anesthesiology subspecialists
that are ew in number and high in
demand. Similarly, the data are also
used to benefit some groups when theyrequest subsidy increases in order to add
additional clinicians who can be and
are added or substantially less than the
amount o the requested subsidy increase.
In act, it may be helpul or the
group to let the hospital believe that
anesthesiologist incomes are actually
lower than they really are. In some cases,
excluding academic anesthesiologists,
few if any anesthesiologists make
as little as some surveys suggest. In
summary, I have certainly encounteredhospital leaders who try to use those
data in the way Mr. Laden describes.
My response has been to suggest to
them that we both do a recruiting
search and see how many clinicians
express an interest in their proposed
compensation rates. Sometimes it
works and sometimes it doesnt. I will
say that it is more difficult for the
anesthesia group to fight this off when
they have no other options for work.
Mr. Laden
It appears that anesthesiologist
salary adjustments afer practice sales
will not be reflected in national physician
compensation surveys because:
1. Compensation reporting to the
national surveys is inconsistent or
inaccurate, and
2. Anesthesiologist salaries may
not be reduced or long afer
practice acquisition due to shared
revenue expansion initiated by the
acquiring organization.
Te current trend toward ewer
small independent anesthesia groups
will most likely continue, especially i
there is increasing downward pressure
on hospital financial support or these
groups. Surgery should continue its
increase due to the aging population
and technical innovation. I believe the
uture is bright or anesthesiologists even
though many may experience changes
in their financial and organizationastructures.
However, even i all anesthesiologist
are eventually employed by hospitals
practice management companies or
mega-groups, I believe there will always
be a need or anesthesiologist salary
surveys just as there is in most major
industries.
Michael R. Hicks,
MD, MBA, MHCM,
FACHE is a physicianexecutive based inDallas, exas. Heleads the anesthesia
division o a nationalphysician practicemanagement firmand previously led a large regionalphysician-owned anesthesia practice. Inaddition Dr. Hicks is a consultant or anational hospital and ambulatory surgerycenter company. He can be reached at
[email protected] Ladenhas workedor independent an-esthesiologists asa business practicemanager or over 30years. He is a well-
known member o theMedical Group Man-agement Association(MGMA) and o the MGMAs Anesthe-sia Administration Assembly. He can bereached at www.linkedin.com/in/joeladen.
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THE CO MMU NI Q U W I NT ER 2015 PAG E 12
I you have not spent much time
thinking about the impact o the
Exchange plans now being offeredunder Obamacare, you are not alone.
For many anesthesia providers and
their administrative staff, the specific
implications o the Patient Protection
and Affordable Care Act (ACA) passed in
March 2010 are more or less a black box.
As is true o so many issues in healthcare,
the devil is in the details; unortunately
this is just one more complicated issue
that merits special management ocus.
So what are Exchange plans and how
do they work? It is important to understandthat Exchange plan options are offered in
every state. Tese insurance options are
available through the Health Insurance
Marketplace at Healthcare.gov.Essentially
this provides options or those who are
not covered through their employer. In
each state where they are offered, private,
commercial insurers have contracted to
provide coverage at discounted rates. For
example, Blue Cross o Caliornia continues
to offer its traditional PPO coverage, as
does Blue Shield, but both now offer anIndividual Exchange option.
As o January 1, 2014 all eligible
Americans must be covered by insurance
or their medical care. Tey will either be
covered by their employer or through an
Exchange plan. While many patients have
signed up, thus ar there is a very real
concern that these numbers will increase
as we move into 2015 as more Americans
look to avoid the penalty associated with
being uninsured. Depending upon the
state where the person lives they will
either choose their coverage through
a state Health Insurance Exchange or
through the Federal Exchange. Te
ACA introduced some very significant
eatures that had not previously existed:
the mandate that every American havehealth insurance coverage, the act that
patients cannot be denied coverage or
pre-existing conditions and subsidies
or those that cannot afford to pay their
premiums. Te law identifies our levels
o coverage that must be offered.
Bronzehas the lowest monthly
premium and the highest out o
pocket cost and a $5,000 deductible
where the maximum out-o-pocket
per individual is $6,350
Silverhas the second lowest pre-
mium with a deductible o $2,000
where the maximum out-o-pocket
per individual is $6,350
Goldhas the second highest pre-
mium but no deductible
Platinumprovides the best ben-
efits or the highest premium with
no deductible and a maximum out-
o-pocket expense o $4,000
Te principal vehicle or
communicating the details o plan option
is www.healthcare.gov, which is where
people are expected to review the details
o each plan and make an application
or coverage. In addition to the edera
Exchange, quite a number o states like
UNDERSTANDINGTHEIMPACTOFINDIVIDUALEXCHANGEPLANSON
ANESTHESIAPRACTICESJody Locke, MA
Vice President of Anesthesia and Pain Management Services, ABC
http://healthcare.gov./http://healthcare.gov./http://www.healthcare.gov/http://www.healthcare.gov/http://healthcare.gov./7/21/2019 Winter 2015 Communique by Anesthesia Business Consultants
13/28
THE CO MMU NI Q U W I NT ER 2015 PAG E 13
Caliornia and Oregon offer their own
Exchange options. For practice managers
interested in the plans offered in a given
location there is a wealth o specific
market data available on line. Figure 1 isan example o the coverage patterns or
Los Angeles.
Ultimately, the questions every prac-
tice must answer are whether to contract
with the Healthcare Exchange plans and
what rate to accept and thats i they can
even participate in the given insurance
Exchange Networks. Some insurance
plans have closed networks, meaning
they will not take new providers. For
example, Blue Cross o Caliornia will
not readily contract with a group at a
ier 2 hospital.
When the Exchange plans were first
being rolled out, many o the major insur-
ers were offering significantly discountedrates or Exchange plans. Most practices
declined these offers, preerring to wait to
see how significant the impact would be.
Not surprisingly, as the number o patients
covered through Exchange options has
increased, the major plans are now more
eager to contract with providers, and the
terms they are offering are improving
dramatically. In many cases it is now possi-
ble to get the same rate or an exchange
plan as or the corresponding PPO plan.
Every practice situation is different
though, and contracting decisions should
be made based on solid analysis o reliabldata. Tere are a number o aspects o this
Exchange issue that merit close review
but three are essential:
1. Te number and percentage
o patients covered by each
Exchange plan,
2. Te effective yield per unit, and
3. Te impact o deductibles and
co-payments
Any analysis o the impact o a new
payer option must begin with a careuassessment o the number o patient
covered. Plans with a nominal impact on
the practices cash flow may not merit the
same level o aggressive contracting a
smaller plans. You may also not have the
leverage to significantly affect contrac
rates. raditionally, practice manager
assess the impact in two ways: by
tracking the number o patients treated
each month and by calculating their
percentage. wo examples are shown
in the tables on the next page. Note that
Continued on page 14
FIGURE 1
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THE CO MMU NI Q U W I NT ER 2015 PAG E 14
UNDERSTANDINGTHEIMPACTOFINDIVIDUALEXCHANGEPLANSONANESTHESIAPRACTICESContinued from page 13
the impact o Blue Shield patients was ar
more significant than the impact o Blue
Crosss option in able 1. (In the state o
Caliornia Blue Shield and Blue Cross
are competitors, both selling coverage
or physician services.) O particular
significance to the practice in issue is
the act that the increase in Blue Shield
Exchange patients actually represented a
net increase in overall practice volume.
Each practice must assess the
financial, strategic and political
implications o these trends but clearly
the impact is significant. A meaningul
discount in either case could have
a material impact on the practices
collections and cash flow. Tis is why the
next analysis is so important: identiying
the actual average impact as measured interms o effective yield per ASA unit billed
(able 2). Because o the idiosyncrasies
o anesthesia billing most practices will
find it more useul to isolate time-based
units billed and the collected payments
specifically applied to these units; in
other words, charges and payments or
flat ee services (invasive monitoring,
nerve blocks, intubations, etc.) should
be excluded. Many also preer to use
a calculation methodology that only
includes cases that have been paid in ull.
A quick review o the data presented
in these tables reveals a curious
inconsistency. Why is there such a
discrepancy between the Blue Cross
PPO rate and the Blue Cross Exchange
rate? Te answer is simple. Te practice
decided to wait and see what the impact
o the Exchange would be on Blue Cross.
Te result soon became obvious: out-o-
network providers are paid at a much lower
rate, the checks go to the patients and then
the provider must attempt to collect their
usual and customary charge, all o which
can not only result in lower yields but bad
publicity. In the case o the practice shown
here, upon review o the impact o these
actors management recently changed
its approach and decided to enter into a
contractual relationship. Blue Cross has
now agreed to a rate that matches the PPO
rate, which will change the effective yield
shown in able 2 over time.
TABLE 1 Impact of Exchange Patients
P P O E xchange
% of
Exchange
Patients
P P O E xchange
% of
Exchange
Patients
363 25 6.4% 106 21 16.5%
297 16 5.1% 87 39 31.0%
335 17 4.8% 97 36 27.1%
360 11 3.0% 106 36 25.4%
365 14 3.7% 110 65 37.1%
354 19 5.1% 134 51 27.6%
402 17 4.1% 149 57 27.7%
358 29 7.5% 128 79 38.2%
389 18 4.4% 116 68 37.0%
331 21 6.0% 141 73 34.1%
296 14 4.5% 117 73 38.4%
3,850 201 5.0% 1,291 598 31.7%
B lue C ros s B lue S hield
ASA
TABLE 2
Effective Yield Per Unit
7/21/2019 Winter 2015 Communique by Anesthesia Business Consultants
15/28
Te other issue highlighted by
this data is the distinction between the
contracted rate and the actual yield
posted. One o the distinct challenges
o medical billing is the mechanics o
payment. Historically, most PPO plans
have ollowed the Medicare model
and pay the provider 80 percent o the
allowable minus the balance due or
the deductible and/or copayment. Any
billing person will be happy to confirmthat it is much easier to get money rom
the insurance than the patient. Tis is a
particular challenge or Exchange plans
where patients may have a significant
responsibility based o the level o the
plan they selected. It should also be
noted that the out-o-network benefits
are drastically less or these Exchange
plans, sometimes non-existent, and as
such the patient ends up having to pay a
larger portion o the bill, ofen times 100
percent o the charge. Ideally, the payment posting process
captures not only the amount o the actual
payment but the allowable, deductible
and co-insurance amounts. Tis data
allows or the ollowing calculations
which involve dividing both the
deductible amount and the co-insurance
responsibility by the allowed. While we
tend to assume that deductibles are a
much bigger issue early in the year, as
able 3 indicates, the impact o deductible
and co-insurance can vary significantly
rom patient to patient and month to
month. Why does this inormation matter?
It affects both contracting strategy and
accounts receivable management. A very
significant patient responsibility may
result in consistently lower yields per
unit even with similar contract rates.
Whether this inormation can be used
to advantage in payer negotiations is
not always clear, but it should always be
considered.
Higher patient responsibility and
the challenge o collecting money rompatients afer the service has been
provided may lead to a discussion o
pre-payments or other strategies designed
to create a higher sense o responsibility
on the part o patients. Some practice
are now starting to experiment with
pre-payment programs, especially in
ambulatory settings.
It is also worth noting that greate
patient responsibility will inevitably
have an impact on accounts receivable
metrics such as days in account
receivable, the percentage o the tota
accounts receivable over 120 days and
bad debt write-off percentages. Tose
who manage and monitor their billing
staff based on such perormance metricmay need to reset expectations i the
impact o these plans is significant. Tere
could also be potential implications in
cases o exclusive service agreement
that involve financial support based on
a disparity between the cost o providing
the care and actual collections.
So based on what we know so a
what can we conclude about the impac
o healthcare Exchange plans? It is prob
ably not as significant as some provid
ers might have eared, but it is still significant. Te point is, though, you won
know the impact unless you examine it
careully monitor the impact o these
individual Exchange plans and monito
the data on a regular basis. Like so many
aspects o anesthesia practice manage
ment, the more you know, the more le
verage and options you have.
THE CO MMU NI Q U W I NT ER 2015 PAG E 15
Jody Locke, MA
serves as Vice Presidento Pain andAnesthesiaManagement or ABC.Mr. Locke is respon-sible or the scope andocus o services pro-
vided to ABCs largestclients. He is also re-sponsible or oversight and managemento the companys pain management billingteam. He will be a key executive contact orthe group should it enter into a contract orservices with ABC. He can be reached [email protected].
P lan TypeDeductible &
Co-insuranceQ1 Q2 Q3 Q4 (Up to Nov'14)
Ded % 4.7% 2.5% 2.4% 1.6%
Co-Ins % 9.9% 8.4% 7.4% 7.3%
Ded % 30.5% 19.1% 65.0% 87.2%
Co-Ins % 9.6% 3.9% 9.0% 5.8%
Ded % 4.7% 2.5% 1.2% 2.5%
Co-Ins % 9.9% 7.7% 7.6% 6.8%
Ded % 32.8% 7.0% 7.7% 13.5%
Co-Ins % 18.5% 15.6% 10.6% 10.3%
Blue Cross PPO
Blue Cross Exchange
Blue Shield PPO
Blue Shield Exchange
TABLE 3 Impact of Deductible and Co-Insurance
Tere are a variety o methods that may be employed in the calculation o a yield per case. One method divides
date o entry collections or a given period o time by the Date o service units billed. Te problem with this
approach is that there is no correlation between the payments and the units. Another approach relies on a date
o service approach, in which payments are applied back to the date o service they are intended to pay. Tis
approach can yield useul results but must be viewed with a lag o at least three to our months. A third approach
uses date o service data filtered or only paid cases. Tis approach is not a perect solution but can be used to
obtain more current metrics because it compensates or the lag.
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THE CO MMU NI Q U W I NT ER 2015 PAG E 16
DATELI NEPHOENIX
Phoenix. No, not the city in Arizona,
but the mythical bird. Te one that springs
to lie rom the ashes o its predecessor.
Anesthesia groups, like birds, have
a lie cycle. Birth to death. Formation to
ailure.
Te groups ounders hatch the concept
and bring it into existence. Te group
obtains business traction in its inancy and
grows until it reaches maturity.
But, sooner or later and as inevitable
as the sunset, the group begins to decline:
the loss o contractual relationships. Teunastening o the bonds that bind the
group together. Its eventual dissolution
isnt ar off. Te flames o death engul the
group.
But unlike natural birds, many dying
anesthesia groups have within them the
kernel o rebirth. Enter the phoenix.
DEATHAND PRAXIS
In todays anesthesia market, were
seeing two slightly different patternso anesthesia group decline and death:
the ailed site o a national or regional
anesthesia group and the ailed
independent group.
Most see those groups as
unsalvageable. Yet, under the right
conditions, with the right leadership,
both types o groups might be made to
rise rom the ashes.
Consider the ollowing two generic
examples:
Community-Odessa Medical Center
For the past several years, a national
anesthesia group, through a controlled
orty-seven provider subsidiary,
Community-Odessa Anesthesia (Com-
Od), has held the exclusive contract at
Community-Odessa Medical Center, a
402 bed hospital.Marketing materials aside, Com-Od
has never been able to gain traction at the
acility. Its become the poster child or
the Promise-Delivery GapM: It promised
the stars but delivered sand.
Since obtaining the contract,
Com-Od has seen many providers come
and go. Te national parent organization
has changed local leadership, to no avail.
Te hospital has inormed Com-Od
and its national parent organization that
it wont renew its exclusive contract when
it expires in six months.
Localville Hospital
Localville Anesthesia Group (LAG)
a twenty-three physician group, was
ormed in 1987 to obtain the contract a
Localville Hospital. Other than some workat a close by surgeon owned ambulatory
surgery center, LAG is dependent upon
its relationship with the 209 bed hospita
or its business existence.
Although it perormed well or its firs
ew decades, LAG, which has been run in
a club-like ashiona supermajority o
its thirteen shareholders is required or
any actionhas begun altering. It cant
respond quickly enough to the hospitals
demands or changing service lines.
PHOENIXPROJECT:RECONSTRUCTINGALOCALGROUP
FROMTHEASHESOFITSPREDECESSORMark F. Weiss, J.D.
The Mark F. Weiss Law Firm, a Professional Corporation, Dallas, TX
7/21/2019 Winter 2015 Communique by Anesthesia Business Consultants
17/28
THE CO MMU NI Q U W I NT ER 2015 PAG E 17
Teres not sufficient will among
its members to take action. Some are
near retirement and ear change; othersare stuck in the notion that things that
have always worked will continue to
work. As a result, those members block
any action that would disrupt the status
quo, especially those that call or an
expenditure because it would reduce
the amount o dollars available to be
distributed currently.
Te hospital has inormed LAG that
i the group doesnt become responsive to
its needs, it will seek other coverage when
the current contract expires.
Te Default Course
In the deault, or natural, course
o things, both Com-Od and LAG are
headed to anesthesia group heaven, or,
more probably, anesthesia group hell.
In Com-Ods case, its corporate
parent will pull the plug on Com-Od at
the end o the exclusive contract term.
In LAGs case, its highly unlikely,
given the existing structure, that it will
be able to pull up out o the death spiral
that its in, especially because many o the
groups members dont understand their
true position relative to the ground.
In both cases, unless group
members take action, they will soon
either be unemployed, looking or jobs
at some distant location, or working as
commodity level providers or the new
contract holderor how long and at
what compensation no one can know but
ew will likely find attractive.
THEPHOENIXSTRATEGYTM
Te alternative, the Phoenix StrategyM,
is to birth a new group out o the ashes o
the old.
While its absolutely true that in each
o our examples, Com-Od and LAG, the
groups are dying and will soon be dead,
the trick is to first see beyond the rot to
the kernel o business opportunity that
exists within.
In each situation, despite the
problems that have caused the groups
downall, there are significant assets that
can be leveraged into a new group and a
new contract with the hospital.
Leadership
Without someone or some ew
individuals willing to champion the
creation o a new group, a Phoenix group,
rom the remains o the old and then lead
it moving orward, its impossible or any
dying group to rise rom its ashes. Te
deault position is that the dead stay dead.
But its possible or a true leader
or core leadership group to spark the
start o new lie into a Phoenix group.
Although the hospital itsel might oster
those efforts, a topic o a different sorttouched on briefly, below, suffice it to
say that without strong leadership, its
impossible to successully implement the
strategy.
Tat home grown leadership can
be supplemented. You dont have to
go it alone. For example, leaders can,
and should, seek advice rom outside
experts and assistance rom the billing
service that will perorm the new groups
collections.
Labor Force
One clear advantage or those
reconstituting a group is that theres a
partiallabor orce already in place. Partia
because its likely that some o the existing
group members shouldnt make the cut in
connection with the groups rebirth.When an outside group wins an
RFP, there are generally three buckets
into which the acility places the existing
group members: Tose that must be
recruited by the new group, those that can
either stay or go and those that the new
group cant ever engage.
Why make the mistake o doing any
different in creating a new group rom
an old one? Even i the hospital hasn
expressed a preerence, you know who
shouldnt remain at the acility, so why ooyoursel at the cost o your own uture?
Localness
Perhaps the greatest advantage that a
Phoenix group has is that its leaders know
the influencers at the acility and those
influencers know you.
O course, depending on what
triggered the downall o the existing
Continued on page 18
7/21/2019 Winter 2015 Communique by Anesthesia Business Consultants
18/28
group, it may be that that amiliarity is
what bred contempt. Te solution is to
amputate rom membership in the new
group those who caused the contempt,
and to then work hard to rehabilitate the
budding Phoenix groups image.
But localness alone isnt sufficient in
and o itsel. Instead, it has to be nurtured
and leveraged into support or the group
that both counts (the right people and the
right message) and that cannot easily be
reversed or withdrawn.
Funding
Teres no ree lunch: Implementingthe Phoenix Strategy requires an
investment by the moving parties, an
investment in themselves.
Tis isnt a game or amateurs. Quite
unortunately, the unwillingness to invest
in their own uture is what got many
anesthesiologists into the Com-Od and
LAG situations to begin with.
In addition to contributing capital or
equity interests in the new practice entity,
making loans to the entity and borrowing
rom traditional lenders, groups have
other sources o unding, some rom
outside the group and some rom inside.
O course, outside unding includes
stipend support rom the hospital.
And, in connection with inside
financial support, a Phoenix groups
members ofen agree to deer the flow
o compensation rom the group, tying
their compensation to available unds.
For example, methodologies include
an extended lag time between month
o service and month o payment and a
floating compensation unit value.
Sponsorship
In addition to providing financial
support, the hospital is a natural sponsor
or the rebirth o a Phoenix group.
It needs coverage. Its sick and tired
o the existing group. It could turn to
an RFP and attract a national group
(or a replacement national group) or
some other regional player, but an RFP
is increasingly being seen as a ools
choice: in many cases its what created the
problem with the existing group in the
first place.
Tis is especially true in connection
with the rebirth o a group that was once a
part o a large national or regional group
Te hospital has been burned once and is
likely to be more amenable to an active
financial and political role in ostering the
creation o a truly local group that is likely
to be highly responsive to the hospitals
needs.
CONCLUSION
Unlike natural death, the death o an
anesthesia group can be leveraged into
the birth o a new one.
Someone is going to take over the
provision o anesthesia services at the
acility. Will you be offered a job with the
new master? Will you pack up and leave
on your own volition or a job somewhere
else? Or will you attempt to master yourown ate at the acility?
Under the right circumstances
with the right leadership and support
the transgressions o the past can be
surmounted and the advantages o
localness can be leveraged into a new
beginning.
THE CO MMU NI Q U W I NT ER 2015 PAG E 18
PHOENIXPROJECT: RECONSTRUCTINGALOCALGROUPFROMTHEASHESOFITSPREDECESSORContinued from page 17
Mark F. Weiss is anattorney who special-izes in the business
and legal issues affect-ing physicians andphysician groups ona national basis. Heserved as a clinicalassistant proessor oanesthesiology at USC Keck School o Medi-cine and practices with Te Mark F. WeissLaw Firm, a firm with offices in Dallas, exasand Los Angeles and Santa Barbara, Calior-nia, representing clients across the country.He can be reached by email at [email protected].
mailto:markweiss%40advisorylawgroup.com?subject=mailto:markweiss%40advisorylawgroup.com?subject=mailto:markweiss%40advisorylawgroup.com?subject=mailto:markweiss%40advisorylawgroup.com?subject=7/21/2019 Winter 2015 Communique by Anesthesia Business Consultants
19/28
THE CO MMU NI Q U W I NT ER 2015 PAG E 19
THENATIONALPRACTITIONERDATA
BANK: WHATYOUNEEDTOKNOWNeda M. Ryan, Esq.
Corporate Compliance Attorney, ABC
Te National Practitioner Data Bank
(NPDB) was established under itle IV
o the Health Care Quality Improvement
Act o 1986 and has been operational
since September o 1990. Te NPDB
impacts both anesthesiologists andcertified registered nurse anesthetists
(CRNAs) as certain entities are required
to report adverse actions taken against
their licenses, clinical privileges and
proessional society memberships. Te
issue o the NPDB most commonly
arises under scenarios involving medical
malpractice claims as, ofen, any and all
payments maderegardless o whether
those payments are made to dispose o a
claim or to satisy a judgmentmust be
reported to the NPDB.
THEDATABANK
According to the NPDB Guidebook,
Te intent o [the NPDB] is to
improve the quality o health care
by encouraging State licensing
boards, hospitals and other health
care entities, and proessional
societies to identiy and discipline
those who engage in unproes-
sional behavior; and to restrictthe ability o incompetent physi-
cians, dentists, and other health
care practitioners to move rom
State to State without disclosure
o discovery o previous medical
malpractice payment and adverse
action history.
Te NPDB allows or reporting
and querying o physicians, dentists
and other healthcare practitioners (e.g.,
nurses). State licensing boards, hospitals,
healthcare entities and proessional soci-
eties must submit reports to the NPDB
o certain adverse actions taken against
physicians and nurses under their juris-diction. Likewise, malpractice insurers
must report payments made to plaintiffs
on behal o all licensed practitioners.
Te NPDB is a tool or hiring entities in
their due diligence process. Te NPDB
repeatedly states that the NPDB is an alert
or flagging system.
REPORTINGTOTHENPDB
Actions reportable to the NPDB
include the ollowing:
Medical Malpractice Payments
Entities, including insurance
companies, making settlement
payments or other payments o a
claim or judgment (in whole or in
part), under an insurance policy,
sel-insurance, or otherwise, or the
benefit o a physician or nurse or
medical malpractice.
Licensure Actions by Boards o
Medical ExaminersEach Board
o Medical Examiners must report
any action based on reasons relat
ing to proessional competence or
proessional conduct (e.g., denia
or withdrawal o an application or
license renewal). State and Federal Licensure Ac
tionsEach state and each edera
licensing and certification agency
must report adverse actions taken as
a result o a ormal proceeding (e.g.
revocation or suspension o license
or certification agreement or con
tract or participation in Medicare
and Medicaid, reprimands, censure
or probation); dismissals or closure
o the ormal proceeding by the li
censee resulting in surrendering thelicenses or certification agreement or
contract or participation in Medi
care and Medicaid, or leaving the
state or jurisdiction; any other los
o license or loss o the certification
agreement or contract or partici
pation in Medicare and Medicaid
or the right to apply or or renew, a
license or certification agreement or
contract o the healthcare provider
and/or any negative action or find
ing by a state authority or edera
agency, organization, or entity re-
garding the physician or nurse.
Peer Review and Private Ac-
creditation ActionsPeer review
organizations and private accredi-
tation entities must report negative
actions or findings taken against a
physician or nurse.
Continued on page 20
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Actions aken Against Clinical
PrivilegesA healthcare entity
must report (i) proessional review
actions adversely affecting a physi-
cian or nurses clinical privileges that
span longer than thirty (30) days;
(ii) when it accepts the surrender o
clinical privileges or any restriction
o such privileges by a physician or
nurse; or (iii) when a proessional
review action is taken concerning a
physician or nurse. Federal or State Criminal Convic-
tions Related to HealthcareFederal
and state prosecutors must report
criminal convictions against phy-
sicians or nurses related to the
delivery o a healthcare item or
service (regardless o whether an
appeal is pending).
Civil Judgments Related to Health-
careFederal and state attorneys
and health plans must report civiljudgments against healthcare prac-
titioners related to the delivery o
a healthcare item or service (re-
gardless o whether an appeal is
pending).
Exclusions rom State or Federal
Healthcare ProgramsFederal gov-
ernment agencies (e.g., HHS or OIG)
and state law and raud enorcement
agencies must report those who are
excluded rom participating in Fed-
eral or State healthcare programs.
Other Reportable ActionsState
and Federal agencies must report
other adjudicated actions related
to the delivery, payment, or provi-
sion o a healthcare item or service
against physicians or nurses (re-
gardless o whether an appeal is
pending).
Shortly afer the NPDB was in place,
the Office o the Inspector General
(OIG) conducted a study and published
a report, National Practitioner Data
Bank: Malpractice Reporting Require-
ments. One o the purposes o the report
was to ascertain whether a reporting
floor should be imposed upon reports o
malpractice payments. In conducting a
survey o malpractice insurers, the OIG
determined that while imposing a report-
ing floor would encourage settlement o
smaller claims and would significantly
reduce the number o reports orwarded
to the NPDB, potentially meaningul
reports would not be made when cases
are settled or amounts below the floor,
sometimes deliberately to avoid report-
ing. Accordingly, the OIG determined
that the benefits to reporting do not
outweigh the potential drawbacks o
diminished reporting.
QUERYINGTHE NPDB
Hospitals, state licensing boards,other health care acilities, proessional
societies and plaintiffs attorneys all have
authority to query the NPDB under
certain circumstances. Additionally, indi-
viduals may query their own records at
any time. Hospitals are the only entities
that must query the NPDB. Hospitals
must query with respect to those who
apply or a position on the medical staff or
to obtain clinical privileges at the hospi-
tal. Queries must also be made every two
years thereafer. Other healthcare entitie
may query the NPDB when they seek to
have an employment or other affiliation
relationship with an individual. More
over, state licensing boards may query
the NPDB at any time. Plaintiffs attor
neys may only query the NPDB in certain
circumstances, but medical malpractice
payers may not query the NPDB at any
time. NPDB records are not accessible to
the general public and are only released to
authorized persons and entities.
DISPUTINGNPDB INFORMATION
When an adverse action is submit
ted to the NPDB, a copy o the report is
sent to the subject o the report. It can
be extremely difficult or a physician
or a nurse to change a report made to
the NPDB. Although subjects may no
submit changes to the report directly
subjects may request the reporting entity
to file corrections i they believe there to
be inaccuracies. Te NPDB itsel may nomodiy inormation within the report.
At times, the reporting entity wil
amend the report and notiy all the enti-
ties to whom reports have been sent that
the original report has been revised
However, in other instances, the reporting
agency will reuse to amend the origina
report. In such instances, the subject o
the report may escalate the issue through
a ormal dispute process and/or add a
statement to the report.
When an entity reuses to amendthe report, the physician may escalate
the issue to the Secretary o Health and
Human Services (Secretary) who wil
only review the report or actual accuracy
and not the appropriateness o the action
or the merits o the claim. Importantly
according to the NPDB Guidebook, [t]he
dispute process is not an avenue to protes
a payment or to appeal the underlying
reasons o an adverse action affecting
the subjects license, clinical privileges, or
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THENATIONALPRACTITIONERDATABANK: WHATYOUNEEDTOKNOWContinued from page 19
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proessional society membership. Neither
the merits o a medical malpractice claim
nor the appropriateness o, or basis or, an
adverse action may be disputed. Formaldisputes may only be beneficial to the
subject, thereore, i the acts reported are
inaccurate. Te subject o the report may,
in addition to escalating the dispute to the
Secretary, submit a statement that will be
permanently attached to the report.
HIRINGANATTORNEY
Anesthesiologists and CRNAs may
find it worthwhile to obtain the assistance
o an attorney when aced with report-
able adverse actions. Some reports to
the NPDB are required and can occur
without proo o an anesthesiologists
or CRNAs wrongdoing. For example,
i a medical malpractice claim is settled
(with no admission o wrongdoing), a
report may be made to the NPDB because
money was paid in connection with a
medical malpractice claim. Moreover,
anesthesiologists and CRNAs may also
find it prudent to hire attorneys to repre-
sent them in licensure or staff privilegeissues to avoid reporting to the NPDB.
I a report must be made to the NPDB
in such instances, the physician or nurse
may utilize the assistance o an attorney
in agreeing to the language that is being
submitted to the NPDB; such a strategy
may assist in averting uture issues asso-
ciated with NPDB queries. Finally, i an
NPDB report has been filed, an anesthesi-
ologist or a CRNA may use the assistance
o an attorney to draf the statement to be
attached to the report.
CONCLUSION
Reports to the NPDB can have a
significant impact on an anesthesiolo-
gists or CRNAs prospective employment.
Anesthesiologists and