There was a time when most anesthesia providers were paid based on the collections posted for the patients they treated. This mode of compensation was sometimes referred to as eat what you kill. It was easy to calculate using any standard billing software and had the perception of rewarding diligence and hard work. It was very popular as a means of compensating physicians who personally provided all anesthesia care. It provided a significant incentive to be productive so long as the carrot of revenue potential kept growing. It made perfect sense to providers who were essentially competitors.
As anesthesia providers began to form group practices in the 1990s the “eat what you kill” approach to provider compensation proved increasingly problematic. The first problem was that since not all providers performed the same mix of cases for the same types of patients, actual compensation could vary significantly resulting in disparities that often frustrated those at the low end of the pay scale. Clever providers often found ways to game the system by finding ways to avoid Medicaid cases or surgeons with poor payer mixes.
Looking at Options
The result of the above history was a period of considerable exploration of provider compensation options. The unique anesthesia charge formula provided a vast variety of options. One of the most notable examples was a large anesthesia group in California. They tallied each provider’s time based on a 10-minute unit, a percentage of base value units and a schedule of unit values for flat fee procedures. Each provider’s monthly unit tally was used to determine their share of the net collections for each month they worked. In many ways, this compensation formula epitomized the following reality: if you put a group of anesthesia providers in a room to come up with a compensation formula, the result is likely to be extremely arcane and complicated.
Another model was developed about the same time by another anesthesia group on the West Coast. They eliminated the base units from their formula, so providers were paid based on time spent. The assumption was that every provider’s time is worth the same. They added their own twist though. For each case, the provider was paid for each minute of in-room time plus 15 minutes before and 15 minutes after. This was intended to provide an incentive to turn over cases faster. A schedule of time allowances was developed for all flat fee services, such as invasive monitoring and nerve blocks. Such plans are typically required for physician-only practices while careteam practices typically pay providers a salary that may be enhanced by a bonus structure.
While the majority of American anesthesia practices are careteam practices, it would seem that the issues of anesthesia compensation have been put to bed. This couldn’t be further from the truth. As anesthesia revenue continues to erode and as anesthesia practices are having to turn to their facilities for financial support, we are entering a new era, one in which practices are striving to create more incentive with less revenue as the carrot shrinks. Discussion is now focused on the relationship between the carrot and the stick.
Considering the Concerns
Providers are primarily concerned about three things: how many hours they work, how many cases they do and how hard their cases are. A key issue for hospitals is coverage and call. The administration must ensure that each anesthetizing location has adequate coverage, which determines the necessary staffing. Because there is often not much revenue from call slots, the practice must budget an appropriate allocation for call. From a provider perspective, this is usually the most challenging aspect of their practice. They are prepared to perform a full schedule of cases during the day but spending hours of unproductive time in-house at night is frustrating.
If providers do not get paid for the cases they perform during the day, what is their incentive to be productive and efficient? Despite what hospital administrators often think, most anesthesia providers are only as productive and efficient as the OR schedule. Unless they can provide services to acute pain patients or perform consults, there is very limited opportunity to be more productive. Hospital administrators love to believe that anesthesia can play a more effective role in the management of the operating room suite, but the reality is that, unless anesthesia gets paid to manage the ORs, there is limited opportunity for providers to play a key role.
Increasingly anesthesia care is becoming more diverse and more specialized. Hospitals tend to rely on their anesthesia departments to support their expansion. It used to be that cardiovascular anesthesiologists commanded the most important positions and got paid the most, but those days are fading away. Many other new services, such as stroke management, are changing the focus of the institution. Anesthesia is being called upon to partner with the facility to ensure its success and growth.
So, how has the management of an anesthesia practice changed? It is now less about being productive and more about being compliant. As administrators pay more for anesthesia services, they are more concerned about getting value for their money. Quality of care is still a given, but what has changed are the metrics that have to be reported to ensure the practice is meeting its requirements. Many of the metrics will now determine how much of the financial support the practice will actually get. The stick is now becoming more important than the carrot.
As practices adjust to this new reality, they must find new ways to re-educate providers to the documentation requirements of today’s market.