Blog > Anesthesia Payer Contracting Challenges
AnesthesiaHealthcaremedicare
July 29, 2024
Anesthesia Payer Contracting Challenges

Anesthesia Payer Contracting Challenges

In the early 1980s, Medicare started reducing payment rates for anesthesia. Over the course of a few years, the disparity between commercial payment rates and Medicare rates continued to grow. This encouraged many practices to focus aggressively on payer contracting as a means of offsetting the impact of declining Medicare rates. For many years, this proved to be a reasonably successful strategy. For most practices today, commercial contract rates are at least three times the published Medicare rate. The problem is that the ability to negotiate significant increases in commercial rates is gradually eroding. The result is that the effective net yield per billed anesthesia unit is either flat or declining. This is not to say we should stop focusing on negotiating the best rates possible. It is simply to say that we must modulate expectations.

Anesthesia Payer Contracting Challenges

Share

Payer Mix

Perhaps the most important metric practices need to understand and track is payer mix. Given American demographic trends, the average percentage of Medicare units billed is trending up about one percent per year. In good years, the Medicare rate increases slightly, but this is tending to be the exception rather than the rule. Medicaid rates vary by state, but most are lower than Medicare rates. New York providers face the greatest discrepancy; the New York rate has been $10 per unit for many years despite the high cost of practicing in New York. These two categories, together with workers compensation and no-fault insurance, represent what we refer to as public payer rates. The real challenge is that practices have no ability to affect these rates. As the combined impact of public payers exceeds 50 percent, practices are having to find other ways to maintain their budget, such as negotiating financial support from their facilities.

Commercial payers have been responding to the cost-shifting efforts of providers by rethinking their contract renewal rules. Many large plans no longer even consider requests for rate increases. The most notable of these is Blue Cross of California, the largest commercial insurance plan in the state. Some payers have even proposed a rate decrease. It is becoming ever more difficult to get cost of living increases year over year. Payers are increasingly focused on limiting how much they pay out to providers.

Components

It is always important to note that there are at least three components to each anesthesia payer contract: time-based payments, obstetric anesthesia payments and flat fee payments, which are all part of the fee schedule. Provider enrollment and typical denial trends are often very useful factors that should be used in renegotiations with the payer. It is important to review contracts for renegotiation with the payers on an annual basis. In some cases, multi-year rate increases can be attained which is preferable. At the end of the day, the question is always how far to push the payer. Renegotiating a contract can be a tedious process that involves patience and perseverance.

Management Challenges

The greatest challenge facing most anesthesia practices today is the need to generate sufficient revenue to recruit and retain the number of qualified providers needed to meet the expectations of their facilities. The evolution of payer policies has made it virtually impossible to generate enough revenue from fee-for-service collections to meet the increasing cost of providing the necessary services. Increasing provider compensation costs in this era of provider shortage has changed practice strategy significantly. Certainly, it has made things more challenging.

It used to be that effective practice management focused primarily on revenue generation while it now tends to focus on cost management. Just as the management of a patient under anesthesia involves the monitoring of a variety of data points, so too the effective management of a practice must involve the monitoring of a variety of metrics. As most practices have to make a proposal to their administration, they must have the ability to prepare a realistic budget that is sustainable for the term of the contract. A key component continues to be a projection of practice revenue given an evolving payer mix and a limited ability to negotiate better contract rates.

Related

New Impediment for Planned Mergers: FTC Updates Requirements

Few documents remain the same. Revisions, recensions and emendations are commonplace—even when it comes to ancient and revered texts. We have no original manuscripts of Homer’s Iliad and Odyssey. All we have are copies, but there are three “textual families” of these extant copies, meaning there are variants in some of the wording. It’s up to textual critics to determine which family of copies best represents the original rendering per passage, and this sometimes leads to slight updates in our modern versions of these classic works. Even the vaunted U.S. Constitution has undergone updating over the years through the amendment process.

See Post

The Keys to a Successful Anesthesia Practice

Today’s anesthesia practices are all struggling with three main management challenges. First, they must generate consistent and sufficient cashflow to manage the practice budget. Second, the primary budgetary challenge is to recruit and retain a sufficient staff of qualified providers to perform the services required by the facility. Third, it is not enough to manage the AR and find and retain qualified providers; one must establish and maintain a symbiotic relationship with the facilities it services. While many practices can achieve some of these requirements, many struggle attaining all three. The only practices that will survive long term are those that maintain an effective strategy to balance the three.

See Post

Status of IV Fluid Shortage

America is facing a sudden shortage of vital fluids used in hospitals across the country. According to an October 17 report in The Hill, hospitals were left scrambling after hurricane Helene caused flooding to a Baxter plant in North Carolina, where approximately 60 percent of the nation’s IV fluid supply is manufactured. As a result, more than 86 percent of hospitals are experiencing shortages of IV fluids, according to a survey of more than 250 health facilities conducted by supply chain company Premier Inc. Shortages were evenly spread nationwide, across all provider types. According to the survey, 54 percent of facilities reported they had 10 or fewer days of IV fluids in inventory.

See Post