Revenue Challenges
The greatest challenge for most American anesthesia practices is to generate enough revenue to recruit and retain an appropriate staff of qualified providers to meet the service expectations of the facility. A number of factors have contributed to this. The first is payer mix. As the American population continues to age, Medicare rates have a negative impact on revenue potential. Even though some practices will be able to negotiate more favorable commercial payer rates, Medicare and Medicaid tend to offset their impact on the net yield collected per unit. Despite the best efforts of billing companies to optimize practice collections, maintaining practice revenue is always a never-ending battle. The reality is that payers are always looking for ways to control the cost of paying for anesthesia care.
The problem is compounded by the cost of providing the care. Given the current manpower shortage, anesthesia providers operate in a very competitive environment. Attrition is always a significant factor as practices strive to retain their best providers and recruit replacements. Physician and CRNA compensation has been increasing materially, but the biggest challenge is replacing those who leave for more favorable work situations.
As the gap between practice revenue and provider compensation continues to grow, most practices have to rely on their facilities to fill the gap. Hospital subsidies have become the key to success, but many hospitals are pushing back on anesthesia subsidies. In fact, in too many cases, the need to negotiate more favorable support ultimately results in the end of the anesthesia practice as a private entity.
The Staffing Challenge
Anesthesia staffing can be a particularly daunting issue. There is no one way to coordinate physicians and CRNAs, and the fact is that there are many common models. Many practices in the west prefer a physician-only model, while those across the rest of the country prefer a care-team model. As we often say, though, if you have seen one anesthesia practice, you have seen one anesthesia practice. A variety of factors will determine the specific configuration for a given practice, and the reality is that it is not always the most cost-effective model.
This is where the current manpower shortage has its greatest impact: finding the right compensation package given the workload and culture of a given practice. There is a variety of national compensation data available, but it tends to be data that is not always the most useful means of determining an appropriate compensation package. There is always the additional challenge created by raising rates for new providers and the impact on the rest of the staff.
The Hospital Contract
There was a time, years ago, when an anesthesia practice would generate sufficient revenue from insurance and patients to cover the cost of providing the care. Now, a clear hospital contract with reasonable financial support is key to practice survival. The problem is that the financial terms of the contract must anticipate all the factors mentioned above. They often require the assistance of qualified financial advisors to prepare revenue projections, practice financial requirements and a Fair Market Value assessment to ensure that there are no compliance or inurement issues.
While the management of payer contracting and the revenue cycle for collections is no cake walk, negotiating a reasonable contract for anesthesia services is a very specialized exercise requiring experience and a detailed understanding of current market conditions.