Rebuilding After COVID-19: Three Business Strategies to Optimize Anesthesia Services
By Spencer Lilly
Times of severe economic crisis always expose the cost structures that support business revenue. Accordingly, the financial fallout from COVID-19 has presented hospitals, health systems, and anesthesia practices with an unparalleled opportunity to redesign and rebuild their anesthesia cost structures for greater short- and long-term sustainability.
As surgical volumes increase, health care organizations must recognize that reimbursement is unlikely to return to pre–COVID-19 levels because of the insurance shifts caused by historic unemployment numbers. The effect may be especially dire on anesthesia rates, which already faced a wider Medicare commercial reimbursement differential than most other specialties. In fact, when comparing data from the Texas Medicare Fee Schedule for Anesthesia 2020 and ASA Survey Results from Commercial Fees Paid for Anesthesia Services 2019, commercial reimbursement was 325.1% higher than Medicare. Therefore, a short window of time has opened for a frank and honest assessment of how to optimize cost structures and revenue streams to revitalize anesthesia business strategies.
When evaluating anesthesia service line challenges and opportunities during the COVID-19 recovery period, providers should consider ways to optimize three things: their systemwide anesthesia business model, their clinical anesthesia staffing model, and their anesthesia revenue cycle staffing model.
Challenge/Opportunity #1: Optimize Your Overarching Anesthesia Business Model
Health care consolidation has created a variety of anesthesia business models within many organizations. Some providers are employed; others are contracted. However, with variation comes inefficiency and higher costs.
One multihospital health system in the Midwest, for example, recently conducted an employment assessment after realizing it had developed a complex web of anesthesia service-line arrangements. Over the years, it had employed certified registered nurse anesthetists (CRNAs) across the system at a considerable loss, contracted with a third-party physician practice management (PPM) organization in one facility, and contracted with a local, private anesthesia group for coverage in other facilities. Consequently, it was carrying the financial burden of its CRNAs plus paying $1.4 million annually to the private practice and PPM organization. A consolidated review of the total revenue, along with an assessment of the optimal staffing model, revealed a $2 million savings opportunity with no degradation in service.
Another health system on the East Coast found itself in similar circumstances as four regional hospitals merged to become one system. Each hospital came into the system with different anesthesia models. However, consolidating the various models into a single employed group under one tax ID produced savings of approximately $2.5 million annually.
The questions for every facility and health system are: Which anesthesia model is optimal for everyone? Should the health system continue to outsource anesthesia to a private group or PPM organization and pay a premium stipend that will probably continue to increase over time? Or, is it more cost-effective and sustainable to consider an employment or staffing agreement through a lease model with third-party billing and professional management?
Although hospitals and anesthesia practices typically desire good working relationships, it isn’t easy to know how to work together. Figuring out the best path forward requires taking an inventory and assessment of the facilities’ existing models, and evaluating those models against the organization’s strategic objectives.
Challenge/Opportunity #2: Balance Your Clinical Anesthesia Staffing Models
Cost-effective anesthesia staffing models are imperative when faced with declining revenue. Although CRNAs are traditionally viewed as expensive resources, now is an excellent time to candidly assess whether anesthesiologists and CRNAs are all working top-of-license to maximize staff resources.
All anesthesia resources—both MDs and CRNAs—are costly. Organizations need to align those resources in an optimal way based on demand and clinical acuity. The right balance will differ for each health care organization and should take into account factors such as patient acuity, scheduling requirements, licensure allowances, and billing rules.
For example: Should anesthesiologists and CRNAs be under a single tax ID or separate tax IDs? Separate tax IDs—such as when hospitals contract with their anesthesia physicians but employ their CRNAs—are relatively common. This benefits the anesthesia group by eliminating its CRNA costs and collecting the maximum allowable amount. However, it may increase the health system’s overall staffing requirements by triggering an unnecessary layering/series of billing rules.
To reach the right anesthesiologist/CRNA mix, hospitals and health systems should assess the full depth and breadth of their anesthesia-related services. A model that allows CRNAs and MDs to work at top-of-license capacities across the entire spectrum and tightly matched to demand could help lower overall anesthesia staffing costs.
Challenge/Opportunity #3: Enhance Your Anesthesia Revenue Cycle Staffing Models
COVID-19 shutdowns forced many health care organizations to furlough or release coding and billing staff as service volumes dropped. As anesthesia volumes ramp up, the opportunity exists to consider outsourcing all or parts of the anesthesia revenue cycle so that costs move in step with increasing revenue. This is one way to optimize billing expenses in highly variable environments such as the one in which we currently find ourselves.
Anesthesia-specific expertise, coding accuracy, technology, scale, denial management, and resource allocation are some of the benefits associated with outsourcing. An assessment of the current anesthesia revenue cycle performance and associated costs—including adherence to managed care contract rates and coding accuracy—is a great place to start.
A Historic Opportunity to Optimize
Looking at fixed-cost structures is nothing new for health care organizations. Every year it’s done to understand the economics associated with routine shifts in service volumes and anticipated revenue declines associated with migration to value-based care.
Today, however, hospitals and health systems have historic motivation to optimize the cost structures associated with their anesthesia service lines, along with other hospital-based physician specialties. By taking full advantage of this rare opportunity, they stand to gain a deeper understanding of their anesthesia cost/revenue relationships—and benefit from greater long-term sustainability.
— Spencer Lilly is an independent consultant partnered with abeo. He has more than 25 years of experience as a health care executive at Atrium Health. abeo provides revenue advisory, services, and technology solutions that help drive optimization, compliance, and efficiency surrounding hospital-based specialties such as anesthesia.