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Changing Anesthesia Providers:The Playbook for a Simple and Sustainable Transition

“Our anesthesia group is causing more pain than it cures.”“Our subsidy is 40% higher than it was 3 years ago and we are not getting any more for it.”“Our surgeons are complaining about delays and cancellations.”

TWO | CHANGING ANESTHESIA PROVIDERS NAPA | THREE

“I got a tremendous

amount of push back

from surgeons, medical

staff, and the Board when

we started considering an

anesthesia department

transition. Now when I go

to department meetings

or medical staff meetings,

I get, ‘Why didn’t we do

this sooner?’”

John Malone, President & CEO

UPMC Hamot

Erie, PA

You are Not Alone

There are several reasons why anesthesiamanagement is the fastest growingoutsourced hospital service according to a2008 survey by Waller Lansden1.

The current economic and regulatoryenvironment has hospitals intenselyfocused on controlling costs andimproving revenue. Hospitals are deeplyconcerned about the increasedcompetition for their market’s mostproductive surgeons. Many are dedicatingsignificant resources towards creating anefficient OR that increases surgicalthroughput and keeps their surgeonshappy. As such, hospitals need more thanever for all of their staff and serviceproviders to be aligned with these goals toensure and sustain success.

Unfortunately, the anesthesia departmenthas increasingly become a barrier tosuccess. Hospital administrators areexpressing increased frustration with theiranesthesia group for not realizing thatsurgeons, nurses, and the C-Suite – andnot just patients – are the customer.Today, it’s imperative that the anesthesiagroup be leaders who keep the OR

running efficiently, keep surgeons andpatients satisfied, and provide servicesthat will improve the hospital’s overall casevolume and revenue.

The growing anesthesia subsidy is furtherstraining relationships. Many hospitalshave experienced 30 to 40 percentincreases in their anesthesia subsidy overthe past few years, yet they may not havereceived any additional services for thatinvestment. In some cases, coverage hasactually gotten worse, and hospitals are leftasking, “What have we been paying for?”

If you are experiencing any of theseissues, you are not alone. At NorthAmerican Partners in Anesthesia (NAPA),we’ve heard these concerns from hospital administrators across the nation.However, every hospital and organizationaldynamic is unique and a “one size fits all”solution does not apply. Therefore, we’ve designed the following white paperto be a playbook that will provide adecision making framework for developingand transitioning to an anesthesiadepartment that is aligned with themission of your organization.

The Playbook

When the anesthesia department is notrunning well, no one is really happy.However, change is scary and anydisruption of the status quo will likely bemet with resistance. UPMC Hamot is atypical case study where resistance isfollowed by elation. After the smokecleared, the department was staffed bylargely the same clinicians – now armedwith the tools and leadership they neededto succeed.

Most transitions, while not simple, can bemanaged to look easy. The problem withthe anesthesia department is almost neverclinical but is usually a matter ofleadership. At NAPA, we rarely replacethe anesthesia providers, but we alwaysadd qualified and experienced leadership.

STEP 1.Analyze Current Anesthesia TeamCitizenship and PerformanceCitizenship within the greater hospitalcommunity, or lack thereof, is actually oneof the main triggers for an anesthesiadepartment transition. While it is hard toquantify, hospital leaders generally know iftheir department has it or not. One test isto see whether the anesthesia chief orother clinicians are actively participating onor leading committees that steer decisionsincluding hospital efficiency and quality. Awell-integrated anesthesia team will be theeyes and ears of the hospital within theoperating room, which in turn will help itrecognize opportunities and facilitatepositive change.

Day-of-case cancellation rates and on-time starts are the most telling data for aquick snapshot of your anesthesia

department’s performance and OR’sefficiency. However, it is impossible tocoach by just looking at the numbers; youhave to get on the field. That meanspaying a visit to the operating rooms,talking to surgeons, nurses, perioperativedirector, and even patients. What do theysay about the efficiency of the OR? Is theanesthesia group taking a leadership role?

Is everyone getting what they need fromanesthesia?

Are Your Surgeons Getting: 1. Dependability: Arrive on-time for

each case

2. Quality: Take good care of mypatient

3. A Team-Player Mindset:

a. Help facilitate quick case turnover

b. Be open to accommodatingadditional cases

c. Be flexible in operating roomscheduling

4. The Latest Services, Technologyand Techniques

Are Your Anesthesia Patients Getting: 1. Comfort:

a. Knowledge they will wake up andbe OK

b. Post-op pain relief

c. No post-op nausea

2. Respect for their Time:

a. Low cancellation rates

b. On-time starts

3. Communication:

a. Pre-op – ensure they are preparedfor and qualified for procedure

b. Post-op – give contact informationand the invitation to call withquestions after discharge

The problem with the

anesthesia department

is almost never clinical

but is usually a matter of

leadership.

1Outsourcing 2008: Patient Care Services and Information Technology.

FOUR | CHANGING ANESTHESIA PROVIDERS NAPA | FIVE

While eliminating the stipend may not bepossible, an analysis of financialperformance is an important step towardunderstanding whether your hospital isgetting the most value for its money.

The Revenue CycleMedical Group Management Association(MGMA) benchmarks make it simple tosee if your hospital’s anesthesia servicesare being billed for and collected efficiently.If the MGMA standard is the baseline, yourgroup should be outperforming it.

The key data points are: Days inAccounts Receivables and Percent ofClaims Resolved.

• Days in Accounts Receivables: If thebulk of payments are past 40 days,not enough resources are beingdedicated to collections.

• Percentage of Claims Resolved: This figure should be 97 percent or greater.

Payer ContractingGroups unfamiliar with the art and scienceof payer contracting have a tendency tosign every contract put in front of them,only to later realize they undersold theirservices and the hospital is stuck with alarger stipend. Once again MGMA is agood starting point for benchmarking yourcontracts against facilities in your area. If ared flag pops up in these comparisons, itis time to renegotiate.

A national single or multi-specialty groupwill provide a clear advantage incontracting, as they are large enough toemploy experts, likely from the payercommunity, to handle this essentialservice. Additionally, larger groupsrepresent hundreds of providers ratherthan the 10 or 15 being represented by a local group or small regionalmanagement company.

CodingContrary to conventional wisdom, themost common coding mistakes involveunder-coding rather than over-coding. Forexample: many anesthesia groups do notbill for add-on procedures to cardiaccases, such as placing an A-line or Swan-Ganz catheter. An annual internalreview of coding is necessary to ensurecompliance and that additional revenue is not being overlooked.

It is also essential that coders have accessto continuous training and certification.Certified coders bring both an essentiallevel of skill to the revenue cycle processand an increased level of credibility whendealing with payers.

ExpensesBy far the largest anesthesia expense isstaff, which means this is also the line itemwith the potential to produce the mostanesthesia savings. An examination of thestaffing model options and the subsequentcosts to cover an OR are broken out in thefollowing section.

While eliminating the subsidy altogether may not be possible, an analysis

of financial performance is an important step toward understanding

whether your hospital is getting the most value for its money.

Is Hospital Leadership Getting:1. Ownership of the OR: A leadership

role in helping the operating room runefficiently

2. Quality: The ability to provide forcurrent and implement futureanesthesia needs

3. Measurement: The ability todemonstrate superior outcomes

4. Collaboration: Willingness to work together

Similarly, it is also important to recognizethe needs of nurses and other hospitalstaff. Nurses’ needs are similar to those ofsurgeons, but they are also looking for theanesthesiologists, as surgeons’ MD peers,to help communicate with surgeons andkeep the OR running efficiently.

STEP 2. Analyze Current Team FinancialPerformanceIn most cases, anesthesia revenues arenot enough to independently fund the levelof coverage hospitals need. Manyhospitals have become accustomed topaying a subsidy or stipend to make upthe difference, but are uncomfortable withhow fast it is growing and the fact thatthey do not seem to be getting any morevalue for the money. In the year 2000, anAmerican Society of Anesthesiologists(ASA) survey of hospitals found 70 percentof respondents were paying a smallstipend, usually less than $250,000. Fiveyears later, every hospital who respondedto the ASA survey reported a stipend anda separate study by the Clinical AdvisoryBoard reported the annual subsidy wasapproaching $120,000 annually peranesthesia provider.

SIX | CHANGING ANESTHESIA PROVIDERS NAPA | SEVEN

STEP 3. Understand Your Options – Staffing There are many options to consider when building an anesthesia team thatdelivers clinical and operational quality.First, there are four staffing models toconsider that all come with their ownstrengths and weaknesses. The decisionon which is right for your facility should bebased on data including cost, case-mix,and the comfort of your surgeons, staffand community.

Additionally, there are provider optionsranging from hiring the anesthesia staffinternally to outsourcing the department toa regional or national management group.

Staffing Model Options

MD-Only Model: This model is generallyconsidered the safest. It is often the modelof choice for facilities specializing incardiac, neurosurgery, transplant, andother sensitive procedures. The cost ofthis model varies greatly. In many cases,the hospital is utilizing a local group thathas been with them for many years andenjoyed regular compensation increasesthat have surpassed fair market value. Thecost comes down dramatically ifanesthesiologists are compensated at alevel in synch with the market.

MD/CRNA Mix: This model is the mostwidely implemented. Utilizing medicallysupervised CRNAs brings down the costof the department and puts more handson deck to cover additional cases, improvepre- and post-op communications, roomturnover, etc. The mix depends greatly onthe surgical specialties and volume of thehospital. It typically means a physician toCRNA supervision ratio of 1 MD to 3CRNAs, but the more complex cases areusually covered directly by a physician. Inthis model, total staffing is weighed moretowards physicians than CRNAs.

Care Team: This model is an MD/CRNAMix in which the CRNA may operate moreindependently by performing higher-riskcases. In the Care Team model, nearlyevery case is covered by a CRNA withphysician supervision. The Care Team isincrementally less expensive than theMD/CRNA mix, but the presence ofanesthesiologist supervision relievessurgeons’ responsibility for directsupervision of the CRNAs and generallymakes hospital leadership and patientsmore comfortable with the anesthesiadepartment.

CRNA-Only: In these facilities the CRNAfunctions with the same scope as ananesthesiologist. This model is clearly theleast expensive, but it is also the mostdebated. Sixteen states have opted out ofthe CMS physician supervisionrequirement. These states are: Alaska,California, Colorado (Critical Access andsome Rural Hospitals only), Idaho, Iowa,Kansas, Kentucky, Minnesota, Montana,Nebraska, New Hampshire, New Mexico,North Dakota, Oregon, South Dakota,Washington, and Wisconsin.

Provider Options

Hospital Employee Model:

Pro: Complete control of clinical andeconomic outcomes and predictability of cost.

Con: Additional expenses that come withmanaging department and full-timeemployees. Hospital billing departmentlacks essential expertise in anesthesiabilling, coding, and contracting.“Employee mentality” among theanesthesiologists does not encouragemaking hospital and OR more efficient.

Local Groups:Pro: The comfort factor. Hospital andsurgeons have existing relationship/familiarity with group leadership.Diminished likelihood of falling into theemployee mentality.

Con: Difficulty providing coveragethrough staffing shortfalls. The inability toinvest in a management infrastructure thatfosters improved performance often leadsto a lack of experience or expertise innegotiating payer contracts andcollections and makes it difficult to access,develop and utilize a robust QualityManagement Programs.

Staffing Options for a 6 OR Facility:

For the purposes of this example we assigned a value of $400,000 to an MD and$150,000 to a CRNA, though the actual cost varies geographically and is based onany number of variables:

MD-Only: MD/CRNA Mix: CRNA-Only*:

MD 1: $400 MD 1: $400 CRNA 1: $150MD 2: $400 MD 2: $400 CRNA 2: $150MD 3: $400 MD 3: $400 CRNA 3: $150MD 4: $400 MD 4: $400 CRNA 4: $150MD 5: $400 MD 5: $400 CRNA 5: $150MD 6: $400 CRNA 1: $150 CRNA 6: $150MD 7: $400 CRNA 2: $150 CRNA 7: $150MD 8: $400 CRNA 3: $150 CRNA 8: $150

CRNA 4: $150CRNA 5: $150

Total: $3,200,000 $2,750,000 $1,200,000

Cost/Room: $533,333 $458,333 $200,000

*An option only in opt-out states

Staffing is the largest

anesthesia expense,

which means it is also

the line item with the

potential to produce the

most anesthesia savings.

There are many options

to consider when

building an anesthesia

team that delivers clinical

and operational quality.

EIGHT | CHANGING ANESTHESIA PROVIDERS NAPA | NINE

STEP 4. Understand Your Options –Information Availability &Processing It is imperative that your anesthesiadepartment provide a deep QualityAssurance (QA) program. The dataderived from the QA program is essentialto improving the clinical quality and overallefficiency of the operating room. Detailedreports should be available for real-timereview and presented to hospitalmanagement on a regular basis to proveresults and drive improvement. Spottingand fixing issues with on-time case starts,case cancellations or turnover will improveefficiency and create additional capacitythat can be converted to additional casesand OR revenue.

A national management group provides abigger-picture view of quality data since itis able to compare and contrast numbersamong all its partner facilities and in somecases beyond.

TechnologyTechnology can help the OR run efficiently,improve revenue cycle, and facilitate bettercommunication among providers.

OR efficiency and anesthesia quality arebetter managed with the ability to run real-time reports on key data points including:efficiency statistics such as on-time starts,critical events such as post-lumbarpuncture headaches, and specialprocedures such as arterial lines.

Paper alone is no longer an option for an efficient revenue cycle. Technologymakes the process faster and moreaccurate while reducing mistakes tocorrect on the back end, all of which ismuch cheaper. Reports should begenerated and analyzed for data thatincludes: volume, cash per case, anddays in accounts receivable.

A management company should utilize aninternal Collaboration Suite software tofacilitate the flow of communicationbetween all its clinicians at various practicelocations. Hospitals benefit when theiranesthesia chief can share problems andsolutions with their network of peersacross the country. If a new procedure isbeing used at one hospital to improveefficiency or correct a safety issue, itshould be shared with all hospital partners.

A Quality Assurance Program will generate

detailed reports for real-time review and presented

to hospital management on a monthly basis to

prove results and drive improvement.

Small Regional Groups (less than 5 hospitals):Pro: May have an understanding of localculture. Able to cross-cover in cases ofsickness and share call better. Doctorsless reactionary when asked to do moreservice. Start to dedicate resources tonon-clinical matters.

Con: Lack the size to have well-developed management structures. Insome cases, newly added hospitals maysee service suffer while the groupdedicates resources to its primaryhospitals. New hospitals are sometimesadded to support staffing at existinghospitals and are neglected.

Large Regional or National Single-Specialty ManagementCompanies:Pro: Proven systems and processes forefficient OR management. Infrastructurethat provides expertise in revenue cycle,contracting, and recruiting. Centralizedadministrative functions mean local teams

can concentrate solely on clinical care.National benchmarking data. Local chairhas committee of peers.

Con: Some administrators feel they arelosing the local presence.

National Multi-specialtyManagement Companies:Pro: Savings across the board on multiplespecialties such as anesthesia, radiology,and emergency medicine.

Con: May not have the right focus onanesthesia. If a radiology group starts toprovide anesthesia, it doesn’t necessarilyhave a track record of success inanesthesia. If anything happens to thecompany or the relationship is damaged inone or more services, untangling therelationship is difficult. Company does nothave a single contract to focus on, so theymay be willing to shift some funding fromone clinical area in a hospital to another tomeet short-term needs.

Citizenship within the

greater hospital

community, or lack

thereof, is actually one of

the main triggers

for an anesthesia

department transition.

Hospitals are dedicating significant resources towards creating an efficient OR

that increases surgical throughput and keeps surgeons happy. As such, hospitals

need more than ever for all their staff and service providers to be aligned with

these goals to insure and sustain success.

TEN | CHANGING ANESTHESIA PROVIDERS NAPA | ELEVEN

STEP 5. Align Interests of AnesthesiaDepartment with HospitalIt is impossible to structure a stipend thataligns the interest of all parties withoutfirst pinpointing revenue inefficiencies andunnecessary costs related to theanesthesia department, and using thatinformation to choose a staffing modeland anesthesia provider. In addition tothe contract options below, manyhospitals also utilize performanceguarantees that must be met orexceeded to hit the management fee.Guarantees may include: reduction of cancellation rates, epidural rates, start times, hiring goals, or adding new services.

Cost PlusBoth parties agree on a budget and what it will cost to run the department. Theanesthesia department’s revenues arefixed and the hospital’s cost could rise orfall based on pre-approved changes to theanesthesia department. The hospitalbenefits if revenue is higher than expectedor expenses are managed to be lower than budgeted.

Fixed FeeIn this model, a set subsidy amount isnegotiated, usually on an annual basis.Risk is theoretically deferred totally to theanesthesia group. However, the hospitalis exposed to risk if the subsidy amountproves insufficient and the groupstruggles to maintain service levels.

Revenue ThresholdIn this model, the anesthesia group isguaranteed a certain amount of revenueeach month. The group collects what itcan, and the hospital makes up thedifference. A hospital employing thismodel should have the utmost confidencein the anesthesia group’s revenue cycleexpertise. Due diligence on billing,collections, coding and contracting isrecommended.

Surgical Volume GuaranteeThis model is sometimes used in a hospitalthat experiences large fluctuations insurgical volume or a startup situationwhere the surgical volume is not yetsteady. The hospital guarantees thenumber of cases so the anesthesia groupcan commit resources. If the hospital fallsshort, they make up the difference to theanesthesia group.

About North American Partners in AnesthesiaFounded in 1986, North American Partners in Anesthesia (NAPA) is the leading single specialty anesthesia and perioperative managementcompany in the United States. NAPA is comprised of the most respectedclinical staff, providing thousands of patients with superior and attentive care.The company is known for partnering with hospitals and other health carefacilities across the nation to provide anesthesia services and perioperativeleadership that maximize operating room performance, enhance revenue, anddemonstrate consistent patient and surgeon satisfaction ratings.

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