maximizing the value of your payments to hospital-based

Maximizing the Value

of Your Payments to

Hospital-Based

Service ProvidersLUIS A. ARGUESO, PARTNER, HEALTHCARE APPRAISERS

ROBERT STIEFEL, MD, PRINCIPAL, ENHANCE HEALTHCARE CONSULTING

1

Speaker Backgrounds

Luis A. Argueso

Partner at HealthCare

Appraisers

Over 10 years of experience in

healthcare valuation

Head of Hospital-Based Services

and Telemedicine Valuation

service lines at firm

Robert Stiefel, MD

Board-Certified Anesthesiologist

Co-founder of a large

anesthesia management

company sold to Team Health

Co-founder of Enhance

Healthcare Consulting with

extensive experience in

Anesthesia services and OR

Improvement

2

Learning Objectives

Outline the challenge associated with hospital-based

service arrangements (HBSAs)

Understand the key components of HBSAs

Explore recent industry trends

Learn strategies for maximizing the value of your HBSAs

Synthesize concepts with a deep dive into

anesthesiology HSBAs

3

Outlining the Challenge

Hospitals are required to maintain professional provider coverage of key service lines; examples include:

Anesthesiology

Emergency Medicine

Hospitalist Medicine

Costs have increased over time, with stagnant reimbursement

Increasing requests for financial support

Value-based payment requires closely-aligned providers

4

Understanding HBSAs: Services

Professional services involving MDs and advanced

practice professionals (APPs)

Coverage secured through onsite & on-call availability

Sometimes accompanied with medical directorships

Traditional specialties: anesthesiology, emergency

medicine, hospitalist medicine, and intensive care

Emerging specialties: neurology, orthopedic surgery,

psychiatry, and trauma surgery

5

Understanding HBSAs: Payment

Options

Fixed Subsidy

Fixed, regular payment

Amount based on

anticipated financial

shortfall

Can vary depending on

service level (e.g., number

of full-time providers,

number of covered

locations, volume of patient

encounters)

Collections Guarantee

Payment amount fluctuates:

based on the difference

between cost and actual

collections

Regular reconciliation

Often accompanied with

payment caps

6

Developing Industry Trends

Consolidation of physician provider groups

Decreased hospital volumes (especially inpatient services)

Changes is medical professional workforce:

Increased utilization of APPs

Shortage of physicians (and CRNAs)

Unwillingness among providers to cover hospitals

Emergence of telemedicine

Greater share of reimbursement tied to outcomes and quality

measures

7

Strategies for Maximizing Value:

Payment Structure

Each payment option comes with pros and cons

Subsidies: ease of administration, incentives to collect,

overpayment risk

Collections guarantees: reconciliation required, limited incentive

to collect, limited overpayment risk

Contract terms can address shortcomings of each

Example: Hospital payment caps in collections guarantee arrangements

Example: Avoiding automatic escalators in subsidies

8


Coverage Levels

Detailed vs. Vague coverage requirements

Example: 24/7 availability with sufficient providers vs.

specific coverage schedules with locations/hours of

coverage

Balancing flexibility with a contract that can be

efficiently administered

Evaluating the utilization of APPs

Comparing staffing to industry benchmarks

9


Provider Compensation

Delving into compensation benchmarks

Understand the differences between surveys

Matching compensation to the level of service:

Hours of coverage

Volume of patient encounters

wRVUs

Understanding the local marketplace

10

ANESTHESIOLOGIST COMPENSATION SURVEYS

11

Compensation Data Anesthesiologists as of September 2017

All annual compensation data rounded to the nearest $1,000

National Base Compensation (all data)

Survey n Mean 25th Percentile Median 75th Percentile 90th Percentile

AMGA 1,667 423,000$ 357,000$ 416,000$ 472,000$ 543,000$

Hospital and Healthcare Comp Service 1,020 382,000$ 349,000$ 386,000$ 405,000$ 448,000$

MGMA 2,626 449,000$ 363,000$ 441,000$ 533,000$ 661,000$

Sulluvan Cotter 2,482 401,000$ 344,000$ 396,000$ 450,000$ 510,000$

Towers Watson 1,219 354,000$ 335,000$ 377,000$ 414,000$ 453,000$

Average 401,800$ 349,600$ 403,200$ 454,800$ 523,000$

Low 354,000$ 335,000$ 377,000$ 405,000$ 448,000$

Median 401,000$ 349,000$ 396,000$ 450,000$ 510,000$

High 449,000$ 363,000$ 441,000$ 533,000$ 661,000$

CRNA COMPENSATION SURVEYS

Compensation Data CRNA's as of October 2017

All annual compensation data rounded to the nearest $1,000

National Base Compensation (all data)

Survey n Mean 25th Percentile Median 75th Percentile 90th Percentile

AMGA 1,790 182,000$ 158,000$ 180,000$ 197,000$ 222,000$

Hospital and Healthcare Comp Service 529 166,000$ 159,000$ 166,000$ 172,000$ 182,000$

MGMA 1,964 173,000$ 150,000$ 175,000$ 197,000$ 209,000$

Sulluvan Cotter 2,337 175,000$ 165,000$ 175,000$ 184,000$ 199,000$

Towers Watson 8,234 138,000$ 155,000$ 166,000$ 179,000$ 195,000$

Average 166,800$ 157,400$ 172,400$ 185,800$ 201,400$

Low 138,000$ 150,000$ 166,000$ 172,000$ 182,000$

Median 173,000$ 158,000$ 175,000$ 184,000$ 199,000$

High 182,000$ 165,000$ 180,000$ 197,000$ 222,000$

12


Professional Collections

Evaluating collections benchmarks

Understand the drivers of revenue cycles for the

various specialties

In-network vs. Out-of-network pros and cons

Impact of APP utilization

Payor consolidation and provider leverage

13


Miscellaneous

Meaningful and targeted quality metrics

Effective medical director/administrative service

terms

Practice overhead benchmarking:

management fees and profit margins

Termination provisions (e.g., without cause

notice periods)

Rights to audit financials

14

ANESTHESIA SUBSIDY DRIVERS

THE “FOUR LEGS” CONTROL

FAIR MARKET VALUE COMPENSATION SUPPLY AND DEMAND

REQUIRED ANESTHETIZING LOCATIONS HOSPITAL

STAFFING MODEL GROUP

BILLING/CONTRACTING

PERFORMANCE

GROUP

15

Anesthesiology Deep Dive: Provider

Compensation

Survey differences related to anesthesiologist and CRNA compensation benchmarks

What percentile should I select?

Comp surveys must be trued up to local market reality, workload, responsibility

California, Alaska or Wisconsin? All physician, care team or all CRNA?

CRNA compensation rising rapidly, recent trend to a “mercenary” model – work for the highest bidder of the day

Compensation models often include portions allocated to:

Base salary

Productivity – structured as a fixed pool - Beware of production data shortcomings

Incentive metrics

Part of the overall group compensation is “overhead” – increasing rapidly with large national groups

16

ANESTHESIA PERFORMANCE METRICS FRAMEWORK

17

1. Average IP LOS total joints and CV

2. Anesthesia supply cost/case

3. Anesthesia med cost per GA

1. Surgeon Satisfaction

2. Patient Satisfaction

3. Peri-operative Staff Satisfaction

4. TJC/DNV anesthesia issues on last survey

1. Prime time OR Utilization

2. Anesthesia related first case delays

3. DOS Cancellations

4. Close to out of OR

1. PQRS Overall Compliance

2. Total outcome indicators (GHA report)

3. Short term pain management

4. Actual post op temperature

ClinicalQuality

OREfficiency

ExpenseManage-

ment

CustomerSatis-

faction

Anesthesiology Deep Dive:

Required Locations Hospitals have control

Coverage and service creep – each adds expense, how much incremental pro-fee revenue?

Out of OR – endo, IR, neuro-interventional, EP etc.

Trauma

Centers of excellence

Free providers for blocks, pre-ops etc.

Utilization

Coverage provisions in agreements:

Define locations and call

Additional coverage

OT Allocation in expense calculation

Hourly

“Accordion” for +/- fixed locations

18

OR UTILIZATION

19

July 2018 - Aug 2018 7A-3:30P 3:30P-5P 5P-7P 7P-Midnight Midnight-7A

Minutes 113,496 6,268 5,457 4,122 1,327

Surgery Hours 1,892 104 91 69 22

Anes Staffed Locations 11 5 5 2 1

Business Days 44 44 44 44 44

Total Shift Hours 4,114 330 440 440 308

Hrs/Staffed OR/day 3.9 0.5 0.4 0.8 0.5

Shift Utilization (%) 46 22.6 14.8 15.6 7.2

July 2017 - June 2018 7A-3:30P 3:30P-5P 5P-7P 7P-Midnight Midnight-7A

Minutes 562,804 32,580 22,722 16,077 8,297

Surgery Hours 9,380 543 379 268 138

Anes Staffed Locations 11 5 5 2 1

Business Days 253 253 253 253 253

Total Shift Hours 23,656 1,898 2,530 2,530 1,771

Hrs/Staffed OR/day 3.4 0.4 0.3 0.5 0.5

Shift Utilization (%) 39.7 20.4 10.69 10.6 7.8

*All Mon-Fri Business Days (Holidays and Weekends Excluded) – OR only, includes all cases

Anesthesiology Deep Dive: Staffing

Under group control

CRNAs: Independent vs. Direction vs. Supervision

A lot of grey areas:

Is in house call required?

What is a reasonable AA/CRNA medical direction ratio?

Post call day off?

What defines immediately available for medical direction purposes?

Infinite options for the same coverage needs

Staffing models can have a dramatic impact on anesthesia

contract expense

20

PHY 3

OR 3

PHY 1

OR 1

STAFFING WITH ENDO

ALL MD MODEL

VACATION

MAIN OR

PHY 4

OR 4

PHY 2

OR 2

PHY 10

POST CALL

• MD 1st call, off post call

• Assume rotating late shift

responsibility

• MD s 6 weeks vacation per year

• 3 dedicated endo, 5,500 endo

cases covered

ENDOSCOPY

TOTAL FTE s

11.5 MD

0 CRNA s

PHY 5

OR 5

PHY 6

OR 6

POST CALL

PHY 11.5

1.5 FTE VAC

PHY 7

ENDO 1

PHY 8

ENDO 2

PHY 9

ENDO 3

Year 1

IncomePatient/Payer Collections 3,485,065

Total Net Collections 3,485,065$

ExpensesPhysician Salaries 4,636,800$

Physician Taxes 161,370$

Directors Stipends 30,000$

Physician Other Benefits 46,368$

Physician CME, Lic & Dues 46,000$

CRNA Taxes -$

CRNA Salary -$

CRNA Locums -$

CRNA Overtime -$

CRNA CME, Lic & Dues -$

Pension Fund Contributions 231,840$

Professional Liability Insurance 161,000$

Health/Dental Insurance 161,000$

Billing Fees 174,253$

Other Miscellaneous Expenses 34,851$

Management Fees/Admin Expenses 174,253$

Total Expenses 5,857,736$

EBITDA (deficit) (2,372,670)$

MD's @ $459K All In 11.5

CRNA's -

21

Financial Summary

Expenses: $5,857,736

Revenue: $3,485,065

Subsidy: $2,372,670

PHY 1

STAFFING WITH ENDO

CARE TEAM MODEL

VACATION

MAIN OR

CRNA 3.75

OR 3

7A-5P

CRNA 2.5

OR 2

7A-5P

CRNA 5.75

ENDO 1

ENDOSCOPY

PHY 5

POST CALL

CRNA 6.75

ENDO 2

• MD 1st call

• 3 late CRNA s (5P) per day

• CRNA s with 7 weeks vacation per

year, MD s 8 weeks

• 3 dedicated endo locations, 5,500

endo cases

CRNA 9

VAC

TOTAL FTE s

6 MD s

9 CRNA s

CRNA 1.25

OR 1

7A-5P

PHY 4

ENDO

POST CALL

CRNA 7.75

ENDO 3

PHY 3

OR 6

PHY 2

OR 5

PHY 6

POST CALL

CRNA 4.75

OR 4

Year 1








CRNA Taxes 99,433$

CRNA Salary 1,776,600$

CRNA Locums -$

CRNA Overtime 53,298$

CRNA CME, Lic & Dues 18,000$








EBITDA (deficit) (1,945,030)$

MD's @ $459K All In 6.0

CRNA's @ $235K All In 9.0

St Joseph Hospital BangorAnesthesia Model

Summary

22

Financial Summary


Revenue: $3,485,065

Subsidy: $1,945,030

PHY 1

OR 1

STAFFING WITH ENDO

FIELD MODEL

VACATION

MAIN OR

CRNA 3

OR 4

CRNA 2

OR 3

CRNA 6

ENDO 2

ENDOSCOPY

PHY 2

COVER

FIELD

PHY 4

POST CALL/

VAC

CRNA 7

ENDO 3

• CRNA 1st call and MD 2

nd call

• Assume CRNA on call from home,

off post call

• CRNA s with 5 weeks vacation per

year, MD s 13 weeks

• 3 dedicated endo locations, 5500

endo cases

CRNA 9

VAC

TOTAL FTE s

4 MD s

9 CRNA s

CRNA 1

OR 2CRNA 4

OR 5

CRNA 5

OR 6

PHY 3

ENDO 1

POST CALL

CRNA 8

POST CALL

Year 1








CRNA Taxes 101,390$

CRNA Salary 1,911,600$

CRNA Locums -$

CRNA Overtime 114,696$

CRNA CME, Lic & Dues 18,000$








EBITDA (deficit) (995,845)$

MD's @ $411K All In 4.0

CRNA's @ $251K All In 9.0

23

Financial Summary


Revenue: $3,485,065

Subsidy: $995,845

Anesthesiology Deep Dive: Revenue

Cycle Facilities are at risk in practices with collections guarantees or in employed models

Reported collections often form the basis for flat subsidy negotiations

Provider leverage (or lack of) with payors – vary with group size, expertise and billing partner

A pro-forma with accurate caseload and payer mix can accurately model expected revenue

Anesthesia revenue realization is often a “black hole” to C-suite

Facilities should track and understand anesthesia revenue drivers in any subsidized arrangement

Resources:

AMGA, MGMA, and SCA report collections/ASA unit benchmarks

ASA publishes per ASA unit revenue benchmarks

Medicare and Medicaid rates public

Local knowledge of rates – vary by state and region

24

COMMERCIAL PAYER SURVEY

25

QUESTIONS?

26

maximizing the value of your payments to hospital-based

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