Published October 28, 2010

Could Higher Medicare Anesthesia…

Could Higher Medicare Anesthesia Reimbursement Reduce Hospital Subsidies?
Overview

Effective January 1, 2009, the average Medicare conversion factor for anesthesia services has been increased to $20.92.  This is a nearly 5 percent increase from the average 2008 rate of $19.97.  Increased Medicare anesthesia reimbursement could impact hospitals that have entered into subsidy agreements with anesthesiologists.  Specifically, for agreements based upon actual collections, the greater the anesthesia revenue, the less subsidy required.  Therefore, hospitals should be aware that with additional Medicare reimbursement, fixed stipend models may yield physician compensation above fair market value if the arrangement was based upon historical collections.

What does this mean to you?
The attached document contains the percent change in the Anesthesia Conversion Factor from 2008 to 2009 by locale.  The formula below can help you estimate the impact to your subsidy arrangement.

Medicare Collections (Practice Provides)
x Anesthesia Conversion Factor Percent Change
= Estimated Subsidy Impact

For example, in the state of Tennessee, the percent increase in the Anesthesia Conversion Factor from 2008 to 2009 is 5 percent.  Assuming constant surgical case/procedural mix and volume (e.g., number of units) and a subsidy arrangement based solely upon collections, for every $100,000 in 2008 Medicare collections for anesthesia services, the subsidy would be effectively reduced by $5,000 in 2009.
For additional information about this and how your hospital’s subsidy arrangement may be affected, please contact the experts listed below at (800) 270-9629.

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