Anesthesiology requests for financial support are increasing, but should they be?
More and more anesthesiology groups are approaching health systems with requests for increased financial support. These requests are often driven by a combination of rising labor costs, declining reimbursements, and growing demands for coverage.
While the requests have several valid reasons (e.g., a declining payer mix with large amounts of Medicaid and/or self-pay patients), health systems have several reasons not to provide increases. Below are 10 questions health systems should ask (recognizing that your specific circumstances may warrant others) before providing increases in financial support to an anesthesiology group.
10 Questions to Ask Before Increasing Financial Support
- Is the anesthesiology practice billing and collecting consistent with industry norms? A financial support arrangement should help an anesthesiology practice with items that are outside of its financial, operational, or strategic control. Billing and collecting below industry averages is not one of those items. Good revenue cycle practices should be a requirement before any financial support arrangement is contemplated.
- Are the anesthesiology providers capturing all eligible billable anesthesiology units? If all billable anesthesiology units are not captured, services are performed, but the opportunity for revenue is not generated. This circumstance, in turn, can then lead to a need for additional yet unwarranted financial assistance.
- Has the anesthesiology practice renegotiated its commercial contracts recently? With Medicare and Medicaid reimbursement generally staying the same or declining each year, actively managing (and renegotiating) commercial contracts on a regular basis is imperative to mitigate the need for financial support. Further, some of these arrangements, such as collection guarantees, can sometimes disincentivize practices from taking on what may be perceived as a time-intensive and/or cumbersome managed care contract renegotiation process.
- Does the anesthesiology group know how to optimize billing opportunities compliantly under the No Surprises Act? Taking effect in January 2022, the No Surprises Act eliminated surprise bills for patients receiving services from out-of-network providers (such as anesthesiology and other specialties) at in-network hospitals/health systems. While this has lowered reimbursement in certain anesthesia environments, advanced knowledge of the independent dispute resolution process can still help anesthesia practices in some of these circumstances.
- Does the anesthesiology group offer benefits consistent with industry norms? Benefits are a form of remuneration, and the amounts paid to anesthesiology providers should be reasonable when setting the financial support. Often, a comparison to either the hospital providers benefit plan and/or benchmark surveys can help with assessing the appropriateness of benefits paid to medical doctors of anesthesiology (MDAs), certified registered nurse anesthetists (CRNAs), and/or anesthesiology assistants (AAs).
- Do the MDAs, CRNAs, and/or AAs take an unusual amount of paid time off (PTO) for vacation, sick time, and continuing medical education? Anesthesiology providers typically have more weeks of PTO than other specialties. The actual amount of PTO, however, should be evaluated when considering fair market value compensation for these providers. And, if PTO is deemed to be excessive, a downward adjustment to a provider’s annual compensation may be warranted.
- Has the ratio of MDAs to CRNAs/AAs been carefully reviewed? The number of MDAs, CRNAs, and AAs is often the No. 1 factor that impacts a practice’s expense structure and subsequently the amount of financial support required. Careful examination of staffing ratios, the number of anesthetizing locations, and operating room efficiencies is imperative to making sure you are not paying for more coverage than you need.
- Are the practice’s malpractice insurance premiums higher than average due to a poor claim history? Financial support arrangements should include consideration for expenses that are usual and customary amounts, including malpractice premiums. If an anesthesiology provider’s malpractice history is greater than industry average, an adjustment to the financial assistance may be necessary.
- Is the overhead of the anesthesiology practice consistent with industry norms? Typically, overhead is a relatively small amount (vs. provider compensation, benefits, and malpractice, collectively) in the determination of any financial assistance paid by a health system to an anesthesia practice. Overhead often ranges from 10%-20% of net revenue/cash collections; although, legitimate reasons may exist for overhead to be lower or higher. Additionally, it is important to understand what expenses are being passed through as a part of any overhead allocation. For example, overhead for business operations outside of the arrangement with the health system should not be included nor should certain other elective expenses of the practice (e.g., charitable donations or gifts).
- Has the arrangement been recently reviewed for fair market value and commercial reasonableness? MDA and CRNA/AA compensation are rapidly changing in many markets. What is fair market value today may no longer be the same in 3-6 months. An independent, objective third party who truly understands the anesthesiology market can be greatly helpful in establishing fair market value, commercial reasonableness, and ultimately an appropriate level of financial assistance.
Anesthesiology financial support arrangements are often necessary, but the amount of support can be difficult to determine. While the rising number of financial support requests from anesthesiology groups may reflect real challenges in today’s healthcare environment, health systems must approach these requests with a structured and analytical mindset.
By thoroughly evaluating key operational, financial, and contractual factors—such as billing practices, staffing models, benefit structures, and market-based compensation—organizations can ensure that any financial support provided is both fair and strategically sound.
If you would like additional guidance related to compliance, strategy and integration, and fair market value/commercial reasonableness in anesthesiology service agreements, our executives are happy to assist.
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