Winter 2015 Communique by Anesthesia Business Consultants

7/21/2019 Winter 2015 Communique by Anesthesia Business Consultants

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THE CO MMU NI Q U W I NT ER 2015 PAG E 2

FROMMONOLOGUETOCONVERSATION

Dear Readers,

We are entering the new year deter-mined to enhance our engagement with

you. Many o you have provided us with

comments and questions on articles in past

issues, opening the door to new topics and

new contributors and at the very least to

different perspectives.

I you have read previous issues o

the Communiqu, you know that more

and more o our content reflects recipro-

cal and ofen iterative learning. It is time

to open up this process. We want to hear

rom you. Beginning with the Spring issue,

we will add a Letters to the Editor section

and we hope that you will write to us

([email protected])

with your observations on any item that

has caught your interest. We will orward

all correspondence to the author(s) o the

article so that they may respond to your

comments or queries, and we will do our

best to supplement the authors responses

in uture Letters to the Editor pages wher-

ever our own replies are likely to contribute

to a useul discussion. Publication o your

letters in the Communiqu will remain

subject to our discretion, as were sure you

will understand.

You may have noticed an increasingly

conversational ormat in recent articles.

Te give-and-take between experts such as

Michael Hicks, MD, MBA, and Joe Laden in

their article Point-Counterpoint: Do Nation-

al Anesthesia Management Companies

Increase Revenues for Acquired Groups? is

a stellar example o the genre. Tis discus-

sion began in an electronic list serv on the

website o the Medical Group Manage-

ment Association-Anesthesia Administra-

tion Assembly, o which both Dr. Hicks

and Mr. Laden are members. When they

began exchanging views on the relative

benefits o exchanging cash flow today

or an equity stake or other potential or

wealth creation in the uture, it was not at

all clear that the conversation would turn

to the role and value o salary surveys, as it

did in their article. Tere is a strong disin-

centive or financially successul practicesto participate in such surveyswhich by

their nature show averages below the levels

achieved by the leaderswhen the surveys

are used or prospective salary-setting. As

Dr. Hicks says, the provision o anesthe-

sia services is now a regional and national

business and there are many valid business

and legal reasons or not sharing revenue

and expense inormation even in the

aggregate even though this inormation

has previously been willingly provided.

Tus the dialogue between Dr. Hicks andMr. Laden has ended up introducing an

important topic that has not been touched

on previously in the Communiquthe

inherent limitations o compensation

surveys in a consolidating marketplace.

Richard Dutton, MD, MBA and

Matthew Popovich, PhD also use a

conversational approach in their article

on the ASA-Anesthesia Quality Institutes

Quality Clinical Data Registry, QCDR

Made SimpleHa! Te conversation here,

however, is between an unseen interlocutor

who asks the questions so many o you are

raising about the QCDR, and the QCDRs

designers/managers, or example, What

are my options? and What measures can

I report on? It is a ormat that should

make it easier or readers to assess whether

and how to participate in reporting to the

QCDR, even as the registry and its require-

ments continue to develop.

In Phoenix Project: Reconstructing a

Local Group from the Ashes of its Predeces-

sor, Mark Weiss, JD uses his own hallmark

conversational style, notable or its direc

challenges to readers (Even i the hospita

hasnt expressed a preerence, you know

who shouldnt remain at the acility, so

why ool yoursel at the cost o your own

uture?) as well as its upbeat conclusions

(the death o an anesthesia group can be

leveraged into the birth o a new one.)

Some o the most useul materia

presented in our publications comes rom

the pragmatic conversations that our writers

have with our readers and other members othe anesthesiology community that morph

into ideas or more generalized education

Understanding the Impact of Individua

Exchange Plans on Anesthesia Practices by

ABCs own Jody Locke is one such article

Mr. Locke walks readers through the

mechanics o estimating the dollar impact o

participating in one or more o the Obam-

acare Exchanges. Te higher patient cost

sharing responsibilities under these health

plans drive not just accounts receivable

management but also contracting strategies

and even prepayment policies.

Still more inormation that you

can use in your practice throughout the

year are staff articles on Current Proce-

dural erminology (CP) code changes

or 2015, on ICD-10 coding and on the

National Practitioner Data Bank.

Please do send us your ideas on addi

tional topics you would like to see

addressedor to address your-

sel!as well as your comments

on any o the inormation,

suggestions or conclusions

contained in this issue. We

are looking orward to the

next stage in our ongoing

conversation with you.

With best wishes,

ony Mira

President and CEO

NEW! Lettersto the Editor
mailto:[email protected]:[email protected]


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Te act is, olks, that the Qualified

Clinical Data Registry (QCDR)and pay

or perormance reporting in general

is ridiculously complex. And the rules

are changing every year. Tis article

will lay out some o the basics, using

simple lists and bullets, in the hope o

making the options more intuitive. We

wish to acknowledge also the editorial

assistance o Karin Bierstein, hersel an

expert, who will correct any inadvertent

misstatements we might make. Between

the three o us we should be able to lif the

og a little bit.

Lets begin with some Q&A:

Do I have to participate inperformance reporting?

Leaving aside the local advantages

o an effective quality management

program, external perormance

reporting is already required or

hospital and ambulatory surgery center

accreditation. Perormance reporting at

the ederal level is also required or every

eligible proessional (EP)physician,

certified registered nurse anesthetist

(CRNA) and anesthesiologist assistant

(AA)paid by Medicare, or else

payments will be docked. Te penalties

at this moment are small, but the

government is committed to increasing

them to as much as 10 percent o total

payments over the next five years. Many

anesthesiologists have already received

letters rom Medicare noting their ailure

to participate in perormance reporting

in 2013, and inorming them that their

payments will be decreased in 2015.

When?

Sooner than you think. For practiceswith minimal Medicare billing, the

financial penalties or not reporting will

be small at first. But Medicaid will soon

ollow, and private insurers likely afer

that. One way or another, every practice

will need to measure and report on

quality i it wants to stay in business or

the next decade.

What are my options?

Sixty-one percent o anesthesiologists

in 2012 reported quality measures to

the Physician Quality Reporting System

(PQRS). Most anesthesiologists report

via the claims-based reporting option.

Tis requires appending a code to each

case billed to Medicare, saying that the

antibiotics were given on time, that

you washed your hands beore placing

the central line, or that the patient was

normothermic when they hit the Post-

Anesthesia Care Unit (PACU). (Tese were

three o the five measures most commonly

reported by anesthesiologists in 2012.) In

2014 reporting these measures successully

yielded a 0.5 percent (hal o one percent!)

incentive rom Medicare, but beginning in

reporting year 2015, satisactorily reporting

will only prevent a -2.0 percent penalty

Worse still, the number o measures tha

must be reported has increased rom the

current three up to nine, with required

inclusion o at least one cross-cutting

measure or claims-based and traditional

qualified registry reporting. And yes, the

average anesthesia provider currently has

only a ew measures to choose rom when

using these mechanisms and no outcome

measures or cross-cutting measures. Moreon this below.

Tere are alternatives to the

individual claim reporting mechanism, as

Medicare attempts to phase it out. One

is the Group Practice Reporting Option

(GPRO), which allows groups to presen

their data through an aggregation service

Ofen involving the same measures

but through a different mechanism, i

allows or EPs to receive the 0.5 percen

incentive in 2014 while attempting to

avoid penalties in the uture. Anotheralternative is to be part o an Accountable

Care Organizationa consortium o

physicians and acilities accepting a

risk- and/or savings-sharing payment

rom Medicarein which case you are

probably a salaried employee o an HMO

like Kaiser or a large university system

and can saely stop reading nowyoure

most likely covered.

QCDR MADESIMPLE HA!Richard P. Dutton, MD, MBA

Chief Quality Officer, American Society of Anesthesiologists

Executive Director, Anesthesia Quality Institute, Schaumburg, IL

Matthew T. Popovich, Ph.D.

Director of Quality and Regulatory Affairs, American Society of Anesthesiologists, Washington, D.C.

Continued on page 4


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QCDR MADESIMPLE HA!Continued from page 3

Te final, and newest, alternative is the

Qualified Clinical Data Registry (QCDR),

intended to give eligible providers

credit or participation in external

benchmarking or quality improvement.

While the reporting mechanism is similar

to other reporting mechanisms described

above, the set o measures that can be

reported is much broader. Medicare has

given these approved registries in each

specialty the autonomy to define their own

important quality metrics, in exchangeor doing the data capture, analysis and

reporting that Medicare used to have to do

itsel. We can expect Medicare to continue

to promote registries in order to offload

the data management burden onto private

entities.

Im already lostHelp!

OK, lets look at a glossary. Here is a

handy list o the critical acronyms:

CMSTe Centers or Medicare and

Medicaid Services. In round numbers

about 1/3 o all healthcare payments in the

US are rom Medicare, with another 1/6

through Medicaid. So about 50 percent

o all healthcare is bought by the ederal

or state government. Its a little less than

that or anesthesia, but this is still a big

hunk o our business.

P4PPay or Perormance. What

the government intends to do, instead o

paying or quantity or service or time. Te

burden o demonstratingperormance is

on us.

PQRSTe Physician Quality

Reporting System. Te first steps toward

P4Pin reality, Pay For Reporting and

not or Perormance in the sense o

outcomes or practitioners by CMS.

Now about eight years old, the program

began as a scheme o incentive paymentsto eligible providers who reported either

perorming or not perorming one or

more approved quality improvement

measures.

EPEligible Proessional. Any

individual who bills CMS or their

proessional clinical services to a patient.

Tis includes anesthesiologists, CRNAs,

AAs and others.

NQFTe National Quality

Forum. A not-or-profit, membership-

based organization created to endorsemeasures or use by CMS and others or

quality reporting. Highly bureaucratic

approval o a measure through NQF can

take years o effort and costs hundreds

o thousands o dollars. CMS-approved

measures ofen orm a subset o all

NQF-approved measures.

VMTe Value-Based Payment

Modifier. Te CMS companion program

to PQRS, just getting started. Uses the

same set o measures and combines PQRS

and QCDR measures with outcome and

cost measures. EPs not satisactorily

reporting PQRS will be penalized under

the VM program cumulatively; this

money will und an incentive pool or

those who meet all o the requirements.

Te VM system is already active in 2014,

with results to be applied in 2016.

MAVTe Measure Applicability

Validation process. Groups and providers

using the claims-based or traditional

qualified registry reporting mechanisms

who cannot find enough applicable

measures to report are subject to the

MAV test, which assesses whether more

measures would have been available

Assuming CMS agrees that there were

none, the EP will not be penalized under

PQRS.

QCDRTe Qualified Clinical Data

Registry. A new mechanism or practices

to report PQRS and that will, in the uture

impact their VM. QCDRs are developedand maintained by medical specialty

societies, and must seek to improve

quality within that specialty by means o

data aggregation and periodic eedback to

participants (benchmarking). Te QCDR

can use both approved PQRS measures

and its own non-PQRS measures. In

2015, the QCDR will be authorized to

include up to 30 o these non-PQRS

specialty-specific measures, thus allowing

any participant in a QCDR that takes

advantage o this authorization to find theminimum nine that must be reported.

GPROTe Group Practice

Reporting Option. Practices can send

their data to CMS as a group (all provider

using one ax Identification Number or

their business). Tis is different rom

the QCDR, as the GPRO only allows

reporting the existing PQRS measures

and requires different minimums.

OK, I get it. I have to report

performance on quality measures toCMS. What next?

alk to your office manager and you

practice management company. Tis is

complicated material and everyone should

get proessional advice. Ten consider

your exposurethe percent o cases your

eligible proessionals bill to CMS. Ten

decide what your practice posture will be

Do you want to do everything possible to

earn VM incentives? Or are you satisfied


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with avoiding penalties? Do you have an

existing system to capture clinical data,

or are you starting rom scratch? Once

youve answered these basic questions,

you should check out the ollowing

publicly available resources:

CMSTe definitive source, but not

always easy to understand! http://www.

cms.gov/Medicare/Quality-Initiatives-

Patient-Assessment-Instruments/PQRS/

index.html

Te AQI websiteInormation

on the QCDR. http://www.aqihq.org/

PQRSOverview.aspxTe ASA websitehttps://www.

asahq .org /For-Mem b ers/Qual i t y-

Management/QCDR.aspx (requires

member log-in).

ABC weekly e-Alerts on PQRS,

VM and QCDR topicshttp://www.

a n e s t h e s i a l l c . c o m / p u b l i c a t i o n s /

anesthesia-industry-ealerts

What measures can I report on?

Te ollowing currently approvedPQRS measures apply to most

anesthesiologists. Tese measures can be

reported through any mechanism: claims-

made, group-reporting or through the

QCDR. When reviewing the measures,

EPs should pay attention to the CP Codes

in the denominator o the measures. I the

specified denominator codes or a measure

are not included on the patients claim (or

the same date o service) as submitted

by the individual eligible proessional,

then the patient does not all into thedenominator population, and the PQRS

measure does not apply to the patient.

#30Perioperative Care: imely

Administration o Prophylactic

Parenteral Antibiotics (this measure has

been retired by CMS, and can no longer

be reported to PQRS in 2015)

#44Coronary Artery Bypass Graf

(CABG): Preoperative Beta-Blocker in

Patients with Isolated CABG Surgery

#76Prevention o Catheter-

Related Bloodstream Inections (CRBSI):

Use o a Central Venous Catheter (CVC)

Insertion Protocol

#130Documentation o Current

Medications in the Medical Record

(the denominator codes do not include

anesthesia codes)

#193Perioperative emperature

ManagementFor General anesthetics

> 60 minutes, the percentage o patients

reaching the PACU at greater than 36

degrees, or in whom active warming

devices were used

#226Preventive Care andScreening: obacco Use: Screening and

Cessation Intervention (non-anesthesia

codes)

#342Pain Brought Under Control

within 48 Hours o admission to palliative

care (non-anesthesia codes)

#358Patient-Centered Surgical

Risk Assessment and Communication:

Te Percent o Patients who Underwent

Non-Emergency Major Surgery Who

Received Preoperative Risk Assessmen

or Procedure-Specific Postoperative

Complications using a Data-Based, Patient

Specific Risk Calculator, and who also

Received a Personal Discussion o Risk

with the Surgeon (non-anesthesia codes)

How do I report?

Tis is the question you should

ask your practice managers. Te shor

version is that someone (possibly

including the provider at the point o

care) indicates in the medical record that

the patient is eligible and the measure has

been met. Someone else abstracts thi

inormation rom the medical recordor the billing documentation and turns

it into a code. Tat code is reported

directly to CMS with the bill or the case

(under claims made) or to the GPRO or

QCDR. Perormance on the measure is

calculated at the end o the year, based

on the rate o successul reporting over

all eligible cases.


Continued on page 6
http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/PQRS/index.htmlhttp://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/PQRS/index.htmlhttp://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/PQRS/index.htmlhttp://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/PQRS/index.htmlhttp://www.aqihq.org/PQRSOverview.aspxhttp://www.aqihq.org/PQRSOverview.aspxhttps://www.asahq.org/For-Members/Quality-Management/QCDR.aspxhttps://www.asahq.org/For-Members/Quality-Management/QCDR.aspxhttps://www.asahq.org/For-Members/Quality-Management/QCDR.aspxhttp://www.anesthesiallc.com/publications/anesthesia-industry-ealerts/681-physician-payments-sunshine-act-anesthesiologists-should-register-and-review-their-informationhttp://www.anesthesiallc.com/publications/anesthesia-industry-ealerts/681-physician-payments-sunshine-act-anesthesiologists-should-register-and-review-their-informationhttp://www.anesthesiallc.com/publications/anesthesia-industry-ealerts/681-physician-payments-sunshine-act-anesthesiologists-should-register-and-review-their-informationhttp://www.anesthesiallc.com/publications/anesthesia-industry-ealerts/681-physician-payments-sunshine-act-anesthesiologists-should-register-and-review-their-informationhttp://www.anesthesiallc.com/publications/anesthesia-industry-ealerts/681-physician-payments-sunshine-act-anesthesiologists-should-register-and-review-their-informationhttp://www.anesthesiallc.com/publications/anesthesia-industry-ealerts/681-physician-payments-sunshine-act-anesthesiologists-should-register-and-review-their-informationhttps://www.asahq.org/For-Members/Quality-Management/QCDR.aspxhttps://www.asahq.org/For-Members/Quality-Management/QCDR.aspxhttps://www.asahq.org/For-Members/Quality-Management/QCDR.aspxhttp://www.aqihq.org/PQRSOverview.aspxhttp://www.aqihq.org/PQRSOverview.aspxhttp://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/PQRS/index.htmlhttp://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/PQRS/index.htmlhttp://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/PQRS/index.htmlhttp://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/PQRS/index.html


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Whats different about the QCDR?

EPs participating in the QCDR

report their perormance on a case-by-

case basis just as they would to CMS

under claims made. Te QCDR thenanalyzes perormance and reports on the

EPs behal to CMS. Te difference is that

the QCDR may measure other elements

than those reported to CMS (its a real

registry, not just a billing mechanism).

Te QCDR will provide regular eedback

to the provider throughout the year.

Andmost importantthe QCDR can

provide reporting credit or non-PQRS

measures.

Aha! Tats how I can find ninemeasures to report!

Exactly! Here are the 11 non-PQRS

measures available in the ASA-QCDR

(the National Anesthesia Clinical

Outcomes Registry, or "NACOR") or

2014. Even more will be added in 2015.

Anesthesiology: Post-Anesthetic

ranser o Care Measure: Proce-

dure Room to a Post Anesthesia

Care Unit

Post-Anesthetic ranser o Care:

Use o Checklist or Protocol or Di-

rect ranser o Care rom Procedure

Room to Intensive Care Unit (ICU)

Prevention o Post-Operative

Nausea and Vomiting (PONV)

Combination Terapy (Adults)

Prevention o Post-Operative

Vomiting (POV)Combination

Terapy (Pediatrics)

Composite Anesthesia SaetyTe percentage o all patients who

complete a scheduled procedure

without a major complication

Immediate Perioperative Cardiac

Arrest Rate

Immediate Perioperative Mortal-

ity Rate

PACU Reintubation Rate

Short-term Pain Management

Composite Procedural Saety or

Central Line Placement

Composite Patient Experience

OK, I know this is important, and Ihave to do it. How much is it goingto cost me to prevent penalties or earnincentives?

Costs will depend on the current

sophistication o your practice inormation

technology and on your billing or quality

capture vendor. alk with them first!

Participation in NACOR is open to anyanesthesia practice in America and is

free to ASA members. Te ASA-QCDR

service is also ree to ASA members

participating in NACOR. Non-member

EPs (i.e. your nurse anesthetists and AAs)

can use the ASA-QCDR service or $295

per EP per year, with discounts available

or large groups. Tis is likely a raction

o the penalty and incentive money at

risk, but each group will need to make this

assessment on their own.

Can I still participate in 2015?

Yes, although you need to ge

moving. CMS has threshold levels

of reporting required under each

mechanism, so you will need to have

your data flowing soon. For the QCDR

EPs using the QCDR option will need to

report at least nine measures covering

at least three National Quality Strategy

domains for at least 50 percent of their

patients seen during 2015.

I youre reading this at the ASA

Conerence on Practice Management

or the ulane-ABC-Medical Business

Solutions Advanced Institute or

Anesthesia Practice Managemen

(AIAPM), please stop by the AQI, ASA or

ABC exhibits to learn more. Tere wil

be presentations at each meeting on the

topic o PQRS reporting and the QCDR.

Te AQI is here to help you manage

ederal perormance reporting in our

brave new world o healthcare qualityComplicated, yes. But you can do it!


QCDR MADESIMPLE HA!Continued from page 5

Richard P. Dutton,MD, MBA is VisitingProessor o Anesthe-siology, University oMaryland School oMedicine and AQIExecutive Director.o contact Dr. Dutton

or the AQI, visitwww.aqihq.org.

Matthew T. Popo-vich, Ph.D. is theDirector o Qualityand Regulatory Affairsor the AmericanSociety o Anesthesi-ologists. He is basedout o the ASA Wash-ington, D.C. officeand may be reached [email protected].
http://www.aqihq.org/mailto:qra%40asahq.org%3E?subject=mailto:qra%40asahq.org%3E?subject=http://www.aqihq.org/


7/28


unds now rather than in the uture, and

this money is taxed at the capital gains

rate rather than at the much higher W-2

income rate.

A question has arisen as to whether

the voluntary reduction in anesthesiologist

salaries through these types o acquisitions

will depress the overall air market value

o anesthesiologist salaries in a locale, a

region or even nationally. Tis is important

to independent anesthesiologists who

rely on air market anesthesiologist

compensation rates when negotiating with

acilities or financial support. Tere is

an assumption that anesthesiologist salary

surveys incorporate the reported beore

and afer W-2 wages o anesthesiologists

involved in these practice sales. An

additional assumption is that the salaries

o anesthesiologists who sell their practice

in this manner remain at their agreed to

lower level or the oreseeable uture.

Tere are a number o published

national physician compensation surveys

rom entities such as the Medical Group

Management Association, American

Medical Group Association, Merritt

Hawkins and Medscape. However, none

o these surveys are scientific and some

data are sel-reported by medical groups.

Hence, it is not known i anesthesia

groups that are acquired have participated

in surveys or whether their salary data

will be reported afer acquisition.

Dr. Hicks

Tere are a number o actors that can

lead an anesthesiology group to consider

merging or selling its practice. Tese include

the opportunity to trade uture income

potential or a cash payout today, a desire

to take an equity stake in an entity with a

perceived greater ability to provide income

and wealth creation in the uture, or on a

more pessimistic level, the sense that the

market or anesthesia services is peaking

and that the current groups situationbe

it structure, leadership or environment

does not permit it to make the necessary

changes to be successul in the uture.

Regardless o the motivation

however, the owners o large sophisticate

practices that do sell/merge/affiliate ar

replacing one orm o economic gai

(practice revenue distributed general

in the orm o W-2 income) or othe

types o economic gain such as a shar

o the sales price in a pure cash buyou

cash and equity in the new practic

and possibly different tax treatmen

o unds, as Mr. Laden points ou

However, I think there are som

other but less requently discusse

considerations that are important as we

First, many o the acquired platorm group

through better strategy and managemen

command higher commercial insuranc

rates than most other groups even withi

their home geographies. As a resul

when they take a "discount" off o the

pre-transaction income the end result

that their uture salary stream is reset to th

true prevailing market rate or their are

excluding their practice. In other word

post-transaction these physicians w

earn what their colleagues in other loc

practices earn and consider as "marke

rates. I know this is almost unbelievab

by many who work in smaller practice

but I am certain that no sophisticate

purchaser, whether in private equity or

strategic acquirer like the large physicia

practice management companies, is goin

to enter into a high dollar acquisition ancreate an artificially low labor expense t

get a deal done. Tis would be a significan

financial misstep and sophisticate

acquirers generally don't make thos

kinds o mistakes. Tis doesnt mea

that these companies are not sometime

overpaying or acquisitions but purchas

prices depend on a number o actor

and labor expense is only one o them

Tis is a topic or another time, thoug

POINT-COUNTERPOINT: DONATIONALANESTHESIAMANAGEMENTCOMPANIESINCREASEREVENUESFORACQUIREDGROUPS?Continued from page 1

Continued on page


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Secondly, some acquired practices,

even the sophisticated ones, immediately

begin to be the beneficiaries o even

better expertise, scale and technology

and as a result begin to repair their

"discounted" incomes. In other words,

the decrease in income resulting rom

the acquisition really becomes much

smaller as a result o improved contracts,

scheduling efficiencies and overhead

reduction while the benefits provided

in terms o equity and tax treatment

continue to accrue to the sellers.

Unortunately, consolidation in

anesthesia is requently portrayed in

terms o "selling out" or acting out o ear.

I am sure or some practices, possibly

smaller ones, that may be true. However,

I am certainrom multiple personal

experiencesthat or larger, more

sophisticated groups these transactions

occur not as a result o ear or even greedbut as a result o sound strategic planning

and sophisticated capital structure

decisions. Medical practices o all types,

not just anesthesia, requirenow and in

the utureassets that allow their leaders

the opportunities to make executable

decisions based on sound knowledge

and strategy. Tese transactions in

anesthesia are a path, but not necessarily

the only path, toward that goal.

Mr. Laden Dr. Hicks has made an excellent

point that anesthesiologists who merge

into or are acquired by a group with

better commercial payer rates can benefit

rom the higher rates. For example, rom

the ASA Commercial Fees Paid survey

in the Southern section the managed care

rate or all payers at the 25thpercentile is

$58 and at the 75thpercentile is $75, a 29.4

percent difference. Teoretically, i a group

at the 25thpercentile level in the Southern

Section joined a group in that section at

the 75th percentile and had 40 percent

o its patient revenue with contracted

managed care payers, patient revenue

would increase by 11 percent overall

afer joining the group with higher rates.

I the patient revenue per owner

anesthesiologist were $1,000,000 (see

MGMA 2014 Physician Compensation

Survey and MGMA 2014 Cost Survey

for representative data) or example,

afer joining the group with higher

rates the anesthesiologist's patient

revenue would increase by $110,000

annually in our example, replacing

much o the anesthesiologist's

income that was monetized in

the orm o capital gain proceeds.Whether or not physician income

can be increased afer an acquisition

may depend on the type o organization

the doctor joins. Doctors who sell must

examine their employment contracts

careully and determine i salary increases

and/or perormance bonuses are possible

and probable. For example, will the new

practice owners take additional practice

income or themselves or is there a

mechanism or additional revenue to be

shared with the anesthesiologists? It may

be better to sell to an organization that

has true physician representation in its

management structure.

Tere can be many paths to

increasing income afer acquisition

Te most immediate will occur i the

acquiring organization has higher payer

rates. However, the doctors need to find

out i the acquiring organization actually

has higher ees with their major payers

For example, a dominant local Blue Shield

may not care that the acquirer has great

Blue Shield contracts in other states. On

the other hand, the acquiring organization

may have a avorable national contract

with a nationwide payer.

Te acquiring organization may have

plans to expand the acquired practice to

nearby locations or to add a ree-standing

pain clinic. Depending on the deal

expansion revenue and profits may or maynot be shared with the anesthesiologists

who sold their practice.

Dr. Hicks

Our ideas are not dissimilaror any

group merger/acquisition/partnership

the devil is in the details. My view has

long been that anesthesia practices need

active strategy creation and decision

making with a view o creating additiona

value not only or their customers but also

or their own members. In the case o theintrinsic value to the practices members

this value can be in the orm o increased

W-2 income, or exchange o one orm

o equity or another or enhanced job

security. What doesnt work, as many in

the business unortunately know all too

well, is just sitting around and waiting/

ignoring/hoping that nothing changes

One thing that can be said concerning

income is that when a groups anesthesia

contract is acquired in a competitive


https://www.asahq.org/sitecore/content/Home/For%20Members/Publications%20and%20Research/Newsletter%20Articles/2014/October%202014/payment%20and%20practice%20management?ArticleID=%7b508F2BAB-7B3D-449F-9F77-F74F4219D056%7dhttps://www.asahq.org/sitecore/content/Home/For%20Members/Publications%20and%20Research/Newsletter%20Articles/2014/October%202014/payment%20and%20practice%20management?ArticleID=%7b508F2BAB-7B3D-449F-9F77-F74F4219D056%7d


9/28


bidding process by some other entity it is

nearly certain that physician incomes arenot going up or even likely to remain the

same.

Tat being said, however, there are

other salary related issues in any proposed

transaction. As Mr. Laden suggests,

income afer a transactionnow and in

the uturedoes depend on the type o

organization the physician joins. In this

regard, there are several different models.

raditionally most anesthesia

acquisitions were straight cash

transactionsthe seller gets cash and thebuyer gets the equity interest and control

o the practice. Te profit stream that the

buyer is acquiring comes rom a reduction

in income to the physicians since the

overwhelming majority o practices

distributed all monies afer meeting

overhead expenses to the physician

partners. Te physician sellers logic,

as alluded to previously, is that they are

trading uture earnings (and uncertainty)

or cash in the bank today that can be

used however they see fit (investment,

retirement, new boat or house, etc.). All

o the large strategic acquirers only did

this type o transaction and it remains the

most common orm.

Lately this has changed somewhat,

however, with the advent o a

partnership model wherein an equity

position in the acquiring company comes

with the cash. In this case the physicians

are now trading uture patient service

earnings or cash and possible capitalappreciation in the acquirers stock. Tese

transactions still require the creation o a

profit stream and this largely comes rom

the reduction in income o the physicians

(but not below market rates as mentioned

above). However, it creates opportunities

that other relationships may not. Not

surprisingly, it is always in the interest

o the acquirer to enhance the revenue

o any practice it acquires (or obvious

reasons). However, in partnership

models it is in both the acquirers and

the physicians interest to enhance

profitability since both parties stand to

gain as owners o the company. Part o

this gain can be provided in the orm o

W-2 income (income repair) while the

enhanced profitability leads to capital

appreciation o the companys stock. Tis

is proving to be a very attractive option in

the anesthesia M&A marketplace because

i the salaries are able to be brought

back near or at their level prior to the

acquisition then the physicians have

no decrease in real income and also the

benefit o an equity position that is likely

to increase aster and more appreciably

than their relatively illiquid ownership

position prior to selling.O course, this is an example o a major

deal point and not a devilish detail and is

indicative o some o the creativity that

can be exercised in creating a transaction.

As is always the case, physicians, whether

they are selling their practices or not, must

examine all o the transaction documents

including their employment contracts

careully and determine i salary increases

and/or perormance bonuses are even

possible or probable.

Mr. Laden

Based on the complexity o the

transactions that Dr. Hicks has described

it would be wise or anesthesiologists

considering an acquisition or partnering

deal to bring in experienced advisors

who can help navigate a pathway to a

avorable conclusion. While it may seem

straightorward to simply take cash-in

hand, the anesthesiologist should be

completely aware o his or her clinical and

financial path over the next 5-10 years. I

the doctor takes stock in the acquiring

organization, the uture plans o the

organization should be thoroughly vetted

by the doctor and the doctors financia

advisors.

Dr. Hicks

A key aspect o any substantia

transaction is the rigor applied to

the due diligence process. Key dea

points, and importantly the underlying

assumptions on which they are based

demand examination as to whether

they are sustainable post transaction

Some key assumptions involve whether

existing relationships that the buyer and

Continued on page 10


10/28

seller have prior to the transaction will

continue and under what terms afer the

transaction is consummated. Examples

pertaining to anesthesia transactions

include the stability o service contracts

with acilities, employment terms o the

clinical staff and whether financial terms

o existing relationships will remain

in place or extend to newly acquired

clinicians or sites o services. Relative

to rate comparisons with payers, this

can be problematic or several reasons,

not the least o which include legal and

regulatory barriers to sharing this type o

inormation prior to a transaction. In my

experience this is difficult i not impossible

at the individual contract level but can be

reasonably approximated at the aggregate

level using third party organizations to

make comparisons and then blinding the

potential buyer and seller to actual payer

specific contract rates. In general, most payer contracts

remain at the regional or state level

but recently a ew major payers with

national ootprints have been agreeable

to national anesthesia rates. Tese appear

to be a mixed benefit with some parts o

the now larger practice getting minimal

or no increase in rates but other parts

being beneficiaries o significant positive

contributions. At a corporate level there

are ways to distribute this benefit to make

such a contract appealing to the entirepractice, however.

As Mr. Laden points out, some

groups do not have the benefit o

significant commercial rate contracts.

Tese groups are potentially in a difficult

position as they are the most likely to

require significant financial support and

are also less likely to be attractive merger

or acquisition targets. Tey are also the

most likely to depend on having valid

compensation data during negotiations.

Mr. Laden

I there are secrecy provisions in

acquisitions deals, wouldnt this prevent

the doctor and/or his group rom

reporting to Medical Group Management

Association (MGMA) and other surveying

organizations afer the acquisition?

Dr. Hicks

Obviously, proprietary inormation

should always be protected and treated

as the valuable asset that it is. Tat being

said, there are no secrecy provisions

outside those that are ound in all other

competitive business environments.

What may be different, however, is that

the provision o anesthesia services is now

a regional and national business and there

are many valid business and legal reasons

or not sharing revenue and expense

inormation even in the aggregate even

though this inormation has previouslybeen willingly provided.

For example, to whose benefit is it

or a large anesthesia practice to openly

report to the world its compensation

or that it has superior reimbursement

rates? Will doing so help those who have

managed their practice so as to achieve

superior rates or will it lead to a tougher

negotiation environment during the nex

round o negotiations afer groups with

lower rates have used the data to improve

their own rate structure? In my experience

the quality o inormation reported to

MGMA and other organizations is a

mixed bag. Some practices that have

better financial perormance choose no

to participate as there is little to be gained

by releasing that their rates are superior

to others and in act are only providing

competitors a rate target or their own

negotiations. In this context it can be

argued that smaller groups desiring

better rates can either join one o the

larger sophisticated groups, create their

own version o the same or develop the

expertise to get better rates on their dime

and their time.Tat being said, I understand the

value o surveys in general. However

their utility was greater and their need

more acceptable in a prior era when

groups were small, local and minimally

managed. In this era o nationa

competition their use may indeed be

problematic. For example, the payer rate

issue does indirectly come up in Request

For Proposal responses as hospitals

and health systems want to understand

why there may be differences in subsidyrequests among competitors or a service

contract. In act, I have been asked severa

times i I really had the correct subsidy

numbers in submitted pro orma budgets

as our submitted subsidy proposal was so

different (lower or higher) than those o

other bidders.

Mr. Laden

As anesthesia groups consolidate

through acquisition or merger, it appear




11/28


that salary surveys may become less

useul than in the past. Anesthesiologists

may need to find other methods to

validate their compensation in situations

such as arranging financial support rom

healthcare acilities. Perhaps the true test

o air compensation is the amount it takesto attract quality anesthesia providers to

a particular geographic location. Tis

will vary with the desirability o the

geographic area, the current scarcity o

anesthesia providers and job specifics.

Dr. Hicks

Tis is an example o the nature o

the changing competitive landscape.

Many anesthesiologists and practice

leaders are troubled by this and with some

justification. However, it is a Catch-22situation. Many o the groups with high-

income clinicians are loathe to report

this data or the very reason that they

are above the reported averages and it is

to their benefit to have the world believe

that they make less than they really do. As

a result I believe the national surveys can

be airly inaccurate and this includes the

data produced by the ASA.

Unortunately, in my opinion hospitals

as well as practice leadership requently

rame the discussion incorrectly. It is

even more perversely ramed by outside

consultants who blur the compensation

requirement to hire an incremental or

additional clinician (the clinician at the

margin rom an economic perspective)

with the cost o an entire clinical staff. I

have even observed national consultants

attempt to (mis)use MGMA and other

data to justiy grossly underweighting the

services o anesthesiology subspecialists

that are ew in number and high in

demand. Similarly, the data are also

used to benefit some groups when theyrequest subsidy increases in order to add

additional clinicians who can be and

are added or substantially less than the

amount o the requested subsidy increase.

In act, it may be helpul or the

group to let the hospital believe that

anesthesiologist incomes are actually

lower than they really are. In some cases,

excluding academic anesthesiologists,

few if any anesthesiologists make

as little as some surveys suggest. In

summary, I have certainly encounteredhospital leaders who try to use those

data in the way Mr. Laden describes.

My response has been to suggest to

them that we both do a recruiting

search and see how many clinicians

express an interest in their proposed

compensation rates. Sometimes it

works and sometimes it doesnt. I will

say that it is more difficult for the

anesthesia group to fight this off when

they have no other options for work.

Mr. Laden

It appears that anesthesiologist

salary adjustments afer practice sales

will not be reflected in national physician

compensation surveys because:

1. Compensation reporting to the

national surveys is inconsistent or

inaccurate, and

2. Anesthesiologist salaries may

not be reduced or long afer

practice acquisition due to shared

revenue expansion initiated by the

acquiring organization.

Te current trend toward ewer

small independent anesthesia groups

will most likely continue, especially i

there is increasing downward pressure

on hospital financial support or these

groups. Surgery should continue its

increase due to the aging population

and technical innovation. I believe the

uture is bright or anesthesiologists even

though many may experience changes

in their financial and organizationastructures.

However, even i all anesthesiologist

are eventually employed by hospitals

practice management companies or

mega-groups, I believe there will always

be a need or anesthesiologist salary

surveys just as there is in most major

industries.

Michael R. Hicks,

MD, MBA, MHCM,

FACHE is a physicianexecutive based inDallas, exas. Heleads the anesthesia

division o a nationalphysician practicemanagement firmand previously led a large regionalphysician-owned anesthesia practice. Inaddition Dr. Hicks is a consultant or anational hospital and ambulatory surgerycenter company. He can be reached at

[email protected] Ladenhas workedor independent an-esthesiologists asa business practicemanager or over 30years. He is a well-

known member o theMedical Group Man-agement Association(MGMA) and o the MGMAs Anesthe-sia Administration Assembly. He can bereached at www.linkedin.com/in/joeladen.
mailto:?subject=http://www.linkedin.com/in/joeladenhttp://www.linkedin.com/in/joeladenmailto:?subject=


12/28


I you have not spent much time

thinking about the impact o the

Exchange plans now being offeredunder Obamacare, you are not alone.

For many anesthesia providers and

their administrative staff, the specific

implications o the Patient Protection

and Affordable Care Act (ACA) passed in

March 2010 are more or less a black box.

As is true o so many issues in healthcare,

the devil is in the details; unortunately

this is just one more complicated issue

that merits special management ocus.

So what are Exchange plans and how

do they work? It is important to understandthat Exchange plan options are offered in

every state. Tese insurance options are

available through the Health Insurance

Marketplace at Healthcare.gov.Essentially

this provides options or those who are

not covered through their employer. In

each state where they are offered, private,

commercial insurers have contracted to

provide coverage at discounted rates. For

example, Blue Cross o Caliornia continues

to offer its traditional PPO coverage, as

does Blue Shield, but both now offer anIndividual Exchange option.

As o January 1, 2014 all eligible

Americans must be covered by insurance

or their medical care. Tey will either be

covered by their employer or through an

Exchange plan. While many patients have

signed up, thus ar there is a very real

concern that these numbers will increase

as we move into 2015 as more Americans

look to avoid the penalty associated with

being uninsured. Depending upon the

state where the person lives they will

either choose their coverage through

a state Health Insurance Exchange or

through the Federal Exchange. Te

ACA introduced some very significant

eatures that had not previously existed:

the mandate that every American havehealth insurance coverage, the act that

patients cannot be denied coverage or

pre-existing conditions and subsidies

or those that cannot afford to pay their

premiums. Te law identifies our levels

o coverage that must be offered.

Bronzehas the lowest monthly

premium and the highest out o

pocket cost and a $5,000 deductible

where the maximum out-o-pocket

per individual is $6,350

Silverhas the second lowest pre-

mium with a deductible o $2,000

where the maximum out-o-pocket

per individual is $6,350

Goldhas the second highest pre-

mium but no deductible

Platinumprovides the best ben-

efits or the highest premium with

no deductible and a maximum out-

o-pocket expense o $4,000

Te principal vehicle or

communicating the details o plan option

is www.healthcare.gov, which is where

people are expected to review the details

o each plan and make an application

or coverage. In addition to the edera

Exchange, quite a number o states like

UNDERSTANDINGTHEIMPACTOFINDIVIDUALEXCHANGEPLANSON

ANESTHESIAPRACTICESJody Locke, MA

Vice President of Anesthesia and Pain Management Services, ABC
http://healthcare.gov./http://healthcare.gov./http://www.healthcare.gov/http://www.healthcare.gov/http://healthcare.gov./


13/28


Caliornia and Oregon offer their own

Exchange options. For practice managers

interested in the plans offered in a given

location there is a wealth o specific

market data available on line. Figure 1 isan example o the coverage patterns or

Los Angeles.

Ultimately, the questions every prac-

tice must answer are whether to contract

with the Healthcare Exchange plans and

what rate to accept and thats i they can

even participate in the given insurance

Exchange Networks. Some insurance

plans have closed networks, meaning

they will not take new providers. For

example, Blue Cross o Caliornia will

not readily contract with a group at a

ier 2 hospital.

When the Exchange plans were first

being rolled out, many o the major insur-

ers were offering significantly discountedrates or Exchange plans. Most practices

declined these offers, preerring to wait to

see how significant the impact would be.

Not surprisingly, as the number o patients

covered through Exchange options has

increased, the major plans are now more

eager to contract with providers, and the

terms they are offering are improving

dramatically. In many cases it is now possi-

ble to get the same rate or an exchange

plan as or the corresponding PPO plan.

Every practice situation is different

though, and contracting decisions should

be made based on solid analysis o reliabldata. Tere are a number o aspects o this

Exchange issue that merit close review

but three are essential:

1. Te number and percentage

o patients covered by each

Exchange plan,

2. Te effective yield per unit, and

3. Te impact o deductibles and

co-payments

Any analysis o the impact o a new

payer option must begin with a careuassessment o the number o patient

covered. Plans with a nominal impact on

the practices cash flow may not merit the

same level o aggressive contracting a

smaller plans. You may also not have the

leverage to significantly affect contrac

rates. raditionally, practice manager

assess the impact in two ways: by

tracking the number o patients treated

each month and by calculating their

percentage. wo examples are shown

in the tables on the next page. Note that


FIGURE 1


14/28


UNDERSTANDINGTHEIMPACTOFINDIVIDUALEXCHANGEPLANSONANESTHESIAPRACTICESContinued from page 13

the impact o Blue Shield patients was ar

more significant than the impact o Blue

Crosss option in able 1. (In the state o

Caliornia Blue Shield and Blue Cross

are competitors, both selling coverage

or physician services.) O particular

significance to the practice in issue is

the act that the increase in Blue Shield

Exchange patients actually represented a

net increase in overall practice volume.

Each practice must assess the

financial, strategic and political

implications o these trends but clearly

the impact is significant. A meaningul

discount in either case could have

a material impact on the practices

collections and cash flow. Tis is why the

next analysis is so important: identiying

the actual average impact as measured interms o effective yield per ASA unit billed

(able 2). Because o the idiosyncrasies

o anesthesia billing most practices will

find it more useul to isolate time-based

units billed and the collected payments

specifically applied to these units; in

other words, charges and payments or

flat ee services (invasive monitoring,

nerve blocks, intubations, etc.) should

be excluded. Many also preer to use

a calculation methodology that only

includes cases that have been paid in ull.

A quick review o the data presented

in these tables reveals a curious

inconsistency. Why is there such a

discrepancy between the Blue Cross

PPO rate and the Blue Cross Exchange

rate? Te answer is simple. Te practice

decided to wait and see what the impact

o the Exchange would be on Blue Cross.

Te result soon became obvious: out-o-

network providers are paid at a much lower

rate, the checks go to the patients and then

the provider must attempt to collect their

usual and customary charge, all o which

can not only result in lower yields but bad

publicity. In the case o the practice shown

here, upon review o the impact o these

actors management recently changed

its approach and decided to enter into a

contractual relationship. Blue Cross has

now agreed to a rate that matches the PPO

rate, which will change the effective yield

shown in able 2 over time.

TABLE 1 Impact of Exchange Patients

P P O E xchange

% of

Exchange

Patients

P P O E xchange

% of

Exchange

Patients

363 25 6.4% 106 21 16.5%

297 16 5.1% 87 39 31.0%

335 17 4.8% 97 36 27.1%

360 11 3.0% 106 36 25.4%

365 14 3.7% 110 65 37.1%

354 19 5.1% 134 51 27.6%

402 17 4.1% 149 57 27.7%

358 29 7.5% 128 79 38.2%

389 18 4.4% 116 68 37.0%

331 21 6.0% 141 73 34.1%

296 14 4.5% 117 73 38.4%

3,850 201 5.0% 1,291 598 31.7%

B lue C ros s B lue S hield

ASA

TABLE 2

Effective Yield Per Unit


15/28

Te other issue highlighted by

this data is the distinction between the

contracted rate and the actual yield

posted. One o the distinct challenges

o medical billing is the mechanics o

payment. Historically, most PPO plans

have ollowed the Medicare model

and pay the provider 80 percent o the

allowable minus the balance due or

the deductible and/or copayment. Any

billing person will be happy to confirmthat it is much easier to get money rom

the insurance than the patient. Tis is a

particular challenge or Exchange plans

where patients may have a significant

responsibility based o the level o the

plan they selected. It should also be

noted that the out-o-network benefits

are drastically less or these Exchange

plans, sometimes non-existent, and as

such the patient ends up having to pay a

larger portion o the bill, ofen times 100

percent o the charge. Ideally, the payment posting process

captures not only the amount o the actual

payment but the allowable, deductible

and co-insurance amounts. Tis data

allows or the ollowing calculations

which involve dividing both the

deductible amount and the co-insurance

responsibility by the allowed. While we

tend to assume that deductibles are a

much bigger issue early in the year, as

able 3 indicates, the impact o deductible

and co-insurance can vary significantly

rom patient to patient and month to

month. Why does this inormation matter?

It affects both contracting strategy and

accounts receivable management. A very

significant patient responsibility may

result in consistently lower yields per

unit even with similar contract rates.

Whether this inormation can be used

to advantage in payer negotiations is

not always clear, but it should always be

considered.

Higher patient responsibility and

the challenge o collecting money rompatients afer the service has been

provided may lead to a discussion o

pre-payments or other strategies designed

to create a higher sense o responsibility

on the part o patients. Some practice

are now starting to experiment with

pre-payment programs, especially in

ambulatory settings.

It is also worth noting that greate

patient responsibility will inevitably

have an impact on accounts receivable

metrics such as days in account

receivable, the percentage o the tota

accounts receivable over 120 days and

bad debt write-off percentages. Tose

who manage and monitor their billing

staff based on such perormance metricmay need to reset expectations i the

impact o these plans is significant. Tere

could also be potential implications in

cases o exclusive service agreement

that involve financial support based on

a disparity between the cost o providing

the care and actual collections.

So based on what we know so a

what can we conclude about the impac

o healthcare Exchange plans? It is prob

ably not as significant as some provid

ers might have eared, but it is still significant. Te point is, though, you won

know the impact unless you examine it

careully monitor the impact o these

individual Exchange plans and monito

the data on a regular basis. Like so many

aspects o anesthesia practice manage

ment, the more you know, the more le

verage and options you have.


Jody Locke, MA

serves as Vice Presidento Pain andAnesthesiaManagement or ABC.Mr. Locke is respon-sible or the scope andocus o services pro-

vided to ABCs largestclients. He is also re-sponsible or oversight and managemento the companys pain management billingteam. He will be a key executive contact orthe group should it enter into a contract orservices with ABC. He can be reached [email protected].

P lan TypeDeductible &

Co-insuranceQ1 Q2 Q3 Q4 (Up to Nov'14)

Ded % 4.7% 2.5% 2.4% 1.6%

Co-Ins % 9.9% 8.4% 7.4% 7.3%

Ded % 30.5% 19.1% 65.0% 87.2%

Co-Ins % 9.6% 3.9% 9.0% 5.8%

Ded % 4.7% 2.5% 1.2% 2.5%

Co-Ins % 9.9% 7.7% 7.6% 6.8%

Ded % 32.8% 7.0% 7.7% 13.5%

Co-Ins % 18.5% 15.6% 10.6% 10.3%

Blue Cross PPO

Blue Cross Exchange

Blue Shield PPO

Blue Shield Exchange

TABLE 3 Impact of Deductible and Co-Insurance

Tere are a variety o methods that may be employed in the calculation o a yield per case. One method divides

date o entry collections or a given period o time by the Date o service units billed. Te problem with this

approach is that there is no correlation between the payments and the units. Another approach relies on a date

o service approach, in which payments are applied back to the date o service they are intended to pay. Tis

approach can yield useul results but must be viewed with a lag o at least three to our months. A third approach

uses date o service data filtered or only paid cases. Tis approach is not a perect solution but can be used to

obtain more current metrics because it compensates or the lag.
mailto:Jody.Locke%40AnesthesiaLLC.com?subject=mailto:Jody.Locke%40AnesthesiaLLC.com?subject=


16/28


DATELI NEPHOENIX

Phoenix. No, not the city in Arizona,

but the mythical bird. Te one that springs

to lie rom the ashes o its predecessor.

Anesthesia groups, like birds, have

a lie cycle. Birth to death. Formation to

ailure.

Te groups ounders hatch the concept

and bring it into existence. Te group

obtains business traction in its inancy and

grows until it reaches maturity.

But, sooner or later and as inevitable

as the sunset, the group begins to decline:

the loss o contractual relationships. Teunastening o the bonds that bind the

group together. Its eventual dissolution

isnt ar off. Te flames o death engul the

group.

But unlike natural birds, many dying

anesthesia groups have within them the

kernel o rebirth. Enter the phoenix.

DEATHAND PRAXIS

In todays anesthesia market, were

seeing two slightly different patternso anesthesia group decline and death:

the ailed site o a national or regional

anesthesia group and the ailed

independent group.

Most see those groups as

unsalvageable. Yet, under the right

conditions, with the right leadership,

both types o groups might be made to

rise rom the ashes.

Consider the ollowing two generic

examples:

Community-Odessa Medical Center

For the past several years, a national

anesthesia group, through a controlled

orty-seven provider subsidiary,

Community-Odessa Anesthesia (Com-

Od), has held the exclusive contract at

Community-Odessa Medical Center, a

402 bed hospital.Marketing materials aside, Com-Od

has never been able to gain traction at the

acility. Its become the poster child or

the Promise-Delivery GapM: It promised

the stars but delivered sand.

Since obtaining the contract,

Com-Od has seen many providers come

and go. Te national parent organization

has changed local leadership, to no avail.

Te hospital has inormed Com-Od

and its national parent organization that

it wont renew its exclusive contract when

it expires in six months.

Localville Hospital

Localville Anesthesia Group (LAG)

a twenty-three physician group, was

ormed in 1987 to obtain the contract a

Localville Hospital. Other than some workat a close by surgeon owned ambulatory

surgery center, LAG is dependent upon

its relationship with the 209 bed hospita

or its business existence.

Although it perormed well or its firs

ew decades, LAG, which has been run in

a club-like ashiona supermajority o

its thirteen shareholders is required or

any actionhas begun altering. It cant

respond quickly enough to the hospitals

demands or changing service lines.

PHOENIXPROJECT:RECONSTRUCTINGALOCALGROUP

FROMTHEASHESOFITSPREDECESSORMark F. Weiss, J.D.

The Mark F. Weiss Law Firm, a Professional Corporation, Dallas, TX


17/28


Teres not sufficient will among

its members to take action. Some are

near retirement and ear change; othersare stuck in the notion that things that

have always worked will continue to

work. As a result, those members block

any action that would disrupt the status

quo, especially those that call or an

expenditure because it would reduce

the amount o dollars available to be

distributed currently.

Te hospital has inormed LAG that

i the group doesnt become responsive to

its needs, it will seek other coverage when

the current contract expires.

Te Default Course

In the deault, or natural, course

o things, both Com-Od and LAG are

headed to anesthesia group heaven, or,

more probably, anesthesia group hell.

In Com-Ods case, its corporate

parent will pull the plug on Com-Od at

the end o the exclusive contract term.

In LAGs case, its highly unlikely,

given the existing structure, that it will

be able to pull up out o the death spiral

that its in, especially because many o the

groups members dont understand their

true position relative to the ground.

In both cases, unless group

members take action, they will soon

either be unemployed, looking or jobs

at some distant location, or working as

commodity level providers or the new

contract holderor how long and at

what compensation no one can know but

ew will likely find attractive.

THEPHOENIXSTRATEGYTM

Te alternative, the Phoenix StrategyM,

is to birth a new group out o the ashes o

the old.

While its absolutely true that in each

o our examples, Com-Od and LAG, the

groups are dying and will soon be dead,

the trick is to first see beyond the rot to

the kernel o business opportunity that

exists within.

In each situation, despite the

problems that have caused the groups

downall, there are significant assets that

can be leveraged into a new group and a

new contract with the hospital.

Leadership

Without someone or some ew

individuals willing to champion the

creation o a new group, a Phoenix group,

rom the remains o the old and then lead

it moving orward, its impossible or any

dying group to rise rom its ashes. Te

deault position is that the dead stay dead.

But its possible or a true leader

or core leadership group to spark the

start o new lie into a Phoenix group.

Although the hospital itsel might oster

those efforts, a topic o a different sorttouched on briefly, below, suffice it to

say that without strong leadership, its

impossible to successully implement the

strategy.

Tat home grown leadership can

be supplemented. You dont have to

go it alone. For example, leaders can,

and should, seek advice rom outside

experts and assistance rom the billing

service that will perorm the new groups

collections.

Labor Force

One clear advantage or those

reconstituting a group is that theres a

partiallabor orce already in place. Partia

because its likely that some o the existing

group members shouldnt make the cut in

connection with the groups rebirth.When an outside group wins an

RFP, there are generally three buckets

into which the acility places the existing

group members: Tose that must be

recruited by the new group, those that can

either stay or go and those that the new

group cant ever engage.

Why make the mistake o doing any

different in creating a new group rom

an old one? Even i the hospital hasn

expressed a preerence, you know who

shouldnt remain at the acility, so why ooyoursel at the cost o your own uture?

Localness

Perhaps the greatest advantage that a

Phoenix group has is that its leaders know

the influencers at the acility and those

influencers know you.

O course, depending on what

triggered the downall o the existing



18/28

group, it may be that that amiliarity is

what bred contempt. Te solution is to

amputate rom membership in the new

group those who caused the contempt,

and to then work hard to rehabilitate the

budding Phoenix groups image.

But localness alone isnt sufficient in

and o itsel. Instead, it has to be nurtured

and leveraged into support or the group

that both counts (the right people and the

right message) and that cannot easily be

reversed or withdrawn.

Funding

Teres no ree lunch: Implementingthe Phoenix Strategy requires an

investment by the moving parties, an

investment in themselves.

Tis isnt a game or amateurs. Quite

unortunately, the unwillingness to invest

in their own uture is what got many

anesthesiologists into the Com-Od and

LAG situations to begin with.

In addition to contributing capital or

equity interests in the new practice entity,

making loans to the entity and borrowing

rom traditional lenders, groups have

other sources o unding, some rom

outside the group and some rom inside.

O course, outside unding includes

stipend support rom the hospital.

And, in connection with inside

financial support, a Phoenix groups

members ofen agree to deer the flow

o compensation rom the group, tying

their compensation to available unds.

For example, methodologies include

an extended lag time between month

o service and month o payment and a

floating compensation unit value.

Sponsorship

In addition to providing financial

support, the hospital is a natural sponsor

or the rebirth o a Phoenix group.

It needs coverage. Its sick and tired

o the existing group. It could turn to

an RFP and attract a national group

(or a replacement national group) or

some other regional player, but an RFP

is increasingly being seen as a ools

choice: in many cases its what created the

problem with the existing group in the

first place.

Tis is especially true in connection

with the rebirth o a group that was once a

part o a large national or regional group

Te hospital has been burned once and is

likely to be more amenable to an active

financial and political role in ostering the

creation o a truly local group that is likely

to be highly responsive to the hospitals

needs.

CONCLUSION

Unlike natural death, the death o an

anesthesia group can be leveraged into

the birth o a new one.

Someone is going to take over the

provision o anesthesia services at the

acility. Will you be offered a job with the

new master? Will you pack up and leave

on your own volition or a job somewhere

else? Or will you attempt to master yourown ate at the acility?

Under the right circumstances

with the right leadership and support

the transgressions o the past can be

surmounted and the advantages o

localness can be leveraged into a new

beginning.


PHOENIXPROJECT: RECONSTRUCTINGALOCALGROUPFROMTHEASHESOFITSPREDECESSORContinued from page 17

Mark F. Weiss is anattorney who special-izes in the business

and legal issues affect-ing physicians andphysician groups ona national basis. Heserved as a clinicalassistant proessor oanesthesiology at USC Keck School o Medi-cine and practices with Te Mark F. WeissLaw Firm, a firm with offices in Dallas, exasand Los Angeles and Santa Barbara, Calior-nia, representing clients across the country.He can be reached by email at [email protected].
mailto:markweiss%40advisorylawgroup.com?subject=mailto:markweiss%40advisorylawgroup.com?subject=mailto:markweiss%40advisorylawgroup.com?subject=mailto:markweiss%40advisorylawgroup.com?subject=


19/28


THENATIONALPRACTITIONERDATA

BANK: WHATYOUNEEDTOKNOWNeda M. Ryan, Esq.

Corporate Compliance Attorney, ABC

Te National Practitioner Data Bank

(NPDB) was established under itle IV

o the Health Care Quality Improvement

Act o 1986 and has been operational

since September o 1990. Te NPDB

impacts both anesthesiologists andcertified registered nurse anesthetists

(CRNAs) as certain entities are required

to report adverse actions taken against

their licenses, clinical privileges and

proessional society memberships. Te

issue o the NPDB most commonly

arises under scenarios involving medical

malpractice claims as, ofen, any and all

payments maderegardless o whether

those payments are made to dispose o a

claim or to satisy a judgmentmust be

reported to the NPDB.

THEDATABANK

According to the NPDB Guidebook,

Te intent o [the NPDB] is to

improve the quality o health care

by encouraging State licensing

boards, hospitals and other health

care entities, and proessional

societies to identiy and discipline

those who engage in unproes-

sional behavior; and to restrictthe ability o incompetent physi-

cians, dentists, and other health

care practitioners to move rom

State to State without disclosure

o discovery o previous medical

malpractice payment and adverse

action history.

Te NPDB allows or reporting

and querying o physicians, dentists

and other healthcare practitioners (e.g.,

nurses). State licensing boards, hospitals,

healthcare entities and proessional soci-

eties must submit reports to the NPDB

o certain adverse actions taken against

physicians and nurses under their juris-diction. Likewise, malpractice insurers

must report payments made to plaintiffs

on behal o all licensed practitioners.

Te NPDB is a tool or hiring entities in

their due diligence process. Te NPDB

repeatedly states that the NPDB is an alert

or flagging system.

REPORTINGTOTHENPDB

Actions reportable to the NPDB

include the ollowing:

Medical Malpractice Payments

Entities, including insurance

companies, making settlement

payments or other payments o a

claim or judgment (in whole or in

part), under an insurance policy,

sel-insurance, or otherwise, or the

benefit o a physician or nurse or

medical malpractice.

Licensure Actions by Boards o

Medical ExaminersEach Board

o Medical Examiners must report

any action based on reasons relat

ing to proessional competence or

proessional conduct (e.g., denia

or withdrawal o an application or

license renewal). State and Federal Licensure Ac

tionsEach state and each edera

licensing and certification agency

must report adverse actions taken as

a result o a ormal proceeding (e.g.

revocation or suspension o license

or certification agreement or con

tract or participation in Medicare

and Medicaid, reprimands, censure

or probation); dismissals or closure

o the ormal proceeding by the li

censee resulting in surrendering thelicenses or certification agreement or

contract or participation in Medi

care and Medicaid, or leaving the

state or jurisdiction; any other los

o license or loss o the certification

agreement or contract or partici

pation in Medicare and Medicaid

or the right to apply or or renew, a

license or certification agreement or

contract o the healthcare provider

and/or any negative action or find

ing by a state authority or edera

agency, organization, or entity re-

garding the physician or nurse.

Peer Review and Private Ac-

creditation ActionsPeer review

organizations and private accredi-

tation entities must report negative

actions or findings taken against a

physician or nurse.



20/28

Actions aken Against Clinical

PrivilegesA healthcare entity

must report (i) proessional review

actions adversely affecting a physi-

cian or nurses clinical privileges that

span longer than thirty (30) days;

(ii) when it accepts the surrender o

clinical privileges or any restriction

o such privileges by a physician or

nurse; or (iii) when a proessional

review action is taken concerning a

physician or nurse. Federal or State Criminal Convic-

tions Related to HealthcareFederal

and state prosecutors must report

criminal convictions against phy-

sicians or nurses related to the

delivery o a healthcare item or

service (regardless o whether an

appeal is pending).

Civil Judgments Related to Health-

careFederal and state attorneys

and health plans must report civiljudgments against healthcare prac-

titioners related to the delivery o

a healthcare item or service (re-

gardless o whether an appeal is

pending).

Exclusions rom State or Federal

Healthcare ProgramsFederal gov-

ernment agencies (e.g., HHS or OIG)

and state law and raud enorcement

agencies must report those who are

excluded rom participating in Fed-

eral or State healthcare programs.

Other Reportable ActionsState

and Federal agencies must report

other adjudicated actions related

to the delivery, payment, or provi-

sion o a healthcare item or service

against physicians or nurses (re-

gardless o whether an appeal is

pending).

Shortly afer the NPDB was in place,

the Office o the Inspector General

(OIG) conducted a study and published

a report, National Practitioner Data

Bank: Malpractice Reporting Require-

ments. One o the purposes o the report

was to ascertain whether a reporting

floor should be imposed upon reports o

malpractice payments. In conducting a

survey o malpractice insurers, the OIG

determined that while imposing a report-

ing floor would encourage settlement o

smaller claims and would significantly

reduce the number o reports orwarded

to the NPDB, potentially meaningul

reports would not be made when cases

are settled or amounts below the floor,

sometimes deliberately to avoid report-

ing. Accordingly, the OIG determined

that the benefits to reporting do not

outweigh the potential drawbacks o

diminished reporting.

QUERYINGTHE NPDB

Hospitals, state licensing boards,other health care acilities, proessional

societies and plaintiffs attorneys all have

authority to query the NPDB under

certain circumstances. Additionally, indi-

viduals may query their own records at

any time. Hospitals are the only entities

that must query the NPDB. Hospitals

must query with respect to those who

apply or a position on the medical staff or

to obtain clinical privileges at the hospi-

tal. Queries must also be made every two

years thereafer. Other healthcare entitie

may query the NPDB when they seek to

have an employment or other affiliation

relationship with an individual. More

over, state licensing boards may query

the NPDB at any time. Plaintiffs attor

neys may only query the NPDB in certain

circumstances, but medical malpractice

payers may not query the NPDB at any

time. NPDB records are not accessible to

the general public and are only released to

authorized persons and entities.

DISPUTINGNPDB INFORMATION

When an adverse action is submit

ted to the NPDB, a copy o the report is

sent to the subject o the report. It can

be extremely difficult or a physician

or a nurse to change a report made to

the NPDB. Although subjects may no

submit changes to the report directly

subjects may request the reporting entity

to file corrections i they believe there to

be inaccuracies. Te NPDB itsel may nomodiy inormation within the report.

At times, the reporting entity wil

amend the report and notiy all the enti-

ties to whom reports have been sent that

the original report has been revised

However, in other instances, the reporting

agency will reuse to amend the origina

report. In such instances, the subject o

the report may escalate the issue through

a ormal dispute process and/or add a

statement to the report.

When an entity reuses to amendthe report, the physician may escalate

the issue to the Secretary o Health and

Human Services (Secretary) who wil

only review the report or actual accuracy

and not the appropriateness o the action

or the merits o the claim. Importantly

according to the NPDB Guidebook, [t]he

dispute process is not an avenue to protes

a payment or to appeal the underlying

reasons o an adverse action affecting

the subjects license, clinical privileges, or


THENATIONALPRACTITIONERDATABANK: WHATYOUNEEDTOKNOWContinued from page 19


21/28

proessional society membership. Neither

the merits o a medical malpractice claim

nor the appropriateness o, or basis or, an

adverse action may be disputed. Formaldisputes may only be beneficial to the

subject, thereore, i the acts reported are

inaccurate. Te subject o the report may,

in addition to escalating the dispute to the

Secretary, submit a statement that will be

permanently attached to the report.

HIRINGANATTORNEY

Anesthesiologists and CRNAs may

find it worthwhile to obtain the assistance

o an attorney when aced with report-

able adverse actions. Some reports to

the NPDB are required and can occur

without proo o an anesthesiologists

or CRNAs wrongdoing. For example,

i a medical malpractice claim is settled

(with no admission o wrongdoing), a

report may be made to the NPDB because

money was paid in connection with a

medical malpractice claim. Moreover,

anesthesiologists and CRNAs may also

find it prudent to hire attorneys to repre-

sent them in licensure or staff privilegeissues to avoid reporting to the NPDB.

I a report must be made to the NPDB

in such instances, the physician or nurse

may utilize the assistance o an attorney

in agreeing to the language that is being

submitted to the NPDB; such a strategy

may assist in averting uture issues asso-

ciated with NPDB queries. Finally, i an

NPDB report has been filed, an anesthesi-

ologist or a CRNA may use the assistance

o an attorney to draf the statement to be

attached to the report.

CONCLUSION

Reports to the NPDB can have a

significant impact on an anesthesiolo-

gists or CRNAs prospective employment.

Anesthesiologists and

Documents

Winter 2015 Communique by Anesthesia Business Consultants