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What is your Cost per anesthetizing

LoCation?By Jody locke

Whether your practice is currently engaged in a hospital contract negotiation or not, it is hard to ignore the daily balancing act of scheduling available staff to best meet administration and surgeon expectations. If your practice is like most, discussions of coverage requests, new venues, and other clinical opportunities consume considerable amounts of time at group meetings. The real question is how you resolve such discussions and what criteria you use to make objective assessments of each request.

Obviously, the challenge lies in the fact that coverage and call determinations are both financial and strategic. The financial part of the equation should be the easiest part, but somehow it is not. It should be easy to determine whether the economics of a venue justify the level of coverage requested, but somehow this is

the hard part. Deciding what is politically in the best interest of the practice invariably determines the outcome. This aspect often seems easier and safer. Such logic can be rather short-sighted and, too often, practices find themselves teetering on the brink of disaster because of decisions that were made months or years earlier.

Just as parents are advised not to permit what they will regret tomorrow,

ABC offers The Communiqué in electronic formatAnesthesia Business Consultants, LLC (ABC) is happy to announce that The Communiqué will be available through a state-of-the-art electronic format as well as the regular printed version. The Communiqué continues to feature articles focusing on the latest hot topics for anesthesiologists, nurse anesthetists, pain management specialists and anesthesia practice administrators. We look forward to providing you with many more years of compliance, coding and practice management news through The Communiqué. Please log on to ABC’s web site at www.anesthesiallc.com and click the link to view the electronic version of The Communiqué online. To be put on the automated email notification list please send your email address to [email protected].

➤ inSide thiS iSSue:

What is your Cost per anesthetizing LoCation? . . . . . . . . 1the 2008 MgMa Cost survey for singLe speCiaLty praCtiCes 2aBC organizes the KiCKoff Meeting of the Waaag . . . . 8anesthesia group (un)governanCe . . . . . . . . . . . . . . . . . . 9suCCeeding at negotiations . . . . . . . . . . . . . . . . . . . . . . . 10CoMpLianCe Corner: oig WorKpLan 2008 . . . . . . . . . . . . . 12or suCCession pLanning . . . . . . . . . . . . . . . . . . . . . . . . . 14event CaLendar . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16

Continued on page 4

the CoMMuniqué spring 2008 page 2

the 2008 MgMa Cost survey for singLe speCiaLty praCtiCes

by Joe ladenBusiness Manager, Anesthesia Associates of Louisville (Ky.)

You are at the negotiation table with your hospital administrator to discuss your subsidy request. You slide your proposal over to the other side of the table. The hospital’s subsidy verification consultant takes your proposal and at the same time pulls a copy of the MGMA Cost Survey

from her briefcase and says, “Let’s see how your numbers compare.” Do you panic, not knowing if the cost survey will support your proposal, or do you smile with confidence because you know your numbers line up favorably with MGMA’s data from similar practices?

If your practice is to be measured against others using the MGMA Cost Survey, it is imperative that you participate in the survey and have your numbers counted. The higher the participation rate, the more useful the survey will be.

piCking the right BattLes I am pleased to share another issue of the ABC Communiqué with you. It is always an interesting challenge to decide which of the many timely and interesting submissions we should include in our anesthesia practice management journal. So many topics seem so important at the time they are identified; it is just not that easy to know which ones will truly impact the future of the specialty. As recent events have clearly highlighted, sometimes the battles we steel ourselves most for, ultimately resolve themselves. Too often it is the seemingly insignificant sideline that consumes our time. Let us hope that the ABC crystal ball is reliable and that we have once again identified topics and opportunities that will be relevant and useful to you in the management of your practice. Consider some of the challenges that have become hot topics at recent anesthesia man-agement meetings. Only a year ago we were all bracing ourselves for another reduction in the Medicare Conversion factor. Despite all the dire predictions, the rate was increased by a larger percentage than I can remember ever having been approved for a single year. More recently, Aetna appeared to be destined to set a prec-edent that would change reimbursement policy for endoscopic anesthesia; a disproportionate amount of time was dedicated to this topic at the ASA Practice Management Conference in Tampa. Once again, wiser heads prevailed and Aetna backed down. PQRI would appear to be next in line as one of those public issues that confuses and confounds our clients. The con-cept is simple enough; provided that CMS and the insurance plans could agree on a set of cri-teria and a mechanism for paying practices for their compliance. My read on this one is that we

are all in a wait and see mode. Meanwhile, an-other drama is playing itself out in HCA board rooms across the country. Having shelled out close to $96 million in anesthesia subsidies last year, the company has gone on the aggressive to control its anesthesia costs. We can only hope this remains a HCA issue, but I hardly think we will be so lucky. There is a reason anesthesia incomes only went up about 1.8% last year as compared to the 10.6% the year before. Hospi-tal administrations nationwide are really push-ing back on anesthesia requests for support and the traditional arguments are just not working so well any more. Each spring the American Society of Anesthesiologists Conference on Practice Management provides us a timely reality check. Program Chair Robert Johnstone, M.D., who assumed the position of ASA’s Vice President for Professional Affairs when Alexander Hannenberg, M.D. was elected First Vice-President last fall, described ten issues that are defining the future of anesthesia practice. These included “healthcare reform resulting from the 2008 congressional and presidential elections, marketplace battles over payer policies, workforce scopes of practice, and the roles of anesthesiologists in perioperative care.” Thriving in this changing environment, according to Dr. Johnstone, will involve “enlarging the perspective of each issue, understanding the drivers of change, and including regulators, legislators, and public citizens in the solutions.” The 2008 ASA Practice Management Conference consisted of more than twenty-five presentations on topics both timely and of enduring interest. The dominant theme was – as it has been for several years, consistent with our

experience – preparing financial information and negotiating with hospitals. Summaries appear in the ASA Newsletter and in the very valuable compendium of abstracts that you may order from ASA. For those of you who are not aware of this annual meeting, let this note serve as an introduction to what has become the most important practice management meeting of the year. The conference, and the abstracts, are a good place to start your own strategic review and planning process. They certainly helped us kick-start ours. Another fundamental management topic, understanding comparative costs per anesthetizing location, is the focus of the lead article in this issue of the Communiqué. We hope that this article and others here will help you to manage your practices more productively and give you a few valuable insights that you could not find anywhere else. Please know that we always welcome comments and feedback on our editorial choices as well as suggestions for future topics. Nothing would please us more than to have a reader contribute his or her assessment of a key issue. It is never easy to pick the right battles, much less to know how to resolve them definitively. If there is one thing I have learned over the years no matter how good our individual judgment it can always be honed with the critical experience of experts.

Sincerely,

Tony Mira, founder and CEO


Your participation in the survey will result in many benefits, including:

• MGMAmembersreceivefreecopiesof survey reports in which their organization participates. The non-member price of the Cost Report is $500, and the price to members who did not participate is $285.

• You will obtain a free customizedranking report benchmarking your practice against its peers.

• YouwillqualifyfordiscountsontheCost Survey Report CD. The in-teractive report CD has additional information and stratification not available on the printed report.

• You may participate in the MGMA “Performance and Practices of Suc-cessful Medical Groups” and receive a free copy of this report. (Non-participating MGMA member cost, $300; non-member cost, $515.) Better performing groups may be highlighted in this publication and receive an award certificate.

The MGMA Cost Survey for Single Specialty Practices can be used to benchmark your practice against other anesthesiology practices nationwide. Some of the practice parameters that can be compared are:

• Charges and collections per provider• Revenue(collections)perASAunit• CRNAcosts• Fringebenefitcosts

• Billingcosts• CostspercaseandperASAunit• Accountsreceivableaginganddays

in A/R• Chargesbypayer• Numberof support staffandcosts

per anesthesiologist• Financial support for operating

costs (hospital subsidy)

For those of you who regularly com-plete the MGMA surveys, you should en-courage your colleagues in anesthesiology to do the same. This applies especially to colleagues who have not completed the survey in the past and who have called you asking for survey information. A high participation level by anes-thesiology groups in the past has allowed the MGMA to produce an anesthesia-specific cost report in conjunction with the MGMA Anesthesia Administration Assembly (AAA). If participation levels remain high, the Cost Survey for Anesthe-sia and Pain Management Practices will be available in 2009. Data from your practice’s billing and accounting systems will be needed to complete the cost survey. Practices that

have outsourced billing, accounting, and management should ask for the assistance of their service provider to complete the survey. A few practice management systems produce special reports tailored to MGMA survey requirements. If there are any questions about completing the survey, the MGMA staff is willing to assist via telephone or email.

The Cost Survey is available in PDF, as well as Excel-based, and online web-based versions. The online web-based version is preferred because of the exten-sive real-time editing features and because your data is input directly to the MGMA resulting in greater accuracy. You can complete the web-based cost survey in multiple sessions and from any location with internet access. Online help is avail-able while you are answering the survey questions. Data from your prior survey is also available online. Since this article was written, the May 2 deadline has passed. If you have completed your questionnaire, you will receive your Cost Survey report by mail. If not, you may order a copy of the report from the MGMA.


What is your Cost per anesthetizing LoCation?

so too, anesthesia practice managers should remember that economics is not a discipline that respects one’s wishes. Unreasonable commitments ultimately come to haunt not only the people who made them, but the practice that has to make good on them. Successful practices have learned that the careful monitoring and management of three distinct phenomena can make all the difference. The first is revenue maximization and a detailed appreciation of all the factors that are responsible for the group’s cashflow, from managed care contracting to revenue cycle management. The second is expense management and a clear set of criteria and benchmarks for determining just how generous the practice can really afford to be to its employees. The third, and most critical, is the arcane science of cost-accounting applied to the even more obscure management of a competitive cost structure. Knowing whether the practice is appropriately staffed and what services it can reasonably be expected to provide may seem complicated; actually it is not. Like so many disciplines, this is just a matter of understanding a few key principles and knowing how to apply them judiciously.

It is the rare anesthesiologist or CRNA who does not know that he or she should be paid for the services performed; unfortunately, too few can actually establish this objectively based on the practice’s payor mix and production levels. A mastery of revenue cycle management necessarily involves an understanding and mastery of accounts receivable performance metrics. Any serious effort to benchmark a practice must begin with a careful review of the factors that create value. No serious negotiation with a hospital can ignore the need for complete and reliable management information such as unit production, payor mix, and

accounts receivable metrics such as Days in AR (DAR) and bad debt percentages.

The same is true of expense management. There is no substitute for regular financial statements and an appreciation of the insidious chasm between provider expectations and the practice’s financial realities. It is curious that so many anesthesia practices eschew the notion of budget and yet, in ignoring the need to establish reasonable levels of income and expense, they leave themselves especially vulnerable to the vagaries of the market. Intuitively, all anesthesia providers know that one cannot manage what one does not measure, but somehow the application of this important business concept gets lost in the management of the practice as a whole.

It is not enough, though, to have a clear understanding of the revenue cycle, nor is it enough to manage expenses aggressively; these are relative management tools and can be very misleading without an objective

reconciliation to market realities. In the atomistic world of anesthesia this can be especially intimidating. Every practice wants to believe that its situation is unique and that compensation should be commensurate with the specific services provided in the local market. While there is always some element of truth to this view, its relevance is much less significant than most are willing to admit.

Today’s successful practices understand and appreciate the concept of normalized productivity metrics. Consider the problem. Two practices provide similar coverage. One relies exclusively on physicians and the other on a leveraged care team model. Since their cost structures are so different, how does one determine what is reasonable, especially when it comes to asking for financial support from a hospital? When faced with such a problem, a growing number of consultants are now turning to a simple calculation that yields the net cost per anesthetizing location.

Continued from page 1

TABle 1

Understanding this notion requires a disciplined view of the practice. For purposes of this discussion an anesthetizing location is defined as an actual or virtual location that requires dedicated anesthesia staffing for part or all of a 24 hour period. This will include operating rooms, delivery suites, and dedicated coverage for non-OR anesthesia (NORA). Consider Table 1 on page 4, which represents the coverage requirements of a hypothetical practice. You will note that coverage is simply defined as the number of locations that must be staffed each day of the week. For purposes of highlighting the methodology, we have used an example in which the number of rooms varies by day of the week. Some will argue that one must also consider how long each room will run and how many hours of coverage are necessary for each location. This can be a relevant enhancement to the model, but it may also complicate the analysis needlessly, especially when the objective

is to use this information for an objective and meaningful comparison to other practices.

Applying this coverage map to our analysis requires multiplying each of the coverage tallies by the number of days associated with that day. In other words if there are four non-holiday Mondays in January then the total Monday coverage days equals 48 (12 * 4). Table 2 above provides a summary tally of the total location days the practice must cover in 2008, a leap year. While it is useful to know how to perform this calculation, the key to the analysis is to know the total (3,280 Hospital Location Days) for it is this number that ultimately drives all subsequent cost calculations and benchmark comparisons.

Based on the determination of total annual anesthetizing locations, it is possible to calculate both the revenue metric and the cost metric, and ultimately to work through various scenarios to balance the two.

The objective of the revenue metric calculations is the establishment of the revenue per location day. This number is relatively easy to identify when one looks back in time, because actual net collections can be divided by actual coverage tallies. Doing the calculation prospectively can be a little trickier because it will require a reasonable estimate of expected collections levels. This subtle challenge notwithstanding, let us suppose that we agree the practice will collect $5,000,000 after refunds. The result would be a revenue per location day of $1,692.00, which according to the 2007 MGMA Cost survey, is close to the average cost per location day of those practices that contributed.

By most staffing models, this level of coverage would require at least 15 FTE (Full-time Equivalent) anesthesiologists in an MD only practice. Obviously, actual staffing will vary based on a variety of factors, but this is intended as a representative example for purposes of establishing a point of comparison for one staffing model versus another. Based on this assumption, the cost per location day is considerably higher than the revenue, which is an all too common phenomenon across the country and the reason why so many practices must seek financial support to maintain coverage levels.


Continued on page 6

Revenue per location Day Calculation

Annual Case Volume 12,000ASA Unit Production 150,000Yield per ASA Unit $37.00

Expected Revenue $5,550,000Annual Location Days 3,280Actual Revenue/Location Day $1,692

TABle 2

TABle 3

Many an anesthesia practice will get this far in their calculation of the need for financial support and think they are ready to present their subsidy request to administration. Nothing could be more perilous. Establishing the level of support to be requested is only the first step. The calculations presented thus far only speak to the economics of coverage as viewed from the anesthesia perspective. Failure to assess the potential request from the hospital’s perspective is sure to have serious tactical, not to mention, financial repercussions.

Hospital administrators have two perspectives when it comes to hospital-based physicians. They always start by asking what the current terms of the contract are and why they need to change. If the discussion survives a logical review of market factors and new coverage requests, then it moves to the second big question: why can’t the group accommodate the hospital’s requirements by modifying the way it provides the services? Administrators have come to believe in the notion of care-extenders, and often push back on the practice to “simply hire more CRNAs.” It has become almost a matter of course that hospital administrators will ask for an analysis of a more leveraged care team model. If the group does not do its homework and

prepare the necessary analysis prior to the first meeting, the results are sure to be disappointing for all parties involved.

The fact is that well-managed practices should be performing the following assessments on a periodic basis. Think of mastering these financial tools as practicing for the big game. The more comfortable one gets with the basic concepts, the more reliable the analysis will be and the more adeptly it can be applied to a variety of practice scenarios, from simple coverage decisions to hospital negotiations.

In the example in Table 5, a total annual cost per CRNA of $175,000 is used. This is actually somewhat below market, and is used here simply to highlight the argument and beliefs of

hospital administrators, that it is the cost of the physicians that is creating the need for the subsidy. Two points of comparison are provided according to an assessment of reasonably equivalent staffing ratios based on a determination of FTE providers per 10,000 units billed. Option A simply highlights the financial impact of a nominal change in staffing model, while option B demonstrates the potential impact of a wholesale shift in the model. The savings of such a restructuring are significant. Of course, such an analysis fails to address the implications of actually executing such a transformation, not to mention the challenge of hiring so many new providers.

Why is it becoming ever harder for anesthesia practices to negotiate the levels

Staffing Cost Caculation


What is your Cost per anesthetizing LoCation?Continued from page 5

Days of coverage 3,280Days worked 226FTE Anesthesiologists 15

Total cost at $420,000per physician per year $6,300,000Annual Location Days 3,280Actual Cost/Location Day $1,921

Option A: Nominal leverage using CRNAs # Comp & Benefits Total CostNumber of Physicians 14 $420,000 $5,800,000Number of CRNAs 2 $175,000 $350,000Total Team Cost $6,230,000Location Days 3,280 $1,899.39

Option B: Significant leverage using CRNAs # Comp & Benefits Total CostNumber of Physicians 7 $420,000 $2,940,000Number of CRNAs 14 $175,000 $2,450,000Total Team Cost $5,390,000Location Days 3,280 $1,643.29

TABle 4

Current Model: Physician only # Comp & Benefits Total CostNumber of Physicians 15 $420,000 $6,300,000Number of CRNAs 0 $175,000 $0Total Team Cost $6,300,000Location Days 3,280 $1,920.73

TABle 5


of stipend that many were obtaining so consistently even a couple of years ago? The answer has to do with three words that should be a source of great concern to anesthesia practice administrators: fair market value. This is not a consideration when a hospital employs the CRNAs. Hospitals can pay their own employees whatever they want to. They are also free to hire as many individual providers as their budgets permit.

The minute the cost of anesthesia services involves a payment to another entity, however, there is an entirely different set of guidelines and limitations. Fair Market Value (FMV) assessments are essential to compliance with Stark, antikickback, and in some cases even the antitrust laws. Administrators and their legal counsel talk about such determinations as if they represented an objective science. The reality is much closer to the appraisal of a house where the outcome is always influenced significantly by the agent performing the analysis. Anesthesia practices should understand that FMV is the hospital’s ultimate refuge and protection from the anesthesia subsidy request.

This is exactly why the notion of anes-thetizing location is so critical to the future of today’s anesthesia practices. Hospital sti-pends fall into three main categories: those based on a negotiated annual amount, those based on staffing requirements, and those based on coverage requirements. There is a variation on the second that will involve the identification of loss leader services such as cardiac or OB anesthesia. When it comes to negotiating leverage, the real opportunity for the typical prac-tice lies with arrangements that provide an alignment of incentives between the hospital’s desire to maximize availability for surgeons to book cases and the cost of providing the necessary anesthesia provid-

ers to get the work done. This is where the location rate card can be played so effec-tively. Doing so, however, requires care-ful planning and preparation. As with the acquisition of many new skills and tech-niques, the first few times you use them you immediately come to understand how you could have used them differently and more effectively.

An understanding and appreciation of the value of anesthetizing location may not solve all the financial challenges of an anesthesia practice. In fact, it may reveal challenges and issues that practice had never even considered. What the use of such calculations does provide, however, is a form of communication that puts

anesthesia practices more on a level playing field with hospital administrations, a form of common currency that allows for more effective discussion of the real challenges facing both the anesthesia practice and the hospital. If used logically and as an educational tool, such an approach will definitely change the tenor and tone of the discussion between the group and its hospital. This is not a panacea, but a tool that must be used carefully and with discipline. As anyone who has used the tool can attest, though, it is probably one of the most useful and innovative tools today’s anesthesia practices has. Whatever your situation it is hard to ignore the potential of such an opportunity.


the Washington area anesthesioLogy adMinistrators group:

aBC organizes the kiCkoff Meeting of the WaaagBy Karin Bierstein, Jd, mph

Who are some of the people most likely to have solutions to problems such as an unintelligible new payer directive or the spread of rumors among local an-esthesiologists that Medicare is going to stop paying for procedures performed in the outpatient setting? Officers and man-agers of other groups who have already addressed an issue that has just surfaced in their geographic area are often an ex-cellent resource.

Recognizing the value of a local network to foster the exchange of information (but not potentially anti-competitive information such as fees!) among anesthesiology group leaders, ABC brought together twenty physicians and administrators for a half-day meeting in a Washington, D.C. hotel on April 1, 2008. Our model for this venture was the Tristate Anesthesia Administrators Group or “TAAG” that has been convening rep-resentatives of practices in Pennsylvania, New Jersey, Maryland, and more recently Delaware for a number of years. Stephen Comess, a recent TAAG past president, joined us to explain the achievements and operations of that group.

Our guests included not just ABC cli-ents, but also others who responded to an open invitation posted on the listserv of the Medical Group Management Associa-tion’s Anesthesia Administration Assembly (MGMA AAA). The first speaker at the WAAAG meeting was the attorney whose expertise in anesthesia issues is second to none: Judith Jurin Semo, Esq., who prac-tices in the Washington area – and across the country. Ms. Semo provided a fresh perspective on “When the Hospital No Longer Wants to Pay: Contract Nego-

tiations.” If you feel that your hospital is demanding far more than it ever did in the past, you are not alone.

A second attorney, Catherine D. Ber-tram, Esq. (the WAAAG meeting took place in Washington, D.C., where some say that every 20th person on the street is a lawyer) spoke next. Ms. Bertram is a trial lawyer and former hospital risk management counsel who demonstrated many of the skills with which she keeps the attention of juries as she explained what anesthesiologists should do to make sure that they never meet her across the table at a deposition, let alone in the courtroom. Note: participants raised the question whether anesthesiologists should personally discuss the risks of anesthesia and personally obtain the pa-tient’s informed consent. This is an issue that continues to arouse debate in the specialty; Ms. Bertram, however, was as unequivocal as every other lawyer you have heard on the vulnerability of the an-esthesiologist who delegates this function to a non-physician.

We were fortunate enough to have a third speaker, Richard Rauh, Executive Director of Southeast Anesthesiology Consultants, P.A. and Southeast Pain Man-

agement, PLLC in Charlotte, NC. Mr. Rauh described the many components of the highly successful pain practice he has helped his group build.

ABC’s major objective was met when Denise A. Lascar, RN, MBA, MHA, President of the Center for Ambulatory Surgery, Inc. in Washington, DC, an ABC client and an active member of the AAA, volunteered to become the first president of the WAAAG and to organize its second meeting. It was most satisfying to the ABC staff who organized the kickoff to see the enthusiasm of the participants for an ongoing local best-practices forum.

Readers who would like to make sure that they are on the WAAAG mailing list should send their contact information via email to [email protected].

Readers in “the other Washington” who would like to attend a similar event should note that ABC and AAI

1 are

planning to convene the first meeting of the SWAAG (State of Washington Anesthesia Administrators Group) in Seattle on June 4, 2008. If you are interested in attending, please send an email, including your contact information, to [email protected].

ABC CEO Tony Mira is a strong be-liever in the value to our clients, and to others, of regional networking. Plans are in the works for us to help launch local interest groups in Michigan, Wisconsin and North Carolina. We encourage po-tential speakers and other participants to contact us.

1Anesthesia Business Consultants, LLC (ABC) and Anesthesiologists Associated, Inc. (AAI) announced January 23rd the completion of a business combination.

Continued on page 11

anesthesia group (un)governanCeBy mark F. Weiss, J.d.


Democracy is fine for government; it just doesn’t work for anesthesia groups of more than a few members, at least not on any level past the election of a leader.

You may have heard the expression, “money likes speed,” the notion being that you have to move quickly to take ad-vantage of a profitable opportunity. The fact is that success in business, in general, requires the ability to quickly analyze a situation and come to a decision.

Anesthesia groups face many chal-lenges in the marketplace. Many of those challenges are external, such as the de-crepit level of payment from Medicare and the overall commoditization of the profession. It’s simply stupid to further hinder your group’s business by making it difficult or even impossible to make busi-ness decisions on a timely basis. Yet this is what many groups do through their pro-cesses of participatory decision making.

Following a speech at a national con-ference, an anesthesiologist approached me. He told me that his group faced major challenges in terms of competition,

which resulted in lowered per-physician income. However, the group’s board had been unable, for over a year, to come to a decision about what to do. The point had come that some members were threaten-ing to leave for what they perceived as better opportunities.

I asked him how many anesthesi-ologists there were in the group, and he responded, “Thirty-six.” I then asked how many of the thirty-six were shareholders, and he responded, “Thirty-six.” Finally, I asked how many sat on the board of di-rectors, and he responded, “Thirty-six.”

Is there any wonder why they couldn’t come to a decision? Can you imagine how long a board meeting must last?

The unfortunate fact is that this poor group is by no means an anomaly. I don’t mean to profess that I’ve conducted a scientific study, but over the course of decades, I’ve come across far too many anesthesia groups that have painted themselves into a corner in terms of being able to make decisions because they allow far too many to participate in the decision making process.

Perhaps this results from the collegial nature of most physicians. I often hear from clients that everyone on the “team” is equal because everyone is an anesthesi-ologist. That philosophy doesn’t work for baseball teams – and it doesn’t work for anesthesia groups, either.

I recently concluded the negotiation of a two-year exclusive contract relation-ship in which the hospital is paying my client group a significant seven figure annual stipend. Just prior to the date set for signing, the hospital offered to increase the term of the contract by an additional year. My client’s response was that it would require a shareholder vote and, due to vacations, a quorum would not be available until sometime at the end of the following month. The hospital did not want to wait.

There’s no way to know for two years whether this group’s default position will result in a better or worse future for the group. What is certain is that its structure left it unable to exercise any leadership in attempting to determine its own future. Even a hastily made decision is better than simply permitting a third party to make a decision based on its best interests.

Whether your group is organized as a corporation or as a partnership, it is es-sential that you adopt a corporate-style structure for decision making. This in-


suCCeeding at negotiations through preparatory Work

and psyChoLogiCaL operationsBy mark F. Weiss, J.d.

Advisory Law Group, A Professional CorporationLos Angeles, CA •Santa Barbara, CA

Popular books on negotiation are nearly useless in respect of negotiating an exclusive anesthesia contract. They con-fuse negotiation with bargaining, focus on transactions and not on relationships, and, perhaps worst of all, they portray negotiation as a series of back and forth proposals and counterproposals.

True negotiation in respect of an ex-clusive contract is an extensive process that is wedded to, and cannot be sepa-rated from, a larger strategic vision and a wide set of tactical tools. I refer to this process as the Exclusive Contracting ContinuumTM.

Negotiation does not involve a time line, although timing is very important. The time to “start” negotiations on an ex-clusive contract is not when the RFP hits your desk, it’s not when the CEO delivers a draft of the proposed document, and it’s not some magic three, or even six, months prior to the end of your current contract’s term. Rather, the time to being negoti-ating is . . . well, in the paradigm I urge you adopt, it’s actually already begun. My clients understand that the day to “begin” negotiating their next exclusive contract is the day they execute their present ex-clusive contract.

As opposed to a timeline paradigm, the Exclusive Contracting Continuum is diagrammed in simple form as a recur-ring cycle of subprocesses; more fully, it’s diagrammed in the form of an atom,

with each of the subprocesses revolving around the nucleus.

Although there is a certain order to the commencement of some of the el-ements in the initial adoption of the Continuum, once begun, they operate continuously. Among the many elements of the Exclusive Contracting Continuum are the following subprocesses:

If a group’s members’ interests aren’t aligned with the group, all of its other ef-forts expended in the Continuum process may be for naught. The Group Align-mentTM subprocess involves an analysis, and potential realignment, of the group’s personnel and of incentives and restric-tions, both monetary and non-monetary.

Deal points, which are developed through a specific subprocess, do not exist in a vacuum – they exist within a framework. Without intervention, the framework is destined to be that of the hospital. Accordingly, we must devote significant efforts to framing the issues in a group-favorable manner well in

advance; many of the elements of the Continuum provide the tools to dissemi-nate the message.

The subprocess known as The KnowledgeTM is an intelligence gathering operation. It’s aimed at gathering as much in-depth information on the facility you are targeting and on the individuals who are in a position to influence the facility’s decision. This process is also deployed toward potential competitors.

The ultimate purposes of The Knowl-edge process are to influence the behavior of third parties in favor of the group, and to alter their perceptions of it. This is accomplished though a series force multi-pliers known militarily as “psychological operations.” These include profiling, with the goal of deducing how the subject will think, behave, and act in similar circum-

the Knowledge™

disinformation

data Spin™

Shadowing theinfluencers™

Focus onthe Future™

thegroupAlignment™

Coding Corner


stances. The results of profiling are used as a guide for tactics deployed against the profiled individuals. They are also used in deploying created circumstances, both real and verisimilitudinous, likely to drive the subject’s behavior in the manner most favorable to achieving our goals. Finally, profiling results are valuable in planning situations in which the predicted behav-ior itself can be used to create a pitfall.

The subprocess of developing com-munity awareness uses the results of The Knowledge to accomplish two objectives: The first is to create direct benefit from their performance – in other words, to do good while you are doing well. The second is to manufacture situations that can be publi-

cized in order to sway broader opinion. In order to publicize the group’s ac-

tivities, there is a coordinated Publicity PushTM. Putting the Publicity Push into context, participation in events that de-velop community awareness brings a limited, but highly focused, community consciousness. The purpose of the Pub-licity Push is to leverage off of the group’s community and other activities to include a larger audience, one that will directly or indirectly be of benefit to the group.

Just as the creation of community awareness and the related Publicity Push seek to transmit truthful, yet spun, in-formation that is attuned to its intended audience as a result of profiling, a simi-

lar process using disinformation can be employed. “Disinformation” in this context is misinformation that is delib-erately disseminated in order to influence or confuse.

As briefly outlined above, negotiation is a continual process, not a 1-2-3 series of steps arranged upon a timeline. Proper preparation for the “face to face” stage of negotiation requires a long term commit-ment to developing information and to employing it. This effort is best viewed as a series of interlocking processes de-signed to maximize your outcome. The processes I present today are among the many processes that comprise the com-plete Contracting Continuum.

volves a basic level of democracy in terms of electing a board, which in turn elects a leader. Small groups may dispense with the notion of a board.

Simply adopting a corporate-style structure for decision making is not enough. In order to be effective in terms of business decision making, the rules pertaining to power sharing among the levels must err on the side of allocating too much power upward in the chain.

At the basic level of shareholder or partner, group members should be en-titled to vote for board members and on those major events that state law reserves to equity owners, such as dissolution of the group. The fewer other voting rights, the better.

If the group has a board, its purpose should be limited to major policy deci-sion making and to electing the president or managing partner. The board should not be empowered to make day to day business decisions or to override the de-cisions of the group’s leader.

That leaves the group’s leader free to make decisions.

Understand that this is not meant to belittle the “we’re all doctors” mentality. Of course you are. You are all human beings, too. It’s just that you all can’t be leaders or there will be no leadership. Sorry, it’s tough love.

ABOUT MARK F. WEISS

Mark F. Weiss is a nationally recog-nized expert, and a frequent author and speaker, on the business and legal issues affecting anesthesiolo-gists and anesthesia groups. Mr. Weiss holds an appointment as Clinical Assistant Professor of An-esthesiology at USC’s Keck School of Medicine, where he developed and teaches a lecture series course on the business and legal issues affecting anesthesiologists. He practices law with Advisory Law Group, A Professional Corpora-tion, with offices in Los Angeles and Santa Barbara, California.

anesthesia group (un)governanCeContinued from page 9

(Reprinted with permission)

Medicare Now Values CPT® Code 00797 at the Correct

Level – 11 Base Units

When the 2008 Medicare Fee Schedule first appeared, the American Society of Anes-thesiologists (ASA) contacted the Center for Medicare and Medicaid Services (CMS) to report an error posted on the CMS website. The error incorrectly listed the base units for CPT Code 00797, Anesthesia for intraperito-neal procedures in upper abdomen including laparoscopy gastric restrictive procedure for morbid obesity. The correct base unit value, 11 units, is now listed on the CMS website at hhtp://www.cms.hhs.gov/center/anesth.asp.

ASA was informed by CMS that Medi-care carriers received the correct base unit information printed in the HCPCS file in late 2007. Until recently Medicare therefore pro-cessed all 2008 claims for 00797 at the 11 base unit value rather than the incorrect posting of 8 base units. ASA noted that some private payers may have used the incorrectly-posted base unit value from the CMS website.

On behalf of our clients, we have re-viewed the CPT code 00797 payments paid to our clients and we will contact any third party payers to ensure proper reimbursement. For others, we highly recommend sharing the corrected web posting with your third party payers so you may be reimbursed properly.


oig WorkpLan 2008: interventionaL pain proCedures

inCLudedAbby pendleton, esq.

Jessica l. gustafson, esq.Wachler & Associates, P.C.


On October 1, 2007, the Department of Health and Human Services (HHS) Office of Inspector General (OIG) issued its 2008 annual Work Plan, which out-lined the key focus areas and projects the OIG intends to pursue during the 2008 fiscal year (FY 2008). The OIG Work Plan is available in its entirety from the OIG website. 1

Approximately 80 percent of the OIG’s resources are devoted to projects within the Medicare and Medicaid programs. These projects include audits, evalua-tions, investigations, and legal activities. Although the 2008 Work Plan outlines the OIG’s intended areas of activity for the fiscal year ahead, the OIG also has noted that work planning is a dynamic process that continues after the publication of its annual Work Plan. Thus, after analyz-ing current events and emerging issues as they arise, the OIG may add new activities or cancel or delay planned activities, as it deems appropriate.

Of particular importance to the pain management community, the OIG an-nounced that one of its planned focus areas for 2008 would be “Medicare Payments for Interventional Pain Management Proce-dures”. The OIG also included “Medicare “Incident to” Services” as a planned focus area. Given this information, pain man-agement physicians should be prepared to face increased scrutiny with regard to bill-ing and documentation practices.

Specifically with respect to pain man-agement, the OIG has stated its intentions to do the following in FY 2008:

We will review Medicare payments for interventional pain management procedures. Section 1862(a)(1)(A) of the Social Security Act provides that Medicare will pay for services only if they are medically necessary. Interventional pain management procedures consist of minimally in-vasive procedures, such as needle placement of drugs in targeted areas,

ablation of targeted nerves, and some surgical techniques. Many clini-cians believe that these procedures are useful in diagnosing and treat-ing chronic, localized pain that does not respond well to other treatments. Interventional pain management is a relatively new and growing medi-cal specialty. In 2005, Medicare paid nearly $2 billion for these procedures. We will determine the appropri-ateness of Medicare payments for interventional pain management procedures and assess the oversight of these procedures.

The OIG also stated its intention to review the medical necessity, documen-tation, and quality of care for “incident to” services. In general, the Medicare “incident to” rules allow claims by non-physicians to be submitted under the physician’s provider number if certain specified requirements are met. Nota-

As part of our desire to keep both clients and readers up to date, the Communiqué has been printing compliance information since its inception. In the Compliance Corner, we will now formally keep you abreast of the various compliance issues and/or pick out a topic that would be of interest to most of our readers.


bly, the claim will be paid at 100 percent of the Medicare physician fee schedule even though the services were in fact furnished by auxiliary personnel. In gen-eral, in order to bill such services, they have to meet particular requirements. For example, services may be covered as “incident to” services if they are: (1) fur-nished in a non-institutional setting (e.g., a physician’s office) to non-institutional patients; (2) an integral, though inciden-tal, part of the service of a physician in the course of diagnosis or treatment of an injury or illness; (3) commonly furnished without charge or included in the bill of a physician; (4) of a type that are com-monly furnished in the office or clinic of a physician; (5) furnished under the direct supervision of the physician (i.e., in the office suite); and (6) furnished by person-nel who are employed or contracted by the physician (i.e., the physician/group must pay the cost of the individual). Physical therapy services also have addi-tional requirements/limitations relative to the types of individuals who may per-form the physical therapy services.

Given the OIG’s pronouncement regarding its intention to review inter-

ventional pain procedures and “incident to services” (which are common in some pain practices), pain physicians are well advised to continue and pursue proac-tive compliance measures. There are a number of action steps that a physician can undertake to become more informed and to reduce compliance exposure in these areas including, but not limited to:

1. Obtain, review, and follow, if appli-cable, the local Medicare Carrier’s policy or policies on pain proce-dures. These policies often contain critical information regarding documentation and medical ne-cessity requirements. Physicians are responsible under the law for knowing the information in these policies.

2. Obtain, review, and follow policies issued by third party payors ad-dressing these services. Physicians must remember that compliance is not specific to Medicare and Medicaid (i.e., failure to follow the rules of other payors can also lead to exposure under various state and federal laws).

3. Obtain and review the Medicare incident to requirements to ensure compliance. For example, physi-cians must be aware and comply with the on-site supervision re-quirement. Some physicians mistakenly believe that complying with less stringent public health code supervision requirements is sufficient for billing purposes. This simple mistake can create false claims exposure for a physician.

4. Establish internal documentation criteria for all members of the group to follow with regard to ser-vices and procedures.

5. Educate all members of the group as to the importance of documen-tation and other requirements including medical necessity.

BIOGRAPHIES

Abby Pendleton is a partner and Jes-sica Gustafson is an associate with the healthcare law firm of Wachler & Associates, P.C. The firm represents healthcare entities and providers with their healthcare legal needs. Ms. Pendleton and Ms. Gustafson special-ize in a number of areas, including but not limited to: Medicare and other third party payor audit defense and appeals; compliance; transac-tional and corporate matters; fraud and abuse analysis; reimbursement and contracting matters; licensure, staff privilege and third party payor de-participation matters; healthcare fraud defense; and HIPAA privacy and security compliance.

1OIG Work Plan, Fiscal Year 2008, available at http://www.oig.hhs.gov/publications/docs/workplan/2008/Work_Plan_FY_2008.pdf (last accessed February 24, 2008.


or suCCession pLanning, Change ManageMent, and Leadership

deveLopMentBy Jerry ippolito

President OR Efficiencies, LLC – Naples, FL

Last night’s party was great! I can’t think of when we all had such a wonderful time to-gether. The OR staff, surgeons, anesthe-siologists, residents and even adminis-tration were in full

attendance. All of the day’s issues were put aside as we celebrated Mary’s retire-ment. Where have all of these years gone? Mary had been our medical center’s Di-rector of Surgical Services for nearly three decades – she was here when I was a med student and bailed me out so many times during my anesthesia residency. She was tough but well respected for her ability to keep our fifteen rooms running like a well tuned race-car. However this morning the dreaded hangover set in – no, not the one from the extra martini; the one of the reality that the Director’s office is dark. We’ve heard nothing regarding Mary’s re-placement and the Chief Nursing Officer told me that there are no qualified candi-dates with interest in our community. The most qualified candidate turned down the opportunity because the spouse wouldn’t be able to find appropriate employment. Several staffing agencies have been ap-proached but qualified interim managers are not available for at least three months. One of the CNO’s thoughts is to use this void of leadership as an opportunity to bring in a consultant to assess whether we are doing things as best possible – that’s not a bad idea, but who is going to run the

OR on a daily basis? I told the CEO that as Chief of Anesthesiology I’d step up to the plate and do whatever I can – he rec-ognizes that it won’t be easy for me as the Chief of Surgery is a talented surgeon but an ineffective leader of his peers. I really don’t want to run the OR; I prefer teach-ing the anesthesia residents. What has happened here? Mary’s been planning this retirement for eighteen months and here we are – an ocean liner at full steam ahead and there’s no captain on board. Man the life-boats !!

The above scenario is not as melodra-matic as it seems and does not represent any one hospital. Although what I’ve presented in this scenario is fiction, it is happening in real time, every day, at many hospitals across the nation. A severe short-age of perioperative services leadership is increasingly evident in the nation’s surgi-cal programs. According to the American Association of Operating Room Nurses (AORN), the average age of the OR nurse is in excess of 42 years and increasing. Typically even the most accomplished of individuals require at least ten to fifteen years experience as a Director of Surgical Services to be optimally effective in pro-grams with high case volumes; even more experience is required in highly political environments. Accomplished surgery leaders have been vacating the field for re-tirement or career opportunities in other realms of health care or industry in gen-eral. The critical shortage of incoming nurses, coupled with the lack of focused identification of leadership potential, skill development, and mentoring, has created

a serious shortage of surgery program leaders. While this void of leadership is most felt among directors of surgical ser-vices, it is not exclusively limited to that population. A void of effective leadership is frequently experienced among a hospi-tal’s medical staff (e.g. Chief of Surgery; Chief of Anesthesiology, etc.)

Directors of Surgical Services typi-cally rise through the staff ranks as talented OR nurses. Medical staff chiefs of service are typically individuals who are recognized as excellent physicians;

Jerry ippolito


or well liked among peers; or recognized by peers as not wanting to “rock-their-boat”. Individuals with superior clinical skills, whether nurse or physician, are too frequently presumed to possess a similar ability to perform as managers despite lack of any planning and preparation for these new responsibilities.

The challenges of today’s complex surgical services programs dictate the need for uninterrupted and proactive management to:

• Providedynamic,stableleadershipacross all components of periop-erative services;

• Facilitate day-to-day communica-tion among key stakeholders;

• Identify opportunities to imple-ment new programs and improved processes enhancing patient care, optimizing physician productivity, and promoting staff retention;

• Assure programs’ marketability tostaff, surgeons, anesthesiologists and anesthetists;

• Maintain programs’ financialviability.

Author John Maxwell writes that an organization can only grow as far as the leadership potential of its top leaders. To keep ahead of the competition, com-panies / hospitals / medical groups must continually make changes. Healthcare executives want their hospitals and surgi-cal programs to rise to the next level, and to do so the administrative team, pro-gram directors, and physician leadership (surgical and anesthesiology department chairs) must be capable of supporting and sustaining necessary change. A hos-pital CEO (or even anesthesiology group practice president) may have the vision of where they want their organization to go, but that does not necessarily mean the leadership team possesses the skills to lead the organization along the path to success. Consultants can be engaged

to identify opportunities for making pro-gram change and assist in implementing successful change. However, if a hospi-tal’s leadership team is not capable of sustaining change, then programs will regress after the consultant leaves, regard-less of the capabilities and successes of the consultant. While the consultant is guid-ing change, implementation projects are generally filled with staff and physician energy and excitement. Unfortunately, without an effective leadership team to maintain program focus and determine priorities, it does not take long for ef-fectively implemented change to become derailed by higher priorities or a lack of acceptance from others after the consul-tant departs. The cost of changes that fail (or then the regression of success) goes far beyond financial cost or foregone rev-enue. When changes fail and programs regress in organizations, employees and physicians begin to lose trust in the lead-ership of the organization. They become frustrated, cynical, and begin to give up. Employees and physicians often turn into chronic complainers, making future change efforts even less likely to succeed.

Most hospitals have medical staff de-velopment plans that are built on practice succession planning to assure continu-ity of medical staff services based at the hospital. Too frequently the need for managerial succession planning (par-ticularly within perioperative services) goes unrecognized. There is a need for proactive identification of individuals from within the ranks (nursing; medical staff; management; etc) who can be men-tored to develop their skills in inspiring excellence in themselves, their peers, staff, and their organizations (in addition to the traditional organizational and finan-cial skills). Leaders need to be developed to support healthier organizations that produce higher levels of results. Leaders must be developed to act more like coach-es within organizations. Performance and morale improves remarkably when

leaders possess the ability to motivate and inspire employees and peers just like some of the great sports coaches. When an or-ganizational culture is established and an atmosphere is developed where individu-als are encouraged and nurtured to thrive the following typically results:

• Improvedrecruitmentandreten-tion of highly skilled staff;

• Continuity of effective management;

• Improvedworkprocessesandre-duced problems;

• Improved relationships with em-ployees, bosses, and peers;

• Development of concrete strate-gies to achieve their goals;

• Abilitytodelegatetasksandspendmore time managing people;

• Asenseofenergyandpassionforwhat people do;

• ImprovedORproductivity;• Improvedcasestarttimes;• Decreasedturnaroundtimes;• Decreasedtotalcasetimes;• Andlastbutnotleast– IMPROVED OR EFFICIENCIES!!

professionaL events

date event LoCation ContaCt info

Apr. 30-May 4, 2008 Society of Obstetric Anesthesia and Perinatology Annual Meeting

Renaissance Chicago Hotel, Chicago, IL

www.soap.org

May 1-4, 2008 Society for Ambulatory Anesthesia Annual Meeting

Loews Miami Beach Hotel,Miami Beach, FL

www.sambahq.org

May 15-18, 2008 Association of University Anesthesiologists 55th Annual Meeting

Washington Duke Inn & Golf Club, Durham, NC

www.auahq.org/annualmtg.html

May 17-18, 2008 MGMA Pain Management Preconference Philadelphia Marriott Downtown, Philadelphia, PA

www.mgma.com

May 18-21, 2008 MGMA AAA Annual Conference Philadelphia Marriott Downtown, Philadelphia, PA

www.mgma.com

May 30- Jun 1, 2008 CSA/UCSD Annual Meeting & Clinical Anesthesia Update

Hilton Los Angeles/Universal City, Los Angeles, CA

www.csahq.org

Jun. 18-22, 2008 Society of Cardiovascular Anesthesiologists Annual Meeting & Workshops

Vancouver Convention & Exhibit Center, Vancouver, BC, Canada

www.scahq.org

Aug. 9-13, 2008 American Association of Nurse Anesthetists Annual Meeting

Minneapolis Convention Center,Minneapolis, MN

www.aana.com

Sep. 11-14, 2008 New England Society of Anesthesiologists Annual Meeting

Marriott Hotel on the Wharf,Newport, RI

www.nesa.net

Sep. 12-14, 2008 Ohio Society of Anesthesiologists Annual Meeting

The InterContinental Hotel,Cleveland, OH

www.osainc.org

Oct. 17, 2008 American Society of Critical Care Anesthesiologists Annual Meeting

Orlando, FL www.ascca.org

Oct. 17, 2008 Society for Pediatric Anesthesia Annual Meeting

Orlando, FL www.pedsanesthesia.org

Oct. 17, 2008 Society of Neurosurgical Anesthesia & Critical Care Annual Meeting

Orlando, FL www.snacc.org

Oct. 18-22, 2008 ASA Annual Meeting Orange County Convention Center,Orlando, FL

www.asahq.org

Oct. 19-22, 2008 MGMA Annual Conference San Diego Convention Center,San Diego, CA

www.mgma.com

Oct. 31–Nov. 2, 2008 Association of Anesthesiology Program Directors/Society of Academic Anesthesiology Chairs Annual Meeting

Hyatt Regency San Antonio,San Antonio, TX

www.aapd-saac.org

Dec. 12-16, 2008 New York State Society of Anesthesiologists Postgraduate Assembly in Anesthesiology

New York Marriott Marquis, New York, NY

www.nyssa-pga.org

Jan. 23-25, 2009 ASA Conference on Practice Management Arizona Grand Resort,Phoenix, AZ

www.asahq.org

ANESTHESIABUSINESS CONSULTANTS

255 W. Michigan ave.P.O. BOx 1123JacksOn, Mi 49204

PhOne: (800) 242-1131Fax: (517) 787-0529WeB site: www.anesthesiallc.com

Health & Medicine

Anesthesia Business Consultants: Communique spring08