Maximizing the Value of Your Payments to Hospital-Based Service - - PowerPoint PPT Presentation

Maximizing the Value

• f Your Payments to

Hospital-Based Service Providers

LUIS A. ARGUESO, PARTNER, HEALTHCARE APPRAISERS ROBERT STIEFEL, MD, PRINCIPAL, ENHANCE HEALTHCARE CONSULTING

1

Speaker Backgrounds

Luis A. Argueso

 Partner at HealthCare

Appraisers

 Over 10 years of experience in

healthcare valuation

 Head of Hospital-Based Services

and Telemedicine Valuation service lines at firm Robert Stiefel, MD

 Board-Certified Anesthesiologist  Co-founder of a large

anesthesia management company sold to Team Health

 Co-founder of Enhance

Healthcare Consulting with extensive experience in Anesthesia services and OR Improvement

2

Learning Objectives

 Outline the challenge associated with hospital-based

service arrangements (HBSAs)

 Understand the key components of HBSAs  Explore recent industry trends  Learn strategies for maximizing the value of your HBSAs  Synthesize concepts with a deep dive into

anesthesiology HSBAs 3

Outlining the Challenge

 Hospitals are required to maintain professional provider

coverage of key service lines; examples include:

 Anesthesiology  Emergency Medicine  Hospitalist Medicine

 Costs have increased over time, with stagnant

reimbursement

 Increasing requests for financial support  Value-based payment requires closely-aligned providers

4

Understanding HBSAs: Services

 Professional services involving MDs and advanced

practice professionals (APPs)

 Coverage secured through onsite & on-call availability  Sometimes accompanied with medical directorships  Traditional specialties: anesthesiology, emergency

medicine, hospitalist medicine, and intensive care

 Emerging specialties: neurology, orthopedic surgery,

psychiatry, and trauma surgery 5

Understanding HBSAs: Payment Options

Fixed Subsidy

 Fixed, regular payment  Amount based on

anticipated financial shortfall

 Can vary depending on

service level (e.g., number

• f full-time providers,

number of covered locations, volume of patient encounters)

Collections Guarantee

 Payment amount fluctuates:

based on the difference between cost and actual collections

 Regular reconciliation  Often accompanied with

payment caps

6

Developing Industry Trends

 Consolidation of physician provider groups  Decreased hospital volumes (especially inpatient services)  Changes is medical professional workforce:

 Increased utilization of APPs  Shortage of physicians (and CRNAs)  Unwillingness among providers to cover hospitals  Emergence of telemedicine

 Greater share of reimbursement tied to outcomes and quality

measures

7

Strategies for Maximizing Value: Payment Structure

 Each payment option comes with pros and cons  Subsidies: ease of administration, incentives to collect,

• verpayment risk

 Collections guarantees: reconciliation required, limited incentive

to collect, limited overpayment risk

 Contract terms can address shortcomings of each

 Example: Hospital payment caps in collections guarantee arrangements  Example: Avoiding automatic escalators in subsidies

8

Strategies for Maximizing Value: Coverage Levels

 Detailed vs. Vague coverage requirements

 Example: 24/7 availability with sufficient providers vs.

specific coverage schedules with locations/hours of coverage

 Balancing flexibility with a contract that can be

efficiently administered

 Evaluating the utilization of APPs  Comparing staffing to industry benchmarks

9

Strategies for Maximizing Value: Provider Compensation

 Delving into compensation benchmarks  Understand the differences between surveys  Matching compensation to the level of service:

 Hours of coverage  Volume of patient encounters  wRVUs

 Understanding the local marketplace

10

ANESTHESIOLOGIST COMPENSATION SURVEYS

11

Compensation Data Anesthesiologists as of September 2017 All annual compensation data rounded to the nearest $1,000 National Base Compensation (all data) Survey n

Mean 25th Percentile Median 75th Percentile 90th Percentile

AMGA

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

Hospital and Healthcare Comp Service

1,020 382,000 $ 349,000 $ 386,000 $ 405,000 $ 448,000 $

MGMA

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

Sulluvan Cotter

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

Towers Watson

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

Average

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

Low

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

Median

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

High

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

CRNA COMPENSATION SURVEYS

Compensation Data CRNA's as of October 2017 All annual compensation data rounded to the nearest $1,000 National Base Compensation (all data) Survey n

Mean 25th Percentile Median 75th Percentile 90th Percentile

AMGA

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

Hospital and Healthcare Comp Service

529 166,000 $ 159,000 $ 166,000 $ 172,000 $ 182,000 $

MGMA

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

Sulluvan Cotter

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

Towers Watson

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

Average

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

Low

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

Median

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

High

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

12

Strategies for Maximizing Value: Professional Collections

 Evaluating collections benchmarks  Understand the drivers of revenue cycles for the

various specialties

 In-network vs. Out-of-network pros and cons  Impact of APP utilization  Payor consolidation and provider leverage

13

Strategies for Maximizing Value: Miscellaneous

 Meaningful and targeted quality metrics  Effective medical director/administrative service

terms

 Practice overhead benchmarking:

management fees and profit margins

 Termination provisions (e.g., without cause

notice periods)

 Rights to audit financials

14

ANESTHESIA SUBSIDY DRIVERS THE “FOUR LEGS” CONTROL

FAIR MARKET VALUE COMPENSATION SUPPLY AND DEMAND REQUIRED ANESTHETIZING LOCATIONS HOSPITAL STAFFING MODEL GROUP BILLING/CONTRACTING PERFORMANCE GROUP

15

Anesthesiology Deep Dive: Provider Compensation

 Survey differences related to anesthesiologist and CRNA compensation

benchmarks

 What percentile should I select?  Comp surveys must be trued up to local market reality, workload, responsibility

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

 CRNA compensation rising rapidly, recent trend to a “mercenary” model – work

for the highest bidder of the day

 Compensation models often include portions allocated to:

 Base salary  Productivity – structured as a fixed pool - Beware of production data shortcomings  Incentive metrics

 Part of the overall group compensation is “overhead” – increasing rapidly with

large national groups

16

ANESTHESIA PERFORMANCE METRICS FRAMEWORK

17

• 1. Average IP LOS total

joints and CV

• 2. Anesthesia supply

cost/case

• 3. Anesthesia med cost

per GA

• 1. Surgeon Satisfaction
• 2. Patient Satisfaction
• 3. Peri-operative Staff

Satisfaction

• 4. TJC/DNV anesthesia issues
• n last survey
• 1. Prime time OR Utilization
• 2. Anesthesia related first

case delays

• 3. DOS Cancellations
• 4. Close to out of OR
• 1. PQRS Overall Compliance
• 2. Total outcome indicators

(GHA report)

• 3. Short term pain

management

• 4. Actual post op

temperature

Clinical Quality OR Efficiency Expense Manage- ment Customer Satis- faction

Anesthesiology Deep Dive: Required Locations



Hospitals have control



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



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

 Trauma 

Centers of excellence



Free providers for blocks, pre-ops etc.



Utilization



Coverage provisions in agreements:



Define locations and call



Additional coverage

 OT Allocation in expense calculation  Hourly  “Accordion” for +/- fixed locations

18

OR UTILIZATION

19

July 2018 - Aug 2018 7A-3:30P 3:30P-5P 5P-7P 7P-Midnight Midnight-7A Minutes 113,496 6,268 5,457 4,122 1,327 Surgery Hours 1,892 104 91 69 22 Anes Staffed Locations 11 5 5 2 1 Business Days 44 44 44 44 44 Total Shift Hours 4,114 330 440 440 308 Hrs/Staffed OR/day 3.9 0.5 0.4 0.8 0.5 Shift Utilization (%) 46 22.6 14.8 15.6 7.2 July 2017 - June 2018 7A-3:30P 3:30P-5P 5P-7P 7P-Midnight Midnight-7A Minutes 562,804 32,580 22,722 16,077 8,297 Surgery Hours 9,380 543 379 268 138 Anes Staffed Locations 11 5 5 2 1 Business Days 253 253 253 253 253 Total Shift Hours 23,656 1,898 2,530 2,530 1,771 Hrs/Staffed OR/day 3.4 0.4 0.3 0.5 0.5 Shift Utilization (%) 39.7 20.4 10.69 10.6 7.8 *All Mon-Fri Business Days (Holidays and Weekends Excluded) – OR only, includes all cases

Anesthesiology Deep Dive: Staffing

 Under group control  CRNAs: Independent vs. Direction vs. Supervision  A lot of grey areas:

 Is in house call required?  What is a reasonable AA/CRNA medical direction ratio?  Post call day off?  What defines immediately available for medical direction purposes?

 Infinite options for the same coverage needs  Staffing models can have a dramatic impact on anesthesia

contract expense

20

PHY 3 OR 3

PHY 1

OR 1 STAFFING WITH ENDO ALL MD MODEL VACATION MAIN OR PHY 4 OR 4

PHY 2

OR 2

PHY 10

POST CALL

• MD 1st call, off post call
• Assume rotating late shift

responsibility

• MD s 6 weeks vacation per year
• 3 dedicated endo, 5,500 endo

cases covered ENDOSCOPY

TOTAL FTE s 11.5 MD 0 CRNA s

PHY 5 OR 5 PHY 6 OR 6 POST CALL

PHY 11.5

1.5 FTE VAC

PHY 7

ENDO 1

PHY 8

ENDO 2

PHY 9

ENDO 3

Year 1 Income

Patient/Payer Collections 3,485,065

Total Net Collections 3,485,065 $

Expenses

Physician Salaries 4,636,800 $ Physician Taxes 161,370 $ Directors Stipends 30,000 $ Physician Other Benefits 46,368 $ Physician CME, Lic & Dues 46,000 $ CRNA Taxes

• $

CRNA Salary

• $

CRNA Locums

• $

CRNA Overtime

• $

CRNA CME, Lic & Dues

• $

Pension Fund Contributions 231,840 $ Professional Liability Insurance 161,000 $ Health/Dental Insurance 161,000 $ Billing Fees 174,253 $ Other Miscellaneous Expenses 34,851 $ Management Fees/Admin Expenses 174,253 $

Total Expenses 5,857,736 $

EBITDA (deficit) (2,372,670) $ MD's @ $459K All In 11.5 CRNA's

• 21

Financial Summary Expenses: $5,857,736 Revenue: $3,485,065 Subsidy: $2,372,670

PHY 1

STAFFING WITH ENDO CARE TEAM MODEL VACATION MAIN OR

CRNA 3.75 OR 3 7A-5P CRNA 2.5 OR 2 7A-5P CRNA 5.75 ENDO 1

ENDOSCOPY

PHY 5

POST CALL

CRNA 6.75 ENDO 2

• MD 1st call
• 3 late CRNA s (5P) per day
• CRNA s with 7 weeks vacation per

year, MD s 8 weeks

• 3 dedicated endo locations, 5,500

endo cases

CRNA 9 VAC

TOTAL FTE s 6 MD s 9 CRNA s

CRNA 1.25 OR 1 7A-5P

PHY 4

ENDO POST CALL

CRNA 7.75 ENDO 3

PHY 3

OR 6

PHY 2

OR 5

PHY 6

POST CALL

CRNA 4.75 OR 4

Year 1 Income

Expenses

• $

EBITDA (deficit) (1,945,030) $ MD's @ $459K All In 6.0 CRNA's @ $235K All In 9.0

St Joseph Hospital Bangor

Anesthesia Model Summary

22

Financial Summary Expenses: $5,430,095 Revenue: $3,485,065 Subsidy: $1,945,030

PHY 1

OR 1 STAFFING WITH ENDO FIELD MODEL VACATION MAIN OR

CRNA 3 OR 4 CRNA 2 OR 3 CRNA 6 ENDO 2

ENDOSCOPY

PHY 2

COVER FIELD

PHY 4

POST CALL/ VAC

CRNA 7 ENDO 3

• CRNA 1st call and MD 2nd call
• Assume CRNA on call from home,
• ff post call
• CRNA s with 5 weeks vacation per

year, MD s 13 weeks

• 3 dedicated endo locations, 5500

endo cases

CRNA 9 VAC

TOTAL FTE s 4 MD s 9 CRNA s

CRNA 1 OR 2 CRNA 4 OR 5 CRNA 5 OR 6

PHY 3

ENDO 1 POST CALL

CRNA 8 POST CALL

Year 1 Income

Patient/Payer Collections 3,485,065

Total Net Collections 3,485,065 $

Expenses

Physician Salaries 1,432,800 $ Physician Taxes 53,519 $ Directors Stipends 30,000 $ Physician Other Benefits 14,328 $ Physician CME, Lic & Dues 16,000 $ CRNA Taxes 101,390 $ CRNA Salary 1,911,600 $ CRNA Locums

• $

CRNA Overtime 114,696 $ CRNA CME, Lic & Dues 18,000 $ Pension Fund Contributions 167,220 $ Professional Liability Insurance 56,000 $ Health/Dental Insurance 182,000 $ Billing Fees 174,253 $ Other Miscellaneous Expenses 34,851 $ Management Fees/Admin Expenses 174,253 $

Total Expenses 4,480,910 $

EBITDA (deficit) (995,845) $ MD's @ $411K All In 4.0 CRNA's @ $251K All In 9.0

23

Financial Summary Expenses: $4,480,910 Revenue: $3,485,065 Subsidy: $995,845

Anesthesiology Deep Dive: Revenue Cycle

 Facilities are at risk in practices with collections guarantees or in employed models  Reported collections often form the basis for flat subsidy negotiations  Provider leverage (or lack of) with payors – vary with group size, expertise and billing

partner

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

revenue

 Anesthesia revenue realization is often a “black hole” to C-suite  Facilities should track and understand anesthesia revenue drivers in any subsidized

arrangement

 Resources:

 AMGA, MGMA, and SCA report collections/ASA unit benchmarks  ASA publishes per ASA unit revenue benchmarks  Medicare and Medicaid rates public  Local knowledge of rates – vary by state and region

24

COMMERCIAL PAYER SURVEY

25

QUESTIONS?

26