Maximizing the Value. of Your Payments to Hospital-Based Service Providers

Transcription

1 Maximizing the Value 1 of Your Payments to Hospital-Based Service Providers LUIS A. ARGUESO, PARTNER, HEALTHCARE APPRAISERS ROBERT STIEFEL, MD, PRINCIPAL, ENHANCE HEALTHCARE CONSULTING

2 Speaker Backgrounds 2 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

3 Learning Objectives 3 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

4 Outlining the Challenge 4 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

5 Understanding HBSAs: Services 5 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

6 Understanding HBSAs: Payment 6 Options Fixed Subsidy Fixed, regular payment Amount based on anticipated financial shortfall Can vary depending on service level (e.g., number of 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

7 Developing Industry Trends 7 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

8 Strategies for Maximizing Value: 8 Payment Structure Each payment option comes with pros and cons Subsidies: ease of administration, incentives to collect, overpayment 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

9 Strategies for Maximizing Value: 9 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

10 Strategies for Maximizing Value: 10 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

11 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

12 CRNA COMPENSATION SURVEYS 12 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

13 Strategies for Maximizing Value: 13 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

14 Strategies for Maximizing Value: 14 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

15 ANESTHESIA SUBSIDY DRIVERS 15 THE FOUR LEGS CONTROL FAIR MARKET VALUE COMPENSATION SUPPLY AND DEMAND REQUIRED ANESTHETIZING LOCATIONS HOSPITAL STAFFING MODEL GROUP BILLING/CONTRACTING PERFORMANCE GROUP

16 Anesthesiology Deep Dive: Provider Compensation 16 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

17 1. PQRS Overall Compliance 2. Total outcome indicators (GHA report) 3. Short term pain management 4. Actual post op temperature ANESTHESIA PERFORMANCE METRICS FRAMEWORK Clinical Quality OR Efficiency 1. Prime time OR Utilization 2. Anesthesia related first case delays 3. DOS Cancellations 4. Close to out of OR Surgeon Satisfaction 2. Patient Satisfaction 3. Peri-operative Staff Satisfaction 4. TJC/DNV anesthesia issues on last survey Customer Satisfaction Expense Management 1. Average IP LOS total joints and CV 2. Anesthesia supply cost/case 3. Anesthesia med cost per GA

18 Anesthesiology Deep Dive: 18 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

19 OR UTILIZATION July June A-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, Anes Staffed Locations Business Days Total Shift Hours 23,656 1,898 2,530 2,530 1,771 Hrs/Staffed OR/day Shift Utilization (%) July Aug A-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, Anes Staffed Locations Business Days Total Shift Hours 4, Hrs/Staffed OR/day Shift Utilization (%) *All Mon-Fri Business Days (Holidays and Weekends Excluded) OR only, includes all cases

20 Anesthesiology Deep Dive: Staffing 20 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

21 MAIN OR STAFFING WITH ENDO ALL MD MODEL 21 PHY 1 OR 1 PHY 2 OR 2 PHY 3 OR 3 PHY 4 OR 4 PHY 5 OR 5 PHY 6 OR 6 ENDOSCOPY POST CALL VACATION PHY 7 ENDO 1 PHY 8 ENDO 2 PHY 9 ENDO 3 PHY 10 POST CALL PHY FTE VAC 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 Financial Summary Physician CME, Lic & Dues $ 46,000 CRNA Taxes $ - CRNA Salary $ - CRNA Expenses: Locums $5,857,736 $ - CRNA Overtime $ - CRNA CME, Lic & Dues $ - Pension Revenue: Fund Contributions$3,485,065 $ 231,840 Professional Liability Insurance $ 161,000 Health/Dental Insurance $ 161,000 Billing Fees $ 174,253 Other Subsidy: Miscellaneous Expenses $2,372,670 $ 34,851 Management Fees/Admin Expenses $ 174,253 Total Expenses $ 5,857,736 TOTAL FTE s 11.5 MD 0 CRNA s MD 1 st call, off post call Assume rotating late shift responsibility MD s 6 weeks vacation per year 3 dedicated endo, 5,500 endo cases covered EBITDA (deficit) $ (2,372,670) $459K All In 11.5 CRNA's -

22 PHY 1 STAFFING WITH ENDO CARE TEAM MODEL MAIN OR 22 CRNA 1.25 OR 1 7A-5P CRNA 2.5 OR 2 7A-5P CRNA 3.75 OR 3 7A-5P CRNA 4.75 OR 4 PHY 2 OR 5 PHY 3 OR 6 ENDOSCOPY POST CALL PHY 4 ENDO VACATION CRNA 5.75 ENDO 1 CRNA 6.75 ENDO 2 CRNA 7.75 ENDO 3 PHY 5 POST CALL PHY 6 POST CALL CRNA 9 VAC St Joseph Hospital Bangor Anesthesia Model Summary Year 1 Income Patient/Payer Collections 3,485,065 Total Net Collections $ 3,485,065 Financial Summary Expenses: $5,430,095 Revenue: $3,485,065 Subsidy: $1,945,030 Expenses Physician Salaries $ 2,419,200 Physician Taxes $ 98,225 Directors Stipends $ 30,000 Physician Other Benefits $ 24,192 Physician CME, Lic & Dues $ 24,000 CRNA Taxes $ 99,433 CRNA Salary $ 1,776,600 CRNA Locums $ - CRNA Overtime $ 53,298 CRNA CME, Lic & Dues $ 18,000 Pension Fund Contributions $ 209,790 Professional Liability Insurance $ 84,000 Health/Dental Insurance $ 210,000 Billing Fees $ 174,253 Other Miscellaneous Expenses $ 34,851 Management Fees/Admin Expenses $ 174,253 Total Expenses $ 5,430,096 EBITDA (deficit) $ (1,945,030) TOTAL FTE s 6 MD s 9 CRNA s 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 $459K All In 6.0 $235K All In 9.0

23 STAFFING WITH ENDO FIELD MODEL MAIN OR 23 PHY 2 COVER FIELD PHY 1 OR 1 CRNA 1 OR 2 CRNA 2 OR 3 CRNA 3 OR 4 CRNA 4 OR 5 CRNA 5 OR 6 ENDOSCOPY POST CALL VACATION PHY 3 ENDO 1 CRNA 6 ENDO 2 CRNA 7 ENDO 3 CRNA 8 POST CALL PHY 4 POST CALL/ VAC CRNA 9 VAC 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 Financial Other Benefits Summary $ 14,328 Physician CME, Lic & Dues $ 16,000 CRNA Taxes $ 101,390 CRNA Salary $ 1,911,600 CRNA Expenses: Locums $4,480,910 $ - CRNA Overtime $ 114,696 CRNA CME, Lic & Dues $ 18,000 Pension Fund Contributions $ 167,220 Professional Revenue: Liability Insurance$3,485,065 $ 56,000 Health/Dental Insurance $ 182,000 Billing Fees $ 174,253 Other Miscellaneous Expenses $ 34,851 Management Subsidy: Fees/Admin Expenses $995,845 $ 174,253 Total Expenses $ 4,480,910 TOTAL FTE s 4 MD s 9 CRNA s CRNA 1 st call and MD 2 nd call Assume CRNA on call from home, off post call CRNA s with 5 weeks vacation per year, MD s 13 weeks 3 dedicated endo locations, 5500 endo cases EBITDA (deficit) $ (995,845) $411K All In 4.0 $251K All In 9.0

24 Anesthesiology Deep Dive: Revenue 24 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

25 COMMERCIAL PAYER SURVEY 25

26 QUESTIONS? 26