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Anesthesia Budget Challenges

May 6, 2024

Three years ago, anesthesia practices experienced one of the worst budgetary challenges ever when the coronavirus pandemic forced a dramatic reduction in surgical case volume. It was an example of an external market factor completely beyond the control of anesthesia providers. Now that the impact of Covid-19 has more or less slipped into history, a new challenge has suddenly impacted the ability of payers to process claims.

Change Healthcare’s cyber attack has had a similar, but hopefully more short-lived, impact on anesthesia revenue potential as many practices have seen actual date of service collections drop in February and March. As a result, we now see just how impactful a variety of internal and external factors can be.

Anesthesia practice budgeting has now evolved to a third stage of complexity. There was a time when practices primarily just focused on revenue generation; consistent collections allowed practices to be profitable and successful. As revenue generation has become more challenging, most practices have had to focus on cost management. As most practices have had to negotiate with their facilities for subsidy support, the cost of recruiting and retaining an appropriate team of qualified providers has become a major topic of discussion. The past few years have made it abundantly clear that even effective collections and tight budget management may not be enough. What seemed like a solid revenue stream can be subject to unpredictable variances. This explains why comprehensive practice management has become such a necessity. A practice that cannot effectively manage all the factors will ultimately succumb to some of them.

Factors Affecting Practice Revenue

Many practices have decided to outsource their billing because of the challenges associated with optimizing collections for the specific services provided. Coding accuracy is always a concern, especially given the changes taking place in clinical protocols and the evolution of CPT code criteria. As practices continue to provide more nerve blocks, for example, there is often some confusion as to what blocks are covered and what the specific documentation requirements are. From a compliance perspective it is critical that providers not fall victim to upcoding or unbundling. Regular compliance in-service sessions, routine compliance audits and appropriate provider feedback are considered a sine qua non.

From a purely billing perspective, the diversity of payer policies can be daunting. The Coronis Health software has been designed to identify each billing class with a specific rate expectation and processing protocol. Unfortunately, the number of patients for whom insurance information has not been collected by the hospital admitting staff can pose a very frustrating collections challenge. The use of caller ID has made traditional collections calls much less productive than ever before.

Although the negotiation of reasonable contract rates is important, all practices are facing the inexorable impact of a growing Medicare population. An evolving payer mix can greatly erode the revenue potential of even a well-managed practice. This is one of a number of factors that has made it so important for the facility to financially support the anesthesia practice.

Factors Associated with Manpower and Staffing

The national anesthesia manpower shortage has had a significant impact on most practices. A shortage of providers makes each provider more expensive. As the market grows tighter, providers are more focused on lifestyle issues and more willing to jump from one practice to another, especially if the perceived opportunity is a practice that is less demanding and better compensated. Over the past few years many once stable practices have seen more provider attrition. This creates a material challenge as practices try to compete for providers. Urban centers with academic competitors can be most impacted when university hospitals decide to pay whatever it takes to attract qualified providers.

In the face of such competition, many a practice has decided to turn the payroll issues over to the facility. When a hospital employs the anesthesia providers, it never saves the facility money but relieves the anesthesia practice of the management responsibility. Finding ways to maintain the once touted goal of practice independence has become increasingly difficult to achieve.

External Market Factors

As if managing an anesthesia practice in the current market is not challenging enough, along come national issues such as the pandemic and Change Healthcare. In many ways, managing a modern anesthesia practice is like playing a game of three-dimensional tic-tac-toe where the practice only controls one dimension. Anesthesia providers have been extensively trained to deal with “never events” in the operating room but have little preparation for market never events that may require a very different approach and set of tools. This is exactly why so many practices have become so dependent on their practice managers. After all, none of us can really predict when the next challenge will further change the market.

What Makes Practices Successful

Managing a business today is a multi-factorial exercise, and managing a medical practice is no exception. Two criteria are essential to survival and long-term success: perspective and strategy. The challenge and the opportunity must be divined by identifying the general market trends and applying their impact to the specific factors affecting a given practice.

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