In response to a recent federal court ruling, HHS and other departments have proposed a new fee amount for accessing the IDR process under the No Surprises Act.
The rollercoaster ride continues. Many of us actually enjoy the ride. The ups and downs and the change in direction and acceleration can be quite thrilling. That’s true for a carnival ride, but it’s not that exhilarating when it involves keeping up with the ever-changing rules proposed and implemented by federal authorities.
The Latest Proposal
You will recall that, several weeks ago, a federal district court in Texas put the kibosh on the government’s $300 charge for parties accessing the independent dispute resolution (IDR) process. This process, which was developed as part of the No Surprises Act (NSA), is available to insurance companies and out-of-network medical providers where there is a dispute over payment for services. Originally, the fee was set at $50, then it was raised 700 percent to $350. The Texas court was having none of it, saying that the new fee was cost prohibitive to providers, and ordered the government to go back to the drawing board.
In response to the court’s ruling, The U.S. Departments of Health and Human Services (HHS), Treasury and Labor (collectively, “Departments”) proposed last month to set the IDR fee at $150. The Departments also proposed increasing the upper limit of the fee range for certified IDR entities by 20 percent for single determinations and 25 percent for batched determinations. If finalized, the proposed rule would go into effect on January 1, 2024.
According to a report on HealthcareDive, the government projects it will spend $70 million to implement the IDR process in 2024. This includes personnel costs, certifying IDR entities and completing investigations. The Departments based their costs on the assumption that there would be 225,000 IDR disputes in the coming year. This assumption is based on trends that were noted during the period of February to July of this year. The proposed fee of $150 was deemed by the Departments to be sufficient to allow the government to recoup its costs.
Where We Are
With all the changes we’ve seen relative to this topic, it’s no wonder the provider community may be in a state of confusion on where things stand. So, it may be helpful at this point to sum up where we are relative to the NSA and its associated regulations. You’ll recall that the act went into effect on January 1, 2022. The legislation was a response to patients receiving surprisingly large medical bills from providers who turned out to be out of network—unbeknownst to the patients.
The NSA stipulates what the patient can and can’t be charged by these non-participating providers. When it comes to what the insurance pays these providers, the parties are not always in agreement. When this leads to a dispute, the IDR process can be utilized. This essentially involves an arbitration process where parties submit a payment amount to a third-party arbiter—certified by the Departments—who is charged with settling the dispute by determining a payment amount in what is called a “final offer.” Of course, the non-par provider has to pay to enter into this process, and that has been the ball that has been volleyed back and forth for months now, based on court rulings and multiple Department proposals.
Thus far, the IDR process has been a mixed bag for those who have experienced it firsthand. According to one news outlet, payers, providers and arbitration service representatives told the U.S. House Ways and Means Committee in recent testimony that “the roll-out has been far from smooth.” Parties filed 334,828 disputes in the federal IDR portal between April 15, 2022 and March 31, 2023, which amounts to nearly fourteen times the number of claims the Centers for Medicare and Medicaid Services (CMS) had estimated and prepared for. This has led to high volumes and a growing backlog of disputes. The increase in the workload is the government’s rationale for raising the IDR fee from the original $50 rate. The Departments contend that the newly proposed fee ($150) will allow them to provide additional resources to address the large dispute volumes.
We will have to wait and see if the new fee—if finalized—will have the intended effect. It may, in fact, lead to less backlogs, but it could still be deemed a financial deterrent to providers wishing to access the dispute process. Hold on tight; the rollercoaster is pulling out of the station. If you have any questions on this topic, please contact your account executive.
BY KATHERINE BOWLES, RN, ESQ. Hanson Bridgett LLP, Los Angeles, CA
This following article describes the Provider Non-Discrimination Law, its potential violation by CIGNA in approximately 36 states and the legal battle that could potentially ensue.
THE AFFORDABLE CARE ACT’S ANTIDISCRIMINATION LAW: AN OVERVIEW
Since January 2012, the Affordable Care Act (ACA) has prohibited insurance plans, insurance providers and others from discriminating against providers who are acting within the full scope of their license or certification under applicable state law.1 In 2021, Congress, acting through Section 108 of the Consolidated Appropriations Act (CAA), required the U.S. Department of Labor, the U.S. Department of Health & Human Services and the U.S. Treasury (the Departments) to issue a notice of proposed rulemaking, followed by a final rule, to fully implement section 2706(a) of the Public Health Service Act (PHSA).2 In response, the Departments indicated that the statutory language is self-executing and may be enforced without further regulatory action.3 This means that the Provider Non-Discrimination Law is enforceable in any state where an insurer, a group or individual health plan or other payors impose discriminatory payment policies.
The Provider Non-Discrimination Law prohibits provider discrimination in two key areas: (1) a provider’s participation in the group or individual health insurance plan; and (2) coverage under the group or individual health insurance plan. The Law makes clear that insurance plans, insurance providers and others may not reject a provider from participating in-network simply because he or she is licensed as a Certified Registered Nurse Anesthetist (CRNA) and not as a physician anesthesiologist. The Law also prohibits insurance plans, insurance providers and others from establishing varying reimbursement rates based on licensure status, although insurance plans and insurers may continue to discriminate on the basis of quality or performance measures. In other words, reimbursement for anesthesia services must be the same for nurse and physician anesthesiologists who have equivalent quality and performance indicators.
The Provider Non-Discrimination Law is applicable to all non-grandfathered group health plans and health insurers offering group or individual health insurance.4 The Law is also incorporated into Section 715(a)(1) of the Employee Retiree Income Security Act (ERISA) and Section 9815(a) (1) of the Internal Revenue Code.5 Similar language is included in Section 1852(b) (2) of the Social Security Act regarding Medicare Advantage Plans.6 Hence, the Law is broadly applicable to most insurance plans, insurance providers and employer-sponsored health plans throughout the United States.
THE RESTRICTION TO CRNAS WITH INDEPENDENT PRACTICE
The Provider Non-Discrimination Law protects all providers practicing within the full scope of license and certification in their respective state. As of this writing, 22 states, Guam and the District of Columbia have opted out of CRNA supervision requirements.7 During the Public Health Emergency (PHE), the Centers for Medicare and Medicaid Services (CMS) waived the supervision requirements for CRNAs, resulting in CRNAs having independent practice authority in approximately 36 States.8 At its broadest possible application, the Law would have prevented payment discrimination in these 36 states. However, with the expiration of the PHE this past May 11, the Law was allowed to sunset, except in those states that adopt the opt-out process.9 Following the end of the PHE, CRNAs in the 22 opt-out states will remain protected by the Law.
CIGNA’S FUEL TO THE FIRE
On March 12, 2023, Coronis Health (formerly Anesthesia Business Consultants) published a blog post, noting that CIGNA would lower reimbursement by 15 percent for nonmedically directed procedures performed by CRNAs.10 In other words, a physician anesthesiologist billing under modifier “QZ” would be reimbursed 15 percent more than a nurse anesthetist billing under the same modifier. CIGNA’s timing is odd, given the shortage of providers and the increased number of providers practicing within the full scope of their license due to pressures placed on the system by the COVID-19 pandemic.11 CIGNA’s proposed payment policy adds fuel to fire by lowering reimbursements for facilities and provider groups already facing significant anesthesia payment pressures.
Notably, CIGNA’s stated policy threatens to violate the Provider Non-Discrimination Law for any provider practicing independently (billing modifier QZ) in 36 states through the end of the PHE and in 22 states, Guam and the District of Columbia, thereafter. Providers who see a decreased reimbursement under CIGNA’s new policy may have the right to pursue declaratory and injunctive relief, unfair competition laws, breach of contract and other claims, depending on applicability to the individual provider and/or provider group. Rather than saving money, CIGNA’s new plan is likely to spur lawsuits seeking equal protection and application of the Provider Non-Discrimination Law.
KATHERINE BOWLES, RN, ESQ. Before becoming an attorney, Kate practiced as a Registered Nurse at hospitals throughout Los Angeles, CA. She is currently a Partner in the Health Care Section at Hanson Bridgett LLP and can be reached at kbowles@hansonbridgett.com.
1. Public Health Service Act section 2706(a) “Non-discrimination in health care is codified at 42 U.S. Code section 300gg-5. See also https://www. govinfo.gov/content/pkg/CRPT-113srpt71/pdf/CRPT-113srpt71.pdf (last accessed March 19, 2023).
2. https://www.dol.gov/sites/dolgov/files/ebsa/laws-and-regulations/ laws/no-surprises-act/listening-session-announcement-regardingprovider-nondiscrimination-under-section-2706a-of-the-phs-act.pdf (last accessed March 19, 2023).
3. https://www.cms.gov/CCIIO/Resources/Fact-Sheets-and-FAQs/aca_ implementation_faqs15 (last accessed March 19, 2023).
4. See footnote 3.
5. See footnote 3.
6. See footnote 3.
7. https://www.aana.com/docs/default-source/sga-aana-com-webdocuments-(all)/801-fact-sheet-concerning-state-opt-outs-pdf. pdf?sfvrsn=450743b1_34 (last accessed March 19, 2023).
8. https://www.cms.gov/newsroom/fact-sheets/cms-waiversflexibilities-and-transition-forward-covid-19-public-healthemergency#:~:text=CMS%20will%20end%20this%20emergency,Reg. (last accessed March 19, 2023).
9. See footnote 9.
10. https://www.anesthesiallc.com/publications/blog/entry/a-change-inthe-wind-new-policy-further-complicates-anesthesia-practices (last accessed March 19, 2023).
11. CRNAs were among the most utilized providers in the nation during the COVID-19 pandemic, according to a CMS report summarized by the AANA. See https://www.aana.com/news/press-releases/2021/01/18/ nurse-anesthetists-among-most-utilized-healthcare-providersaccording-to-cms (Last accessed March 19, 2023).
BY RITA ASTANI, MBA President of Anesthesia, Coronis Health, Jackson, MI
Over the years, anesthesia groups have investigated certain strategies—beyond standard anesthesia services—to enhance their revenue opportunities. There has been the widespread incorporation of acute pain services, additions of a chronic pain component, the seeking of new places of service and experimenting with ketamine clinics. In addition to these, there is another avenue of additional reimbursement potential that some practices are now pursuing: presurgical testing. What does this service entail, and what can anesthesia groups expect to reap by adding this component to their line of services?
DEFINING OUR TERMS
Over the years, we have noticed a growing interest within the anesthesia community in the concept of presurgical clinics. Often, this interest was sparked by a speaker at a state or national event or by a hired consultant who presented the idea to the group as a “can’t miss” revenue opportunity. Essentially, these clinics perform what is sometimes called pre-anesthesia testing (PAT) or presurgical clearances on patients who are scheduled for various surgeries—surgeries that will ultimately involve anesthesia services. For convenience, we will use the acronym PAT to identify this service.
In many cases, it is not the anesthesia providers performing the PATs. Rather, the group hires a nurse practitioner (NP) or advanced practice nurse (APN) to see the patient, perform the testing (e.g., vitals, blood work, etc.) and generally evaluate the patient to determine if he or she can be expected to successfully withstand the scheduled procedure. For example, if the upcoming surgery involves the cardiovascular system and the surgeon has reason to believe the patient may have difficulty with the surgery or the anesthesia, the surgeon may refer the patient to the PAT clinic to get a full workup and recommendation as to the suitability of the patient for the operative session.
DETERMINING THE PROPRIETY
Seeking to add value to the group in the eyes of the surgeons and hospital administration is certainly commendable. And looking for ways to add another revenue stream in this financially challenging time is quite understandable. The PAT clinic concept would seem to check both of these boxes. There are, however, some factors that anesthesia groups should take into consideration before dipping their toe into these waters.
The first thing to consider is the propriety of this arrangement. How appropriate is it for an anesthesia group to submit a claim for evaluating a patient in connection with a scheduled case for which the same anesthesia group will be billing for anesthesia services? The anesthesia provider is already required to perform a pre-anesthesia assessment (PAA) prior to the anesthesia service. That PAA is bundled into the anesthesia code that appears on the claim form. In other words, the PAA is not separately billable. But now we have this additional evaluation, in the form of a PAT session, for which anesthesia providers are seeking separate payment.
Typically, claims for these services would be submitted with a relatively low-paying evaluation and management (E/M) code. And, of course, groups will have to provide human resources to staff the clinic and perform these pre-surgical clearances. The question is this: are the compliance risks and resource requirements worth the reward?
There are three typical ways in which an anesthesia provider obtains payment from the E/M code set: (a) a postoperative pain round, (b) the PAA where the case was canceled prior to induction, and (c) an anesthesia consult. In scenario “a,” the service is separate and apart from the anesthesia service. In scenario “b,” the PAA that is usually bundled becomes payable only because the anesthesia service never took place. In scenario “c,” the consult is only payable if it represents a service that is above and beyond the bundled PAA. The question is, does the PAT constitute an anesthesia consult; and, if so, does it meet above-and-beyond criterion?
To answer the above question, we need to determine the following: (a) who is performing the PAT, and (b) what does this evaluation service actually entail? According to the Medicare State Operations Manual in its treatment of the conditions of participation (CoPs)—that is, the conditions that hospitals have to meet in order to participate with Medicare—we are given a list of provider types that are authorized to perform a PAA. That list does not include an NP. A nurse practitioner is not an anesthesia provider, so an NP cannot perform a pre-anesthesia assessment. It follows that an NP cannot also perform an anesthesia consult. If these PATs are essentially an anesthesia consult, then it is entirely inappropriate for such services to be performed by the NP.
If these PATs or presurgical clearance screenings are not an anesthesia consult, then what are they? Our understanding is that patients undergoing these screenings are being referred to the anesthesia group by the patients’ surgeons. Again, the purpose is purportedly to check out whether the patient is a legitimate candidate for surgery and/or anesthesia. But why isn’t the surgeon doing this? Isn’t this determination part of the surgeon’s own health and physical (H&P) exam prior to surgery? Why does there need to be an additional step in the process— additional to the surgeon’s H&P and the anesthesiologist’s PAA? Furthermore, if the PAT service is more analogous to an H&P than the PAA, why is the anesthesia group’s NP more competent to perform this service than the patient’s own surgeon? The point we’re trying to make here is that some payers may eventually question the medical necessity of this supplemental and relatively amorphous evaluative service (in addition to the bundled H&P and the bundled PAA).
PROCEED WITH CAUTION
Despite the concerns addressed above, the case can be made that the service being provided in these PAT clinics may be deemed medically appropriate or necessary and thus payable in at least some instances. As with anesthesia consults, claims for these screenings should not be routine, i.e., not submitted for every patient or just any patient. In assessing both the risk and opportunity relative to presurgical testing services, one anesthesia compliance attorney has indicated the following:
Preoperative assessments can be billed, provided that very rigid controls and prerequisites are implemented and followed, and further provided that the anesthesia group has a tolerance for some risk.
As to the risk, U.S. v. Chen, a False Claims Act (FCA) case, may be somewhat instructive. The case was brought against Dr. Chen, an anesthesiologist, for submitting consultations (the highest consult code available) for each of his anesthesia cases. The jury found that he submitted over 3,500 claims inappropriately, and the court of appeals affirmed. So, if claims for PAT services are (a) deemed to be akin to an anesthesia consult claim, and (b) submitted routinely, it could result in an FCA action.
The Chair of the Committee on Economics for the American Society of Anesthesiologists (ASA) wrote an article in 2014, explaining the circumstances under which the ASA believes these PAT-type services can and cannot be billed, as follows:
a. The service must be significantly above and beyond the usual pre-anesthesia evaluation, and as such would need to address items that are not addressed in the routine pre-anesthesia eval.
b. The conditions examined could include a comprehensive exam of the patient’s entire medical condition, as well as management of those issues that need to be corrected or optimized prior to surgery.
c. These visits would be billed “under rare conditions.”
Where the PAT or pre-surgical clearance clinic sees a large percentage of surgical candidates, such as all those with a physical status indicator of III or higher, the provider of the PAT services may pop up on the payer’s radar, and an audit may ensue. The provider and/ or group would need to be able to accept that risk.
Of course, the above does not directly address the scenario where an NP employed by the anesthesia group is the one who is performing the bulk of these screenings. Since an NP cannot perform an anesthesia consult, any evaluative work performed by the NP may be deemed by the payer (or the government) as necessarily outside the scope of the PAA and thus not an attempt to unbundle the PAA. Nevertheless, it would be wise for anesthesia groups that are looking to employ NPs for this very purpose to recognize there is risk and that such services should not be routine.
Rita Astani, MBA, is the Coronis President of Anesthesia. She came to Coronis Health through the recent Anesthesia Business Consultants merger. Rita joined Anesthesia Business Consultants in 1991, last serving as Executive Vice President of Client Services before taking the position of President of Anesthesia after the companies merged. With degrees from The University of Michigan and Ohio State University, Rita has a Masters Degree in Business Administration in hospital and health services administration. Her vast array of knowledge and expertise in anesthesia practice management makes her a valuable addition to our team. She can be reached at Rita.Astani@CoronisHealth.com.
KATHRYN HICKNER, ESQ. Brennan Manna & Diamond, LLC, Cleveland, OH
During the past several years, many health law practices have noticed a dramatic increase in the number of telehealth businesses and private equity-backed healthcare providers. Both of these trends often rely heavily on corporate structures commonly referred to as “friendly physician,” “captive PC” or “MSO” models. Although friendly physician models are used by non-physician healthcare providers (e.g., physical therapists, psychologists and dentists), this article focuses on physicians and how the model is used in connection with the provision of professional medical services. Below is a summary of some of the questions often asked by law firm clients as these organizations are structured, developed and operationalized.
WHY DO ORGANIZATIONS ADOPT A FRIENDLY PHYSICIAN MODEL?
Friendly physician models have developed as a result of state law commonly referred to as the corporate practice of medicine doctrine. In corporate practice of medicine states, non-physicians are unable to own an entity that employs or contracts with physicians to provide professional medical services. These entities must instead be owned by licensed physicians. Many corporate practice of medicine states require that physician owned entities that provide professional medical services be organized as professional entities that satisfy certain state-level organizational requirements. The doctrine is intended to protect the independent medical judgment of physicians—to protect the sanctity of the physician-patient relationship.
Over 30 states have adopted some form of the corporate practice of medicine doctrine pursuant to either statutes or case law. Each state’s requirements are unique. States such as New York, California and Texas have robust corporate practice of medicine doctrines that are actively enforced. Other states are less stringent. Some states like Michigan permit certain entities to be owned by physicians licensed in other states, while some states limit ownership to physicians licensed in the state. The process in New York and Illinois to form a professional entity often takes months but professional entities in other states can be formed within an hour. In Florida, unlicensed individuals may own a medical group, but the group is generally required to obtain a Health Care Clinic Act license if not physician owned. Organizations that provide professional medical services in multiple states need to review these laws carefully on a state-by-state basis as the geographic footprint of the organizations evolve.
WHAT IS A FRIENDLY PHYSICIAN MODEL?
Friendly physician models are used to permit non-physicians to indirectly invest in physician practices when the state law prohibits non-physicians from directly investing. In general, a friendly physician model involves at least two entities: (a) a professional entity that is owned by one or more licensed physicians, and (b) a management services organization (or MSO) owned in whole, or in part, by nonphysicians.
In a friendly physician model, the professional entity employs or contracts with physicians and other licensed healthcare professionals and is the direct provider of medical services to patients. The patients pay the professional entity for the services rendered. The professional entity is often enrolled with Medicare, Medicaid and/or third-party payors unless the practice is cash based. The professional entity also typically maintains the professional liability insurance covering the services provided.
The management entity may have both physician and non-physician owners. The management entity often provides a turnkey operation to the professional entity. Typical management services provided by the management entity to the professional entity include, for example, the following: (a) development services; (b) provision of real property; (c) provision of information technology and other equipment; (d) provision of office and medical supplies; (e) purchasing and contracting guidance; (f) provision of support personnel; (g) human resource services; (h) patient and case scheduling services; (i) training; (j) credentialing guidance and payor contracting; (k) billing and coding services or advice; (l) financial management, cash management, accounting and related reporting; (m) compliance, quality and risk management activities; (n) intellectual property; and (o) marketing services. In exchange for the management services provided, the professional entity pays the management entity a management fee.
WHAT ARE SOME OF THE REGULATORY CONSIDERATIONS OFTEN AT ISSUE WHEN STRUCTURING A FRIENDLY PHYSICIAN MODEL?
In addition to addressing the nuances of the applicable states’ corporate practice of medicine doctrine requirements, friendly physician models are often carefully structured to mitigate risk under the federal Anti-Kickback Statute and parallel state laws and state fee-splitting requirements. Common safeguards to mitigate regulatory risk include ensuring that the management fee is within the range of fair market value for bona fide services actually provided, is not a percentage-based fee or other fee that varies based upon the volume or value of services provided to patients, and is set in advance and not changed more than once a year. In general, it is advisable to have the management fee be a flat fee or based upon a cost-plus structure.
A third-party valuation of the management fee by a qualified and experienced healthcare valuation consultant is typically advisable but usually not per se required. In the event that the parties make a reasonable good faith determination of what the management fee should be, such determination must be reasonable and documented. Attorneys, even those that focus on heath law, are generally not qualified to opine on what is or what is not within the range of fair market value. When valuation consultants are engaged, it is often a good idea for attorneys to engage the consultants under attorney-client privilege.
HOW DO INVESTORS PROTECT THEIR INTERESTS IN A FRIENDLY PHYSICIAN MODEL?
In addition to mitigating regulatory risk by incorporating safeguards as discussed above, non-physician owners of the management entity want to protect their investment and limit financial risk from a business perspective. One way to do that is through buy/sell provisions that provide that non-physician investors can essentially replace the friendly physician owner of the professional entity with another licensed physician in various circumstances. These agreements are often called nominee agreements or member transfer restriction agreements.
HOW CAN FRIENDLY PHYSICIANS LIMIT THE FINANCIAL AND LEGAL RISK ASSOCIATED WITH BEING THE OWNER OF THE PROFESSIONAL ENTITY THAT PROVIDES PROFESSIONAL SERVICES?
There are several ways that physician owners of professional entities within a friendly physician model can mitigate legal risk. First, physician owners should ensure that the friendly physician model is structured properly and includes safeguards to mitigate regulatory risk. See discussion above. Second, the physician owners should ensure that those managing the day-to-day operations cause funds to flow in accordance with the governing documents. Legal documents are not helpful if they do not reflect reality. The structure needs to be respected. Third, physician owners should ensure that the organization has an active and robust healthcare regulatory compliance plan and that the culture of compliance starts from the top. The healthcare regulatory enforcement environment is often punitive. Physicians have a license to lose and non-physician investors typically do not. Accordingly, physicians have more risk than non-physician investors in the event of non-compliance. Fourth, physician investors should understand whether the governing documents require the physician owner of the business to make capital contributions, cover management fee payment shortfalls or personal guarantees. They should confirm that such provisions are acceptable and have their own attorney review the documents before signing.
Kathryn (Kate) Hickner, Esq. is an attorney at Brennan, Manna & Diamond, LLC, Cleveland, where she is a Partner in the firm’s national health law practice. Additional information regarding Kate’s background and experience can be found at https://www.bmdllc.com/ team/kathryn-e-hickner/. Kate can be reached at kehickner@bmdllc.com and 216.417.0844.
BY MARK F. WEISS, JD The Mark F. Weiss Law Firm, Dallas, TX, Los Angeles and Santa Barbara, CA
“Everyone is doing it” is no more of a defense to a federal Anti-Kickback Statute (AKS) violation, than the fact that dozens of people are selling crack on street corners is a defense to drug charges.
A recent OIG Advisory Opinion serves as a stark reminder that deals in which “anesthesia management companies” sponsor and manage captive anesthesia groups owned by surgeons, aka “company model deals,” come fraught with danger of criminal prosecution.
Although OIG Advisory Opinion 23- 05, made public on August 18, 2023, addresses a proposed business arrangement involving intraoperative neuromonitoring (IONM), the scheme it shot down is completely analogous to the sponsored form of the company model of anesthesia services.
Whether prosecutions and whistleblower actions will follow is anyone’s guess, but an educated guess is that it’s simply a matter of time.
A PRIMER ON THE COMPANY MODEL
Let’s begin with a quick primer on the company model.
Although it can take various forms, the most prevalent are a direct model and a sponsored model.
The direct model involves the formation of an anesthesia services company by the surgeon-owners of an ambulatory surgery center (ASC). The purpose of the company is to provide all of the anesthesia services for the center. Prior to the company’s formation, all anesthesia services were provided by anesthesiologists (working alone or in concert with CRNAs) either for their separate accounts or for the account of their anesthesia group. After the formation of the company, the anesthesiologists and CRNAs are employed or subcontracted by the company, with a significant share of the anesthesia fee being redirected to the company model’s owners, the surgeons.
In the sponsored model, a so-called anesthesia management company fosters the creation of an anesthesia company for the surgeons, who become its owners. The management company continues to provide operational support from a menu including recruiting, credentialing, managed care contracting, billing and collection—in many cases providing a turnkey management solution to the surgeon-owners. As in the direct model, after the formation of the company, the anesthesiologists and CRNAs are employed or subcontracted by the company, with a significant share of the anesthesia fee being redirected to the company model’s owners, the surgeons.
The Proposed Arrangement
The entity requesting the Advisory Opinion 23-05 (Monitoring Company) contracts with various hospitals and ASCs for IONM, which involves a technical component performed by a neurophysiologist and a “live,” but often remote, monitoring of the test results and waveforms by a neurologist.
Currently, the Monitoring Company employs neurophysiologists and has a management services agreement with a physician practice (Practice) that employs and/or subcontracts with neurologists. Surgeons schedule IONM services for their surgical cases by making a referral to the Monitoring Company. The Monitoring Company then schedules one of its neurophysiologists to perform the technical component and contacts with Practice to assign a neurologist to perform the professional component. Generally, the Monitoring Company bills the hospital or ASC at which the case is performed for the technical component, and Practice bills the surgical patient or insurer, as applicable, for the professional component.
The “Proposed Arrangement” involves a contractual joint venture in which the referring surgeons would profit from their referrals. Specifically, the Monitoring Company would assist surgeons (Surgeon Owners) who request IONM monitoring with the formation and operation of a turnkey physician-owned entity (Newco) that would perform IONM services.
The Surgeon Owners would form the Newco and would set the terms of their respective ownership interests and the methodology for the distribution of profits amongst themselves. Neither the Monitoring Company nor the Practice would have ownership in Newco.
After formation, the Surgeon Owners would have limited participation in Newco’s day-to-day business operations and would instead contract with the Monitoring Company and Practice for the performance of the following business operations:
Pursuant to a billing services agreement between the Monitoring Company and Newco, the Monitoring Company would provide to Newco billing, collection and certain other administrative services in exchange for a fee from Newco (the “Billing Services Agreement”).
Pursuant to a personal services agreement between Practice and Newco, Practice would provide to Newco the services of its neurologists and the services of neurophysiologists (which Practice would lease from the Monitoring Company under the management services agreement between the Monitoring Company and Practice) in exchange for a fee from Newco (the Personal Services Agreement).
The Monitoring Company certified that the services provided by the Monitoring Company and Practice under these contracts would constitute virtually all of the day-to-day requirements of an IONM business. The Monitoring Company does not expect that Newco would need to hire any dedicated employees because the Monitoring Company and Practice would provide all necessary services for Newco.
Newco would contract with various hospitals and ASCs under an IONM services agreement that would govern Newco’s provision (or arranging for the provision) of the technical and professional components of IONM services for surgeries at such facilities. Generally, Newco would bill the hospital or ASC for the technical component and would bill the surgical patient or insurer, as applicable, for the professional component.
Although Newco’s billing would be handled by the Monitoring Company under the Billing Services Agreement, the Monitoring Company would take direction from the Surgeon Owners regarding the amounts to be billed for services.
Why Would Monitoring Company Do This?
Why would the Monitoring Company want to do this? It’s because other IONM companies are engaging in the scheme, and surgeons, seeking to profit from IONM referrals, are demanding it.
In its request to the OIG, the Monitoring Company stated that it seeks to retain business from its existing surgeon clients that otherwise would be lost to competing IONM companies willing to engage in the scheme, and certified that it would adopt the Proposed Arrangement only as required in specific situations where its existing surgeon clients wish to own their own IONM company and may not continue to do business with Requestor otherwise.
Although Newco would pay a fee to the Monitoring Company under the Billing Services Agreement and would pay a fee to Practice under the Personal Services Agreement, the Monitoring Company anticipates that Newco would achieve substantial profits from the Proposed Arrangement (i.e., the difference in fees paid to the Monitoring Company and Practice under the services agreements and reimbursement received from third parties) and anticipates that Monitoring Company and Practice would earn substantially less profit under the Proposed Arrangement than under their current business model.
This is primarily because, as the Monitoring Company certified: (i) reimbursement for the professional component of IONM can far exceed the cost of providing the service; and (ii) Practice would charge Newco less than it could bill a third-party payor for the same services under the Monitoring Company’s and Practice’s current business model because competing IONM companies marketing similar arrangements to surgeons have aggressively discounted their charges for such services.
The Underlying Law
The federal anti-kickback statute (AKS) prohibits the offer of, demand for, payment of or acceptance of any remuneration for referrals of Medicare or Medicaid patients. There are exceptions, most notably regulatory “safe harbors,” that describe certain arrangements not subject to the AKS because they are unlikely to result in fraud or abuse.
Broad OIG Guidance
The OIG has issued two fraud alerts applicable to the analysis of joint venture model deals: its 1989 Special Fraud Alert on Joint Venture Arrangements, which was republished in 1994, and a 2003 Special Advisory Bulletin on Contractual Joint Ventures.
Note that the term “joint venture,” as used by the OIG in the alerts, is not limited to the creation of a legal entity; rather, it covers any arrangement, whether contractual or involving a new legal entity, between parties in a position to refer business and those providing items or services for which Medicare or Medicaid pays.
The OIG has made clear that compliance with both the form and the substance of a safe harbor is required in order for it to provide protection. The OIG demands that if even one underlying intention is to obtain a benefit for the referral of patients, the safe harbor would be unavailable, and the AKS would be violated.
Although each alert is illustrative of the regulatory posture of the OIG, the 2003 Special Advisory Bulletin is particularly on point in connection with analyzing structures such as presented in regard to IONM as well as other “popular” arrangements designed to capture referral profits.
In it, the OIG focuses on arrangements in which a healthcare provider in an initial line of business (for example, a surgeon) expands into a related business (e.g., IONM or anesthesiology) by contracting with an existing provider of the item or service (e.g., neurophysiologist, neurologists, anesthesiologists or nurse anesthetists) to provide the new item or service to the owner’s existing patient population.
The 2003 bulletin lists some of the common elements of these problematic structures in general terms, with bracketed examples inserted by the author:
The surgeon expands into [IONM or an anesthesia business] that is dependent on direct or indirect referrals from, or on other business generated by, the owner’s existing business [such as the surgeon’s practice or ASC].
The surgeon does not operate the [IONM or anesthesia] business—the [IONM provider or anesthesiologist] does—and does not commit substantial funds or human resources to it.
Absent participation in the joint venture, the [IONM provider or anesthesiologist] would be a competitor [of the surgeon’s IONM or anesthesia company], providing services, billing and collecting [for the IONM company’s or the anesthesiologist’s own benefit].
The [surgeon] and the [IONM company or anesthesiologist] share in the economic benefit of the [surgeon’s] new [IONM or anesthesia] business.
The aggregate payments to the [surgeon] vary based on the [surgeon’s] referrals to the new [IONM or anesthesia] business.
The OIG’s Opinion
The OIG determined that the Proposed Arrangement would involve several forms of remuneration, including, but not limited to: (i) discounts under the Personal Services Agreement provided by Practice to Newco; (ii) the opportunity for Newco to generate a profit through the difference between the fees paid by Newco to each of the Monitoring Company and Practice under the services agreements and the reimbursement Newco would receive for such services from third parties; and (iii) returns on investment interests in Newco to the Surgeon Owners. These streams of remuneration could induce the Surgeon Owners to make referrals of IONM services for which payment could be made by a federal healthcare program.
The OIG found that there was no safe harbor protection for the Proposed Arrangement’s streams of remuneration, and that it would have many of the indicia of suspect contractual joint ventures about which the OIG has longstanding and continuing concerns.
The Proposed Arrangement would present a host of risks of fraud and abuse under the federal AKS, including patient steering, unfair competition, inappropriate utilization and increased costs to federal healthcare programs. The OIG stated that it is possible that the Proposed Arrangement could enable the Monitoring Company and Practice to do indirectly what they could not do directly: pay the Surgeon Owners a share of the profits from their referrals for IONM services that could be reimbursable by a federal healthcare program.
Even if the Monitoring Company could ensure that no IONM services reimbursable by a federal healthcare program would ever be referred to Newco, the remuneration to Newco under the Proposed Arrangement could induce the Surgeon Owners to refer their IONM services reimbursable by a federal healthcare program to the Monitoring Company and Practice, thereby disguising remuneration for federal healthcare program beneficiary referrals through the payment of amounts purportedly related to non-federal health care program business.
TAKE HOME THESE ESSENTIAL POINTS
The term “company model” is an industry descriptor of certain types of arrangements. It’s not the case that any specific law or regulation makes, in blanket fashion, company model deals illegal.
Just because the facts of Advisory Opinion 23-05 involve IONM and neurologists doesn’t lessen the value of the opinion as an indication of the OIG’s position vis-Ã -vis other joint venture arrangements, such as the role played by so-called anesthesia management companies in helping surgeons, e.g., gastroenterologists, set up and manage captive anesthesia companies for their ASCs.
Although they give great insight into the minds of the federal enforcers of the AKS, that is, of the OIG, advisory opinions themselves are binding only on the specific requestor. The AKS is a criminal statute, and, as such, intent to provide/accept remuneration to induce referrals must be proven. That means that the analysis is highly fact-specific.
In similar fashion, when an alleged company model scheme underlies a federal False Claims Act (i.e., whistleblower) lawsuit, specific facts relating to the kickback-tainted claims for payment must be pleaded with particularity, although there is some variance among the federal court circuits as to the required degree.
The bottom line is that each arrangement within the rubric of the company model must be scrutinized extremely carefully. The “chance” of criminal conviction, or of civil judgment on the False Claims front, may be low, but the criminal penalties (jail time, civil monetary penalties, exclusion from participation in federal healthcare programs) and trebled civil damages judgments are high. Low odds times high penalties equals high risk.
Mark F. Weiss, JD, is an attorney specializing in the business and legal issues affecting anesthesia groups and healthcare facilities on a national basis, practicing at The Mark F. Weiss Law Firm, with offices in Dallas, Texas and Los Angeles and Santa Barbara, California. He served as a clinical assistant professor of anesthesiology at USC Keck School of Medicine. He can be reached by email at markweiss@weisspc.com.
BY JODY LOCKE, MA Vice President of Anesthesia and Pain Practice Management Services Coronis Health, Jackson, MI
In many of his presentations to participants at the ASA Practice Management Seminars, Dr. Amr Abouleish often suggested the following three levels of American healthcare. In fact, these were basically his leitmotif for understanding practice management.
Healing is an art. Medicine is a science. Healthcare is a business.
Anesthesia training programs focus extensively on the first two, but economic realities make it imperative that practices come to terms with the third. The greatest challenge facing most American anesthesia practices today is to generate enough revenue to recruit and retain a sufficient number of qualified providers to meet the expectations and contractual requirements of the administrations they serve.
It has been said that the effective management of the operating room suite can be compared to sitting on a three-legged stool where administration represents one leg, the surgeons the second leg and anesthesia the third. While there may be a close working relationship between administration and anesthesia, the relationship between administration as customer and surgeons as providers can be somewhat mercurial, which often leaves the anesthesia department captive to challenging, inconsistent and unpredictable staffing and call requirements. It should be obvious that the overall objectives of the administration and the anesthesia department are aligned; both want optimal productivity and reasonable profitability, but this is not always clear. The fundamental problem is that surgeons only use operating rooms as they need them. Fortunately, hospital administrators are starting to welcome input from the anesthesia department to explore options for more effective O.R. management. Some forwardthinking anesthesiologists such as Michael Roizen, MD of Chicago have been suggesting that anesthesia should play a much more active role in the management of the operating rooms. There is clearly an opportunity for anesthesia departments to share insights gleaned from their comprehensive billing database.
Limited personal experience often conditions anesthesia perceptions of surgeon behavior and motivation. The reality is that a detailed assessment of one surgeon’s goals and objectives is just that: an assessment of one surgeon’s practice. Every practice is a unique reflection of the personality of the surgeon, the nature of his or her specialty, economics and the requirements and expectations of the community. Some anesthesia providers have been tempted to generalize based only on their personal experience with surgeon behavior. While there is always some truth to these perceptions, as is often the case, most generalizations are simply not true. Understanding the complex factors that determine surgeon behavior is the key to the development of effective management strategies. As we all know, managing surgeon behavior can be a challenging business, but no single set of providers has more experience and more powerful data tools than those in anesthesia.
Obviously, the pandemic had a dramatic impact on American medicine. From March 2020 to the end of that year, hospitals adopted a wide variety of strategic measures to mitigate the potential impact of the virus. Many suspended the scheduling of elective cases for a period of time, which had a dramatic impact on surgeons and anesthesia providers. The good news is that, by the end of 2021, most facilities had returned to normal and surgical case volume was at or above pre-pandemic levels. Now is an especially good time to identify significant patterns and trends and formulate new strategies for the future. As a result, the focus of this analysis is the surgical activity of 10 significant anesthesia practices during calendar year 2022. The basis of our analysis is date of service (DOS) billing data from multi-site practices across the country. The goal was to identify those unique measures and metrics that anesthesia providers have access to as a result of their billing database that are especially useful in understanding the practices of their surgical colleagues. Because the focus is surgical activity in the operating room, we have excluded obstetric and endoscopic cases. The data does, however, include all types of surgical venues, including inpatient and outpatient venues.
As one can imagine, the resulting dataset is huge. Even relatively small facilities might have a list of hundreds of surgeons who book cases. Given the fact that 20 percent of surgical practices typically generate at least 80 percent of surgical cases, we have focused on the top surgical practices that are most responsible for overall operating room utilization and trends. One of our client practices, for example, provides services to 963 surgeons, of which 202 generate 80 percent of total surgical case volume. We have further refined our focus to the top 20 surgeons for each anesthesia practice because for most practices the top 20 surgeons generate 30 percent of total surgical revenue. The goal here is to provide templates and models that will allow the typical practice to better understand the strengths and weaknesses of their surgeon community in measurable and comparable economic terms.
CRITICAL METRICS
The three most important questions to ask when assessing a given surgeon’s practice are as follows.
How important is the surgeon to the anesthesia practice? What percentage of cases is the surgeon responsible for and what percentage of total surgical revenue does this generate? Surgeon loyalty is also a critical factor. How likely is the surgeon to continue current levels of productivity?
How productive is the surgeon? Does he or she generate a full line up of cases each day such that anesthesia can count on productive days of at least 50 billed ASA units per day, and is there a fair amount of down time? Most surgeons want their 7:30 starts, but how often is there a lineup of cases to follow?
What is the impact of payer mix? Payer mix is the key to profitability. The higher the percentage of Medicare and Medicaid units billed, the lower the average yield per billed unit.
Tracking surgeon production patterns can prove to be an interesting exercise that requires some practice and attention to detail. The ability to consistently extract meaningful data may require some refinement and experience. Ultimately, the goal is to be able to determine the profitability of the top surgeons’ practice by comparing the cost per anesthetizing location day and its revenue potential.
THE TOP 20 SURGEONS
It is always helpful to identify the top 20 surgical practices. Table 1 presents the data for one of the sample practices. The top 20 surgeons were determined based on case count, which is perhaps the most common units of measure for surgical volume. The total billed units are one indicator of anesthesia revenue potential. The collections represent what has actually been collected and posted for the surgeon based on the date of service (collections are matched to the charges they are paying off).
This table is quite representative of all the sample practices in the fact that the majority of surgical practices in the top 20 are orthopedics. These inevitably rise to the top of the list for two reasons: a majority of their patients have commercial insurance that pays at premium rates and many orthopedic anesthetics involve the use of nerve blocks for which there is separate payment. Of particular note in this table is the relationship between the percentage of cases and the percentage of total collections. This is a clear indication of the profitability of the practice. Neurosurgery, for example, involves fewer but longer cases, which makes it more profitable. When the percentage of collections is at or above the percentage of cases it indicates a very profitable surgical practice. It should be noted by contrast that eye surgeons do mostly Medicare cases so their percentage of collections is well below the percentage of cases.
SURGEON PRODUCTIVITY
There are two kinds of surgeons in most hospitals. There are those that bring most of their surgical cases to the facility and who have a good relationship with administration. These are the loyal ones that often get special favors from the facility. It is not uncommon, for example, to have a hospital build a separate wing for a busy orthopedic practice. The significance of these surgeons to the success of the facility and the anesthesia practice cannot be overstated. The irony is that, for the most part, anesthesia providers are more responsible for the quality of the patients’ surgical experience than the surgeons. While it used to be that anesthesia providers were primarily focused on the comfort and safety of their patients, administrators are increasingly focused on customer service; in other words, they want surgeons to feel well treated and well cared for.
Giving surgeons block time is the most common form of recognition facilities grant their favorite surgeons. This is one of the most common tools facilities use to encourage surgeon loyalty. The question, of course, is how consistently each uses his or her block time. Block time can only be an effective tool when it is managed closely.
Table 2 Inpatient and Table 3 Outpatient, provide an example of useful metrics for evaluating surgeon productivity. While the operating room staff is usually focused on the number of cases a surgeon performs per day, what is far more useful and relevant to the anesthesia department is the average number of billable units generated. Billable units are a function of average cases per day multiplied by the average units per case. The data indicates how much variability there is among practices. The key metric here is the number of billable units generated per clinical day. Conventional wisdom holds that a provider needs to generate at least 50 ASA units paid at a reasonable average rate to cover the cost of providing the care.
THE IMPACT OF PAYER MIX
There are two realities that are continuing to challenge all medical practices in the United States. They are the aging American population and the increasing percentage of patients who are covered by Medicare and Medicaid, the rates for which are set by federal and state governments, and not the market. Most practices are seeing a one percent increase in their Medicare population per year. Medicaid percentages are also increasing for many, but for different reasons having to do with the local economy. The average Medicare rate is about $22 per ASA unit while many commercial rates can be as much as $60 per unit. Medicaid rates vary considerably from state to state but are most discounted in the Empire State where New York Medicaid only pays $10 per unit.
Table 2 Inpatient and Table 3 Outpatient, provide examples of the analysis of payer mix by place of service. First, it should be noted that for the anesthesia practice from which this data comes, 81 percent of all cases for the top 20 surgeons were performed on an outpatient basis in 2022. Understanding why cases are performed on an outpatient basis versus in a hospital is a function of many factors most of which relate to the convenience of the patient and the surgeon. Clearly, it is easier to book a case in a surgery center than in a traditional hospital. For the patient, access is also much easier. There is a belief in some practices that surgeons may tend to book their Medicare cases in the hospital while they take their patients with good insurance to outpatient facilities. While this may be a factor for some surgeons, it is not the primary consideration.
In Tables 2 and 3, Medicare and Medicaid cases are broken out. This allows for the identification of a Medicare percentage and a Medicaid percentage. The combination of the two is referred to as the public payer percentage, noted here as the PPP. It is certainly true that the PPP is higher for inpatient cases than outpatient, 58 percent versus 36 percent, but it should be noted that there is considerable variability from surgical practice to surgical practice.
Not only is a smaller percentage of Medicare cases performed in outpatient facilities, but this is also true of Medicaid cases: seven percent inpatient versus three percent outpatient. Obviously, payer mix has a significant impact on the revenue potential by place of service: the yield per unit billed will inevitably be higher for cases performed on an outpatient or ambulatory basis. Over the past years, there has been an inexorable migration of cases from inpatient facilities to outpatient facilities. Increasingly, cases that were once considered inpatient procedures are being reclassified as outpatient procedures.
The implications of this migration have dramatically impacted virtually all anesthesia practices in a number of significant ways and are the result of market factors over which the anesthesia practice has little or no control. Perhaps the most important impact is on coverage and call requirements. Even though cases are migrating out of traditional hospital facilities, the coverage and call requirements have remained much the same. The result has simply been that the economics of hospital care has been eroding. The profitability of 24-hour in-house call coverage is constantly eroding as a result of volume and payer mix trends. This inevitably leads to the need for increased financial support to maintain the same level of service. It comes as no surprise that anesthesia subsidies have increased dramatically over the past decade. In many markets, anesthesia practices are even starting to find they need financial support in ambulatory facilities.
It is also true that anesthesia practices have had to reinvent themselves. The days of a large practice dedicated to just one primary facility are fading fast. The typical practice is spending considerably more time and energy expanding its scope and focus to follow their surgeons to the venues they prefer to do their cases. The result is a new practice model that is based on the new logistical realities of practices that must be able to deploy providers to a variety of venues.
YIELD PER CLINICAL DAY
Every anesthesia practice that must renegotiate its contract with its hospital administrators must assess the profitability of the agreement. This inevitably involves comparing the revenue potential of the clinical services provided with the cost of providing the care. While there are a variety of ways to perform this analysis, many prefer to normalize the calculations based on anesthetizing locations because this facilitates discussion of coverage options. Requirements for this approach require two practice-specific metrics: the cost per anesthetizing location per day and the revenue potential of the average clinical day. Tables 4 and 5 are provided to shed light on two aspects of the calculation of the revenue potential. The first presents the average daily yield potential per day for the top 20 surgeons for each of the anesthesia practices in our sample. This offers benchmark data as a point of reference.
Table 5 shows actual metrics for the top 20 practices for a typical anesthesia practice. Ideally, this should be prepared for your practice as a way of identifying how each surgeon achieves his or her results. As has been discussed, every facility offers privileges to an extensive list of surgeons, but it is usually the top 20 percent that generate 80 percent of the cases and revenue. It is because of this that every anesthesia practice must ensure that the top surgeons are as productive as possible.
Typically, the average daily yield for the top surgeons should be $2,000. As the chart indicates, there are a number of notable exceptions, but they are clearly outliers. The concern is that all the rest of the surgeons yield much less per day. The actual cost of providing the care will vary considerably based on the configuration of the care team and compensation levels. The point is that for most practices there is simply not enough revenue generated from patient collections to cover the cost of the care required; this explains why most practices require financial support.
Table 5 shows the critical production metrics that determine the yield per clinical day. The actual formula multiplies the number of cases per day by the average units per case by the actual net yield per unit. Some surgeons perform more cases with fewer units per case, as is true of endoscopists whose average case only generates about six or seven units, while others perform fewer longer cases. The yield per unit can be a big differentiator. Cardiac surgeons, for example, perform long cases that generate 40 to 50 units per case but because these are mainly Medicare patients the yield per unit is limited by discounted Medicare rates and so their yield per day may also be low.
QUALITIES OF THE BEST SURGEONS
The best surgeons typically embody the following, and these are qualities that anesthesia providers should look for and encourage as part of their commitment to excellent customer service.
Top surgeons understand and appreciate the value of anesthesia and are always open to collaborative approaches to the management of their patients. They recognize the importance of quality anesthesia care. There is no better example of this than orthopedic surgeons that encourage the use of nerve blocks for post-operative pain management.
The best surgeons are loyal to the institution and consider themselves partners with administration. There is no greater challenge to anesthesia practices than surgeons who might decide to take their cases elsewhere. Anesthesia needs to be able to count on consistent surgical volume.
O.R. utilization can be very significant. When surgeons insist on 7:30 starts, the hope and the expectation of the anesthesia providers is that they will get the to-follow cases. Everyone likes full days of cases without significant gaps. Nothing is more challenging than the surgeon who schedules a couple of cases in the morning then goes to his office, only to bring one or two add on cases late in the day.
The acuity of care, as measured in average units per case, can be especially relevant. The relationship between the anesthesia providers and each surgeon is greatly enhanced when there is a certain degree of predictability with regard to the types of cases performed and anesthetic requirements.
Although quality of care has nothing to do with a patient’s insurance or ability to pay, as mentioned at the outset, healthcare is a business. Payer mix and financial yields are always important aspects to monitor and track. The more surgeons that have productive and profitable practices, the less support that will be needed from the facility.
FINAL THOUGHTS
One might wonder how the data and concepts presented here will help the typical anesthesia practice that sees itself captive to a system over which it has no control. For many practices, the information and analysis presented here might simply provide an entertaining confirmation of their current perceptions of the surgical practices they work with daily. To those who are willing to give this information serious consideration, however, there are a variety of possibilities. This article is dedicated to the spirit of partnership that most administrations are now seeking with their anesthesia providers. Building on the themes of accountability, collaboration and innovation, these data and metrics can prove relevant on at least three levels.
First, the sharing of timely and reliable data is a necessary prerequisite to collaboration. Maybe the administration has drawn many of the same conclusions about its surgeons as the anesthesia team, but maybe not. Maybe they only see part of the picture and are limited by the requisites of hospital administration. There is always great value in helping administrators understand and appreciate the specific economics of anesthesia. This can only be helpful, especially when it comes to the negotiation of a stipend.
Second, the anesthesia providers are critical stakeholders in the management of the operating rooms. The data and insights gleaned from their billing system offer a unique set of opportunities and insights for process improvement. No one has more and better information about how surgeons actually work and what makes them more or less efficient. The challenge and opportunity for all anesthesia practices is to take more control of the factors that determine their income and lifestyle.
Drilling down on surgeon behavior is the next level of involvement for most anesthesia practices. It is one thing to know what the collections are and what the impact of payer mix is, but it is quite another to know where the surgical cases are coming from and how important surgeon loyalty is to the future of the practice. Not only will the kinds of information presented here be of interest to your administrators, but sharing them will open up a whole new level of dialogue and partnership.
Jody Locke, MA serves as Vice President of Anesthesia and Pain Practice Management Services for Coronis Health. Mr. Locke is responsible for the scope and focus of services provided to Coronis Health’s largest clients. He is also responsible for oversight and management of the company’s pain management billing team. He is a key executive contact for groups that enter into contracts with Coronis. Mr. Locke can be reached at jody.locke@coronishealth.com.
Our very own Justin Vaughn leads us off with a cautionary tale of medical mistakes. His is a big picture view of adverse events that can greatly impact the reputation of hospitals and anesthesia practices. He shares four particularly useful strategies that groups can implement.
We often remind our clients that anesthesia has more and better data about what actually happens in the operating rooms and delivery suites than any other source. The challenge is knowing how to use this data effectively. Jody Locke’s article is a particularly interesting review of surgeon production patterns. He shares some very practical advice about ways to enhance the relationship between anesthesia departments and administration.
Mark Weiss, JD is always sharing his perspective on legal issues affecting our clients. There has been much discussion of the Company Model over the past few years. It is a tricky topic. His discussion of a recent OIG opinion sheds some valuable light on the potential perils.
Corporate practice of medicine laws have been established in 30 states. They can be especially challenging to today’s Friendly Physician model organizations. Kathryn Hickner, Esq. addresses the particular challenges associated with physician organizations that are owned and managed by non-physicians.
Ever since the specialty of anesthesia first started to encourage the notion of the pre-surgical home and the importance of having anesthesia providers take more responsibility for the management of patients through the entire continuum of the surgical experience, practices have been trying to figure out how to make it a reality. The most common approach has involved the establishment of pre-surgical testing clinics. Most would agree they enhance the quality of clinical care; the challenge is their economics. Rita Astani, our president of anesthesia services, explores the arcane world of Evaluation and Management codes in an effort to put things in perspective.
It’s true: we live in a litigious society. That’s not necessarily an indictment against those who initiate a legal action. It may be that they feel forced into taking such extreme measures because of the inappropriate and detrimental behavior of others. Regardless of which party is at fault, one thing remains certain: the lawyers are getting paid.
Lawsuits are on the rise, and the hospital industry is not immune in this regard. This week, Becker’s Hospital Review provided a list of recent legal actions involving hospitals across the country that may act as cautionary tales for our wider readership. Below are a few of the examples from the list.
According to the Seattle Times, a former medical director for a hospital in Seattle has filed suit against his former facility. The doctor voluntarily left employment at the hospital in question back in 2020 due to what he perceived to be a pattern of discrimination. The suit alleges that the hospital created a hostile work environment, including “permitting the use of racial slurs, failing to remedy known incidents of systemic racism, fostering an environment of conformity to the status quo of racial inequity, and subjecting its Black and Brown employees to a double standard of conduct.”
A prestigious university hospital in Connecticut is facing mounting lawsuits from former patients who claim they underwent fertility procedures without receiving painkillers under the assumption that they would. Back in 2020, a former nurse responsible for the ordering and inventory of controlled substances at the facility was found to have been stealing vials of fentanyl used for fertility procedures and replacing them with saline. Vials of saline were then administered to patients by staff members who, at the time, did not know pain medications had been tampered with.
A hospital need not worry only about alleged transgressions from the recent past as in the previous two examples (both from 2020); a facility in Chicago was successfully sued by a family whose allegations trace back to an event that occurred 20 years ago! The suit was filed on behalf of Shamond Butler, now a 20-year-old man who suffered brain injuries that were tied to inadequate care during his pre- and post-birth process. Mr. Butler cannot speak or read and requires around-the-clock care—allegedly due to the negligence of the hospital. A Cook County jury agreed, awarding Butler $55.5 million. According to the family’s attorney, Butler’s mother was not seen by clinical staff for six to seven hours after being admitted. The medication given to her was meant to cause contractions; but, instead, it cut off the oxygen supply to her child.
A national hospital system based in California reached a $200 million settlement with the state to resolve deficiencies in its delivery and management of behavioral healthcare. According to Becker’s, the settlement stems from a non-routine survey and investigation conducted by the California Department of Managed Health Care (DMHC), beginning in August 2022. The state found that the system had engaged in a pattern of canceling behavioral health appointments and, in many instances, had failed to provide health plan enrollees with timely and clinically adequate behavioral health appointments, as required.
According to NBC News, three physicians at a medical center in the Los Angeles area have filed suit against the center’s ownership, alleging that the misconduct of one orthopedic surgeon was overlooked by management for years. The plaintiffs allege that the behavior of the physician in question created a toxic work environment and put patients at risk. The three female physicians say they were demoted or otherwise retaliated against when they complained about the orthopedist’s behavior, which included sexual misconduct with sedated patients, intentional surgery delays, wearing a gun in the hospital and operating room, and demanding that a television used to monitor a patient mid-surgery show a baseball game for his entertainment during an operation. The plaintiffs allege that administrators of the hospital ignored written and verbal complaints for years.
Another hospital also found itself the subject of a lawsuit involving sexual misconduct. The New York facility came under fire over complaints from over 300 patients that a gynecologist sexually abused them during examinations. The doctor in question was described in the filing as “the most prolific serial sexual predator in New York state history.” The suit further alleges that hospital staff and administrators knew of the abuse starting as early as 1994 and did nothing to stop it.
Finally, an Indiana hospital was forced to settle a lawsuit for $158,000 over allegations that it failed to accommodate a nurse after a work injury. The suit was filed by the Equal Employment Opportunity Commission (EEOC) and was based on findings that the hospital opted to fire the nurse because she had lifting restrictions. Failing to transfer and/or accommodate an employee because of a disability is a violation of the Americans with Disabilities Act. As part of the settlement, the facility agreed to rehire the nurse and change policies surrounding human resource training for all employees.
In light of the above, hospital administrators and department managers must take a more proactive approach in safeguarding the finances of their facility and the welfare of their patients. They must assume that potential lawsuits are just a few misdeeds away. Rooting out misbehavior, inadequate processes and illegal procedures are the facility’s first best defense against the swirling of subpoenas. Lawsuits cost. Implementing changes now can avoid unpleasantries down the road.
Regardless of how a medical group’s management is set up and functioning, there is no guarantee those in leadership will remain in place for an extended period. There must be processes in place to find and train the leaders of the future.
Effective management of any medical practice must include three distinct roles, which are often identified in classic business terms: the CEO, the CFO and the COO. Traditionally, the CEO is the one with the big vision, who sees the practice as a whole, who negotiates contracts with clients and payers. This is the person who should have the strongest relationship with administration. He or she should have a clear sense of what distinguishes the practice and what the practice’s value proposition is. In the current environment, CFOs play a critical role as they must have a sound understanding of their practices’ finances. It is their role to ensure that collections are being optimized and that expenses are being minimized. Ideally this person has a strong working relationship with the billing company or staff. Provider compensation can be a particularly challenging aspect of this role, especially given the national anesthesia manpower shortage. The term “chief operating officer” may not be the best description of this third role, as it is as much about customer service as manpower and staffing. Essentially, this is the person who deals with clinical issues, surgeon complaints and collaboration with the other members of the O.R. team.
The Management Matrix
Some practices consider themselves lucky because there is one experienced physician who plays all these roles effectively and who commands the respect of the members of the practice and administration. Sometimes such practices are even referred to as czar-model practices although such a term is hopefully hyperbolic. The point is that such practices usually enjoy a good relationship with administration and provide a very favorable work situation for physicians and CRNAs. The challenge may be that this head physician personally holds the contract with the hospital. These are not usually the most democratic of practices as management decisions come from the top. Clearly, longevity of such practices is limited to the tenure of the leader.
Such practices aside, many groups struggle with the identification of appropriate players for each of the roles defined above. Typically, individuals are nominated for management positions and voted in by the membership. While this is standard operating procedure for most groups, it can have interesting consequences. When there are strong candidates who understand the business of medicine and have the respect of their colleagues, good leaders can enjoy long tenures. The problem is that too often this is the exception rather than the rule. Sometimes, nothing is worse than an endless succession of short-term presidents or managing partners. A practice must present a continuous and consistent presence to its customers.
There are two critical dimensions to the management of any business, and anesthesia practices are no exception. Every team requires clear and decisive leadership. Think of the role the quarterback plays in football: he has a strategic vision that he effects in carefully selected plays. This is what effective chairmen do; they inspire and motivate the team members to provide a consistent and state-of-the-art service. The flip side of the leadership coin must be effective management. Someone needs to ensure that the visionary standards are consistently implemented. This is the yin and yang of good management. It is a critical counterpoise that exists in all successful organizations. No leader can be effective and successful without a strong support team. This is the responsibility of the executive committee.
Grooming for the Future
It has been said that the problem with most physicians exercising management roles is that they are doctors first and business people second. While there may be some truth to this, it does not have to be the case. This explains why the ASA started providing practice management seminars in 1994. The society recognized the reality that healthcare is a business. Since then, scores of providers have had their eyes opened to the economic challenges of medicine. It is an important theme that many practices continue to focus on and stress. The success or failure of a practice is much more a function of what happens outside the operating room than within its confines.
The perspective of anesthesia providers is often conditioned by the work they do. They are problem-solvers in the context of individual cases. It has even been said that they have the shortest decision-making sequence in medicine; there is no clinical issue they cannot address in a matter of seconds. The problem is that managing a practice requires strategic thinking and long-term planning. It is a different mind-set; and, just as providers had to be trained to provide anesthesia, now they must be trained to manage their practices. It is a new paradigm but one that can be learned and mastered.
Never has there been such turmoil and turnover in the specialty of anesthesia. Too many practices are successful today and gone tomorrow. This is the new challenge, and every practice must understand and appreciate the need to create enduring organizations that will continue to meet the challenges of tomorrow. Just as parents strive to groom their kids for life as an adult, so too, anesthesia practices must groom their young members to be managers of the future. If you have any questions on this topic, please contact your account executive.
BY LYMAN G. SORNBERGER CEO/President, Lyman Healthcare Solutions, Inc., Broadview Heights, OH
The number one concern these days in healthcare is inflation, and over 70 percent of healthcare leaders say that their “financial health” is at risk. Hospitals and providers of all sizes have been on a mission now that prioritizes, among other goals, higher-quality care at a lower cost. Forward-thinking revenue cycle management (RCM) and other financial leaders are making moves now to prepare for the continual economic uncertainty.
The financial instability brought on by COVID-19 is beginning to ease for most organizations; and, over the next three to five years, healthcare transformational strategies will focus on creative cost-saving options with improved patient care.
THE PRIORITY OF COLLABORATION
In order to try to dig themselves out of their financial strife, healthcare providers and organizations are ready for new partnerships that will align talent and expertise from inside and outside their “four walls.” Their ultimate objective is to accelerate their financial results while supporting a broader transformation through managed services and expanded collaboration with their colleagues. Siloed organizations can no longer fiscally survive the increased burdens of diminishing reimbursement, increased cost and patient dissatisfaction.
Those healthcare organizations that create successful collaboration strategies will not only optimize their current systems through “lessons learned” and technology that aligns with their mission and goals, but they will promote their industry brand.
Seasoned healthcare leaders are now being cornered into looking at what they can realistically achieve alone versus looking to outside networking and business relationships. Nowadays, it’s career suicide to maintain the mantra of “go for the status quo; we always did it that way; and/or we are the industry’s best.”
Continued education will always be key to personal and professional growth, but reaching across the aisle will now revolutionize the healthcare RCM world. For years, outsourcing managed services models or aligning with the “competition” has been at arm’s length. For various reasons, leaders have been hesitant to think too far outside the box and only give lip service to the term collaborate. What they may not realize is that the future and financial health of their organizations will be at risk unless everyone is cognizant of the need to find strategic partners.
WHAT COLLABORATION LOOKS LIKE
Without question, those committed to collaboration will be required to be humbler and less threatened in their relationship vision. That does not mean that they relinquish control or become subservient, but rather that they realize that an amazing brain trust exists, and we just need to tap into it more aggressively. Healthcare organizations are becoming more complex while seeking to operate more seamlessly across the continuum of care inside and outside of their hospitals and provider offices.
New, more collaborative and holistic models are emerging that promote financial stability and performance improvement without sacrificing the healthcare organization’s mission, goals and culture. The traditional transactional or siloed outsourcing may work for a few areas, but a more realistic hybrid collaborative model will be the most effective way to accelerate the crucial revenue cycle business functions while also supporting the organization’s broader transformational strategies.
Without question, the approach will require RCM leaders to combine the demands of a high-performing committed revenue cycle team with a shared vision around patient loyalty, engaged employees and fiscal obligations. The heart of any healthcare’s plan is to rein in cost, accelerate and increase revenue and maintain the financial health and industry brand of its RCM. Among the biggest trends affecting how work gets done with RCM are staff shortages, diminished talent pool, automation and collaboration through education and networking.
Revenue cycle management is the ideal springboard for new ways of operation that brings together the expertise and talent from not only inside but outside of healthcare organizations. How much would we all learn if we could just listen to “what NOT to do?”
Healthcare financial leaders need and want more from their personnel, talent pool, technology and systems but lack the resources, internal expertise, education and time to optimize every part of their business. Case in point: before the coronavirus pandemic, most organizations did not have the structure to fully support remote workforces. Now, leaders face the challenges of improving performance, sustaining culture and reducing cost in a virtual environment. Seeking collaborations to carry some or part of the operational load will be critical to maintaining the momentum behind this major cost-saving trend.
THE FOCUS OF COLLABORATION
Technology strategy, now more than ever, should be a major consideration for any new collaboration, whether fully outsourcing the revenue cycle organization or selecting vendors for a portion of its functions. In the last decade, healthcare organizations made huge investments in their current systems, especially electronic health record (EHR) platforms, yet technology-related inefficiencies continue to frustrate the industry. Additionally, clunky, inefficient software has been a pitfall of past outsourcing relationships, particularly in revenue cycle optimization.
Organizations can’t afford to waste time and resources on new technology simply because it’s the next new thing. Their ability to realize quick returns on vendor or outsourcing investments depends on how well their partners understand and can leverage their technology stack. In the future of healthcare, collaborations should be designed to optimize current systems and address the interoperability of HER platforms. This enables smarter business decisions about when to layer in technology that truly aligns to the organization’s goals.
Whether fully or partially outsourced or insourced, the success of the revenue cycle hinges on talent and a pool of some of the same resources in the industry. Yet, for many health systems, years of status quo operating has stagnated its workforces’ skill sets. Revenue cycle employees, or more importantly leaders, are struggling to support trends like shifts to value-based care, integration and consumerism in spite of enterprise technology. Universally, organizations are experiencing a shortage of talent while also understanding they can’t hire for the same skills that they did five years ago.
The revenue cycle employee of the future is a data-driven problem solver who understands the patient consumerism and the financial experience of healthcare. But what now has changed? With the talent pool diluted from COVID burnout, retirements and experts seeking new careers, management education, communication and collaboration are more important than ever. Budgets are lean, but it’s not the time to cut your lifeline to enhancing reimbursement and decreasing cost through limiting education and collaboration opportunities. The cost to replace a seasoned RCM leader has been underestimated and the cost-benefit is well worth its investment. Rethinking how to upskill and retrain revenue cycle teams is needed, and organizations will have to evaluate if their internal capabilities will be sufficient.
Exploring collaborations that prioritize professional development, training and change management provides a foundation to make change stick and helps organizations build the culture to support their continual improvement. Clearly, the investment in business relations with other healthcare systems and third-party vendors are key for the “new world” transformation of the financial health of revenue cycle management. In summary, all parties—internal and external—will be required to plan and act differently and harness the momentum of major cost containment trends. This is the new definition of collaboration
Lyman G. Sornberger is President and CEO for Lyman Healthcare Solutions Inc. Prior to his roles at Lyman Healthcare Solutions, AHIMA Board of Directors, Knowtion Health Advisory Board, Hilton Law Firm and Source1 Healthcare Inc, Sornberger was the Chief Strategy Officer of Capio Partners, Executive Director of Revenue Cycle Management for Cleveland Clinic Health Systems (CCHS) from 2006 – 2012. This role comprised the revenue cycle management for all 11 Cleveland Clinic Health Systems Ohio and Florida hospitals and 1,800 foundation physicians. His responsibilities included all CCHS patient access services, health information management t and billing. Prior to his affiliation with CCHS Mr. Sornberger was with the University of Pittsburgh Medical Center for 22 years as a leader in revenue cycle management. Sornberger is a graduate from the University of Pittsburgh with a BS and a Master’s Degree in Business. He can be reached at 216.337.4472 or lymansornberger@lymanhcsolutions.com.
BY JIM YARSINSKY, CRCE-1 President, Zinserv Healthcare, Marlton, NJ
The most important action a revenue cycle department can make is to implement a well-thought-out process for managing claim denials. Of course, the best way to manage denials is to avoid them in the first place, and this should be a top priority.
CLAIM DENIALS CAN DRAIN YOUR REVENUE
Denials are climbing at an alarming rate for many hospitals. The average claim denial rate across the healthcare industry is five to 10 percent. These claim denials cost each healthcare provider an average of $5 million every year. One problem is that only 35 percent of denied claims get followed up on by hospitals by appealing them or by submitting a corrected claim.
Claim denials represent one of the biggest causes of lost revenue for medical facilities and adopting a set of best practices surrounding claims can help keep denial rates low and make appeals successful more of the time.
DENIALS ARE EITHER PREVENTABLE OR UNPREVENTABLE
According to “The Change Healthcare 2022 Revenue Cycle Denials Index” on Health Leaders Media, registration and eligibility remain the top preventable denials in medical coding. This is mostly due to coordination of benefits, missing or invalid claims data or lack of medical documentation requested. A denial may be triggered if just one field is left blank, including social security number, plan codes, modifiers or address.
There are additional reasons that preventable denials occur:
Medical documentation requests
Medical necessity
Medical coding
Avoidable care
Missing or invalid claim data
Untimely filing
Do you have a general idea of how much you lost to denied claims last quarter? What about which direction that number is trending? Here are some helpful tips to get you on the right track:
1. Know the Main Reasons for Your Claim Denials
A proactive approach is essential to identifying root causes as the basis for denial management and prevention. Getting to the root cause of preventable denials can help a provider improve their revenue cycle and prevent these denials.
2. Addressing Claim Denials
Getting claim denials under control means determining the root causes of your denials. To do this, you must first examine what happens before a claim is created and submitted. This can be hard work, but it can make a positive difference in your revenues if you do. You may notice trends, like claims being filed late or repeated issues with preauthorization. If you identify a trend in claim denials, you can address the cause by reviewing the entire claims submission process end to end. Ensure your scheduling and intake personnel understand how to conduct pre-authorizations and when they are necessary; and, if claims are repeatedly submitted late, examine the workflow process to see where it could be accelerated or automated.
Almost 90 percent of denials are avoidable. The key to avoiding denials is to train your staff to avoid mistakes before they are made.
At least 24 hours before a patient’s scheduled service, the patient’s demographic data should be verified, as well as their insurance coverage and benefits. It is important that you follow up quickly. On a regular basis, distribute denied claims to the billing staff for proper handling. This should happen every day.
All correspondence should be read daily for changes in billing or reimbursement policy from providers. This gives providers the opportunity to amend their policies and procedures to avoid denials. Use denial codes to educate medical billing staff when there is a denial due to incorrect medical coding.
Some denial management processes report and prioritize denials based on claim charges or balances. This may lead to suboptimal prioritization because some payers and some contracts have a lower payment-to-charge ratio than others. A better measure of value for prioritizing denials is the expected reimbursement on the claim. The expected reimbursement is based on the provider’s contract with the payer and is a measure of the true revenue-at-risk.
Segmenting and prioritizing the non-preventable denials based on their expected value, level of effort involved to overturn, and the probability of overturning, can help the organization make the denial management process more efficient, as well as increase and accelerate the cash flows. Identifying the preventable denials can help you improve the revenue cycle.
Denied claims are also either soft or hard denials. A soft denial has a temporary effect on cash and has the potential to be paid in full. The facility will need to follow up, but an appeal is not required. A soft denial can be overturned by submitting a corrected claim or by submitting additional information. A hard denial represents a loss of revenue that must be written off, and therefore, an appeal is required.
3. Making All of This Part of an Overarching Strategy
A clean claims strategy should be a strong priority. Simply putting out metaphorical fires when dealing with claim denials is not a good strategy for achieving and maintaining high clean claims rates. Ultimately, your overarching strategy for keeping denied claims to a minimum should include counting denied claims, identifying why they were denied and tracking claims to measure clean claims performance over time. Doing this effectively requires full understanding of your billing management workflows and medical billing software. Problems leading to denied claims may be found at just about any point in the patient cycle, from when they first schedule an appointment until the insurer pays (or doesn’t pay) the claims.
4. Have a Denial Appeal Process
Naturally, you would like to never have to appeal a denied claim, but that is not realistic for most providers. Develop a process for dealing with denied claims, and make sure your billing staff understands what to do and what documentation is required. It is also important to know how different insurers deal with appeals. For some, a phone call may suffice. For others, you may have to submit more forms or documentation to get them to even consider your appeal. Having a streamlined claims process helps because it can eliminate the problem of claims being denied due to late filing.
5. Set Goals and Monitor Progress Toward Them
As with any type of business improvement measure, setting goals and then tracking your progress toward them is essential to minimizing claims denials. Goals should be shared with all affected staff members, as should the mechanisms for how progress will be tracked. Every quarter, you should find out what the numbers tell you compared to the previous quarter.
When you reach your goals for minimizing claims denials, let your team know. Achieving goals can be terrific for morale, and it is okay to celebrate the big successes.
Jim Yarsinsky, CRCE-1, is president of Zinserv Healthcare. Zinserv employs over 100 elite professional medical billing experts and revenue cycle consultants. The company’s services range from interim revenue cycle staffing, A/R legacy cleanup and extended business office to coding and consulting engagements. Mr. Yarsinsky is a specialist at creating process efficiency and partnering with our customers to provide industry-leading revenue cycle solutions. He earned the designation of Certified Revenue Cycle Executive (CRCE-1) in 1995 from the American Association of Healthcare Administrative Management. Yarinsky also earned his BA in Business Administration from Rutgers University. He can be reached at 877.266.6691 or at jyarsinsky@zinserv.com.
