Arne Pedersen, MBA, FACMPE
Vice President Practice Management, Anesthesia Management Partners, Lake Bluff, IL

Anesthesia providers are losing thousands of dollars in hidden fees due to CMS’ lack of oversight in electronic payments pushed by the Patient Protection and Affordable Care Act, or PPACA (a.k.a. “Obamacare”).

The Problem

According to an August 14, 2023, article published on ProPublica, CMS forwarded email responses to questions and complaints from Zelis Executive, Matthew Albright. Mr. Albright also happens to be a former CMS employee who authored a key federal rule on electronic payments in 2012.[1]

This seems to be a clear case of the fox watching the henhouse.

From the Duane Morris Health Law website, author and attorney, Patricia S. Hofstra, describes what is a virtual credit card payment and how the payers use it. She also discusses how the programs implemented as an opt-out function only, without the knowledge and consent of the providers. She goes onto share parts of a letter dated January 15, 2015, sent to CMS by a group of several healthcare organizations complaining about virtual credit card payments and the excessive fees. The letter refers to a 5% fee charged on each transaction. [2]

Section 1104, Administrative Simplification, clearly states that Electronic Funds Transfers, or EFTs, need to be in place. According to subsection (B) ADOPTION REQUIREMENTS; EFFECTIVE DATES., CMS was required to develop a set of operating rules for EFTs and ERAs no later than January 1, 2011, and have them effective no later than January 1, 2013. In accordance with Section 1104, the language clearly states that the purpose of going electronic with payments and remittance advice was to simplify and reduce paperwork, which was to have a positive net effect on the administrative burdens of healthcare providers. It does not state whether a private entity can become a middleman and charge fees.[3]

An important note is that electronic claims submission was already in play when the PPACA was passed and signed into law in 2010.

While it is true that EFTs and ERAs are reducing the administrative burden on anesthesia providers, it is also true that the electronic transaction fees are adding to the healthcare costs with anesthesia providers bearing those costs. In another section of the ProPublica article, the author details how these middlemen play the game. He names a few industry-known names who are participating in these schemes. “A brochure for one payment company, Change Healthcare, boasted of automatically enrolling 100,000 doctors and hospitals in a plan to receive virtual credit cards and sharing some $8 million a year in revenues with the large insurer it was working for. (Virtual credit cards are a form of electronic payment in which a payer sends a string of numbers that are typed into a credit card reader to generate a one-time payment. Fees for VCCs run as high as 5%.)

Payment processors often boost insurers’ revenues by sharing the fees from virtual credit cards. One processor, VPay, says in its marketing materials that insurers can “make money on every virtual card transaction.” In response to questions from ProPublica, UnitedHealth, which owns Change and VPay, asserted that its services help medical clinics streamline recordkeeping, reduce administrative burdens, and accelerate payments.”[4]

An example of how costly this is for an anesthesia practice is when a large payer pays with a virtual credit card, or VCC, on several claims, say, for $20,000. The moment that card is run, the practice pays $1,000 in transaction fees. Let us say the practice has net collections of $300,000 per month. Of that, say, $100,000 is on the virtual credit card. That is $5,000 per month or $60,000.00 per year in transaction fees.

The Solution

We encourage anesthesia practices to transition away from many of these electronic payment types. This will save thousands of dollars each month. For our newer clients, their previous billing company signed them up for these electronic payments without their knowledge. They had no idea the money they were losing each month to these transaction fees.

Recommendation

Start with a plan. There are two options that will help your group save money.

1. Accept only EFTs with ERAs in accordance with Section 1104 of the PPACA.
2. Accept both Paper checks and EFTs with ERAs and little to no transaction fees.

As a company, we recommend accepting only EFTs or paper checks from the payers. For every new client we onboard at Anesthesia Management Partners, we audit the payment types. From there, we develop a client specific plan to transition from their current setup to one that will save them thousands of dollars monthly.  As an example, recently, one new client was paying over $3,000 in monthly transaction fees.  With our proven work, we’ve virtually eliminated those fees within the first 90 days of our relationship.

In our Billing and Practice Management Service offerings, we provide a multitude of strategies, Analysis, Negotiations, Forecasting, and Budgeting services. We have expertise in helping our clients with the above strategies and more. If you are interested in learning more about these strategies and other services to help your group address the multiple threats to your practice, please contact Anesthesia Management Partners via email at info@anesthesiapartners.com or via phone at (800) 444-6110.

[1] _{https://www.propublica.org/article/the-hidden-fee-costing-doctors-millions-every-year}

[2] _{Virtual Credit Card Payments – Duane Morris Health Law}

[3] _{https://www.congress.gov/111/plaws/publ148/PLAW-111publ148.pdf}

[4] _{https://www.propublica.org/article/the-hidden-fee-costing-doctors-millions-every-year}

Arne Pedersen, MBA, FACMPE
Vice President Practice Management, Anesthesia Management Partners, Lake Bluff, IL

Since the COVID 19 pandemic has subsided, ASCs are struggling with anesthesia coverage. This includes all types of anesthesia providers from physicians to CRNAs to CAAs (in States where they are licensed). It has become commonplace for groups to walk away from covering an ASC. Moreover, groups declining to cover an ASC are in increasing numbers. If ASCs were the place to go to make good money in the past, why are anesthesia groups declining now?

The driving factor is the poor financials for anesthesia. The key issues which are driving the poor financials for anesthesia are the Lack of Providers, Erosion of payor mix, and Poor OR Utilization.

Lack of Providers

The decades long debate is now the hot topic. The retirement of the Baby Boomer Generation is putting a strain on resources, particularly, physician specialists such as anesthesiologists as well as the other anesthesia providers, CRNAs and CAAs. Predictions for an ever-increasing demand curve for medical care during the retirement years of the Baby Boomers is happening. According to the 2019 survey commissioned by AAMC[1], there are three key findings.

• Demographics — specifically, population growth and aging — continue to be the primary driver of increasing demand from 2019 to 2034.
• A large portion of the physician workforce is nearing the traditional retirement age, and supply projections are sensitive to workforce decisions of older physicians.
• While there are still many unknowns about the long-term implications of COVID-19 for the physician workforce, by 2034, any overall supply or demand effect of COVID-19 likely will be small despite the disruptive short-term impact.

As of the date of this article, the demand for anesthesia remains extraordinarily strong, outpacing the supply of anesthesia providers. Anecdotally, we have heard stories repeatedly about the cost of CRNAs and CAAs. In 2015, CRNA compensation ranged from $150,000 to $200,000 per year[2]. With the immediate shortage, CRNA compensation has surged to a range of $250,000 to $350,000 per year. Private practice anesthesia groups are competing with Health Systems for these providers and are driving up the costs. The CAA compensation costs have also increased. In the same MGMA survey, CAA compensation ranged from $120,000 to $160,000 per year. Today, we are hearing ranges from $150,000 to $200,000 per year.

Erosion of Payer Mix

Payer mix is always an issue when considering coverage of ambulatory surgery centers (ASCs). A general rule of thumb for a solid payer mix is 60% good payers (commercial, WC, etc.) versus 40% poor payers (Medicare, Medicaid, and Self Pay). In the table below, we show the 2018 and 2022 payer mix as a percentage of case volumes[3]. The key point is the shift from 57% good vs 43% poor to 49% good vs 51% poor.

There are three trends that we are seeing today when collaborating with our clients, which impact the payer mix at ASCs. These trends are patient demographics, case mix, and current economic conditions.

Patient demographics are a big driver of the payer mix.  As stated before, the aging Baby Boomer population continues to retire and rely on Medicare for health insurance. For anesthesia billing purposes, Medicare does not pay well and falls into the poor payer category noted above.

With the same patient demographics, we also see a change in case mix.  For instance, as the population ages, we see an increase in eye cases which are heavy Medicare. Conversely, the good news is that healthy patients can go to ASCs for their outpatient surgeries and not have to go to the hospital. The cost savings for the payers are significant. This accounts for commercial payers still showing in the mid-forty percent range.

Current economic conditions also drive the payer mix.  The stronger the economy, the better the payer mix.  The reverse is true as well. In our current economic environment, households are struggling with high inflation impacting household budgets and purchasing power. This impacts the number of patients on Medicaid as well as self-pay patients. The data shows an increase in both categories. According to the Bureau of Labor Statistics[4], it will take $1.17 in 2022 dollars to buy the same goods for $1.00 in 2018 dollars for a 17% increase in costs over that period.

Poor OR Utilization

The life blood of an ASC is the case volume. This is the primary driver of revenue. ASCs will court surgeons to bring cases to its center. They also must court anesthesia groups to provide the critical path

to every surgery, anesthesia services. The primary financial drivers for anesthesia include case volumes, case mix, and payer mix.  A significant impact to these financial drivers is OR Utilization.

The basic definition of OR Utilization is (case duration plus turnover time)/available time.

The drivers for OR Utilization are turnover time and scheduling. The ASC controls these primarily through partnership with the surgeons. Shorter turnover times provide more opportunities for greater case volumes. It is critical that the ASC gets the right staff and processes in place to ensure an efficient and effective turnover for each OR.

Moreover, scheduling has impacts as well. If every surgeon requests 7am start times, ASCs run out of ORs quickly and it negatively affects the profitability of anesthesia services because groups must overstaff to meet those start times. Efficient scheduling of cases using the center’s total available hours to its capacity brings more cases at a reduced cost for the center, the surgeons, and the anesthesia group.

The ASCs with the best OR Utilization rates are the ones who partner with surgeons and anesthesia to provide better patient care, better patient experience, and maximize each OR. The ASC generates profitable revenue to positively impact everyone.

Conclusion

While it may seem that multiple headwinds are difficult to manage for the anesthesia group covering an ASC, they are not without options for each group.

In terms of providers, one strategy to employ to address the lack of providers is a PRN/1099 approach. The group utilizes PRN CRNAs to fill out staffing requirements for CRNAs, or 1099s for physicians. While this is not a desirable long-term option, it can help to fill in the gaps in the short run.

In addressing the payer mix, we have seen and helped negotiate the strategy of an ASC stipend. This is starting to become a little more commonplace to ensure coverage from the critical path element, anesthesia services. While ASCs do not like this approach, they will do it to meet surgery demands.

A final strategy that we have seen to address the OR Utilization is the partnership between the center, the surgeons, and the anesthesia group. When all parties work together for the benefit of the patients, they take care of one another as well.

In our Practice Management and Consulting Services offerings, we provide a multitude of strategies, Analysis, Negotiations, Forecasting, and Budgeting services. We have expertise helping our clients with all the above strategies and more. If you are interested in learning more about these strategies and other options to help your group address these issues, please contact Anesthesia Management Partners via email at info@anesthesiapartners.com or via phone at (847) 615-2200.

[1] https://www.aamc.org/media/54681/download

[2] MGMA 2015 Physician Compensation and Production Report based on 2014 Survey Data

[3] VMG Health’s “Multi-Specialty Benchmark Study”

[4] https://www.bls.gov/data/inflation_calculator.htm