Chapter 97. Practice Management

1. Practice structure considers and clarifies lines of authority, decision making, communication processes, information flow, and levels of authority that define how centralized or decentralized the practice functions.

2. Staffing models require careful consideration of several issues, including the complexity of the case, experience of the provider, physical status of the patient, hospital regulations, surgeon expectations, and provider/resident/student nurse anesthetist teaching rules.

3. Charges and payments for professional anesthesia services generally include base relative value units (accounting for anesthetic complexity), plus time units, plus additional unit modifiers multiplied by a dollar conversion factor.

4. Successful negotiations with third-party payers and hospitals hinge on the clear articulation of needs by both parties and willingness of both parties to accept a reasonable offers as well as an accurate understanding of the value your group brings to the hospital or contracting organization.

5. Billing systems must ensure that every service rendered is captured and that all monies contractually obligated for those services are collected.

6. From a billing compliance perspective, if the service is not appropriately documented, then it did not happen. Compliance with various rules and regulations is both important and essential for the financial health of the practice. Further, the consequences of not knowing, or not following, these regulations can be substantial, both legally and financially.

7. Monthly information that should be tracked for trend purposes includes total cases and units, cases and units per location, payer mix, charge lag, charges, contractual adjustments, cash collections, accounts receivable, net collection rate, days in accounts receivable, aged accounts receivable, total credit balances, and collection agency net collections.

Practice management details are often delegated to nonphysician administrative professionals and their support staff, but it is important that all physicians have a global comprehension of basic practice management topics. Practice management, in its simplest form, focuses on the nonclinical pieces of a medical practice. There are entire textbooks just on practice management, so this chapter provides a brief overview of practice management for anesthesiologists. It broadly covers some global practice management areas that relate to all physicians, and when appropriate, it covers details and issues specific to anesthesia, such as billing and compliance, staffing models, and data analysis and reporting.

To many physicians, worrying about the business side of their practice is something that they may have no interest in or even something they are embarrassed about because that is not why they decided to become a doctor. If, however, more money goes out than comes in, no business or physician will be able to continue to do what matters most to them. So, however confusing or distasteful the practice management side of the business may be, it is a necessary one.

We hope this brief chapter complements the other chapters in this book and helps you become a physician who can face the challenges of the future of medicine by understanding basic business practice processes and relating them to the practice of anesthesiology.

What is the practice's mission? Are decisions made to influence the strategic direction of the practice? How does the practice facilitate decision making? How are conflicts resolved? What are the plans for the future? How is the practice going to get there? The answers to these questions help to determine a practice's governance and group dynamics.

Practice Models

Most anesthesiologists join either an academic or a private-practice organization. Academic medical groups have always had complex, multiple missions: teaching, advanced clinical practice, and research. Generally most academic anesthesiologists do have some percentage of their time that is nonclinical, often devoted to research and/or academics, whereas this is uncommon in community practice (except perhaps for those with significant administrative responsibilities, either for the practice or for the facility). Whatever the model, efficient, effective management and financial health are essential foundations for personal and group satisfaction.

Structure and Contractual Issues

Practice structure, at the highest level, considers and clarifies lines of authority (chain of command), decision-making process, communication flows and processes, as well as levels of authority that relate to how centralized or decentralized the practice prefers to function.

An example of a private-practice model might consist of a general partnership as the overriding entity. There may then be an executive committee that might be considered the second level of decision making. This group may be empowered to make operational decisions and financial commitments to a maximum threshold established by the general partnership. Depending on the size of the practice, there may be smaller groups or specific individuals who also have authority and operational decision making for smaller units or divisions.

There are other practice models, such as employment by a health system, the US military, Public Health Service, or Department of Veterans Affairs, where the anesthesiologist is fully employed to perform clinical duties and generally does not need to worry about the economics of billing or case volumes. Other anesthesiologists may work as locum tenens, essentially temporary contracted physicians who are hired by groups and hospitals to cover staffing shortfalls. For any of these arrangements, the structure of the practice must be clear and understood in a written format. Buy-in formulas for new partners should be understood and clear. Issues such as who can leave or be asked to leave, why, and with how much notice is required should be clearly described, as well as the financial repercussions of such actions. Noncompete clauses, if included, should be clearly understood and explained. The process of assigning and requesting time off, call coverage, and overall assignments should be clear and in writing as well.

Compensation Arrangements

The total amounts of monies available for physician compensation are relatively easy to calculate. Revenue less all other expenses leaves an amount of money. That money can be paid fully to physicians as base salary and bonus, as base salary and incentive, or as base salary with some monies saved for the future. The size of the pie, so to speak, is influenced by numerous factors discussed throughout this chapter. How the pie is divided is the basis for understanding the compensation model for a practice.

In an academic practice, the compensation arrangement often considers the teaching, administration, and research responsibilities, funding, and performance in addition to clinical responsibilities. In a private practice, the focus is on the clinical workload. The best compensation arrangement for a practice is the one that meets the needs of the group and allows the group to fulfill its missions while retaining and recruiting physicians as needed.

There are 2 main compensation formulas. At one end of the spectrum, the group splits the bottom line. This equal-share method takes into account that the anesthesiologist is assigned to cover a specified location (or locations) and does not control volume or the payer mix at those sites. Some consider this model fairer because it does not penalize an anesthesiologist who might work with a slower surgeon or at an inefficient location. At the other end of the compensation spectrum is a more individual model that pays the provider for the amount of work he or she performs. Proponents of this model argue that this rewards the anesthesiologist who improves turnover times, takes extra calls, does a late-day elective case, or uses less vacation time. Many anesthesia groups follow a hybrid of these 2 models to balance the needs and priorities of the members.

Negotiating Coverage and Stipends

The relationship between hospital administrators and anesthesia groups has evolved over the past decade as financial pressures on both parties have grown due to third-party reimbursement trends, erosion of hospital operating margins, and rising physician compensation levels.

Successful negotiations hinge on the clear articulation of needs by both parties and willingness to accept a reasonable, mutually beneficial offer. The hospital should set expectations related to daytime and call requirements, number of anesthetizing locations and services, growth and new programs, and administrative activities. To justify financial support, the anesthesia group may need to educate hospital administrators about the local and national physician compensation and recruitment market, efficiency concerns that have an impact on anesthesia productivity (operating room utilization rates, turnover times) and the financial health of the practice (revenue cycle, practice overhead). Stipends typically include those for administrative activities (directorships, participation in hospital committees, etc), call coverage (obstetrics, trauma), income guarantees, and recruitment costs associated with new anesthetizing locations. These costs may be justified based on full-time equivalent (FTE) calculations and market-rate compensation data. Academic groups may receive support for educational expenses, such as residency program director and salary and benefits for residents and fellows.

Credentialing

To meet regulatory requirements and maintain clinical standards, physicians must obtain hospital appointments through a credentialing process involving verification of state medical licensure, board certification status, state and federal Drug Enforcement Administration licenses, employment and training history, and other key documentation.

Physician Anesthesiologist

An anesthesiologist in the United States has completed a 4-year undergraduate degree that includes satisfying premed requirements, 4 years of medical school, and 4 more years of an anesthesia residency. Following successful completion of a residency program, candidates are eligible to sit for the American Board of Anesthesiology certification examination. Almost 90% of anesthesiologists are board certified.

Following residency, many anesthesiologists also complete an additional fellowship year of specialty training in specific areas such as pain management, cardiac anesthesia, pediatric anesthesia, neuroanesthesia, obstetric anesthesia, or critical care medicine.

Anesthesiologists may also seek certification in one of the following subspecialties, which require additional training and examinations: critical care medicine, hospice and palliative medicine, pain medicine.1

Certified Registered Nurse Anesthetist

The requirements for becoming a certified registered nurse anesthetist (CRNA) mainly include a bachelor's degree in nursing or other appropriate baccalaureate degree, registered nurse licensure, a minimum of 1 year of acute care experience (eg, intensive care unit [ICU], emergency department), and the successful completion of both an accredited nurse anesthesia educational program and the certification examination.2

Other Types of Providers

Anesthesiologist assistants (AAs) have first completed an undergraduate degree that includes a core of required courses in biomedically related sciences, followed by satisfactory completion of a graduate degree (typically 2 years) in an accredited AA education program. Upon completion of a program, a student may become certified by passing the National Commission for Certification of Anesthesiologist Assistants examination (NCCAA). As nonphysician anesthetists, AAs work under the direction of licensed anesthesiologists to implement anesthesia care plans. An AA may not practice outside the field of anesthesia or apart from the supervision of an anesthesiologist.1

Physician assistants (PAs) are licensed to practice medicine with physician supervision. Graduation from an accredited PA program and passage of the national certifying examination are required for state licensure. The average PA program curriculum takes approximately 26.5 months to complete.3

Nurse practitioner (NPS) first earn a bachelor's degree in nursing (4 years of education), followed by their graduate NP degree (2-4 years of education), which (depending on state regulations) may provide opportunities for independent practice; such programs also permit specialization in career tracks such as oncology, pediatrics, and geriatrics although not specifically in anesthesia practice because this area is covered by the CRNA programs. However, NPs may assist practices in such areas as preoperative evaluation, postoperative care, and so on.

Anesthesia technician/technologists support the work of anesthesia clinical providers and often assist with monitoring lines, patient transport, patient and room preparation, and stocking of equipment at the anesthetizing site.

Staffing models require careful consideration of several issues, including the complexity of the case, experience of the provider, physical status of the patient, hospital regulations, surgeon expectations, and provider/resident/student nurse anesthetist teaching rules.

Personally Performed

From a billing perspective, for a Medicare case, personally performed means the following:

• The physician personally performed the entire anesthesia service alone (full payment to physician); or,
• The physician is involved with 1 or 2 anesthesia cases with residents, and the physician is the teaching physician as defined by Medicare rules and regulations (full payment to physician); or,
• The physician is continuously involved in a single case involving a student nurse anesthetist (full payment to physician); or,
• The physician is continuously involved in one anesthesia case involving a CRNA (or AA); both the CRNA (or AA) and the physician may be paid pursuant to the medical direction payment policy (50% payment to physician and 50% payment to CRNA or CRNA's employer such as the hospital or physician group); or,
• The physician and the CRNA (or AA) are involved in one anesthesia case, and the services of each are found to be medically necessary. Upon review of documentation, if it is determined that both were necessary for the case, then full payment may be made for each of the 2 providers (full payment to physician and full payment to CRNA or CRNA's employer, ie, the hospital or physician group).5

Care Team

If not performing a case independently, an anesthesiologist generally oversees CRNAs, student registered nurse anesthetists, AAs, interns, residents, or combinations of these individuals. In some care team models, Medicare considers that medical direction has been met, and 50% payment made, if the physician medically directs qualified individuals in 2, 3, or 4 concurrent cases and the physician performs each of the following activities:

1. Performs a preanesthetic examination and evaluation

2. Prescribes the anesthesia plan

3. Personally participates in the most demanding procedures in the anesthesia plan, including, if applicable, induction and emergence

4. Ensures that any procedure in the anesthesia plan that he or she does not perform are performed by a qualified anesthetist

5. Documents his or her presence during some portion of the anesthesia monitoring and monitors the course of anesthesia administration at frequent intervals

6. Remains physically present and available for immediate diagnosis and treatment of emergencies

7. Provides indicated postanesthesia care

These "7 steps," as they are known, must be met to bill Medicare for a medically directed service. Also, the total number of rooms that could be covered at any given time is limited to 4. Exceptions to these medical direction rules allow a physician to perform other specific services and not violate the medical direction rules described. The overall medical direction rules apply to cases involving student nurse anesthetists if the physician directs 2 concurrent cases, each of which involves a student nurse anesthetist or the physician directs one case involving a student nurse anesthetist and another involving a CRNA, AA, or resident.

If anesthesiologists are in a group practice, one physician member may provide the preanesthesia examination and evaluation while another fulfills the other criteria. Similarly, one physician member of the group may provide postanesthesia care while another member of the group furnishes the other component parts of the anesthesia service.

A physician who directs the administration of anesthesia to not more than 4 surgical patients cannot ordinarily be involved in furnishing additional services to other patients. However, addressing an emergency of short duration in the immediate area, administering an epidural or caudal anesthetic to ease labor pain, or periodic rather than continuous monitoring of an obstetric patient does not substantially diminish the scope of control exercised by the physician in directing the administration of anesthesia to surgical patients. It does not constitute a separate service for the purpose of determining whether the medical direction criteria are met. Furthermore, while directing concurrent anesthesia procedures, a physician may receive patients entering the operating room suite for the next surgery, check or discharge patients in the recovery room, or handle scheduling matters without affecting fee schedule payment.5

Health care advances have led to the significant growth of interventional/procedural medicine, and anesthesia providers are being asked to respond to this trend. Anesthesiologists have expanded their workplace beyond the confines of the operating rooms and are traversing the hospital campus to anesthetize patients undergoing a diverse mix of procedures in locations such as electrophysiology or cardiac catheterization laboratories, radiology suites, in vitro fertilization sites, and endoscopy rooms. In addition to off-site procedural locations, anesthesia providers often cover diverse services, such as preoperative assessment clinics, recovery areas, obstetric services, inpatient pain consultative services, outpatient pain clinics, and critical care units. Each location requires a unique anesthesia staffing pattern influenced by volume, clinical complexity, geographic proximity to other anesthesia locations and providers (an important factor for emergency backup and coverage for personal breaks), efficiency demands (turnover times in the operating rooms, patient visits in preoperative or pain clinics), and service/availability demands (dedicated ICU or obstetrics staff). Meeting these multiple and often competing demands for clinical services can be challenging. Coverage of multiple hospitals and other locations requires either dedicated staff for each location or staff that is highly flexible about assignments.

Staffing patterns vary widely by location, from 1:1 coverage of complex surgical cases to 1:4 coverage of routine surgical cases. Financial performance associated with each location is closely linked to efficiency, case volume, and payer mix and should be closely monitored by the group.

Viewed from a national perspective, academic anesthesia departments and private practice anesthesia groups both face a myriad of financial challenges due to both revenue and expense concerns. Revenue constraints include contract rates and reimbursement policies dictated by Medicare and other payers, billing office performance, and hospital support for medical administration, CRNA expenses, and trauma or other call coverage. Expenses are heavily influenced by recruitment and retention needs because professional staff salaries and fringe benefits compose most of the anesthesia practice expenses.

Successful financial management requires a thorough understanding of financial statements, effective budgeting, strong financial oversight, and paying great attention to detail. In today's health care environment, thin operating margins require innovative approaches to important business problems. Often the best business solutions may be technology intensive (eg, electronic charge capture and billing systems, electronic staff scheduling/deployment systems).

Understanding Financial Statements

Although a detailed understanding of financial statements may be daunting to clinicians, a basic understanding of them is necessary for effective practice management oversight. Many business managers use at least 3 basic financial statements to document and assess their practice's financial performance: the income statement (or profit-and-loss statement), the balance sheet, and the cash flow statement.

The income statement summarizes a practice's revenue (primarily from professional services rendered to patients) less expenses (support staff compensation, benefits, malpractice insurance premiums, etc) for a particular month, quarter, or year. The final net figure, usually referred to as the bottom line, is of most concern, but understanding the details that have an impact on that number is also very important.

The balance sheet is used to describe the financial position at a given point in time by detailing practice assets, liabilities, and equity. Assets represent things of value that a practice owns or something that will be received and can be measured objectively. What a practice owes to others are considered liabilities. These include taxes collected from employees but not yet remitted, payments due to an agency for services already provided, and so on. They are obligations that must be paid under certain conditions and time frames. A practice's equity represents funds contributed or retained by the partners or shareholders, who accept the uncertainty that comes with ownership risk in exchange for a potential long-term return on their investment. Assets must always equal liabilities plus equity.

The cash flow statement provides an explanation of uses of cash (ie, cash from patients and insurance companies, investment income, etc). Understanding how much cash a practice has and how much cash a practice needs is essential to ensure that bills can be paid on time, payroll can be processed, and so on.

Budgeting

A budget is a quantitative financial plan for a defined period of time that serves to articulate financial and operational goals, objectives, and strategic plans. A budget allows you to quantify and prioritize these goals, objectives, and plans and provides you with a way to measure financial and operational performance. Approaches to budgets include the historical (uses historical data updated with new facts, trends, and assumptions), zero-based/bottom-up (assumes all costs must be justified), and flexible budgeting methodologies (updated throughout the budget period according to major cost drivers such as volume). Capital budgets focus on projects or tangible assets (eg, property, plant, or equipment items) that exceed a certain expense threshold. Important operating budget considerations include professional staff salaries and fringe benefits, payer reimbursement assumptions, malpractice costs, operational changes (such as additional anesthetizing locations), and investment income returns. Revenue budget assumptions should address volume growth of anesthetic procedures, contract rates for payment, payer mix, and collection rates, although expense budget assumptions should consider the impact of staffing needs (resignations and hiring), compensation and incentive plans, and inflationary costs. Operating room utilization and efficiency influence both staffing needs and revenue generation, and therefore they should be carefully reviewed as part of the budgetary process.

Revenues and Expenses

The 3 main sources of anesthesia practice revenues are patient services revenue, contract revenue, and nonoperating revenue (interest and investment income). For the purposes of this discussion, we exclude other income sources such as research grants, philanthropy, royalty income, and endowments.

Clinical volume and type of service, contract rates, payer mix, and billing performance are the main drivers of patient services revenue. Contract revenue may be derived from professional services agreements, hospital stipends, or other management service contracts. Major expense categories include physician and CRNA compensation and benefits, support staff expenses, malpractice fees, billing and overhead fees, depreciation, bad debt (mostly for uninsured or underinsured patients), and other operating expenses such as rent, utilities, and information technology. It is important to understand which expenses are fixed (costs that remain constant despite changes in case volume, eg, anesthesia machines) rather than variable (costs that fluctuate with volume, eg, anesthetic drugs), particularly if volume predictions are uncertain. For example, when hiring additional staff to cover a new anesthetizing location, the practice will incur a fixed and incremental compensation expense, but revenue will depend on the volume and efficiency of the newly added site unless otherwise negotiated in advance with the hospital.

Financial Analysis

Practice profitability requires an ongoing analysis of performance against expectations, goals, and targets. Essential financial analyses should include periodic budget analyses of the variance between actual and budgeted performance, service-specific margin analyses (percentage by which revenues exceed expenses; may be calculated on a direct, total, or contribution basis), and benchmarking analyses (comparison to published compensation,* productivity, billing, and expenses† data).

Capital

Large capital (tangible asset) items such as anesthesia machines, monitoring equipment, and electronic medical records typically are purchased through the hospital and may require advanced planning via the capital budgeting process. Smaller items, such as computers for administrative use, may be purchased through practice funds.

*The Association of American Medical Colleges (AAMC), Society of Academic Anesthesiology Chairs (SAAC)/Association of Anesthesiology Program Directors (AAPD), Medical Group Management Association (MGMA) academic and private practice compensation surveys.

†MGMA best performing practices.

Professional versus Technical Billing

The provision of anesthesia services is paid for by 2 separate reimbursement mechanisms: a technical or facility fee and a professional fee. Third-party payers compensate the hospital for the technical or nonprofessional costs of anesthesia services via the facility fee (eg, anesthesia equipment, supplies, and technicians), although professional and practice expenses are reimbursed through professional fees. Facility fees or charges are derived from the duration and type of anesthetic services rendered and reimbursed via payer-specific contract rates (eg, diagnosis-related group (DRG) or case rate, percentage of charges, fee for service).

Professional Billing for Anesthesia, Obstetric, Critical Care, and Pain Management Services

Medicare payments for most physician services are made on the basis of a standardized fee schedule (resource-based relative value scale [RBRVS]) that was implemented in 1992, which replaced the traditional customary and prevailing charge system. However, Medicare's method of calculating anesthesia professional reimbursement for anesthesia services differs from that used for other physician services in that the relative value units (RVUs) are based on a schedule developed and maintained by the American Society of Anesthesiologists (ASA). The anesthesia RVUs for any service are described as "base units" and correlate to work effort (ie, estimated anesthetic intensity or complexity). In addition to base units, payment for anesthesia services reflect time units (often 15 minutes per unit), additional modifying units (eg, physical status), on occasion, and an anesthesia-specific conversion factor (or per unit payment rate). Professional fee schedules for most other payers are reflective of Medicare's approach under the RBRVS system. Monitoring catheters and nerve blocks administered during time-based anesthesia services are billed separately.‡

Concurrency modifiers are used to indicate the type of oversight rendered by the attending anesthesiologist in conjunction with a resident and/or CRNA. Personally performed (modifier AA) indicates that an attending anesthesiologist was present for the entire case, whereas medical direction (QK or QY) denotes concomitant involvement in 1, 2, 3, or 4 anesthetics in conjunction with a resident or CRNA. The CRNA portion of a medically directed case is billed with a QX modifier. Medical supervision (AD) indicates physician involvement in more than 4 concurrent cases.

Billing for nonsurgical obstetric anesthesia (ie, labor epidurals) typically follows 1 of 4 methods recommended by the ASA: (1) base units plus patient contact time plus one time unit per hour, (2) base units plus time units subject to a reasonable cap, (3) a flat fee, and (4) an incremental fee schedule.§

Critical care, acute pain, and chronic pain management services are billed as evaluation and management services and procedures and reimbursed under the RBRVS system. Critical care services are billed based on physician time expended (eg, <30 min, 30-74 min). Acute and chronic pain services are billed via a variety of current procedural terminology (CPT) codes,** including inpatient consultations, subsequent hospital day care, new patient visits, follow-up visits, and interventional procedures.

Documentation and Coding

Adequate medical record documentation is required to substantiate billing for all anesthesia services with specific criteria established by local payers based on current Medicare rules or the payer's specific policies. The coding of anesthesia services (assignment of appropriate nationally standardized codes indicating the type of procedure or service rendered) typically is performed by professional coders employed directly by the practice or by the billing office. Documentation and coding are essential for compliance purposes and for negotiating the claims denial and appeals process.

Charges versus Payments

A professional charge for a time-based anesthesia service is generated based on the total number of ASA units (base, time, and additional modifying units) and procedures where the unit and procedure charges are set by the physician practice. The payment or reimbursement usually is based on negotiated contract rates and varies by payer. The key differences between charges and payments are the result of contractual adjustments and write-offs. For example, for a practice with a $100 per ASA unit charge, a 7-hour triple coronary artery bypass would generate a charge of $4800 (for 20 time units plus 28 base units). Medicare reimbursement†† for this case if personally performed, however, would total $1080 based on the $22.50 conversion factor (Philadelphia, 2010)‡‡ with a $3720 contractual adjustment.

Reimbursement for invasive monitors (arterial or pulmonary arterial catheters, etc), regional anesthetic blocks, evaluation and management services, and other procedures are based on a flat fee schedule negotiated with each payer rather than ASA units. Whereas charges are influenced by volume and service mix, payments are affected by payer mix, contract rates, and payer policies, and the speed of payment depends on submission of "clean claims."

Billing Services

Anesthesia practices may choose to bill and collect for their own professional fees or outsource these activities to a billing company. Given the complexities of anesthesia billing, it is essential to employ a service with expertise in this area. Such expertise often is difficult to recruit and retain in-house for small to midsize anesthesia groups and may be outsourced to a billing company. The accuracy of claims is the responsibility of the physician group independent of billing service arrangements, so it is imperative that billing functions be monitored closely and include a robust compliance plan (see "Billing Compliance" later). Billing performance should be closely monitored by the practice/department to continually ensure accuracy, effectiveness, and efficiency (Table 97-1).

‡Assumes that these services were not the primary mode of anesthesia and were not included in the calculation of anesthesia time units unless clinically appropriate.

§Reimbursement for surgical obstetric anesthesia is based on time and base units as described earlier.

**CPT Code Book.

††Sample calculation only; not reflective of Medicare payment reduction for concurrency.

‡‡2010 Medicare anesthesia conversion factor for metropolitan Philadelphia.

Negotiation Strategies

Before you begin negotiations, be sure you have an accurate and realistic understanding of the value your group brings to the hospital or contracting organization. That is important because if you cannot come to an agreement with the payer, your only option will be not to contract with them. If the hospital has a contract with that payer and many of the surgeons have a contract with that payer, you will be under tremendous pressure to obtain a contract with that payer. If you do not, you must be in a position to present data that can explain why.

It is critical to educate the payer and the hospital about anesthesia salaries in the local market, what others pay, the national shortages, and other issues that are well known to you but may not be known to the payer or the hospital. Make sure what you are asking for is reasonable and your explanation is understandable.

Understand each payer's fee schedule, not just their anesthesia per unit rate. Many practices are provided a fair anesthesia per unit rate; however, their fee schedule for procedures (eg, pulmonary arterial catheter insertion) or for pain or critical care services may be inadequate. Understand where your primary business volumes incur, and be sure you can prioritize what services are most important when negotiating your fee schedule.

Do not allow a payer to dictate policies and fee schedules; however, you also must be realistic regarding a fair-market payment scale in your local community. Like most negotiations, it is best if the final agreement is a win/win. An important but frequently overlooked contract issue is being sure that if the payer does not pay quickly or underpays, there should be clear language regarding the penalties and next steps to resolve the problem.

Physicians and many administrators tend to want too much data that may not be pertinent to understanding their practice and practice operations. Focusing on the key issues leads to more effective analysis with fewer distractions.

Tracking What You Need to Know

Tracking what you need to know falls into 3 categories:

1. Information needed to ensure that your billing process is collecting all the money that should be collected

2. Information to be comfortable that your billing process is meeting all billing compliance rules and regulations

3. Information that notes trends to which your practice may need to react or form a strategic plan

In general, you want to be sure that every service you rendered is captured and whatever monies that contractually should be collected for those services are collected. You want to be sure that services are reconciled against case logs (eg, operating room final schedules) so you know what services were rendered and you have a charge to submit for that service. You need to know what bills have been paid and whether or not they have been paid correctly. Of all the bills that are not yet fully paid, how old (aged) are they, and what is being done to collect the remainder (payment plan has been set up, etc)?

Following a statistically valid sample of random accounts through the revenue cycle process is a helpful method for fully understanding how the system is working and validate some of the monthly data. If you review randomly selected cases from the operating room schedules and track each through the billing cycle, you will have a very good sense of how your billing process is working. Sometimes reports of average data and group numbers do not always tell the entire story. This sampling process, although somewhat time consuming, is a great way to know what is truly happening and whether or not your monthly reports are accurate.

Billing Metrics and Trends

Trends are important for strategic purposes. Remember, 1 month does not a crisis make. Some of the monthly information that should be tracked for trend purposes includes the following:

• Total cases and total anesthesia units (is volume increasing or decreasing?)
• Cases and anesthesia units per location and per FTE physician
• Payer mix (especially if better payers are being replaced by poorer payers over time)
• Charge lag (how long it takes from when you render the service until the charge is entered into the billing system)
• Charges, contractual adjustments, and cash collections in total and by division/location/FTE (eg, ambulatory surgery center, multiple hospitals, acute pain, chronic pain, critical care, etc)
• Accounts receivable (is the total accounts open and still due to be paid growing or decreasing over time?)
• Net collection rate (collections divided by gross charges less contractual adjustments plus refunds). This should not be confused with gross collection rate, which is a more common measure that has less value in our opinion. Essentially, the net collection rate is a measure of how much money is being collected as a percentage of what is collectable. For example, if your charge was $1500 and you have a contract that payer X agrees to pay you 60% of your charges, then your expected payment would be $900. If you are paid $850, then your net collection rate is 94%. Generally, depending on factors such as self-pay or charity care, a net collection rate in the high 80s to mid-90s would be expected.
• Days in accounts receivable (how long it takes to collect the money due on your charges)
• Percentage of accounts receivable older than 90 days from date of service (the older past due accounts age, the less likely it is that you will eventually collect them)
• Total credit balances (many times credit balances grow and mask other problems)
• Collection agency net collections (many practices worry about what a collection agency charges, yet what really matters is how much money they collect for you net of their fees). Some larger practices always have 2 collection agencies and split what is turned over to each evenly and then track the net results. When one agency outperforms the other over time, they may drop the lower performer and contract with a new agency.

Although it may seem at times that all the myriad of rules and regulations are in place just to make the practice of anesthesiology more difficult, there are reasons why compliance with various rules and regulations is both important and pertinent. The consequences of not knowing or not following these regulations can be substantial, both legally and financially.

Note that Medicare rules and regulations change occasionally, and sometimes they are interpreted differently by various carriers and agencies, so always check with your practice leadership and billing compliance experts as well as your local carrier to ensure that your understanding of billing practices rules and regulations are up-to-date and correctly interpreted for the state in which you are located.

Common Problems

What scenarios seem to present the most opportunities for anesthesia billing compliance problems?

• Physicians not understanding the billing rules and regulations. Anesthesia time starts when the anesthesia practitioner begins to prepare the patient for anesthesia services in the operating room or an equivalent area and ends when the anesthesia practitioner is no longer furnishing anesthesia services to the patient, that is, when the patient can be placed safely under postoperative care. It rarely correlates with the surgical start and stop times or the in- or out-of-operating-room times. Because the stop time often occurs after the patient leaves the operating room and the begin time often starts before the patient is brought into the operating room, the chance for overlap is obvious. Overlap is not a problem as long as it is properly documented and the impact on medical direction billing is understood and followed. The problem occurs when the billing does not accurately reflect the existence or extent of simultaneous care (ie, "concurrency").
• Medically directing more than 4 concurrent cases. When the physician is responsible for more than 4 concurrent cases, he or she is no longer medically directing any of them. Exceeding 4 cases has significant negative ramifications on your overall reimbursement. Even a 1-minute overlap invokes billing concurrency that may have an impact on billing regulations and reimbursement amounts. Figure 97-1 illustrates a typical workday and the consequences of 1 minute of overlap that affects reimbursement significantly. In this illustration, Case 1 in Room A started at 7:31 and finished at 11:32. Case 2 in Room B started at 7:52 and finished at 8:46. Case 3 in Room C started at 8:00 and finished at 14:12. Case 4 started in Room D at 7:15 and finished at 8:42. Case 5 started in Room B at 8:42 and finished at 13:14. During the 8:42 interval, the anesthesiologist actually was responsible for 5 cases. Even though it was only for that 1 minute, all 5 cases now are considered nonmedically directed.
• Rounding. It is a mistake, and wrong, to round your start and/or stop times, even if you are rounding to less time. Many physicians believe that because different clocks may not be synchronized, then they can just round because it really is only a matter of minutes. That rationalization may seem appropriate, but in reality billing compliance requires exact minutes to be reported, not more and not less. It may seem obvious why rounding up would be inappropriate, but why would rounding down? The situation just described is a good example to illustrate the reasoning for this seemingly innocent action. If the physician had rounded down, then Case 5 would have been noted as starting at 8:45 instead of 8:42. Case 4 would have been noted as ending at 8:40 instead of 8:42. The total minutes charged to each case actually would be less than the total minutes the physician was responsible for each case, so it would appear that, if anything, the physician would be shortchanging his or her reimbursement by several minutes. In reality, it would mean that instead of 5 cases being handled concurrently, the maximum concurrent cases now would appear to only be 4, thus greatly improving reimbursement because all the cases now would be considered medically directed, resulting in much greater payment.
• Not meeting the other noted necessary criteria for medical direction (eg, relieving a CRNA in a room for a break while still being responsible for the other rooms). Taking over a case by yourself does not allow you to medically direct other concurrent cases. Likewise, not being present for induction or emergence would prevent that particular case from being considered medically directed.
• Forgetting that if it is not documented, it did not happen.
• Having a written policy in place and then not following it. If you have a policy, you had better make sure you can follow it, do follow it, and have a process in place to monitor compliance and take corrective action if individuals do not comply.

Practice management is the structure that supports the primary function of anesthesia practice, that of delivering anesthesia care to needy patients in operating rooms, obstetric units, radiology suites, intensive care units, and pain management centers. Effective communication, management, and billing functions are essential for individual provider satisfaction and for the vitality of the practice group. As with clinical care, it is often the small details that make the difference between a thriving cohesive practice and one that is failing or fraught with dissension.

• American Academy of Nurse Practitioners. Position statement on nurse practitioner curriculum. http://www.aanp.org/AANPCMS2/AboutAANP/NPCurriculum.htm. Accessed June 16, 2010.
• American Academy of Physician Assistants. Becoming a physician assistant. http://www.aapa.org/about-pas/becoming-a-physician-assistant. Accessed June 16, 2010.
• American Association of Nurse Anesthetists. Becoming a CRNA. http://www.aana.com/BecomingCRNA.aspx?id=98&linkidentifier=id&itemid=98. Accessed June 16, 2010.
• American Society of Anesthesiologists What is an anesthesiologist? http://www.asahq.org/providers/homepage.htm. Accessed June 16, 2010.
• CMS Centers for Medicare & Medicaid Services—Anesthesiologists Center. Medicare Claims Processing Manual. Chapter 12: Physicians/Nonphysician Practitioners, pp. 111-119. http://www.cms.gov/manuals/downloads/clm104c12.pdf. Accessed June 16, 2010.