Preparing the

Financial CaseFor

Hospital SupportASA Practice Management Conference 2008

Joe Laden & Michael J. Monea

Michael J. Monea, President Central Anesthesia Management Services, Inc.

Past Director, KOAMA

Joe LadenBusiness Manager

Anesthesia Associates of Louisville, PSCDirector, KOAMA

Member MGMA/AAAjoeladen@aalouisville.com

KOAMA KOAMA Kentucky / Ohio Anesthesia Kentucky / Ohio Anesthesia

Managers AssociationManagers Association

Mission Statement:Mission Statement:

““Define and Implement Best Practices Define and Implement Best Practices for the Financial Management of for the Financial Management of

Anesthesiology Groups”Anesthesiology Groups”

The OR Utilization SpreadsheetsThe OR Utilization Spreadsheets

ASA NewsletterASA NewsletterPractice Management DepartmentPractice Management Department

June 2004June 2004September 2004September 2004

June 2007June 2007

Spreadsheets can be downloaded from these Spreadsheets can be downloaded from these articles on ASA Web Site articles on ASA Web Site

Phases of Hospital SupportPhases of Hospital Support

Friendly Support RequestFriendly Support Request

Detailed Justification Required Detailed Justification Required

Hospital PushbackHospital Pushback

The cost of providing the service exceeds the revenue of delivery that service, and

The group is providing that service as cost-effectively as is reasonable, and

When the failure to secure that support would imminently jeopardize the ability of the group to provide that service.

When To Consider Hospital Support

Metrics that may indicate a subsidy is needed

Payer MixPayer MixPayments per unit Payments per unit < $36/unit< $36/unitMedicare/Medicaid/IndigentMedicare/Medicaid/Indigent > 40%> 40%

Hospital EfficiencyHospital EfficiencyOR Utilization OR Utilization < 75%< 75%Revenue per ORRevenue per OR < $450,000< $450,000

MD Compensation MD Compensation below regional median below regional median

• O.R. Utilization Percentage • # O.R.’s covered• # Cases

• Revenue per Operating Room• Revenue Per Unit• Payer Mix (% Major Payers)• MD Salaries• CRNA Salaries• Number of MD’s, CRNA’s Employed: Ratio• Overhead Costs (malpractice, health ins.)

Gather your 3 - 5 Year History of the Following Critical Practice Data

YearRevenue Per Revenue Per

ORORRevenue per Revenue per

UnitUnitHours Billed Hours Billed

Per ORPer OR

Average Average Case Case

LengthLength OR UtilizationOR Utilization OR's OR's Personnel Cost Personnel Cost

Per ORPer OR

2007 $465,000 $38.74 1,725 1.7 64.5% 21 $525,000

2006$472,00

0 $39.65 1,775 1.6 68.3% 20 $500,000

2005 $481,600 $40.10 1,760 1.5 69.8% 20 $475,000

2004 $484,300 $40.95 1,840 1.4 72.7% 19 $450,000

2003 $487,000 $41.20 1,820 1.4 73.0% 19 $425,000

When is the Subsidy Needed?Support Crossover Point -- Example

Verify Your Data Against Benchmark Data

MGMA Physician Compensation (W-2Wages)MGMA Physician Compensation (W-2Wages)2006 Data - 3,505 Anesthesiologists2006 Data - 3,505 Anesthesiologists

Median Compensation $365,409

Eastern $375,000

Midwest $393,931

Southern $386,238

Western $326,346

Median Gross Charges per MD $1,016,993

Median Collections per MD $468,410

Median Cases Per MD 961

W-2 Wages 350,000

Retirement Plan Contribution 45,000Professional Liability Insurance 18,500Health Insurance 14,000Disability Insurance 12,000Other Insurance (dental, life, etc) 1,000Professional Meeting and Expense 3,500Employer FICA & Medicare Tax 10,655

Total Benefits, Malpractice and Tax 104,655

Total MD Compensation 454,655

Anesthesiologist Total Compensation

Base Salary 120,000Overtime & Call Pay 15,000Retirement Plan Contribution 20,250Professional Liability Insurance 2,500Health Insurance 14,000Disability Insurance 3,500Other Insurance (dental, life, etc) 1,500Professional Meeting and Expense 2,000Employer FICA & Medicare Tax 7,320

Total Benefits, Malpractice and Tax 51,070

Total CRNA Compensation 171,070

CRNA Total Compensation

Year W-2

Compensation2002 $306,9642003 $323,4912004 $325,9992005 $359,6992006 $365,409

MGMA Compensation and Production Survey 2007

Total Stipend Per Anesthetizing LocationMedian 54,18425th %ile 23,09275th %ile 92,90890th %ile 150,042

Total Stipends/Trauma CenterMedian 1,040,336

MGMA/ASA Cost Survey for Anesthesia and Pain MGMA/ASA Cost Survey for Anesthesia and Pain Management Practices 2006 Data - 117 PracticesManagement Practices 2006 Data - 117 Practices

Units Per MD Median 10,20675th %ile 13,85895th %ile 18,977

Collections Per UnitMedian $38.8825th %ile $34.0575th %ile $51.77

Weeks Worked/Year Median 44Hours Worked/Week Median 46

MGMA Physician Production SurveyMGMA Physician Production Survey2006 Data - 3,505 Anesthesiologists2006 Data - 3,505 Anesthesiologists

Your Practice vs. MGMA – Explain Difference

What happens when the CRNA:MD ratio changes?

IMPACT ON MD COMPENSATION BY CHANGING THE PHYSICIAN : CRNA RATIO

OR's to Cover 24        

MD Total Comp. $450,000 $460,000 $470,000 $475,000 $500,000 $525,000CRNA Total Comp. $172,000 $174,000 $177,000 $180,000 $185,000     

MD's 30 26 22 18 14 10CRNA's 0 6 12 18 24 30     MD Cost $13,500,000 $11,960,000 $10,340,000 $8,550,000 $7,000,000 $5,250,000CRNA Cost $0 $1,032,000 $2,088,000 $3,186,000 $4,320,000 $5,550,000     Total Cost $13,500,000 $12,992,000 $12,428,000 $11,736,000 $11,320,000 $10,800,000     Personnel Cost / OR $562,500 $541,333 $517,833 $489,000 $471,667 $450,000                    

SubsidySubsidy Types Types O.R revenue guarantee vs. collectionsO.R revenue guarantee vs. collections

Payer mix subsidy (guarantee / unit)Payer mix subsidy (guarantee / unit)

MD salary guaranteeMD salary guarantee

Negotiated amount with Negotiated amount with escalator/descelatorescalator/descelator

Fixed amount for call, OB, Medical Fixed amount for call, OB, Medical DirectorDirector

Guarantee for new anesthetizing locationsGuarantee for new anesthetizing locations

Hospital / Consultant Analysis of Your Proposal and Verification of Your Data

O.R. Utilization including Turnover Time

MD / CRNA W-2’s & Benefits – Individual and Average MD / CRNA weeks worked per year MD hours in hospital per week MD call frequency / days off after call MD : CRNA Ratio

Billing and collection statistics & audit Negotiated payer rates O.R Staffing Model

Locum use Governance

Your Practice Parameters That May Be Challenged

• Number of MD/CRNA’s needed to staff facility utilization a reasonable efficiency model• MD:CRNA Ratio

• Anesthesiologist FTE Comp (50th , 75th, 90th %ile)• MD weeks of vacation• Days off after call / late call• Anesthesiologists hours worked per week

• Production per physician (cases & units)

KOAMA OR Utilization SpreadsheetKOAMA OR Utilization Spreadsheet