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MAXIMIZING REVENUE & CONTROLLING COSTS

How to Calculate an Anesthesia Stipend

Bobby Johnson, Director of Finance

11 November 2016

There are many methods that can be used to calculate an anesthesia stipend. In the end, the method you choose shouldn’t matter, as long as all the variables used are identical.

DPI’s preferred method to calculate an anesthesia stipend uses the following algebraic equation:

Cost of Services Provided

+ Overhead

- Cash Collected

= STIPEND

Generally, if the cash collected in this equation is greater than the cost of the services provided, plus a profit margin, no stipend would be necessary.

Let’s use this simple, fictional scenario as an example, and then we can then move into more complex variables:

A CRNA has an exclusive contract to cover all cases at a rural hospital.  The CRNA’s costs per day, plus a 15% profit margin, is $500.  The rural hospital has a very low case volume and averages only 2 cases per day.  The payer mix at this facility is heavily weighted toward Medicare and Medicaid patients.  The average case reimbursement is $200.  Using our equation, let’s plug in the variables:

$500

(cost)

- $400

(cash collected)

= $100

per day stipend

In order for the CRNA to be able to practice at this facility without having to take money out of his or her own pocket to subsidize the facility, the facility will need to pay him or her $100 per workday to maintain profitability. That doesn’t seem too complicated, so why can this often turn into such a complex situation?

There are several factors that complicate this scenario and directly affect the anesthesia stipend equation. This list is not exhaustive, but it does include the major drivers of the anesthesia stipend:

  • Changes in case volume
  • Changes in case mix
  • Changes in payer mix
  • Changes in call coverage
  • Changes in case times
  • After hours cases
  • Changes in regulations – VBM / PQRS / Bundled Payments

Changes in case volume

An anesthetist is only paid for the time they are performing cases—not the time they take for breaks.  In order to maximize the utility of each anesthetist, cases should be strategically scheduled so that the anesthetist is actually performing cases for the majority of his or her shift, thus maximizing OR utilization.  Gaps in an anesthetist’s schedule caused by low case volume or providing call coverage quickly add up to warrant a stipend scenario.

Changes in case mix

Swings in your case mix can quickly affect cash collections. Anesthesia is paid based upon units multiplied by a conversion rate. Units are made up of two components. The first is a time component—every 15 minutes equals one unit. The second is a base value per surgery, where each surgery (depending on the level of complexity) has a base unit ranging from 3 to 13 units. The more complex a surgery is, the higher the base value will be. Thus, changes in the types of surgeries performed can have a notable impact on collections.

Changes in payer mix

As discussed, anesthesia is paid based on units and a conversion rate.  Conversion rates vary between government payers (Medicare and Medicaid) and non-government payers (commercial carriers such as UHC , BCBS, etc.).  Generally, non-government cases pay 2 to 3 times more than government cases.  Thus, a swing in your case volume from government to non-government payers can quickly impact your collections.

Changes in call coverage

Facilities may decide that they want a certain level of anesthesia coverage that results in poor utilization of the anesthetist’s time. This could be call coverage for emergency departments, OB deliveries, or other specific facility requests. These low utilization scenarios almost always result in the need for a stipend.

Changes in case times

On-time starts are incredibly important. Cases should always try to be scheduled in prime hours, and they should start when scheduled. Delays in cases due to personnel arriving late or carrying out inefficient pre-op processes decrease utilization of the anesthetist’s valuable time. Cases that occur in non-prime hours are more expensive due to overtime rates. These minutes can quickly add up to several hours over the course of a week.

Government regulations

New federal regulations that are driving reimbursement from a volume based model to a value based model will have major implications on future collections. Many rural, low volume facilities that require anesthesia subsidy payments contract with small anesthetist groups that don’t have the capacity and resources to deal with the many upcoming changes in rules and regulations. These groups will inevitably begin to see their Medicare collections decrease.

At first glance, it’s easy to see how an anesthesia stipend can be quickly calculated. However, as with any calculation, the more variables that are added to the equation, the more complex and confusing the scenario becomes. DPI’s expertise in calculating anesthesia stipends has proven to be valuable to many of our clients and partners. After receiving the variables detailed above, we would be glad to help you determine if the anesthesia subsidy you are paying is in line with current market levels.

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