MEDICAL ECONOMICS Do you understand how anesthesia is billed?

Ever wonder how anesthesia providers are paid? Most of us are salaried or are paid hourly, but it's good for facility managers to know how the folks at the head of the table bill insurers for our services — and what factors make a facility a desirable place for us to work. Let's start with how anesthesia is billed: in base units and time units.

• Base units. These are the numeric value attached to each CPT code. They cover the pre-operative interview, and generally factor in complexity and risk. Anesthesia for a laparoscopic cholecystectomy is valued at only 7 base units, while a coronary artery graft without cardiopulmonary bypass is valued at 25 base units.
• Time units. These are generally in 15-minute increments. They start the moment a provider enters the OR and stop the moment he gives a report to the PACU nurse.

There are some exceptions, but generally, if a case has 6 base units and takes 60 minutes, you'd bill for a total of 10 units (6 base + 4 time). The ASA Relative Value Guide lists the number of base units for each case. Check the area of the body having the procedure and look under the list of codes. For example, cataract surgery falls under "procedures on the eye" and 00142 is anesthesia for lens surgery (4 base units plus time units).

Here are the factors an anesthesia group weighs when considering a contract's worth at your facility.

1Your payer mix. You might assume all lap choles pay the same. They don't. Nor can you assume that complex procedures involving very sick patients always pay more. Medicare pays much less than commercial insurance. A typical 10-unit case for a private payer might pay $500 ($50 per unit), but Medicare would likely pay only $220 (about $22 per unit). And the landscape can change. If, for example, a large employer closes, many patients in that area may shift from commercial insurance to Medicaid (or no insurance).

2Your case volume. Naturally, the more cases we do, the more revenue we generate (assuming patients are covered). If a case cancels and we're stuck just sitting around, that means no revenue. If a surgeon cancels a day's cases, the day becomes a total loss. Or if a high-volume surgeon slows down, moves away or retires, revenue will likely decrease. Anesthesia providers who are salaried or hourly employees don't have to worry; they get paid regardless. But the anesthesia contract-holder doesn't have that luxury.

3Case delays and speed of turnover. We've all heard surgeons complain about slow turnover and delays. Anesthesia contract-holders have the same concerns. We should help facilitate turnover, and never cause unnecessary delays.

4Non-revenue generating services. Some facilities require services such as on-call coverage for trauma or OB in hospitals, guaranteed room coverage in ASCs (even if no cases are scheduled), or on-site providers who don't actively participate in cases (such as supervising anesthesiologists or floaters to help with turnover). Someone has to pay for these. If they're not covered by the facility, the money comes right out of anesthesia revenue.

5Miscellaneous factors. Your facility's hours of operation matter. Do you allow add-ons, weekend cases or late cases? Do anesthesia providers have any say when it comes to room utilization and minimum cases per room? If, for example, a 3-OR ASC expects to always have 3 providers available for surgeon convenience, that's expensive. You likely won't find providers willing to work only a couple of hours a day with no guaranteed minimum.

UNITS Ever consider how much your cases are worth to an anesthesia provider?

NEGOTIATIONS
What's a Contract Worth?

When negotiating a contract with your anesthesia providers, it helps to know how much revenue they'll earn at your facility. Let's say your surgical center does 3,000 cases per year in the following mix. To simplify, I'll leave out revenue for peripheral nerve blocks, use only a generic value for units and leave Medicaid out.

Case mix

Units per case

Total units

colonoscopies/EGDs (35%, 1,050 cases)

7 (5 base + 2 time)

7,350

general surgery (40%, 1,200 cases)

10 (5 base + 5 time)

12,000

orthopedics (25%, 750 cases)

10 (5 base + 5 time)

7,500

The total of anesthesia units comes to 26,850 (7,350 + 12,000 + 7,500). Now assume that the payer mix is 70% Medicare and 30% commercial. (We'll use a conservative estimate of $40 per unit for commercial insurers.).

The anesthesia revenue generated by this surgical center would be $735,690 and would probably require 2 to 3 full-time providers.

Insurance

Units x rate

Total revenue

Medicare 70% (0.7 x 26,850)

18,795 x $22

$413,490

Commercial 30% (0.3 x 26,850)

8,055 x $40

$322,200

— Mike MacKinnon, MSN, FNP-C, CRNA

$300,800 per year
Let's say a CRNA does nothing but basic hernia repairs (or something similar), and that each takes an hour. We'll value each at 10 units (6 base + 4 time). Since Medicare pays about $22 per unit, each case would generate about $220. Let's further assume a 30-minute turnaround, and that our CRNA takes a 30-minute lunch and 2 15-minute breaks. That leaves time for 5 cases per day, which would generate $1,100 (5 x $220) daily.

What if we add some private insurers to the mix at, say, $40 a unit and assume a payer mix that's 80% Medicare/Medicaid and 20% private? Now we're looking at $1,280 per day (4 x $220) plus (1 x $400). If we extrapolate over a full year, assuming 5 days a week and 5 vacation weeks a year, that CRNA would handle 1,175 cases and generate $300,800 (47 weeks at $6,400 per week). It's a relatively conservative estimate, but there may be fewer cases, and the payer mix may be worse. Plus, as noted, other factors can impact the bottom line, too, such as non-revenue generating services and canceled cases. OSM