While there is much to keep in mind when entering an anesthesia contract with hospital partners, we have identified four key things practices should consider for a high-performance contract.
Make it Managed Care Friendly.
The big question is, “how friendly should this be?” That is often a matter that is brought up in contract negotiations. On one side of the coin, the practice may be required to contract with any managed care organization the hospital designates. On the flip side, the practice may need to negotiate with designated managed care organizations. Most anesthesia contracts end up somewhere in between. The hospital may insist that the anesthesia practice commit to discounts outside of Medicare. Because Medicare significantly under-compensates anesthesia services, it is not the best reference point for discounts.
It should also be pointed out that managed care contracts are much more than the rate of reimbursement. The practice could be susceptible to onerous managed care contract reporting if you declare all contracts that provide a certain ASA unit rate acceptable.
With the advent of the No Surprises Act (NSA), balance billing is prohibited for most patients with out of network services. While this area of managed care contracting may seem less important to hospitals, that is not always the case. Because NSA has caused many managed care organizations to be less willing to negotiate with anesthesia practices, anesthesia contracts that require contracts with all payers can be a bit more problematic.
Service Categories in 3, 2, 1…
Even under the most comprehensive anesthesia contracts, the anesthesia practice’s service obligations can be divided into three categories: Administrative, Call, and Staffing.
Anesthesia contracts often include provisions for the designation of an anesthesia medical director with very specific duties under the contract. The hospital may want to designate the director, who will be accountable to the administrative services rendered. It is becoming more common to impose a limit on the hours of administrative services required, which is essential if the administrative services are not compensated on an hourly basis.
With respect to call services, anesthesia practices must identify how specialized the call coverage is with the hospital and whether any call is in house. Most likely, obstetrics is an in-house call and the one most likely to be mentioned in the anesthesia contract. For instance, if the hospital has a very busy obstetrical service, the physician on call would be in house simply because one or more epidurals will be constantly running. If the service is not very busy, the hospital may ask the physician on obstetrics call be in-house for the convenience of the patients and obstetricians and inconvenience of the anesthesiologist. Another area of specialized call likely to be addressed in the anesthesia contract is cardiac, especially where not all practice members provide regular cardiac anesthesia. It is not uncommon for hospitals that have both cardiac and obstetric services to have multiple anesthesiologists on call, in addition to anesthesiologists for the general operating room.
Anesthesia contracts now typically include details on the staffing obligation, where anesthesiologists are in operating rooms and other anesthetizing locations for scheduled cases. Anesthesiology practices need not commit to providing “all anesthesia services required by hospital.” Instead, they can identify the number of operating rooms and other anesthetizing locations to be staffed and the hours for each, as mutually reviewed and agreed upon on a regular basis. As example, some rooms may have cases scheduled to 2:00 pm. and the others may be scheduled through 3:00 or 5:00p.m. The practice may want to limit “add-ons” or provide a mechanism within the agreement allowing cases to be scheduled for the efficient use of anesthesia resources. All agreements will entail service level measures directly reflecting or resulting from your staffing requirements.
Take Care with Compensation.
When it comes to compensation, a fixed monthly stipend for the call and coverage services provided by the practice can be found in nearly all anesthesia contracts. Many contracts may include an hourly rate for medical director services as well, or a monthly stipend based on a minimum number of hours of administrative service. In other instances, the hospital may make an income guarantee where it ensures a certain level of income for the practice based on the number of FTEs required to perform all services under the contract. This requires the hospital to consider revenues the practice collects from patients and third-party payors for the agreed-upon services at the hospital.
No matter the approach, the hospital’s patient/payer mix should always be taken into consideration, with no absolute conclusions or specific amounts of compensation paid to the practice. Why? Because one amount paid under the anesthesia contract at one hospital doesn’t define what should be paid at another. If one hospital has a heavy Medicare patient mix, it might compensate the practice more than another hospital in the same area that has a better patient mix.
Use Data to Drive Negotiations.
Aside from the contract items already discussed, there are key negotiation tactics in negotiating an anesthesia contract that should not be overlooked. For starters, anesthesiologists typically go into negotiations at a disadvantage due to the differences in education and expertise they face against hospital administrators with MBAs. Anesthesiologists can be better prepared with a team of outsourced practice managers, who can look closely at their data around payer mix, poor utilization of ORs, and physician salaries, as examples. Practices armed with data can negotiate more effectively with hospital administrators who might otherwise make refusals against reasonable compromises unless objectively challenged with the numbers in black and white.
It is also important that anesthesia practices maintain flexibility in negotiations and see opportunities in how they accommodate the hospital’s needs and wants around services, staffing the OR, and managed care. There is opportunity in difficult negotiations to convince the hospital that the practice can provide great value for the requested compensation. After all, each party has a goal to meet in negotiations…the hospital wants to get more services and pay less compensation for them, while the anesthesia practice wants to get as much compensation as possible without overworking its staff. The common denominator is money. Key to negotiations is for anesthesia practices to remain firm and keep the end goal in perspective.
Anesthesia practices have many things to keep in mind when negotiating complex hospital contracts. It should be noted that every practice has different needs, structures, and data as they go up against hospitals, who also have a specific set of differentiators. Therefore, no two contracts will ever be the same. The most successful and profitable contracts are created when all factors are carefully and strategically considered for both the practice and the hospital partners.