Healthcare Insider Podcast: Smart contracting: Tips for hospitals and … – Modern Healthcare

Most hospitals and ambulatory surgery centers spend a significant amount of time and resources on securing contracts with anesthesia providers to help them provide essential patient care.
Shortages of anesthesia providers and higher healthcare costs overall make hiring internally, contracting, or re-contracting with an anesthesia group a costly endeavor. Despite these challenges, there is due diligence both facilities and anesthesia providers can conduct in advance of negotiations to save money and create long-lasting partnerships.  
In this episode of Healthcare Insider, Dr. Josh Miller, physician managing director for Surgical Directions, shares thoughtful hiring tactics a hospital or ASC should deploy to make sure the anesthesiology group meets their unique needs and expectations. Miller also discusses the common challenges that come up when solidifying a contract and how to address them for long term success. 
Listen to the full episode below.
Camille Baxter:
Hello and welcome to Healthcare Insider, a sponsored content podcast series from Modern Healthcare Custom Media. I’m your host, Camille Baxter, and today we are speaking with Dr. Joshua Miller, physician managing director for surgical directions. Dr. Miller has more than 30 years of clinical and leadership experience as an anesthesiologist with subspecialty training in chronic and interventional pain management. He spent a significant portion of his career working in and managing tertiary care level hospital operating rooms, critical care units, and freestanding ambulatory surgery centers. He also has vast corporate leadership experience as corporate medical director of a practice with 103 anesthesiologists. In addition, Dr. Miller served as a founding member, treasurer and chair of the finance committee for a clinically integrated network and ACO with 2,700 physicians.
Before we dive in, we’d like to thank the sponsor of this episode, Surgical Directions. Surgical Directions is a specialty healthcare consulting firm composed of professionals with deep experience, working side by side with clients to achieve the absolute greatest impact and sustainable performance possible. From assessment to implementation, to interim or permanent placements within your leadership team, Surgical Directions is more than a consulting firm. They’re a collaborative partner dedicated to your success. Today we are talking to Dr. Miller about how hospitals and ambulatory surgery centers can better control anesthesia costs with thoughtful hiring and contract strategies. Dr. Miller, thank you so much for being here today.
Dr. Joshua Miller:
Thank you, Camille. This is an important discussion and I’m glad to be able to participate.
Camille Baxter:
Well, great. Then let’s dive right into it. Dr. Miller, to start us off, can you explain what challenges ambulatory surgery centers and hospitals are facing right now in terms of anesthesia costs? Set the stage for us a bit.
Dr. Joshua Miller:
To discuss the issues of cost related to anesthesiology, we really have to understand the staffing problems. So there are several things that are creating a staffing problem for both hospitals and ASCs. So a couple of those things, we’re having a population bubble of baby boomers. Because of that, the average age of an anesthesiologist is now about 54 years old. Nurse anesthetists, which are a vital part of the anesthesia coverage model, are moving to a four year training program, which will be required by the year of 2025. As a result, we have less nurse atheists graduates for the next several years. COVID Great Resignation is affecting anesthesia providers that are near the ends of their careers. Our population’s aging, roughly 10,000 baby boomers are turning 65 every day, and of course that means that older patients require more procedures, both in the ASC hospital, ORs, and non-operating room anesthetizing locations such as endoscopy, cardiac cath labs, interventional radiology.
And finally, there is an increase in non-operating room anesthesia locations in general. So we’re moving more to interventional procedures that occur outside of the operating room stressing OR departments in many ways. This is causing an acute shortage of anesthesia providers for both hospitals and ASCs. The problem was really more of a hospital issue several years ago because generally an ASC is a better lifestyle for the anesthesia providers. This is now trickling down to ASCs. This is affecting costs. So for example, an anesthesiology per diem daily rate in an ASC was about 16 to $1,800, 3 to 4 years ago. That rate is now between 22 and $2,600 per day due to provider shortages.
Camille Baxter:
It kind of sounds like there’s a little bit of a perfect storm going on with the shortages and the costs changing. So hospitals and ASCs alike are struggling to figure out the optimal anesthesiology models to use. Can you talk a little bit about the options that they have and how a hospital or ASC should determine what’s best for them.
Dr. Joshua Miller:
In general, the anesthesiology models depend on surgeon desires. For example, where I’ve been to ASCs, where surgeons demand or require physicians or anesthesiologists exclusively. Others are comfortable with a team care model or another model. Patient age and health comorbidities are affecting the modeling types of an ASC. So for an endoscopy ASC, you might have 45 to 50 year old people receiving their first endoscopy, they’re otherwise healthy, versus a 70 year old for a cardiac cath procedure in a cardiac cath ASC. And then state requirements. Does the state require an anesthesiologist to be present or can a nurse anesthetist practice without supervision? So for these kind of different models, we can look at the economics and the benefits of one versus the other.
From an economic standpoint, and if you’re doing a team care model, the break even is about three rooms with anesthetists, with coverage by one anesthesiologist. That care team model allows for an extra pair of anesthesia provider hands where one provider to a room doesn’t allow for help when you have an urgent or emergency procedure or anesthesiology related issue. Similarly, you may not have help if you have a problem in the post anesthesia care unit. Your specific anesthesiology model requires a deep dive into the case mix, the volume and state legal requirements. This is really one of Surgical Direction’s areas of expertise. We do a lot of determinations of ASC or hospital’s idea models for anesthesiology coverage.
Camille Baxter:
So after an organization decides what anesthesia model they should use, I’m sure there are challenges that come up with solidifying the contract. Can you lay out what some of those might be?
Dr. Joshua Miller:
So first of all, as you said, defining and modeling needs to be the essential first step for developing a new anesthesiology contract. So if you’re going to send out a request for proposal or RFP, some of the questions you need to ask are, who’s your anesthesiology partner going to do? Is it going to be a large national anesthesia group, a local group, or is it independent daily physicians, which are 1099s or per diems? There are differences with the type of [inaudible 00:06:29] between 1099 and per diem. Or some ASCs are now rolling up into a large consortium of ASCs and do you want to build your own anesthesiology division? Is this the best approach? And it’s really about understanding the cost and benefits of different models. For example, a large national medical group may be more expensive initially, as they are generally either private equity owned or a publicly traded company, and they require a little bit higher margin to make their money back, if you will. And therefore they are a little bit more costly than a per diem or a local group might be.
That said, the large company will generally guarantee you coverage, so you may pay a little bit more, but you know you’re always going to have coverage. If you don’t have that kind of contract, you may be scrambling for coverage if you utilize a 1099 or per diem model. The worst case scenario is you have to close an OR or two because you don’t have anesthesiology coverage. Then you lose both your surgical fee and importantly, the facility fee. Then also you can ask, what are your coverage needs? How many rooms are you going to run? How many first starts in the morning? What are you going to do as far as, do you want to schedule weekend or evening cases? Some patients want their endoscopy on a Saturday, for example.
Camille Baxter:
With all of these challenges as it relates to these options, how can a hospital or ASC go about addressing some of these contract challenges? Like what data should they be looking at?
Dr. Joshua Miller:
Well, you’re exactly right. Data is key, or usage data has to be clean. If your data doesn’t appropriately defines your needs, the anesthesiology group will cover for a maximum usage, which means higher costs. So we had Surgical Directions use a proprietary software program called Merlin that feeds the EMR data or the electronic medical records data inputs directly into the program and gives you a clearly defined coverage need that gives the ASC or hospital an exact understanding of their coverage. In your RFP, ask outside anesthesiology groups about their payer network and make sure it aligns with the ASC or hospital networks. If you have a stipend as part of the contract, have precise language as to how the stipend is built. For example, the cascading stipend may incentivize the anesthesiologist to be more efficient.
Make sure you have a time limit on the contract to allow for renegotiation as the market changes. Average terms are two to four years. Also, with regards to termination, both sides should have an ability to remove themselves from the contract based on certain specific metrics defined in the contract. If you do decide to build your own anesthesiology division or per diems, you’ll probably need a scheduler or billing expert specific to anesthesiology in your back office.
Camille Baxter:
So there really are a number of factors that need to be considered and evaluated all the way through the process in order to really define and implement that model. Are there any other final thoughts that we haven’t touched on that you’d like to add, Dr. Miller, to share with our listeners?
Dr. Joshua Miller:
I think it’s important that you know your anesthesiology or hospital’s current needs, and also importantly, their plans for growth. Are you adding procedures to your hospital or ASC that will require anesthesiology? Possibly not in the traditional locations that you think about. Do you have a data driven anesthesiology model so that you’ll understand what your needs are? It’s important, I think, to look at different partners benefits and downsides through the RFP process. Understand how the coverage model matches your ASCs expectations. This may not be an apples to apples comparison. Look at it very carefully. Make sure you’re hiring high quality anesthesia providers. Don’t let the quality kind of get lost in the contracting. Quality and ability are essential as the cases are becoming more complex and the patients are sicker as we spoke about earlier. Review your payer contracting and their payer contracting. Make sure that there’s synergy between the two payer networks. And also discuss estimates on anesthesiology payer charges, and this will affect your no surprise act, good faith estimate for your patients.
Importantly, as you develop these very complex anesthesiology contracts, remember, you’re not alone. There are companies with experts using data driven metrics and national experience that are doing this work every day and can guide you through the process.
Camille Baxter:
Thank you so much again, Dr. Miller, for talking with me today and for helping us better understand more about these challenges within hospitals and ASCs.
Dr. Joshua Miller:
Thanks, Camille. I really enjoyed it.
Camille Baxter:
This has been a sponsored episode of Healthcare Insider, created in collaboration with Surgical Directions. For more information about Surgical Directions, please visit I’m your host, Camille Baxter. Look for more episodes of Healthcare Insider under the multimedia tab on or subscribe to the podcast at your preferred pod catcher. Thanks for listening.
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