Anesthesia Managed Care Contract Rates: Thoughts From Tony Mira

Editor's note: This article by Tony Mira, president and CEO of Anesthesia Business Consultants, an anesthesia & pain management billing and practice management services company, originally appeared in Anesthesia Business Consultants eAlerts, a free electronic newsletter. Sign-up to receive this newsletter by clicking here.

Across the United States and the District of Columbia, the average anesthesia managed care contract rate during the first several months of 2012 was $67.94.

That figure comes from the latest ASA survey of commercial fees paid for anesthesia services, published in the November issue of the ASA NEWSLETTER. ASA fields the survey electronically every year, soliciting responses through email, committee list servs, newsletters and the website. Whether the responses are representative of the specialty is an open question, but the overall consistency of the survey results from year to year, since it was initiated in the mid-1990s, supplies a certain measure of credibility. The survey leverages the relatively small number of respondents by asking for the conversion factors ("CFs" or "unit rates") for five of each group's largest managed care contract rates.

The first thing to note is that $67.94 is a weighted average of averages across up to five contracts for each of the 175 practices that submitted valid responses. The average CF for all five contracts reported ranged from $64.80 to $71.44. Thus, the average of the highest of the five contract rates reported by the pool of respondents is $71.44, and that number is part of the $67.94 statistic.

The national mean of the medians for the five contracts was lower, predictably, ranging from $61.70 to $68.00. The highest spread of CFs was $113.10-$135.00, with the top figure of $135.00 coming from a Southern state. Although 40 states contributed data, the small numbers of responses dictated reporting by region. The lowest spread of unit rates was $34.00-$37.00, with the bottom figure (which was also the weighted average of the lowest rates) submitted by a practice in the Eastern region. As in previous years, notwithstanding some of the lowest CFs, the Eastern states reported the highest set of average CFs across the five contracts. The lowest rates came from the Western region, as usual. Readers interested in seeing the summary statistics for their own regions should refer to Table 5 on page 48 of the article.

The second fact that stands out is that the conversion factors are lower than those reported in last year's survey. In 2011, 214 practices participated, producing national average conversion factors for the five highest contracts ranging from $67.57 to $72.87. On the other hand, the medians increased slightly. The survey authors believe that the decreased average conversion factor may be due simply to the lower survey response rate. They also conclude that "previous ASA surveys have helped groups in their negotiations. The range of rates, shows in the figures, shows less variance of CFs. The increased median CF is likely due to a narrowing of the range of CFs trending slight upward."

A recent discussion within the MGMA's Anesthesia Administration Assembly (AAA) online community tells us that groups do not necessarily raise their charges on an annual or even on a biannual basis. At ABC, we often find that new clients have not changed their charge master for several years. There may be a lesson to be learned here.

There is considerable regional variation in the number of anesthesia units (base + time) reported by the respondents. In the Eastern and Southern regions as well as in the Midwest, the predominant staffing model is the anesthesia care team; anesthesiologist-only cases outweighed the number of care team cases by 2.4 to 1 in the Western region. Anesthesia units per FTE physician per year varied between 8,159 and 11,539 for anesthesiologist-only cases, and between 11,928 and 17,264 units for care team cases, with the lowest numbers reported in the West.

The CFs correlate negatively with the numbers of CRNAs in the responding practices. Like the study authors, we do not hazard a guess as to why. On the other hand, the influence of geographic location, practice size and payer market share on unit rates as demonstrated through a regression analysis contained no surprises. As noted above, managed care contracts provide for higher CFs in the Eastern than the Western regions. Intuitively, we know that larger groups may have more bargaining power — unless the payer market is relatively concentrated.

It is interesting to note the lack of growth in physicians' incomes overall during the last decade, as reported in a study that appeared as a Research Letter in the November 28, 2012 issue of JAMA, Trends in the Earnings of Health Care Professionals in the United States, 1987-2010. The RAND Corporation researchers found that physician earnings increased far more slowly than those of other health care professionals. From 1996-2000 and 2006-2010, adjusted physician earnings dropped 1.6 percent, while pharmacists' salaries rose by 34.4 percent. Other national studies have already shown that annual physician incomes decreased between 1995 and 2003. Possible explanations, according to the JAMA study, "include managed care growth, Medicaid, payment cuts, sluggish Medicare payment growth, or bargaining by insurance companies." The study focused on primary care and cannot be extrapolated to anesthesiology, of course, but the presumed impact of payer bargaining power is relevant to understanding revenues across the board.

"Sluggish Medicare payment growth" is common to all medical specialties. As we know, that growth will turn sharply negative if Washington does not manage to produce a legislative solution to the SGR problem within the next month. The anesthesia CF, currently $21.41, is scheduled to decrease by 26 percent to $15.93 — a figure which is just 23 percent of the 2012 national average managed care rate, a significantly lower ratio than the traditional (if unacceptable) 33 percent.

Beyond continuing to remind your Senators and Members of Congress that they must fix the SGR problem and prevent another 26 percent cut in Medicare payments in the immediate future, readers should consider helping their cause by participating in the 2013 and future ASA commercial fee surveys. He who has the data has the gold, as the saying goes.

Related Articles on Anesthesia:
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CareFusion Introduces Safer Anesthesia System

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