By: Jeremiah O’Leary, MBA, CMPE, SVP of Practice Management
My first article for the Anesthesia Business Journal was on managed care contracting. As an overall strategy, it advocated that our clients should:
- Approach the situation as an opportunity for partnership.
- Gather information on the Managed Care Organization (MCO).
- Gather data about the patient population.
- Define the services to be provided.
- Define potential risks and take steps to limit risk factors.
- Determine compensation.
The article went on to address the common methods of contracting, which included Discounted Unit Rate, Fixed Fee per Procedure and Case Rate. I also described an approach to a lesser known method because a few of our clients were under Global Fixed Price contracts with their hospitals for CABG cases.
The global pricing method never really gained much traction, until recently. With the implementation of the Affordable Care Act and the establishment of Alternative Care Organizations, the idea of global or bundled pricing for comprehensive medical care has come to the forefront. Over the last 18 months, our anesthesia billing consultants have negotiated a number of bundled contracts for our clients including OB, joint replacements, laminectomies, and arthrodesis. Medicare has been piloting the bundled joint replacements at a facility level for several years and is now expanding the program. This evolution will naturally lead to the inclusion of physician services into “the bundle”.
The overall strategy for Global Contracts is basically the same as I outlined in my first article with an emphasis on “Opportunity for Partnership” and “Defining the Services to be Provided”. The partners will now include the hospital and the other specialists involved in the service. While the partners will be collaborating to offer a fair market price, they will also be competing for a fixed compensation pool. This process will force the partners to carefully define the services. As bundled payments pick up momentum, the physician component of the services will be more closely evaluated to determine the impact that each of the various procedures has on the final outcome, length of stay, and patient satisfaction.
When it comes time to “Determine Compensation”, there will need to be better rationale beyond historical payments. For this purpose, Medac’s anesthesia business consultants have developed models based on individual practice data and clinical protocols. The first step is to develop a Case Profile for the procedure that is being bundled. Using our robust database, we are able to pull the average base and time units for individual clients and the ancillary procedures that are part of the service. The example above illustrates one client’s Case Profile for Hip and Knee Arthroplasties. Note that the physical status modifier is embedded with the base units, which explains the average 8.06 base units for the Hip Arthroplasty instead of 8.0. Time is driven by the surgeons at the institution and the blocks, USG and other ancillary procedures are determined by the department protocols. This practice’s protocol for the Knee Arthroplasty includes a nerve catheter, which also includes an inpatient follow-up visit.
The challenge in global pricing is breaking the thought process of using Medicare reimbursement as the benchmark. While this is the “easy answer”, it severely disadvantages anesthesia. Most anesthesia billing consultants view global contracting as an opportunity to level the playing field and raise anesthesia to a more equitable benchmark compared to the other specialties. In the above example, we used the average, volume weighted managed care rate as the Conversion Factor multiplied against the average total units of the case profiles. Alternatively, we could have used 105% of the Blue Cross/Blue Shield rate. The objective is to arrive at a benchmark that is equitable for all specialties. In this case, we “accepted” the Medicare reimbursements for the ancillary procedures because they are based on the RBRVS scale, which is reasonable across the specialties.
It’s important to remember that all managed care contracts, especially global contracts, are different. These contracts should be part of an overall negotiation strategy, which can be modified by your Anesthesia Billing Consultants to meet the needs of your practice.