From a billing perspective, all anesthesia charges fall into three categories: time-based surgical anesthesia, obstetric (OB) analgesia and non-time-based charges, such as those for invasive monitoring, nerve blocks, ultrasonic guidance and visit codes. Health plans tend to have policies that pay a contracted rate per unit for surgical anesthesia, including c-sections. Non-time-based services are all paid based on the payer’s fee schedule, not ASA units. It is payment for obstetrical anesthesia that most confuses and frustrates our clients because of all the arcane nuances embedded within the charge and payment calculation. It should also be noted that the clinical and financial review of surgical anesthesia payments should never be comingled with labor payments because, not only are the payment methodologies different, but the payer mix is sure to be very different.
OB anesthesia can be a make-or-break service for an anesthesia practice. Many a practice has lost its contract as a result of its unwillingness to provide a comprehensive service. Because so many hospitals focus on the importance of growing their obstetric business, this is an aspect of anesthesia practice management that must be taken very seriously and managed very closely. Just know that the effective management of a profitable OB anesthesia service is an order of magnitude more complicated than that required for the surgical anesthesia service.
An Assortment of Options
Some years ago, the ASA Relative Value Guide (RVG) laid out four recommended options to charge calculation for a labor epidural service, which opened the flood gates for an almost endless number of variations as practices explored ways to optimize the revenue potential of this service. The RVG’s billing options for OB anesthesia, specifically in connection with a labor epidural, are as follows:
- Base units, plus minutes from insertion of catheter to delivery, subject to a reasonable cap.
- Base units, plus one unit per hour plus direct contact time.
- Incremental time-based fees.
- Flat fee.
Not only are there billing options as it concerns labor epidurals, there are coding options, as well, when it comes to OB anesthesia, generally. The CPT coding manual provides the following coding options, with the RVG listing base units that reflect a different care modality/scenario, per code:
• 01960 Anesthesia for vaginal delivery only, no mention of epidural (5 units)
• 01961 Anesthesia for cesarean section, no mention of epidural (7 units)
• 01967 Epidural for labor analgesia (5 units)
• 01968 Epidural for cesarean section after epidural (Add-on code worth 3 units*)
*Some insurances only pay 2 units.
An Assortment of Rules
Based on all these CPT coding and RVG billing options, the ABC/Medac billing system, First Anesthesia, now includes no less than 20 specific rules for OB billing. The key issue is the determination of time units. Historically, payer policies required the documentation of actual time spent with the patient, but increasingly anesthesia providers feel they should be paid for the time they are available. Diverse payer policies are a critical factor. The goal is to ensure appropriate payment. Usually, the Medicaid policies are the most specific, even though the rates are the lowest. Every state Medicaid policy for OB anesthesia is different.
Obviously, one of the major distinctions between surgical anesthesia and obstetric anesthesia is the fact that one provider may be managing multiple epidurals simultaneously. For most payers this is not an issue, but the rules for MediCal (Medicaid in California) take concurrency into consideration. The total units billed per hour cannot be more than four, no matter how many epidurals an anesthesiologist may be managing at one time even those that are not MediCal patients. This unique rule requires that we undertake a special review and calculation of concurrency for each labor epidural service, which in turn has necessitated some fairly complicated programing of our system.
Validating the accuracy of payments has become a significant challenge when it comes to OB anesthesia. However, as stated above, the ABC/Medac software has 20 specific rules for calculating the expected payment for a given obstetric case to address this. Ironically, it is the lowest paying plans, mainly the Medicaid and Medicaid Managed Care plans, that require the most careful monitoring.
The Price is Right . . . or Not
Price setting for any medical service is a juggling act. On the one hand, the objective is to price the service so that it is not underpaid, which would result in leaving money on the table. On the other, pricing must be sensitive to market factors.
The average labor epidural can run for hours. Our data shows that the average time units can be as high as 29 or 7.25 hours. This will result in substantially high bills, some of which will be higher than the obstetrician’s charge. As a result, practices often find themselves debating the need for a cap on the total charge. There are two methods to accomplish this: one can limit the number of time units or the total charge. Some ABC/Medac clients have implemented such caps but others have not. As a company we recommend the implementation of a cap based on local market conditions Depending on the location of the practice, caps can range widely based on local market pricing. Suffice it to say that labor anesthesia is either a significantly profitable or abysmally costly service to provide. The determining factor is usually the payor mix and the number of deliveries performed per year.
A Hard Look at Profitability
The most important single factor in the profitability of an obstetric anesthesia service is the percentage of Medicaid (or MediCal in California) patients. In almost every state, Medicaid has the lowest payment rate while maintaining the most stringent payment requirements. A practice with overwhelming Medicaid will find it very difficult to generate enough money to cover the cost of providing the service, especially a 24-hour in-house epidural service.
Profitability in the area of OB anesthesia will be impacted by multiple factors. However, two of the most important variables to consider are: (a) the percentage of Medicaid cases in your payer mix, and (b) whether payers in a particular state pay face-to-face time versus “stick to delivery time,” with or without a cap, for labor epidurals. As to the first variable, the percentage of Medicaid cases for most practices is going to be higher for OB. This percentage can reach as high as 70 percent.
When it comes to the other variable, i.e., time requirements for labor epidurals, there are various Medicaid and Blue Cross Blue Shield plans throughout the country that pay based on face-to-face time, which means that you can only charge for the time you are actually present with the patient. (This includes discontinuous time blocks reflecting your intermittent visits with the patient throughout the case.) Payers who require this billing methodology include Pennsylvania Highmark Blue Shield, Pennsylvania Medicaid, Maryland’s CareFirst Blue Cross/Blue Shield, New York Medicaid, Wisconsin Medicaid and Colorado Medicaid—just to name a few.
For payers that do not require face-to-face time for a labor epidural service, OB anesthesia can be very profitable. Some commercial/managed care payers will reimburse labor epidurals based on a straight base-plus-time calculation. Then there are payers that incorporate either a cap on the time or a hybrid formula (e.g., four units for the first hour, one unit for every hour thereafter). Finally, there are those that pay a flat rate for labor epidurals. United Healthcare’s national policy pays labor epidurals based on base-plus-time, to a cap of 435 minutes. Cigna’s policy is base units, plus a time cap of 10 units. Aetna’s national policy is to pay base, plus one unit of time per hour and 4 units for the last hour. Depending on these two variables—Medicaid percentage in your OB payer mix and payer billing requirements for labor epidurals—OB can be the most lucrative part of your practice, or it can be a drain on your providers and your coverage costs.
There are other factors that impact profitability in your OB practice. For example, the potential role of CRNAs in OB is intriguing given the opportunity created by opt-out states. It used to be that many hospitals employed CRNAs because the anesthesiologists were unwilling to provide an acceptable obstetric anesthesia service. This appears to be changing as more practices have started relying on CRNAs to set up and manage epidurals. It will be interesting to see how this evolves over time as practices explore ways to manage the overall cost of anesthesia care more closely.
While we typically assess the profitability of a surgical anesthesia practice based on normalized metrics for activity, Monday through Friday between 7:00 AM and 3:00 PM, the OB service must be seen as a 24-hour service, 365 days a year. An OB shift is typically three times as long as an OR shift. As a practical matter, the OB shift must generate at least twice what the surgical shift does to be profitable. Any negotiation of a subsidy agreement with the facility must take this into consideration. Providing a 24-hour in-house OB anesthesia service is an expensive proposition, no matter how you look at it.
Today’s successful anesthesia practices routinely monitor and manage the following factors, all of which can be variable:
• The average net yield per case, which includes a distinction between labor epidurals, epidurals that go to C-section and deliveries without epidural The OB payer mix, with a special focus on the impact of Medicaid and Medicaid HMO plans
• The volume of cases by month and the busiest times of day
• The staffing requirements
• The profitability of the service
• The need for financial support
If you would like us to help you analyze and assess your OB anesthesia service, feel free to reach out to your Medac account executive who will be happy to work with you.