EHC’s QA Series Question 1

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June 11, 2020

As a CFO of a hospital paying our anesthesia group on a (revenue) guarantee, our contractual payments have gone up 300% this month as anesthesia revenue has dropped dramatically.  How are other facilities handling this scenario?

As a CFO of a hospital paying our anesthesia group on a (revenue) guarantee, our contractual payments have gone up 300% this month as anesthesia revenue has dropped dramatically.  How are other facilities handling this scenario?

The substantial drop in anesthesia collections due to elective case cancellations will have an amplified impact on either the anesthesia group or hospital.  Typical anesthesia support mechanisms are designed based on a stable and predictable cash flow for professional services.  With a “black swan” event resulting in a huge revenue decrease, an uncapped guarantee will cause the hospital expenditure to increase dramatically, protecting provider compensation.  Conversely in a flat subsidy arrangement, provider compensation may plummet to levels that will cause Physicians and Anesthetists to seek employment elsewhere.  

EHC has engaged with many facilities and groups to assist them as they review the realities of their current revenue streams, coverage requirements and reasonable compensation targets. In recent weeks some anesthesia groups have been asked to reduce their monthly stipend, but continue their present staffing, while others have been asked to take the same percentage reduction (25%) as the hospital employed orthopedic surgeons. Some hospital systems have requested that contracted practice management corporations reduce their subsidy by a fixed percentage for the immediate future. Meanwhile, there has been further consolidation of the large Anesthesia Practice Management companies and some hospitals are considering hospital employment of their anesthesia service. If all of this sounds confusing, it is and will be for the foreseeable future.

With that being said, to best prepare and position yourself, we recommend that each hospital and group sit down together and similar have discussions to determine a mutually acceptable support structure to ensure adequate coverage and retention of providers as volume recovers. 

We actually anticipated this in Part 1 of the “Anesthesia Finances in the age of COVID-19” series. Take a look: https://enhancehc.com/covid-19-anesthesia-finances-news-1/ 

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Response provided by: Robert Stiefel, MD