A three hospital health system in the Midwest had a longstanding contract with a local anesthesia provider group paying a subsidy based on a revenue guarantee. Three years in a row the amount of subsidy had increased – 15%, 12% and 20% respectively – despite the fact that their coverage requirements had not changed. The health system CFO determined that approximately 80% of the subsidy increases were related to diminishing revenue (there were small, agreed upon annual expense escalators), and that the revenue shortfall could not be explained by caseload or payor mix changes.
The CFO suspected that inefficiencies in the anesthesia billing and collections processes were the problem and engaged Enhance Perioperative & Anesthesia Consulting (EPAC) to analyze the revenue cycle.
DETAILED ANALYSIS AND A RED FLAG
First, EPAC analyzed four years of billing and collections data provided by both the anesthesia provider group and the health system. A/R trends, cases, anesthesia units billed, contract rates, blended unit analysis and the actual to expected blended unit rates were all reviewed. This anesthesia-specific analysis verified that the anesthesia revenue cycle was not optimized. In addition, the EPAC team found a steady decrease in the actual to the expected blended unit rate, which was a red flag.
Because the anesthesia vendor provided the billing and collection service “in-house”, EPAC provided a detailed onsite analysis of the billing operation. Several issues were identified, including the lack of a payor contracting strategy, poor oversight of write-offs, an outdated billing system, an outdated charge master, and lack of sufficient collections resources. These shortcomings resulted in poor collections, which the hospital absorbed 100% through subsidy payments.
EPAC determined that by utilizing a professional anesthesia billing vendor, the anesthesia group could optimize its anesthesia revenue cycle and reduce the hospital’s required payments. EPAC then helped negotiate the vendor contract and transition to the outsourced billing solution within six months.
ACHIEVING RESULTS WITH A PROFESSIONAL BILLING SERVICE
- Anesthesia charge master incrementally increased to market levels over 1 year
- An aggressive payer contracting strategy implemented
- Days in A/R reduced 18%
- Claims sent to collection agency reduced 37%
- Actual to expected blended unit rate ratio increased from 84% to 97%
- Anesthesia subsidy reduced 12% and 18% in the first 2 years