This spring, at the request of the ASA Washington Office, representatives of 66 anesthesia practices completed a brief survey of conversion factors and capitation rates.

The survey instrument asked for the conversion factors used by the practice's three largest commercial payers, indemnity or managed care. The overall national average conversion factor for anesthesia services runs in the range of $41 to $44.50 for a 15-minute unit. Table 1 summarizes the responses:

Conversion Factors (CF) for the Three Highest-Volume Commercial Payers Reported by 66 Anesthesia Practices

	CF #1		CF #2		CF #3
Average	$44.41		$42.82		$41.28
Median	$42.96		$41.00		$38.25
Minimum	$22.68		$24.08		$25.00
Maximum	$75.00		$67.50		$78.00
Count	66		65		64

To judge the validity of these numbers, it is important to note the threefold variation between minimum and maximum conversion factors. Also, the respondents were not evenly distributed geographically. There were six questionnaires returned from Texas, five each from Georgia, Florida and Pennsylvania, and only one from California. A response rate from California that was more consistent with the proportion of anesthesiologists practicing in that state might have lowered the average and median numbers - and perhaps even the minimum conversion factors - significantly. The fact that 20 out of the 66 respondents were from the Southeast conversely would tend to inflate the conversion factor statistics.

For states with at least five practices responding, the antitrust rules (see synopsis of the Statements of Antitrust Enforcement Policy in Health in the box) permit us to publish summary statistics for those states [Table 2].

Conversion Factors for Four States
TEXAS	CF #1	CF #2	CF #3
Average	$45.07	$43.32	$40.57
Median	$45.70	$43.50	$39.25
Minimum	$31.50	$36.00	$34.00
Maximum	$59.00	$53.10	$50.00
Count	6	6	6
FLORIDA
Average	$54.10	$48.30	$49.44
Median	$48.00	$49.50	$51.00
Minimum	$35.00	$30.50	$34.00
Maximum	$75.00	$64.50	$60.21
Count	5	5	5
GEORGIA
Average	$58.00	$54.80	$53.70
Median	$67.50	$60.00	$57.00
Minimum	$38.00	$40.00	$35.00
Maximum	$75.00	$67.50	$78.00
Count	5	5	5
PENNSYLVANIA
Average	$31.45	$36.28	$32.60
Median	$32.00	$32.00	$30.00
Minimum	$26.25	$26.00	$25.00
Maximum	$35.00	$56.00	$46.00
Count	5	5	5

Grouping states by region produces the data shown in Table 3. The regions and their associated states are: West Coast (WA, n = 3; OR, n=1; CA, n=1; AZ, n=1); Midwest (MO, n=2; KS, n=2; IN, n=2; IL, n=3; IA, n= 2; MI, n=2; MN, n=1; SD, n=1); New England (MA, n=4; ME, n=1; NH, n=1); Mid-Atlantic (NY, n=3; PA, n=5) and Southeast (VA, n=3; WV, n=1; TN, n=1; NC, n=1; MS, n=1; KY, n=1; GA, n=5; FL, n=5; AL, n=2).

Conversion Factors by Geographic Region
WEST COAST	CF #1	CF #2	CF #3
Average	$35.16	$35.24	$36.03
Median	$37.00	$35.00	$38.00
Minimum	$22.68	$24.08	$25.00
Maximum	$41.25	$45.63	$43.75
Count	6	5	5
MIDWEST
Average	$44.08	$41.40	$40.80
Median	$44.00	$38.00	$37.00
Minimum	$28.08	$25.25	$30.00
Maximum	$66.60	$63.38	$70.73
Count	15	15	15
NEW ENGLAND
Average	$40.74	$40.83	$34.60
Median	$39.80	$40.00	$37.00
Minimum	$27.81	$39.00	$25.00
Maximum	$58.00	$45.00	$38.00
Count	6	6	5
SOUTHEAST
Average	$50.08	$46.99	$45.90
Median	$47.00	$43.75	$43.00
Minimum	$31.00	$30.50	$31.50
Maximum	$75.00	$67.50	$78.00
Count	20	20	20
MID-ATLANTIC
Average	$38.52	$40.68	$37.75
Median	$33.50	$41.20	$39.00
Minimum	$26.25	$26.00	$25.00
Maximum	$57.00	$56.00	$53.00
Count	8	8	8

Consistent with our anecdotal information, the highest values are in the Southeast, and the lowest are in the West. In between the extremes, the Mid-Atlantic region and New England trail the Midwest. Several practices in the Southeast and the Midwest reported that they used 10-minute units, which were converted to the more common 15-minute units, but which may nevertheless have some connection with the relatively higher payment levels in those regions.

Eleven practices indicated that they had at least one commercial contract that based reimbursement upon capitation, using a "per member per month" (PMPM) payment system. The maximum PMPM rate reported was $4.06, which was paid for the greatest average number of "covered lives," i.e., patients in the plan: 400,000. This rate did not include chronic pain procedures, nor did the lowest PMPM rate, $1.75; however, the next two lowest PMPM rates did encompass pain services. Seven of the 11 rates were between $2.40 and $2.85.

The smallest capitated population was 8,000. A much larger population is desirable from the point of view of spreading the risk of a spike in utilization of services. If a practice is receiving only $22,400 (8,000 x $2.80) per month, it is easy to imagine a combination of obstetrical and surgical cases among 8,000 people that would have brought in much more than the capitation rate if paid by base and time units. Eliminating the outlier capitated plan size of 400,000 in our sample, the average population was 39,310.

There were five capitated contracts for Medicare patients, generally with even smaller numbers of covered lives. The highest PMPM rate ($7.50) did not encompass pain services, but again, the two lowest rates did. The average Medicare PMPM payment was $5.93. Table 4 summarizes the capitation rate data supplied by the survey respondents.

The PMPM rates listed in Table 4 should be viewed with great caution in determining a prospective PMPM for an anesthesia practice. A figure of $4 may not be profitable if the group of patients in the particular health plan utilizes anesthesia services at an exceptionally high rate. A $2 PMPM may be an excellent rate for a young, healthy population. To establish acceptable rates for your own practice, you need to understand the utilization patterns of the group to be covered as well as your costs of delivering services. For further information, you may wish to consult the monograph published by ASA last year, Calculating Anesthesia Capitation Rates, available from the ASA Publications Department (847) 825-5586; e-mail: publications@asahq.org.

Capitation Rates - Per Member Per Month (PMPM)

	Commercial PMPM	Medicare PMPM
Average	$2.79	$5.93
Median	$2.62	$5.75
Minimum	$1.75	$4.18
Maximum	$4.06	$7.50
Count	11	5

Most readers are well aware that price-fixing is strictly prohibited under the antitrust laws, and that the enforcement authorities can and do infer illegal agreements to fix prices from the exchange of price information. Nevertheless, the rules provide a "safety zone" (within which the federal agencies will not charge businesses with an antitrust violation) for publication of fee data as long as certain conditions are met.

In their August 1996 joint "Statements of Antitrust Enforcement Policy in Health," the Department of Justice (DOJ) and the Federal Trade Commission (FTC) acknowledged that surveys of prices for health care services (or of salaries and benefits) "can have significant benefits for health care consumers. Providers can use information derived from price and compensation surveys to price their services more competitively and to offer compensation that attracts highly qualified personnel. Purchasers can use price survey information to make more informed decisions when buying health care services." [Statement Number 6, Enforcement Policy on Provider Participation in Exchanges of Price and Cost Information]

The DOJ and FTC balanced the need to make competitive price information available against the need to prevent price discussion and coordination by requiring that surveys meet three conditions in order to come within the safety zone:

1. The survey is managed by a third party (e.g., a trade association or health care consultant, among others);
2. The information provided by survey participants is based on data more than three months old; and
3. There are at least five providers reporting data upon which each disseminated statistic is based, no individual provider's data represents more than 25 percent on a weighted basis of that statistic, and any information disseminated is sufficiently aggregated such that it would not allow recipients to identify the prices charged or compensation paid by any particular provider.

The survey described in this column was designed to satisfy these requirements, and the data have been reported in accordance with the conditions. As is evident, this achievement was not especially difficult. Component societies may wish to undertake similar surveys to give their members information that will help them to determine more competitive fees.

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The views expressed herein are those of the authors and do not necessarily represent or reflect the views, policies or actions of the American Society of Anesthesiologists.

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