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August 2001
Volume 65 |
Number 8
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PRACTICE MANAGEMENT
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| Hospital Contracts,
Four Years Later |
Karin Bierstein,
Assistant Director of Governmental Affairs (Regulatory)
“How Many Anesthesia Practices Have Exclusive Contracts?”
was one of the most popular subjects published in this column
(July 1997). We asked the authors of the 1997 survey, Shena J.
Scott, M.B.A., CMPE, and Genie G. Blough, M.B.A., CMPE, to update
the survey for the Conference on Practice Management held in February
2001 in La Jolla, California.
The new survey yielded data from 153 respondents reporting on
192 distinct facilities, including some ambulatory surgical centers.
This represented a 30-percent response rate from among the more
than 500 members of the Anesthesia Administration Assembly of
the Medical Group Management Association and of several ASA committees
surveyed — largely the same sample as in 1997. One-third
of the respondents were from the Southeast, but the remaining
two-thirds were evenly distributed across the country. Private
practices outnumbered academic practices four to one. More than
one-half of the responses came from metropolitan areas with populations
in excess of 250,000. Twenty-six percent were from suburban and
mid-size locations, and 18 percent came from service areas with
populations of less than 100,000. One-third of responding practices
counted 10 to 30 providers (anesthesiologists and nurse anesthetists),
another one-third had totals of between 31 and 60, and the remainder
had either fewer or more providers.
Exclusive Contracts
The great majority of anesthesia groups (87 percent) responding
to the survey work in an exclusive arrangement with their hospitals.
The arrangement usually takes the form of a written contract (54
percent of all respondents), but de facto exclusives are common
as well (33 percent). These proportions are virtually identical
to those reported in 1997. Although nearly 40 percent of groups
without a contract in 1997 anticipated signing one within two
years, the ratio of written contracts did not increase significantly.
There is a fair amount of stability in hospital arrangements,
with nearly 60 percent of the groups indicating that they have
practiced in the facility for more than 10 years.
With respect to the price of an exclusive contract, the “tying”
or linking of anesthesiologists’ privileges to the term of
the contract, the situation has improved for anesthesiologists
over the last four years. In 1997, 53 percent of groups with exclusive
contracts reported that their privileges were tied to the contract.
That number has decreased to 44 percent. Most contracts are for
at least two to three years, and more than three-fourths are automatically
renewable. If, however, they contain clauses allowing the hospital
to terminate without cause without going through the normal due
process procedures contained in the medical staff bylaws, those
contracts are only good for 90, 180 or 360 days, whatever the
agreed notice period might be. Ninety percent of those anesthesia
practices whose members’ privileges are tied to the exclusive
are entitled to at least a 90-day notice before the contract may
be terminated. Thirty-four percent of this group also have other
forms of protection in addition to notice such as initial grace
periods before formal notice may be given, arbitration or other
third-party review and liquidated damages (payment of a predetermined
penalty).
Ms. Scott and Ms. Blough make the interesting observation that
most of the groups with tied privileges and no additional contract
protection are relatively large with at least 30 providers, and
are either “physician-only” or have a high ratio of
anesthesiologists. “Perhaps groups in these categories are
more secure that they are difficult to replace and therefore feel
less threatened by a contract of this nature.”
Stipends
Eighty-eight out of the 153 practices responding (58 percent)
receive a total of 164 individual stipends. Table 1 shows the
different types of stipends paid, the percentage of all respondents
receiving the associated type and the amount or dollar range reported
by the largest set(s) of respondents. Percentages add up to more
than 100 because some practices have negotiated multiple stipends.
As Ms. Scott and Ms. Blough state, “Medical director stipends
remain the most common (60 percent of groups receiving stipends,
31 percent of total stipends provided), but have become the least
financially rewarding of stipends offered. Nearly 75 percent of
medical director stipends today were less than $50,000 per year,
with the majority of those being less than $25,000. In 1997, 66
percent of medical director stipends exceeded $50,000 per year,
with over half of those (one-third of total medical director stipends)
exceeding $100,000.”
The second most common stipend covers managing the operating
room suite, for which 33 percent of the survey respondents reporting
stipends are paid more than $50,000.
The number of practices paid a stipend greater than $100,000
for providing obstetrical anesthesia coverage has decreased from
75 percent to 42 percent, and the minimum stipend has dropped
below $50,000. That may explain why a full third of the practices
in the process of negotiating new stipends (21 percent of survey
sample) are focused on obstetrical anesthesia.
In general, stipends are more prevalent in urban areas than in
suburban or rural communities. Eighty percent of academic practices
receive stipends, compared to fewer than half of the private groups.
Smaller and larger groups are more likely to be paid stipends
(75 percent and 90 percent of responses, respectively) than mid-size
practices (44 percent). Sixty-three percent of the trauma centers
represented grant stipends to anesthesiologists, often in addition
to a specific stipend for trauma coverage.
The authors speculate that the lack of stipends for in-house
coverage may account for the decline in the proportions of groups
required to keep an anesthesiologist in-house 24 hours a day (from
65 percent in 1997 to fewer than 50 percent today: “Perhaps
this evolved from physician groups approaching hospitals for stipends
to offset the cost of providing this service in a tighter market
of anesthesiologists and limited reimbursement for these services.”
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Table 1: Stipends Paid by Hospitals
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| Type |
% Receiving |
Amount & % Reporting |
| Medical Director |
60% |
<$50,000 & nearly 75% |
| OR Manager |
40% |
>$50,000 & 33% |
| Trauma |
16% |
>$100,000 & 65% |
| OB Coverage |
11% |
>$100,000 & 42%
<$25,000 & 37% |
| General |
6% |
>$100,000 & N/A |
ICU Management, Cardiac Services,
Acute Pain Medicine |
<10% |
<$25,000 & N/A |
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Pain Clinics
Ms. Blough and Ms. Scott also note that, “Two-thirds of
anesthesia groups in the current survey reported involvement with
a chronic pain clinic. More than 90 percent have been providing
this service for over three years. Only 7 percent have entered
into this line of service in the last three years. The expectation
of significant financial benefit for this service has not been
realized… Many hospitals and anesthesia groups are finding
that the additional capital and overhead associated with providing
this service are more suited to an office setting and are not
necessarily a natural extension of traditional hospital-based
anesthesia services.
“Groups that have provided this service to the community
for a number of years are having difficulty determining the best
way to make this transition. Nearly 80 percent of pain clinics
currently report being hospital-based. Only 20 percent currently
pay rent to the hospital for administrative space in the clinic.”
[If the hospital is giving the anesthesiologists a perk in the
form of free rent, there may be antikickback legal issues. The
“rent” may legitimately take the form of service to
the hospital, though. For a discussion of the antikickback issues,
see “Rent Charged by Hospitals for Office Space Raises
Legal Issues” in the April 2000 issue of the NEWSLETTER.]
“[R]oughly half of respondents anticipate changes as a result
of declining facility reimbursement. Most of the groups anticipating
change (70 percent) expect to either pay rent where it has not
previously been paid, open their own facility or do less chronic
pain altogether. The responses were evenly divided among these
three alternatives. With physician reimbursement for pain services
also declining, many groups will be unable to absorb this cost-shifting.”
Conclusion
Anesthesiologists are in a better negotiating position today
than they were several years ago. Many have found that they are
able to obtain favorable contract terms and reject onerous clauses,
and in some cases groups have successfully called the hospital’s
bluff when the hospital threatens to find another group that will
accept an objectionable contract. Ms. Scott and Ms. Blough conclude:
“If we could offer one piece of advice, it would be to develop
and maintain relationships with hospital administration and surgical
staff such that any benefit that you are able to accrue now will
be upheld on the basis of that relationship in less favorable
times.”
Source Material
• Bierstein K. How many anesthesia practices have
exclusive contracts? ASA Newsl. 1997; 61(7):29-31.
• Scott S, Blough G. Exclusive Contracts: Survey
of Hospital Contracts. In: 2001 Conference on Practice
Management. (Order from <publications@ASAhq.org>.) |
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NEW MEMBER SERVICE:
The e-PM Letter
In order to provide members with more practice management
information, ASA has produced a new electronic practice
management publication. The e-PM Letter will appear
quarterly and will supplement the NEWSLETTER’s
“Practice Management” column. It will also
contain a regular contribution by members of the Anesthesia
Administration Assembly of the Medical Group Management
Association. The e-PM Letter will be available exclusively
through e-mail or the ASA Web site.
To download Vol. 1, No. 1, go to <www.asahq.org/washington/newsletters/e-pmletter.pdf>.
To subscribe, send an e-mail to e-pm-l-request@listserv.asahq.org
with no subject and only the word SUBSCRIBE in
the body of the message.
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Errata
In the June 2001 “Practice Management” column, “What
Pain Doctors Should Know About Evaluation and Management Codes,”
two errors occurred that may have caused confusion for some readers.
On page 24, the seven evaluation and management (E&M) components
in the Documentation Guidelines system were not complete as listed.
Under “contributory components,” the component “counseling”
is missing. Thus the seven E&M components in the Documentation
Guidelines system are: history, examination, medical decision-making,
counseling, coordination of care, the nature of the presenting
problem and time.
Also, the table that appears through
this link, which should have been labeled “Table 7”
in the article, was inadvertently omitted.
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