t the February 2005 Conference on Practice Management, Shena Scott, M.B.A., FACMPE, and Genie Blough, M.B.A., FACMPE, presented the results of their third survey on hospital contracts. Ms. Scott is the current president of the Medical Group Management Association (MGMA) Anesthesia Administration Assembly (AAA), and Ms. Blough is a recent past president as well as the AAA liaison to our Committee on Practice Management. The 2004 data summarized below represent a valuable and an expansive update to their 1997 and 2000 hospital contracting surveys.^1,2

Who Provided the Information?
Thirty percent of the approximately 600 anesthesiology practices that received the 2004 questionnaire returned responses. These 178 practices provided data from 291 facilities across the country. The West, Southeast and Midwest accounted equally for 25 percent, 28 percent and 31 percent of the facilities covered, respectively, while the East was slightly under-represented at 16 percent. The responding groups include 16 percent of ASA’s actively practicing membership and 28 percent of residents. Thirty-four percent of the groups have a total of 10 to 30 anesthesiologists and nurse anesthetists.

Fifty-four percent of private practice groups responding to this survey encompass more physicians than anesthetists, while in 2000, only 36 percent reported a greater number of physicians. Ms. Blough and Ms. Scott observe that “clearly this is a reflection of the increasing anesthetist salaries and many groups … re-evaluating the feasibility of anesthetist-heavy provider models.”

Stipends
The Washington Office receives many inquiries about stipends, and the 2004 survey demonstrates that the number and value of hospital stipends have increased markedly. Fifty-seven percent of the facilities represented provide at least one type of stipend to the anesthesiology group, up from about one-half in 2000. Ninety-one percent of academic practices receive stipends, up from 80 percent five years ago. Figure 1 shows the proportion of respondent groups receiving varying levels of support from their facilities. Nearly 10 percent of the stipends exceed $3 million per year. Larger anesthesiology groups are receiving more stipends (74 percent) than groups with fewer than 10 providers (38 percent).

Figure 1: Total Stipend Amount

Source: Blough G, Scott S. Hospital Contracting Survey Update. ASA Conference on Practice Management, San Francisco, February 5, 2005. Slide used with permission.

Hospitals are paying stipends to their anesthesiology groups for various services, most of which are listed in Figure 2. Medical director stipends remain one of the most common (33 percent) as well as the lowest paying (rarely exceeding $100,000) type of support. Direct service stipends, such as general call coverage (35 percent), obstetrical (28 percent), trauma (21 percent) and “other,” account for 39 percent of total stipends reported. These proportions are shifting, as Figure 2 demonstrates.

Figure 2: New Stipends

Source: Blough G, Scott S. Hospital Contracting Survey Update. ASA Conference on Practice Management, San Francisco, February 5, 2005. Slide used with permission.

Emerging types of income support include income guarantees, which represent 20 percent of the stipends paid in 2004, and provider salary assistance (7 percent), typically for anesthetists. It is interesting that in a very recent report on “Navigating the Anesthesia Shortage” distributed exclusively to its member hospitals and health systems, the Advisory Board (a company that performs management research for its member hospitals) observed that hospitals are increasingly using direct care subsidies to retain or attract anesthesiologists. The report may be available through your own hospitals’ executive offices. It lists the following types of stipends: productivity-based, subsidies for poor payer mix and/or rates, compensation for inefficient operating room utilization, income guarantees, flat amount stipends, recruiting support and nurse anesthetist subsidization.

The Advisory Board recommends leveraging nurse anesthetists, i.e., pushing for anesthesiologists to medically direct more and personally perform fewer cases by paying or contributing to the anesthetists’ compensation. Recall the Blough-Scott conclusion that high anesthetist salary and benefit levels are causing more anesthesiologists to reconsider the economics of employing large numbers of anesthetists.

Contracts
The Advisory Board report further recommends written contracts to ensure anesthesia coverage. From the hospitals’ vantage point, contracts should 1) define the anesthesiology group’s scope of exclusivity, 2) specify the amount and type of anesthesia coverage, 3) set noncompete and contract termination standards, 4) provide for the desired anesthesia care team model and 5) establish performance benchmarks.

The prevalence of written exclusive contracts has changed hardly at all since 2000 [Figure 3]. What is different is the decrease in the number of de facto exclusive arrangements (from 33 percent to 19 percent) and the doubling of nonexclusive situations (from 12 percent to 23 percent). Also worth a mention is the nearly three-fold increase in hospitals employing the anesthesiologists, albeit to a still-minimal level (3 percent). Both a nonexclusive written contract and a switch to employing the anesthesiologists could reflect a strategy of securing more anesthesia coverage.

Figure 3: Group/Facility Relationship

Source: Blough G, Scott S. Hospital Contracting Survey Update. ASA Conference on Practice Management, San Francisco, February 5, 2005. All slides used with permission.

Although only 1 percent of the facilities represented in the contracts survey allow nurse anesthetists to practice independently, there has been a drop in the number that require anesthesiologist supervision either through medical staff bylaws or by contract (from 80 to 64 percent). ASA members may want to pay particular attention to this potential area of contract negotiations, the more so because hospitals are being advised to use, and to contract for, higher ratios of anesthetists to anesthesiologists.

Hospitals are already aggressive in securing anesthesia coverage through noncompete clauses in exclusive contracts. Forty-three percent of clauses in the survey barred anesthesiologists from working at a competing facility, generally for one to two years and in 39 percent of the cases applying even if the facility were the one to terminate the contract. In the worst possible scenario, 15 responding groups reported that they were subject to noncompete clauses that continued to apply after termination by the facility and that those same contracts could be terminated without cause and with automatic revocation of privileges. In other words, these anesthesiologists could be terminated at will and then prevented from practicing anywhere in the geographic area.

Pain Clinics
There has been a decrease in the number of anesthesiology groups reporting involvement with chronic pain clinics (from 66 to 56 percent). Chronic pain medicine is shifting out of hospitals, where only 62 percent are situated today, compared to 80 percent in 2000. Fifteen percent of the pain clinics for which the new survey provides data are in ambulatory surgical centers (ASCs), and 23 percent are in private offices, even though only 53 percent of those private offices are profitable. Ninety-one percent of ASC-based pain practices are profitable, and 80 percent of those based in hospitals remain profitable. On the subject of ASCs, one-third of the survey respondents do not provide anesthesia services at any ASC at all. This result is rather surprising given that the number of ASCs now equals the number of hospitals (approximately 4,400 each).

The appeal of offering chronic pain services in a private office is not clear. Although the office setting provides greater control over costs and personnel (and may justify the use of physician extenders such as physician assistant and nonphysician practitioners) as well as higher fees, the revenues match overhead and capital expenses barely more than half the time.

It is not surprising that most pain practices have been in operation for more than three years and that only 9 percent of the respondents opened new pain practice ventures during that time. Respondents in the 2000 survey appeared equally skeptical of the profit potential in chronic pain medicine. We speculated, then, that apparently declining professional fees and facility payments were the cause. Ms. Blough and Ms. Scott suggest that the same factors are at work today, together with greater efforts by managed care companies to control costs related to chronic pain, which has an increasing incidence in an aging population and is quite subjective.

Conclusion
The survey authors conclude that although the value and frequency of hospital stipends have increased dramatically in some areas, anesthesiologists’ ability to negotiate favorable contract terms in other areas has eroded. There is far greater variation between geographic markets than in 2000 or 1997, and smaller groups are faring relatively poorly in some respects. It seems appropriate to repeat Ms. Blough and Ms. Scott’s “one piece of advice” from five years ago: nurture relationships with surgeons and hospital administration so that “any benefit that you are able to accrue now will be upheld on the basis of that relationship in less favorable times.”

Participate in the 2005 MGMA Cost Survey for Anesthesia and Pain Management Practices, and receive a Valuable ASA Member Benefit: • A free copy of the 2005 MGMA Cost Survey for Anesthesia Practices report (for organizations with an ASA or MGMA member only). • A custom ranking report to see your data alongside those of your peers. • A discount on the CD version of the 2005 MGMA report (for organizations with an ASA or MGMA member only). The survey in which you will participate collects data for a 2005 report. The report will provide information to evaluate different aspects of anesthesia and pain management practice performance — revenues, production, staffing, stipends, etc. — and to help make business decisions about anesthesia and pain management practice operations. Participating is easy: download the electronic version to your computer from <www.ASAhq.org/Washington/AAAsurvey.pdf>, give the electronic file to your practice administrator or billing service to fill in and e-mail the completed survey as an attachment to <surveys@mgma.com>. Alternatively, you or your staff may complete the survey electronically by following the links to the Anesthesia version of the cost survey at <www.mgma.com/surveys/esurveys.cfm>. All submitted data will be kept confidential. Your participation makes a difference. The deadline is Monday, May 9, 2005. Thank you! You may also purchase the 2004 Cost Survey for Anesthesia Practices at an ASA member discount. ASA has negotiated an additional benefit for all members: you may buy the 2004 report at the MGMA affiliate price of $305 instead of the full $465 price (a $160 discount). To order, contact MGMA at (877) 275-6462 or download the order form at <www.ASAhq.org/Washington/pmhomepage.htm>. The affiliate price also will be available to all ASA members for the 2005 report, which will be published at the end of this year.

References:

1. Bierstein K. How many anesthesia providers have exclusive contracts? ASA Newsl. 1997; 61(7):29-31.

2. Bierstein K. Hospital contracts, four years later. ASA Newsl. 2001; 65(8):25-27.