The article below is based upon a talk given by Dr. Abouleish at the Panel on Practice Management on October 26, 2004, during the ASA Annual Meeting in Las Vegas, Nevada.

ndependent of the anesthesiology group, surgical residents will take longer to complete surgical procedures than fully trained surgeons. The operational and financial impact of the longer durations is important for anesthesiology groups to understand.

In simple economics, a group has a net profit when revenue is greater than costs, while the group has a net loss when revenue is less than costs. That is: “Net Gain (or Loss) = Revenue – Costs.”

Historically, especially for private-practice groups, the issue of surgical training programs has not been a major issue because the group’s financial status has been a net gain. Unfortunately, in the last decade, anesthesia provider staffing costs (for both anesthesiologists and nurse anesthetists) have increased at a much higher rate than revenue. From 1997 to 2003, revenue per unit has increased 14 percent for commercial payers and <10 percent for government payers, while staffing costs for private-practice anesthesiologists, academic anesthesiologists and nurse anesthetists have all increased at a higher rate (34 percent to 44 percent for anesthesiologists, >50 percent for nurse anesthetists).^1-5 Faced with this increase in costs relative to revenue, groups no longer have the luxury of ignoring the details of their financial equation. With this perspective, groups providing anesthesia care at hospitals with surgical training programs need to understand the financial implications of these programs.

Although one may argue that the involvement of surgical residents leads to inefficient scheduling, utilization, turnover time or cancellations, these problems exist also in hospitals with no surgical residents.⁶ Also costs due to these causes are difficult to quantify.

On the other hand, surgical duration is longer in hospitals with surgical residents. (Logically it should take longer when teaching a person to do a procedure than someone who is experienced and fully trained.) Comparing four academic anesthesiology groups that provide care in hospitals with surgical residents, the anesthesia times were 20 percent to 30 percent greater than average reported times to Medicare.⁷ In comparing surgical durations based on surgical staff type, academic surgical staffs (residents involved in all or almost all cases) had a median duration of 2.7 hours while those with mixed surgical staffs (residents involved in some cases) had a median duration of 2.1 hours.⁸

These longer-than-average cases impact the clinical productivity of anesthesiology groups as measured using the amount of ASA units billed per hour of care (tASA/h). Both surgical durations (h/case) and base units per case (base/case) determine tASA/h.⁹ If base/case is smaller or h/case is longer, then tASA/h will be lower. The base/case was not significantly different in several comparisons of private practice and academic groups.⁸ The major difference was h/case.

In other words, if a group provides care for surgeries of longer durations (h/case), the group bills less units per hour (tASA/h). This means for the group to bill a similar amount of units per operating room they run (as compared to a group providing care to private-practice surgeons), the group will need to work more hours, in turn leading to higher staffing hours for the same billed charges. On the other hand, if the group works the same hours, then the group will have lower billed charges but the same staffing hours. The actual revenue will differ depending on whether the group’s payer mix is more or less favorable.

Unfortunately for the anesthesiology group providing care at hospitals with surgical training programs, the group is providing care for longer-than-average duration cases and hence is at a financial disadvantage. The financial “loss” is determined by several factors: amount the durations are above average, the payer mix and the staffing costs per hour.¹⁰

Finally, Medicare provides two types of payments to hospitals for graduate medical education (GME = residency programs). The first is direct payment related to direct costs, including residents, salaries, teaching costs and overhead. The second payment is indirect GME designed to account “for the fact that teaching hospitals tend to have greater expenses than other hospitals do for a variety of reasons.”¹¹ The increased anesthesiology staffing costs¹⁰ are due to the surgical training program. Therefore the costs should be covered by the hospital via the hospital’s indirect GME payments.

References:
1. Bierstein K. Fees paid to for anesthesia services: 2003 survey results. ASA Newsl. 2003; 67(8):27-30. <www.ASAhq.org/Newsletters/2003/08_03/pracMgmt08_03.html> Accessed on July 15, 2005.
2. Bierstein K. ASA analyzes commercial relative value system based on average time. ASA Newsl. 1997, 61(6):31-33. <www.ASAhq.org/Newsletters/1997/06_97/Pract_Mgmt_June.html>. Accessed on July 15, 2005.
3. Bierstein K. 2003 Medicare anesthesia conversion factor is $17.05. ASA Newsl. 2003; 67(4):23-25. <www.ASAhq.org/Newsletters/2003/04_03/pracMgmt04_03.html>. Accessed on July 15, 2005)
4. Medical Group Management Association (MGMA). Physician Compensation and Production Reports. 1998 report on 1997 data, and 2004 report on 2003 data. Englewood, CO: 1998 and 2004.
5. Medical Group Management Association (MGMA). Academic Practice Faculty Compensation and Production Reports. 1998 report on 1997 data, and 2004 report on 2003 data. Englewood, CO: 1998 and 2004.
6. Abouleish AE, Dexter F, Epstein RH, et al. Labor costs incurred by anesthesiology groups due to operating rooms not being allocated and cases not being scheduled to maximize operating room efficiency. Anesth Analg. 2003; 96:1109-1113.
7. Abouleish AE, Prough DS, Hughes J, et al. The impact of longer than average anesthesia times on the billing of academic anesthesiology departments. Anesth Analg. 2001; 93:1537-1543.
8. Abouleish AE, Prough DS, Barker SJ, et al. Organizational factors affect comparisons of clinical productivity of academic anesthesiology departments. Anesth Analg. 2003; 96:802-812.
9. Abouleish AE, Prough DS, Whitten CW, Zornow MH. The effects of surgical case duration and type of surgery on hourly clinical productivity of anesthesiologists. Anesth Analg. 2003; 97:833-838.
10. Abouleish AE, Dexter F, Whitten CW, et al. Quantifying uncompensated staffing costs due to longer-than-average surgical case durations. Anesthesiology. 2004; 100:403-412.
11. Congressional Budget Office. Medicare’s payments for indirect medical education. <www.cbo.gov/bo2005/bo2005_showhit1.cfm?index=570-03>. Accessed on July 15, 2005.

Amr E. Abouleish, M.D., is Professor, Department of Anesthesiology, The University of Texas Medical Branch, Galveston, Texas.