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e are pleased to bring you the results of the 2007 national survey of anesthesia conversion factors (CFs) used in commercial managed care contracts. As shown in Table 1 below, the volume-weighted national average commercial CF ranges between $52.16 and $65.06. The median is in the $53 to $63 range.

This is in stark contrast to the Medicare CF for anesthesia services, which is currently $16.19 and projected to decrease by approximately 10 percent in 2008 unless Congress acts. For further information on the projected Medicare cuts and on ASA’s legislative strategy, please see Ron Szabat’s, please see Ron Szabat’s “Washington Report” on page 4.

Explanation of Results
This survey contains three sets of anesthesia CF statistics based on the payment levels for each respondent’s three private payer contracts 1) representing the highest; 2) representing the median (50th percentile) and 3) representing the lowest actual CF paid. By asking for three different data points, we were able to improve the volume and the reliability of the information received.

The results are based on data for the time frame October 2006 to February 2007. In order to comply with the principles for fee surveys published jointly by the federal Department of Justice and the Federal Trade Commission as part of their 1996 “Statements of Antitrust Enforcement Policy in Health,” the questionnaire asked for data not less than three months old at the time of submission. The Joint Statements also require that only aggregate data be published or otherwise made available to our members directly.

All regions of the country are represented in the results. Relative payment rates have remained consistent over the last decade. The highest mean CFs are reported in the Southeast, the East and the Midwest. The lowest are on the West Coast. For the first time, the highest CFs reported in each of the four geographic regions listed in Table 2 on page 32 are equal to or greater than $95.00. These regions group states in the same way as do the regions in surveys published by the Medical Group Management Association (MGMA):

The spread is fairly broad, both across states (difference between highest and lowest state mean CFs: 250 percent) and within individual states (difference between the lowest and highest CFs within states: 167 percent to 384 percent). Although we received enough responses from many individual states to satisfy the conditions for the Antitrust “Safety Zone,” the samples were nevertheless so small that the aggregate data cannot be considered reliable. We know from our readers that while high CF values do not impress payers when they are based on small samples, low CFs are taken as gospel. Accordingly, we have decided not to publish state data.

Methodology
The survey was launched at the ASA Conference on Practice Management held in Phoenix on January 26-28, 2007, where we distributed copies of the one-page questionnaire to approximately 500 attendees. The final call for responses occurred at the annual Medical Group Management Association (MGMA) – Anesthesia Administration Assembly (AAA) meeting in Seattle in early May. In between, ASA staff urged various ASA committees to participate; officers visiting component societies included slides of the survey in their presentations, and AAA leadership appealed to anesthesia practice administrators to complete and return the information. The survey instrument also was available for downloading from the ASA Web site, where you will still find it at www.ASAhq.org/Newsletters/2007/06-07/0607_CostSurvey.doc.

This approach maximizes the number of responses but precludes calculating response rates because the denominator cannot be determined. The absolute number of responses, and the pattern of the data they contain, however, permit a reasonable level of confidence in the representativeness of the results reported in Table 1 on page 31.

We recorded responses from a total of 284 practices employing a total of 5,870 anesthesiologists and holding more than 700 different managed care contracts. Some of these contracts were omitted from the analysis because they accounted for less than 5 percent of the practice’s managed care business or because the CF reported was in the same range as, or lower than, the national average Medicare CF. All CFs of less than $18 were eliminated. In anesthesiology third-party payment contracts, CFs that do not significantly exceed the Medicare rate are highly implausible. The fact that the Medicare rate is lower in 2007 than it was in 1997, combined with the well-known price competition to attract and retain anesthesia personnel, removes any incentive to provide anesthesiology services other than at a multiple of Medicare.

We instructed respondents to exclude data from payers representing 5 percent or less of their total contracted private payer managed care business as well as all Medicare, Medicaid and other governmental payer rates. Contracts for less than 5 percent of an anesthesiology group’s managed care business would constitute “survey noise.”

Approximately 40 responses for each of the three CF levels were either unusable or were not supplied at all, suggesting that some of the questionnaire instructions were unclear and/or that obtaining numbers of cases or even numbers of anesthesiologists may be more difficult than one would hope.

Increasingly, anesthesia groups negotiate to offset inadequate CFs by using 10- or 12-minute time units. “Richer” CFs in the survey responses were normalized to the more common 15-minute unit using an adjustment factor of 1.26 for 10-minute units and an adjustment factor of 1.13 for 12-minute units. The adjustment factors are calculated as ratios based on the average number of minutes and of base units per case. We used the national averages published in the MGMA/ASA Cost Survey of Anesthesia Practices: 2006 Report Based on 2005 Data and note them here because of their general value in analyzing productivity and clinical income, among other management benchmarks: the average number of minutes per case is 97.49, and the average number of base units is 6.03 — unchanged for the last few years. For a full explanation of the adjustment factors used to normalize the 12- and 10-minute CFs, see the report on our 2005 fee survey in the August 2005 issue of the ASA NEWSLETTER www.ASAhq.org/Newsletters/2005/08_03/pracMgmt08_05.html.

Discussion
Readers will recognize intuitively that different group sizes influence what a managed care organization has to pay. Thus a small group doing 2,000 cases should not be weighted the same as a larger group doing 20,000 cases — in the latter instance, the managed care organization is paying the second group’s rate 10 times more often than the first group’s rate. Accordingly, we have multiplied each group’s CF by the number of cases the group performed to provide weighted means, medians and percentiles, which more accurately reflect what managed care organizations have to pay.

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Payment rates may also differ according to whether the group employs nurse anesthetists or anesthesiologist assistants, or whether these providers are employed by a facility or independent group. In some markets, a managed care organization will pay a single higher CF to a group offering the care team model in order to avoid receiving separate claims for each provider. This would tend to turn the CFs of employed versus nonemploying practices into apples and oranges for purposes of comparison and may in fact cause these tables to understate the rates being paid to groups employing anesthetists.

Nevertheless, we believe that the sum total of 639 individual contracted CFs that have withstood various efforts to eliminate erroneous values from the database presents a credible snapshot of early 2007 managed care payment levels for anesthesia services. In the end, contract negotiations depend not just on industry statistics but on what the two parties can offer each other and what they can accept. The means and quartiles reported in this column do not fully reveal the rate of growth of managed care CFs in the $90 and $100 ranges.

Conclusion
The results of the 2007 survey of ASA members’ contracted managed care payment rates show CFs that have increased significantly, as we would expect in an environment where the demand for anesthesiology services continues to outstrip the supply of anesthesiologists. Remarkably, the national Medicare CF has dropped to a level of $16.19 while managed care CFs have risen to the $60 level and well beyond. That gap must not continue to widen because the cost shift from Medicare to the private sector will keep growing and become untenable.

ASA and the survey authors, who as always include Shena J. Scott, M.B.A., F.A.C.M.P.E., and Genie G. Blough, M.B.A., F.A.C.M.P.E., would like to express their sincere gratitude to each practice that contributed information.

A special thank-you goes to Marc Dobrow of the George Washington University School of Medicine, who is interning in ASA’s Office of Governmental and Legal Affairs this summer, for his assistance with the analysis.