Anesthesia Practice Management: Creating a Fair and Compliant Anesthesia Compensation Model

By: Gary Keeling, executive director, Anesthesia Division, Change Healthcare 

As the pandemic evolves and the demand for anesthesiologists persists, you may be finding yourself in the position of trying to create a reasonable and consistent anesthesia compensation model without knowing exactly where to start.

After working on the business side of anesthesia for more than 20 years, I have seen my fair share of anesthesia compensation models — and there are specific aspects that make all compensation plans unique.

That’s why I was troubled by an idea that’s circulating in the industry to use relative value units (RVUs)as the basis for anesthesia compensation. While this method may work for other specialties, it doesn’t hold up when designing a model for anesthesiologists. It’s like trying to pound a square peg into a round hole.  

Think about it. Anesthesia delivery is based on the complexity of surgical cases as developed by the American Society of Anesthesiologists (ASA). You can’t back into RVU calculations by comparing anesthesia to other specialties, such as radiology, because this approach fails to consider the varying complexity and risk attached to different procedures. You also should not use national Medicare unit rates compared to national Medicare RVU rates because this results in complicated formulas that aren’t clear or accurate. (An example of an incorrect calculation might be: $22.19 National Medicare Units divided by $37.89 National Medicare RVU rate = 59% or .59 Comparable Anesthesia Unit Value)

The key to creating a logical anesthesia compensation model is to develop it based on the ASA base, time, and clinical circumstance units. This approach takes into consideration case complexity, allowing higher compensation for procedures that have higher morbidity and mortality rates for patients. For example, under an ASA-based model, an anesthesiologist involved in a cardiac surgery case would be paid much more than one involved in a podiatry case, such as a bunion operation.

Once you commit to using ASA units as the basis for the compensation model, you can start filling in the details. I recommend a portion of compensation be paid as a base salary (50% for instance) and then paying bonuses based on a formula that considers base and time units, as well as physical status modifiers, extreme patient age, and emergency modifier units.

To motivate providers to work on-call and weekend shifts, which are typically less popular due to the absence of scheduled cases and the intrusion on a provider’s personal life, I suggest offering bonus on-call units. So, for example, a provider could receive 40 units in addition to whatever units are generated during their evening or weekend shift. This approach could motivate younger providers with significant student debt to work weekends and volunteer for call shifts. Providers who are closer to retirement may choose to work less call and weekends because, theoretically, lifestyle is more important than compensation.   

The model should also consider the efficiency of the location in which anesthesia is delivered. Surgeon-owned ambulatory surgery centers (ASCs), for example, are typically more efficient than hospital operating rooms, and the surgeons want the same anesthesia providers all the time because it improves their facility efficiency. Let’s say the average operating room turnover time at an ASC is 18 minutes, and the average room turnover time at the hospital is 33 minutes. A provider will generate more units at the ASC. Why not provide bonus units for working in the hospital to balance out the model?

Separating compensation from billing is essential

Once you’ve established the compensation model, you must make sure to keep it separate from the billing system to mitigate the risk of compliance issues. Many anesthesia providers are not aware that Medicare and Medicaid do not pay for physical status modifiers and emergency modifiers, which are used in an ASA-based approach. If you don’t separate the compensation model from the billing system, you may inadvertently commit an anesthesia billing compliance violation, charging government payers and receiving payment for things you shouldn’t.

Gaining provider buy-in is also key to success

Without provider engagement and approval, a compensation model may be doomed from the start. To minimize provider disagreements, I suggest creating a small physician committee, composed of a representative sample of physicians, including ones of diverse age and experience. This group can work with a business anesthesia consultant to develop a plan, review it annually, and adjust as needed. Regular review is important because a stagnant model can cause long-term inequity, and an outdated plan may not attract new talent or retain existing anesthesia providers. That said, continually changing the model makes it hard to keep track of modifications, so an annual review makes good business sense.

How Change Healthcare can help

Our anesthesia practice management consultants can work with your leadership to develop an equitable compensation model. If you choose to work with Change Healthcare, our system segregates billing and compensation model data, so compensation units can be properly tracked and reported. This helps ensure compensation reflects the complexity and risk involved in anesthesia procedures while avoiding compliance issues. By engaging with a neutral, independent advisor, you can receive expert advice and avoid internal conflicts.

Our suite of anesthesia services is designed to help you increase coding efficiency and ensure compliance with federal and state laws, while maximizing your revenue. Our RCM services focus on accounts receivable management, underpayments, denial management, self-pay collections, insurance follow-up, customized reporting, and analytical analysis. Change Healthcare customizes our services to meet your needs, and you can engage us on a consultative, episodic basis; through an ongoing billing and practice relationship; or for periodic education and consulting.

If you would like to learn more about the services and technology we provide, call us at 888-597-2504 or visit: 
https://www.changehealthcare.com/revenue-cycle-management/reimbursement-management/physician-revenue-cycle-services/anesthesia-practices