Contact Us

February 12, 2024

The Importance of Subsidy Negotiations

February 12, 2024

Providing anesthesia services is not cheap, nor should it be. Expenses are multifaceted and dependant on case complexity and volume. Reimbursement is likewise complicated, depending on the payor mix and changing CMS rules. And yet, the need for anesthesia services is rising and provider availability is falling. Oftentimes, revenues are not sufficient to cover the anesthesia provider’s cost. So it’s necessary for hospitals and other surgical centers to support their anesthesia providers to ensure high-quality service. As an anesthesia provider, these subsidies are crucial to your bottom line, so it’s essential to make sure the terms of your subsidy agreement are mutually beneficial to both you and the hospital. 

Why Subsidies?

Of all the separate services that make up a patient’s care package, anesthesia is the lowest reimbursed. Under CMS's final rule, Medicare reimbursements for anesthesia services decreased from $22.2730 per unit in 2019 to $21.1249 in 2023. The No Surprises Act has also complicated anesthesia reimbursement as the Independent Dispute Resolution process has been used to reduce reimbursement by payers who refuse to go in-network with anesthesia providers. These reductions in reimbursements are on top of a need for more provider support as the need for anesthesia services is on the rise. The very well-being of your practice is at stake when you enter into subsidy negotiations. 

Subsidy negotiations break your contract down line by line to ensure each side, anesthesia provider and hospital, knows exactly what to expect from the other. Your anesthesia group’s needs may not always align with hospital budgets, so highlighting discrepancies during contract negotiations allows them to be addressed and resolved. Don’t ever think that a problem will work itself out in the long run - time will only exacerbate it. The contract should provide a good return on the significant investment that hospitals make in their anesthesia services while also fairly compensating anesthesia providers.

Factors to Consider

What should your subsidy contract look like? What does it include? Subsidy contract agreements normally account for fair market value, anesthesia provider workload, staffing model, and revenue cycle performance. Fair market value accounts for the supply and demand of your geographic location by taking regional surveys of a range of salary and benefits packages and comparing your subsidy to a median rate. Your workload should be explicitly laid out including the number of anesthetizing locations, specialty requirements, and average case complexity. Providers may be pressured to open more anesthetizing locations than is stipulated in the subsidy contract. This should be avoided as it will lead to fewer surgical minutes per provider per location as staff is stretched to accommodate needs, thus resulting in fewer billable hours and a loss in revenue. Covering your staffing model and revenue cycle performance in your subsidy agreement will require you to have an itemized list of your assets and expenses. Are you getting every dollar owed to you by payors or are you leaving money on the table? 

Be thorough! You are not just getting a subsidy to cover the time the anesthesia provider spends in the operating room, but also your other expenses - administrative fees, billing fees, malpractice coverage, payroll, call time, overtime, and locums/vacation coverage. Your subsidy contract should also have a minimum case guarantee. If for some reason the demand for anesthesia services does not align with the case volume stipulated in your subsidy, your budget won’t have to suffer. 

Negotiating Your Subsidy Agreement

As always, knowledge is power. Come to the table prepared. Research your anesthesia group, crunch the numbers, and present the data on your overall performance and costs. Stay on top of anesthesia market trends. With reimbursement per unit decreasing and need for providers increasing,  there’s a strong case for significant subsidy support. In addition to paying attention to the needs of your budget, be aware of your staff’s needs. Don’t promise anything that will increase workload without an increase in pay. 

There are three main types of subsidy agreements - a collections guarantee model, a fixed-guarantee, or a mixed model. The collections guarantee model shifts the financial responsibility for the anesthesia group to the hospital. The anesthesia group is paid regular support payments with periodic audits to ensure that revenues collected by the anesthesia group don’t exceed a predetermined cap.  With a fixed-guarantee, there is more of a motivation for the anesthesia group to have an effective revenue cycle, as the payments are made regardless of the amount of the group’s professional collections. The mixed model, as the name suggests, incorporates a fixed-rate subsidy, but with audits of the group’s professional collections which, when they exceed a certain limit, are remitted back to the hospital. 

Being aware of how your revenue cycle performs will allow you to enter the subsidy negotiation process with confidence. Let us help! 

It benefits you to be transparent throughout this process. In order to reach a mutually beneficial agreement, you and the hospital will need to have a very clear picture of your financial needs. And once the subsidy contract is agreed upon, you will also have marching orders for how your subsidy will be allocated. Accountability and follow-through on using the subsidy as agreed upon will create trust between you and your hospital or surgical center. 

With proper preparation and effective negotiation, you should be able to reach a satisfactory subsidy agreement. After signing your contract, steps for continuing communication and performance monitoring should be established. This will allow you to maintain a positive and productive relationship with both the anesthesia providers and the hospital administration. 

1025 Montgomery Hwy Suite 100
Birmingham, AL 35216
info@mbmps.comNewsletter Signup
Phone: 205-979-5882
Toll-Free: 800-477-4544
Fax: 205-979-1248
Client PortalPrivacy Policy
© Copyright 2024 Medical Business Management - All Rights Reserved. Website Developed By 
Electro Marketing.
linkedin facebook pinterest youtube rss twitter instagram facebook-blank rss-blank linkedin-blank pinterest youtube twitter instagram