David Donnelly: Anesthesia Structure & Staffing Considerations

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David Donnelly (00:05):
So thank you all. I'm excited about the previous presentations and kind of what it tees up. It's about change management, about should we change, what do we change to, and how do you affect that change? And so mine is probably diving a little bit deeper into things that I've seen through these employee or non-employee transitions as check steps to make sure if your health system is looking at that, that you factor in some of these considerations. And I probably didn't push the right button. And so I think maybe just by a show of hands, as you think about whether you're a physician group or a hospital system, I'm just interested in how many of these two choices people would raise their hand as the primary issue that they're concerned with in the coverage that the hospital has. Is it mainly securing coverage? How many people would say coverage is the paramount issue that you're really facing or trying to accomplish?

(01:02):
So does that leave cost as the one? So to me, that part is an interesting part. It seems like the chief financial officer is constantly trying to make sure that employed physicians in the health system are not rate limited by anesthesia throughput capacity and making sure that any kind of outsourced agreement makes sense financially. And sometimes the FMV doesn't get you all the way there. It tells you whether it checks a compliance step, but it doesn't tell you necessarily whether that's the best model for your system. And so my experience on insourcing, I probably have been involved in six years, about 50 different facilities insourcing, and there's been lessons learned about what's worked and what hasn't worked. I really want to focus because I think there's some here that are questioning whether they should or shouldn't. And the value of insourcing has largely been on the positive side that it provides a venue for anesthesia providers to have a little bit of predictability and stability.

(02:07):
And so if you're in an outsourced model and the contract that that group has with the hospital system is coming up every three years for renewal, there's the potential that you could kind of reset your retirement if you had to switch employers back to retirement day one. And so I do find that as you get through this anxiety about autonomy, I'm going to lose that if I get into an employed model, that the employed model offers a lot of benefits for a lot of different markets in the hospital-based environment. It also gives doctors the opportunity to be in a leadership role. It doesn't have to be a facility onsite leader. It could be a leader within a market or a health system. It could be a chief medical officer of a hospital system. So there's a lot of benefits that the health systems offer that perhaps a physician service group might not be able to offer in the same way.

(03:05):
The second part I've noticed and positive side is strategic and operational alignment. If you want to scale up a room or shut down a room, it doesn't require you to go through an amendment of a service agreement. You're able to be a lot more nimble and really quickly tailor the coverage and needs that your organization has. They're constantly adapting to opportunities with surgeons, market share, et cetera. So you're able to have everyone on the same team and you'd likely share information and be able to report differently if everyone's on the same team, as opposed if you're in an outsourced relationship where some of it might be confidential information. So I've seen a lot of benefits post integration or post insourcing that you wouldn't have necessarily in an outsourced agreement. And last, I feel like from the physician side or the financial side of the health systems, so much of your CapEx, so much of all the staffing that you have in all the different surgical and procedural departments, you control all that and kind of have the accountability of that.

(04:12):
But what you don't have is that last element of the surgical or procedural experience where it's provided by anesthesia. And so there is benefit in helping make sure that you're financing it already, but helping influence in a positive way to where all the stakeholders, whether they're surgeons, proceduralists, or your own department clinical teams are aligned with the clinical teams of anesthesia. And so those are some of the positives that I've seen, but I wanted to go through some of the different structural considerations if you're looking at employment. And what I wanted to do is open this up a little bit as we go through some of these slides and get feedback like, "Gosh, I wish someone would've told me this before we insourced. Here's a lesson learned." So I would like to open up a little dialogue back and forth on some of these slides.

(05:03):
These are really the hospital systems when you compare to a single specialty group or an outsource group, they're able to perfectly tailor their service line to what the workforce wants and what appeals to people. The hospital structure has standardization, compliance, a lot of different structural things that need to adapt to support a hospital-based service line. And I brought up a few today that are really areas that I think could be a check engine-like type of scenario that you'd have to vet through. So the first was really as health systems are adopting an employed model, many times they've negotiated health rates with payers and they might have an embedded anesthesia allowable that's kind of a ghost rate. It could be very close to Medicare and they said, "Who cares? We don't employ anesthesia," but all of a sudden as they're navigating through an anesthesia employment diligence process, that that kind of anchored anesthesia rate becomes a burden in trying to get market commercial rates.

(06:04):
And so ghost rates is what I've called those is that it was just an embedded rate. No one ever cared about it. It didn't apply, but suddenly as you look at employment, that's an area that it might actually damage you. The other part is my experience has been that health systems, the bulk of their revenue is going to come from the inpatient setting. And so as you model out the financials of an employed model, it could be that the outsource group has actually more favorable revenue because they've been able to have more favorable rates and most of the hospitals and health systems will put a lot of their negotiating leverage on the inpatient side as opposed to physician services. And so as you model the economics, many times the health systems when you're modeling both inpatient and outpatient services are going to wind up accepting a lower rate than what maybe an outsource group has.

(07:00):
And lastly, that lead time to get rates on physician services is a lot longer than you think to really establish an effective date. And so six and nine months is really not an uncommon part as it relates to managed care and trying to secure allowables with the payers on the physician service side. In line with that RCM part is the billing collecting. Many of the groups wind up having an ACO and they wind up having the accountable care organization. So they try to bundle anesthesia within a tax ID that already exists from the quality side. Others wind up putting the anesthesia outside the medical group and have a third party billing and collecting. And it's not good to have probably two different billing collecting groups working out of the same TIN, especially if there's recoupments and other transactional things that could get intermingled with a non-anesthesia group, but looking at how the billing collecting would really work and are going to elect to have that as a separate tax ID for anesthesia, whether or not that's going to be embedded.

(08:07):
HCA was a good example of the platform that it uses, which is MEDITECH. You can't bill and collect base and time units out of MEDITECH. And so many people are on Cerner or Epic, but can your health systems platform that you bill and collect from bull base and time units? And if not, being able to look at whether a third party revenue cycle vendor benefits the health system or not, especially when it comes to you billing and collecting, you might have a perspective, an N of one, but this outsource group that does many anesthesia claims through different vendors might have a different pulse and a value add in being able to give you perspective of how payers are treating their other clients. And so really I wanted to pause there and just get feedback from the room on this managed care and revenue cycle slide.

(08:58):
There's many of you that have already launched employment. For those that haven't, if anyone could share a pearl or a peril that you experience, say, "Gosh, I wish I would have known this before we launched this insourcing as something that you've learned from or what you expected turned out to be different in practice."

Moderator (09:20):
I'm going to pick on somebody.

Attendee 1 (09:23):
So we worked with some hospitals that have been using staffing companies and they had old payer rates in their ... They had old payer rates in their contract, which could be 15, 20 years old, right? What they need to do is look at them in advance to employing their group. So we found one group, they were getting paid $32 a unit from Blue Cross. And we're like, "You're going to have to move that about $50 a unit." And it made it a much slower pace in getting ramped up and getting the revenue to follow the employed group. So that's a pearl.

David Donnelly (10:05):
Any other things that were really big points on the revenue cycle or managed care?

Attendee 2 (10:14):
I agree with it. No, I mean, that's a major lesson learned that we had is we're going through our contracting and we found out the rates had not been looked at in a while and our allowable rate was actually, or actually our bill rate was below the allowable rate by the insurance company in several areas. So we had an opportunity to make up quite a bit there. So from a revenue perspective, that was a major opportunity.

Moderator (10:41):
Thank you, Steve. All right, go ahead, David.

David Donnelly (10:45):
Workforce in place, it used to be probably pre-COVID, if you had a big enough checkbook, you could reassemble a workforce through locums and other options. Now I feel like in a lot of markets, if you can't rely on a transition to using some or all of a workforce in place, it's going to be a difficult process to affect that transition. Even when my experience has been that you offer people more on a Tuesday than they got paid on a Monday, 20% of the workforce in the transition, it's pretty consistent across a lot of the ones I've seen have left. And so people use that change as an opportunity to reassess the market, what works for them, anxiety is about change, they might as well look for locums or other opportunities. So that part about retaining the workforce in place has been a real big one.

(11:38):
And a lot of it hinges on whether or not you have access to the workforce in place, either through a payment, through a buyout of those workers or not. The other part is many times a physician service group that's outsourced will have paid sign-on bonuses, relocations. It's tied to some obligation of repayment over two or three years. If the change in insourcing is happening in a way that that outsource group didn't get to recoup that investment of sign-on bonuses and relocation monies, that they typically want to be made whole or have some consideration for that. And so I call those inherited liabilities, but navigating that and factoring that into your diligence in the finance part has always been an important part that people don't think of in first order. And lastly, the ultimate P&L impact, it's kind of over a three to five year. People will focus on that first year and say, "Wow, that's a shocking number.

(12:39):
Should we have done this? " But really, I think these transitions are expensive upfront because of, as others have mentioned, there's premium labor expense, sign-on bonuses that are typically involved, ramp up of revenue cycle monies, but over a three to five year period, I think is the value as it relates to transition related issues. It was brought up, I'll echo, I think everything we heard earlier today, the value of anesthesia is really in the onsite clinical leadership. And so one of the part, anesthesia is a team sport, unlike your hospital-based services in emergency medicine and radiology that are episodic relationships, anesthesia is a continuity relationship. And so when you manage that service line, it has to be tailored to what needs there are in a continuity relationship, the continuity that you have with the surgeons, the proceduralist, your department heads, your C-suite. It's a little bit different than episodic relationships where someone's just glad that the ER is staffed or someone reads the radiology study.

(13:47):
And so when people brought that onsite leadership as an important part, it really to me is mainly because of that continuity relationship that may be different than what you have in the other relationships that are hospital service line based. A lot of people are anxious about possibly having to report to the wrong part of an organization that doesn't understand them. And so a lot of times you'll hear that the medical group providers report up to a CNO or part of the medical group that really isn't hospital based and they can't really advocate for them effectively. So having someone that the anesthesia team ultimately reports to that can effectively advocate and appreciate what the anesthesia tailoring of support needs is a critical part as anesthesia continues to evolve and has these decreased reimbursements and increased labor supply issues. And lastly, is there going to be enough protected time?

(14:47):
So I can't think of how many providers typically are involved in anesthesia with pharmacy. They're involved with the surgical committees, the governance, peri-op. Anesthesia really touches so many areas of the hospital and is actively involved, but having onsite clinical leaders, both physicians and APPs involved in your committee membership is a critical part about evolving them in the solution. And everyone up to this point has already mentioned that. I'd just be curious about anyone who has done a transition six, 12, 18 months past. What surprised you about what you were expecting and then what it ultimately turned out about workforce and onsite leadership? Patty, please.

Attendee 4 (15:34):
So I had the opportunity to do this when I lived in Tennessee. We broke the contract and we employed our own providers. The who the anesthesia will report to was a huge topic. So at that point, I was director of surgical services and the CRNAs were going to fall under me. And when we told the CRNAs that there was a lot of trepidation because I'm an OR nurse by trade, I'm not a provider, I'm not a mid-level, but really having those relationships and having those leadership skills to sit down and really be their advocate. So there was a dyad relationship. They reported to me and a medical director so that I could handle the HR issues. And then the medical director was basically their person that they reported up to on that end. But it was a great transition. We were very successful. But the other side that you had showed about the cost, there was a huge ... That first quarter, second quarter, even that first year, I thought my CFO was going to throw eggs at us because there was a huge cost, but in the end, it was a right thing for us to do.

David Donnelly (16:35):
Thank you. So the last part that I see can be kind of an unexpected issue that has to be factored in is really the non-clinical operations. And so much of anesthesia has been outsourced through independent groups or regional or national physician service groups. And as hospitals tend to look at employment in the non-academic setting, a lot of that subject matter expertise on the non-clinical side, the operators really were concentrated in these outsourced groups, whether they're local, regional, or national groups. And so it's a real challenge to make sure that you have effective and sufficient numbers of non-clinical operators that can help, again, manage a service line that's not like what you have in other surgeon relationships or out office-based relationships. One anesthesia leader asked me, "How many work RVUs will anesthesia produce?" And so the C-suite may not have a full appreciation that anesthesia is many times buying availability.

(17:36):
They can't independently control productivity, but having operators to be able to be sufficiently able to navigate that. And the other part I think that's unique about anesthesia as an insourcing is a pig in the Python scenario where the number of anesthesia providers that might have to be available, like Patty's example, day one, is maybe 50 to 70 different unique providers that need to cover over the first, second, or third month, even if the budgeted numbers is only 30 strong as far as FTEs. So being able to have enough ops support to navigate through the onboarding and credentialing of all those providers getting through. And then again, managing and tailoring the scheduling systems, how will you wind up having timekeeping, even if it's just for labor management about when did people show up, when did they go home so you can monitor and be a little bit proactive to make sure if you need adjustments.

(18:34):
The other part is just really about recruiting and in an independent physician group, it's peer to peer. And I see in a lot of the hospital systems, it becomes a very process or a control driven process, go to this website, fill out this application, do this or that. So really trying to keep the providers into a more experience driven process to where it's not a control process. Peer to peer is usually the most effective and is going to be the most helpful at communicating what a day in life is like. And then really, I think we'll talk in the panel discussion. Dr. Porter or Steve Porter has been able to develop strategies within a market to really distinguish their opportunity from other ones that exist. So we'll speak to that. And then the last part was really locums. There is going to be a dependence on almost every transition on some premium labor, but many of the health systems may not have had a need to have a locums agreement.

(19:34):
And how do you do that? Do you do it with one, doing everything for you or multiple and being able to come up with a strategy and negotiate that? There's these tailoring parts about anesthesia employment that I think is so important here. And our panel's going to probably dive into a little bit more on the staffing side. So I wanted to thank you and if there's ... Yeah.

Attendee 5 (19:57):
One question is, I've been involved with some consulting engagements where the private group, whether it be a big national group or a local group are in these ongoing contentious subsidy negotiations and eventually the hospital throws the flag and they convince to employ. And more times than not, the hospitals will call me back. I remember one in Jersey, it was TeamHealth. I thought the subsidy request was reasonable. They fired TeamHealth, went to full employment and they called me back a year later and their subsidy went from a million to like eight. And when I dissected, it was one is they went crazy on salaries and Barnabas did the same thing to reset the whole market. And the other is just once you employ these physicians and providers, you get into serious FTE creep where the motivation from a private group and even the big national groups have sophisticated processes.

(20:52):
And they do, I think in many cases sincerely try to keep a lid on the cost because no one likes these contentious. But then the hospital, this particular hospital had no infrastructure to manage these docs. They just went awry, not covering all the, just bringing in locums willy-nilly, not covering all their shifts. They bring in PRNs and things just get out of control. What would be your suggestion to a hospital before they go down that route? Because I just feel a lot of hospitals are just not prepared and they're not really giving the credit of these private groups or trying to make it work.

David Donnelly (21:27):
It's a great question. So two parts. One is if you're not ready to go to full employment model and the contract's coming up for renewal with an outsource group, in consideration of additional money, you could wind up putting in information about not enforcing non-competes if the health system elects to employ. And the other part is only the utilization part that's been brought up. 40%, 45% utilization of a CRNA in an eight-hour time period. They're in the building ready to work and they're not able to bill and collect more than 40 or 45%. Usually that needs to have some kind of tracking metric to help take advantage of what you have. It's like buying too much bandwidth in your home internet and paying for it and never being able to use it.

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