Read
Gary Keeling (00:06):
Bob and I go way back, right? And he said, "We're going to put you on right after the afternoon break." And I said, "Well, that's a tough spot to pick." And he said, "Well, you need to become dynamic." And I said, "Well, I'm a CPA by trade. I've been doing this for 29 years and a dynamic speaker and a CPA don't have too many qualities that cross each other." So I called Bob back and I said, "Hey, I have an idea." He said, "Talk about the finances of a perioperative medicine clinic." And I said, "Remember the movie, Jerry McGuire, Tom Cruise and Cuba Gooding Jr." I said, "Remember when they were saying show me the money." They were yelling at each other over the phone. I said, "Bob, it'll be great. I'll put that on my screen and everyone will think that's hilarious." He said, "No, everyone will think that's cheesy." So he told me to come up with something else to talk about.
(00:51)
So this is only a funny story to the people in this room. So I've been doing this for 29 years. So last September I get a call from a CEO out in the Pacific Northwest. He said, "We own 17 ASCs and we're tired of getting private practice groups, we're tired of locums. We're going to employ them all. " I said, "Oh, okay." He said, "Can you help us out? " I said, "Sure." He said, "We want at least a 5% profit margin on that service." After I dropped the phone, I picked it back up and I said, "You'll be lucky if you lose 15 to 25% on that service. There's no chance on earth you're going to make a profit." And then we heard Dr. Hicks talk this morning and the average subsidies was between 30 and 70%. So the whole issue is people don't really understand anesthesia all that well.
(01:44)
So this was going to be together. So Dr. Steele had to leave early. He had some things change in his life. He put together 25 white papers. If anyone wants this as we leave, he wanted to say here and answer questions, but he couldn't. So they're on the table if anybody wants one. So we talked about the upside to having a parapartive medicine clinic and he mentioned setting it up as a separate entity. That's absolutely the case. Separate tax ID underneath the hospital umbrella and makes it easier for billing and tracking. So anesthesia Boeing, base and time units, perioperative medicine clinic, you're billing CPT codes, E&Ms, et cetera. And you don't have the denials from the insurance companies when they see the anesthesiologist is also doing an E&M. So breaking it into separate organizations is the way to go. I heard Clint Stewart speaking earlier this morning, he's a CFO.
(02:38)
And for CFOs nowadays, I mean, that's a tough job, right? Costs are going through the moon, revenues aren't following along. So they're really playing a balancing act just to kind of keep the health systems head above water and this makes it easier to track. As part of that, you get separate financial statements. There's different margins, different structure. There's RVUs that would fall into a perioperative medicine clinic. You can look at what the return on investment was. If there's additional profit, that in essence is reducing the subsidy paid to the anesthesia group. So there's a lot of advantage of keeping them both separate. So the billing gets a little complicated, but once you figure it out, you're good to go. The global surgical package, there's rules. You can't bring patients back. Some are 10 days, some are 90 days. And if it's necessary to do that, you just have to append appropriate modifiers in order to get them paid.
(03:35)
Same CPT codes, it's very straightforward, but you just need to know the rules. So show the money here, right? This is the Cornelius Vanderbilt profit model. Remember he started Standard Oil. His opinion was, "I'd rather make a dollar off a million people than a million dollars off one person." So these numbers aren't very exciting. Medicare is going to pay 150 bucks for every one of these patients. Commercial care is going to pay 180 bucks. So nobody gets too excited about this, but if you're already doing the work, there's a part of this that people don't realize. So you're getting improved patient care that first and foremost, always. You're going to get a reduction in canceled cases, you're going to get better OR utilization. So there's a financial value to this. I've been doing this a long time and the ASA was promoting this years ago and I would work with anesthesia groups and they would go meet with hospital CFOs and they'd drag me along and they would come up to this nebulous number.
(04:35)
We're going to do all this really cool stuff for you hospital and you're going to make like three million bucks and then kick us back some money. And the CFOs would look and be like, how are you going to measure that? So there's a part of it that improves utilization patient care, but you're going to generate about 150 to $180 per case. So as an example, 20,000 anesthesia cases, you're going to throw off about 700,000 of E&M revenue, which is true. CPT's out the door, money coming back in. The why this is valuable, because as Dr. Steele said, and everyone in this room knows, is a lot of your health systems are already employing these people. So they're already in the budget, they're already in the costs. And here's an example, this is a true client, is they had about 20,000 cases. They were going to generate about 850,000 in billing revenue, plus we had to estimate reduce leakage, improve case mix index, reduction in cancel cases.
(05:36)
We think the upside's going to be around $2.6 million. And this is the example. So this isn't a crazy ... We're going to take questions at the end if that's okay. This isn't like a crazy hospital that's in Beverly Hills. People always use those examples. Everyone has insurance. Everyone has great insurance. Everyone has cash pay. This is a normal hospital. So they had about 20,000 cases.
(05:59)
There's a case mix. Orthopedic, they had big orthopedic practice, but everything else was pretty normal. The CPTs that get utilized from one of these perioperative clinics is typically between 18 and 30% of the patients that come through. You can generate a bill for their time. So their payer mix was 49% Medicare, 5% Medicaid, 46% commercial. So pretty normal hospital, maybe even a little worse on the payer mix side. Here's the final numbers. So we're going to generate 842,000 bucks. The way it works is there was an anesthesiologist that was close to retirement. So he's now the part-time medical director of the perioperative clinic. We're assuming his cost around 280, right halftime MD. They're using an APRN. It's about 180,000. That's with benefits fully loaded, but those costs are already baked into the budget. So the new revenue's coming in, but the costs are going to stay the same.
(07:01)
You're going to add some more costs on there. You're now going to have to pay for the collection of those. Let's say 5% in order to do the billing. And then you're going to have to hire a scheduling person or one and a half scheduling people to schedule the perioperative clinic. But if you look at that, it drops 7.16 to the bottom line because you're using costs that you're already incurring and most of this is work you're already doing. So you're just basically restructuring this and that's where Dr. Steele wanted to stay and kind of get into the details of that, but you're restructuring the service, which now makes it profitable. My last slide then I'm going to hand it off to my colleague over there, Bellinger Moody, who is our compliance expert that has been doing this. But if you want to start a practice, let's say you're going to do 12 patients a day, 260 days a year.
(07:47)
It's about 3,000 patients. You're going to need one APRN for that. You're going to need one scheduling person to do that work. So if you start it, you're going to see a profit of about $300,000 as the clinic grows, then you would ad incremental costs to bring more and more people in. So what we're seeing, and we're all saying the same thing, is that hospitals are struggling with the financials and they're struggling with anesthesia costs and they can't understand why. And like I said, there's a huge shortage. So every dollar counts. This is a way that if you're private practice, you can reduce your subsidy from the hospital and if you're employed, you're just going to improve the bottom line. So that being said, this is all links into the Teams program.
Jeff McLaren founded Medaxion in 2008 to maximize information technology opportunities in the anesthesia market. Previously, he served as co-founder and CEO of Safer Sleep, LLC, a provider of anesthesia safety and record automation services in New Zealand and the UK. Jeff began his healthcare technology career as co-founder, President, and Chief Product Officer of HealthStream, Inc.