Anesthesia Subsidy FMV

Across the country, many hospitals are relying on a third party to review their anesthesia subsidies. We are seeing this trend because groups are requesting, and even demanding, additional financial support in exchange for the services they provide. Hospitals with financial and fair market value compliance concerns are uncertain how to respond so we’ve outlined a straightforward, logical approach that essentially creates a budget for the group and contrast those results with the group’s anticipated revenue. The budget is based upon staff and call requirements that meet the hospital’s service requirements.

Budget components and assumptions:

Staffing.
By far the largest cost for an anesthesia group is the physicians and Certified Registered Nurse Anesthetists (“CRNAs”). We work with hospitals to define the coverage required, and in cooperation with the hospital and group, we then define the provider staff required to deliver necessary coverage. The key to accurate projections is utilizing market information (i.e., MGMA survey data, local job data, and internet job postings) to determine fair market value compensation for providers. This value varies by location, amount of call, types of patients, etc., but our experience has given us the opportunity to tweak formulas to develop an accurate rationale and defensible cost.

Malpractice Costs.
For this cost, there is nothing like experience, so we generally use the group’s actual costs, perhaps including expected increases.

Other Costs.
This part is simple – we assess the group’s actual operating costs, MGMA benchmarks, and our experience with 15 or so such groups to project what these cost should be going forward. Generally, these costs are minor.

Collections.
The last piece of the puzzle is collections. After evaluating the group’s historical collection percentage, we identify gaps and suggest adjustments, assuming there are improvement opportunities or substandard billing and collection practices are uncovered. But beware because this is a double-edged sword. It is often difficult to penalize groups for poor performance in this area because doing so reduces their subsidy and ultimately may precipitate more attrition from the group.

If you would like to discuss this further, call us.