10 Steps to Prepare for and Respond to Anesthesia Subsidy Requests

It is likely only a matter of time until your hospital is asked to subsidize its anesthesia provider, if it hasn't already faced this request. Anesthesia groups are more regularly asking hospitals for subsidies, and hospitals are taking these requests more seriously than they used to and are starting to take action around them, says Thomas Wherry, MD, principal of Total Anesthesia Solutions. Here are 10 steps from Dr. Wherry which will help your hospital prepare for this request, know how to respond to this request and ensure your hospital maximizes the benefits of this financial arrangement. Editor's note: Please assist Dr. Wherry's research of hospital anesthesia stipends by taking a short survey found here.

1. Engage the anesthesia group
Anesthesia providers ask for subsidies when they are struggling financially. Unfortunately, as Dr. Wherry notes, many hospitals do not have a good understanding of the success or struggles of their anesthesia providers, so the hospital does not explore ways to ensure that their anesthesiologists are seeing strong returns on their work.

"I would strongly recommend that the administration of any hospital should develop a relationship with the anesthesia group," he says. "It sounds obvious, but many are not doing it, which is surprising since anesthesia is such an important component of the hospital."

Management should identify a point person within the anesthesia group and start a regular dialogue on how the group is performing and its experience at the hospital. Include your anesthesia provider in on discussions about scheduling efficiency and allocation of block times, for example, as these components of your operation can have an effect on the anesthesiologist's financial performance.


More and more hospitals are looking more closely at their own efficiencies in the OR to help anesthesiologists, Dr. Wherry says. One of the biggest problems for anesthesia groups at the hospital is downtime. Many hospital ORs do not run efficiently, and groups are often asked to cover many more rooms than are needed for actual cases.


"In the past, the hospital wasn't paying for the group to cover those extra rooms, the group was," he says. "The only thing they were paying for was nurses but they could be assigned to other tasks. Once you start paying anesthesiologists to cover those rooms, you need to really look at efficiencies. Many hospitals are bringing consultants and experts to help deal with underutilized block time and developing a more vertical schedule."

2. Reward your anesthesiologists
Hospitals can make a number of inexpensive gestures to show appreciation for their anesthesiologists, according to Dr. Wherry.

"Little things, like providing an office with Internet access, can go a long way," he says. "I've never understood why hospitals don't provide some sort of incentive or bonus program for the group for hitting certain performance measures, such as patient or staff satisfaction."

A hospital may want to consider naming one of its anesthesiologists as the operating room's medical director and paying a small stipend for the work. This is likely to help develop a closer relationship with the anesthesiologists, which may encourage discussions on important issues such as financial challenges before problems turn into crises.

3. Require full disclosure
It is perfectly reasonable to ask an anesthesia group requesting a subsidy to fully disclose its financial records so you can understand why the subsidy is necessary.

"I've seen stipend subsidies given when the group hasn't really disclosed what the problem is — they don't want to show their finances," Dr. Wherry says. "I don't know how you can ask for hundreds of thousands of dollars without that." Hospitals should expect more transparency and force the anesthesiologists to demonstrate the need by opening their books.

It is critical that your hospital involve its accounting team or find a third party who understands anesthesia billing and management to review the group's financial records. This will put you in a place where you can truly understand the group's position.

4. Consider a third-party representative
With hundreds of thousands of dollars potentially tied to a stipend, it is very easy for emotions to run high and the relationship between the facility and anesthesia group to become strained. One option to help prevent this is to find a third-party representative to come in and help determine a fair stipend and any parameters the group must meet to receive the stipend (see step 8).

5. Understand the factors that should influence stipends
The subsidy that is provided should not just be based upon the group's revenue. If the group is failing to capture the reimbursement it deserves or is overspending, it is not the facility's responsibility to make up the group's shortcomings.

A third-party representative — or someone within the facility with knowledge of providing anesthesia and perhaps running a group — should assess whether the anesthesia group's subsidy request is appropriate based on the group's internal efforts to maximize its revenue and minimize costs. Some questions Dr. Wherry suggests assessing about the group include:

  • Is the group's productivity appropriate?
  • Is the group being asked to cover underutilized locations?
  • Is the group staffing efficiently?
  • Is the billing appropriate?
  • How aggressive is the group at pursuing good third-party contracts?
  • Is the call (for hospitals) appropriate?

"All of that information should impact the subsidy; all of those questions need to be answered in determining the subsidies. I think sometimes organizations don't look at that the full picture," Dr. Wherry says. "[Some groups] say, 'here is our budget, here's how much we're making and you need to make up any difference.' That's a really dangerous approach because then it almost becomes an entitlement. To avoid the entitlement mentality being adopted by your group, consider labeling the financial support mission support versus a subsidy or stipend. Mission support implies a collegial partnership."


6. Support anesthesiologists in payor negotiations

If your anesthesiologist provider signs better contracts with payors, it will help reduce subsidy requests. More hospitals are assisting anesthesiologists in contract negotiations payors, Dr. Wherry says.


"They're trying to work and support the group during sometimes very contentious negotiations whereas in the past they would have rarely or never got involved," he says.

7. Avoid one-way deals
Stay away from case/volume guarantees and money guarantees, Dr. Wherry suggests.

"What's the incentive for the anesthesia group to be aggressive in billing and not to cancel cases inappropriately?" he asks. "Guarantees become a disincentive. You don't want to enter a situation where you agree to make the anesthesia group whole every month. That's where I've seen hospitals get burned. For instance, the anesthesia group may need $200,000 to make the budget every, and if they only make $150,000, the hospital must cover the rest. Where is the incentive for the group to improve collections, lower costs or get better contracts?"

This is why it is beneficial to tie the stipend or subsidy to the group's performance, Dr. Wherry says.

"I would strongly encourage any hospital — when entering into an arrangement — to try to get something in return, whether it is showing up on time, high satisfaction, good outcomes, participation in committees or accreditation help," he says. "It really should be tied into performance." Some hospitals have agreed to subsidy contracts with anesthesia providers that sets aside a portion of the subsidy and ties it to meeting performance measures.

8. Determine fair and attainable measures
If you are going to tie the subsidy to performance and meeting requirements, both parties need to agree to the performance measures the group must meet and what will happen if they are met or not met. These performance measures should be measurable, attainable and not too easy.

Reasonable performance measures may include:

  • showing up to the facility on time;
  • staying in the post anesthesia care unit until the patients are stable;
  • committee involvement;
  • providing in-service training to staff;
  • patient or staff satisfaction (with surveys that include a rating for anesthesia); and
  • surgical outcomes such as postoperative nausea and vomiting rates.

Once the measures are agreed upon, you will want to put them in a well-defined contract. Also, depending upon which performance measures are chosen, the anesthesiologists would likely appreciate an invitation to become involved with the hospital’s efforts to improve efficiency in these areas.

Editor's note: To learn more about performance metrics for anesthesia stipends, read "Anesthesia Stipends: Performance Metrics Increasingly a Part of Stipend Agreements."

9. Keep subsidy contracts short-term
Subsidy contract terms should run between six-month and one-year terms. If the hospital is ramping-up and adding an operating room, consider a six-month term as it will give both sides an opportunity to revisit the contract after several months of use of the new room. This term may also help serve as motivation for your surgeons.

The longest subsidy or stipend contract you will probably want to sign is one year, with a review process that starts about three months before the contract expires, says Dr. Wherry. This will allow ample time for a complete review of the hospital operating room’s and the anesthesia group's operations and profits. If the hospital's operating room budget is performing well, and the anesthesia group is benefiting from this growth, the hospital may want to explore whether a subsidy is still necessary.

10. Know your alternatives
Depending upon the relationship you have with your anesthesia provider, a subsidy request can come at any time — and unexpectedly. In addition, the provider may expect an answer fairly soon after informing you of the need for a subsidy. It is worthwhile to regularly research alternatives for your anesthesia provider just in case you cannot satisfy a request for a subsidy and ultimately lose the service of your current group.

"Once subsidy approaches 30-40 percent of the group's revenue, employment arrangements begin to enter the picture," a trend that is becoming more common, says Dr. Wherry. However, moving to an employment model can have its drawbacks and third-party involvement is highly recommended.

Editor's note: Please assist Dr. Wherry's research of hospital anesthesia stipends by taking a short survey found here.


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