William Joseph Martin, DO, who is employed by NorthStar Anesthesia as the medical director of anesthesiology at Elkin, N.C.-based Hugh Chatham Health, joined Becker's to discuss why the anesthesia reimbursement model is broken.
Editor's note: This interview was edited lightly for length and clarity.
Question: Why doesn't the anesthesia reimbursement model work?
Dr. William Joseph Martin: Most third-party payers base their payment model on Medicare and a multiplier. However, in anesthesia specifically the model is a disaster. Most of your physicians who use Medicare are based on relative value units and procedure codes. For example, you do a gallbladder procedure, Medicare pays a certain amount, and the third party payer says, "Well, Medicare doesn't pay very much, so we'll pay you a certain percent times whatever Medicare pays you when we negotiate your contract."
But it's different for anesthesiologists because we're time-based. You can have one surgeon do a procedure in 40 minutes and another take 2.5 hours — if you're paid on a global fee, nobody wants to provide service to that other physician because you could do two procedures while the other is doing one. With anesthesia, you can't control that; that's why it's time-based.
This is especially true if the group employs the certified registered nurse anesthetists. They don't have to worry about billing and collecting, so as they want more salary increases, reimbursements don't match and eventually those lines cross and you can't afford to employ them.
That's why a lot of hospitals and practices are looking to employ everyone — the physicians and the CRNAs — so when they go to negotiate with third-party payers, they have control over the costs. That's why you're seeing more being employed because they can't afford to negotiate costs unless they're in a multistate anesthesia group. You're seeing payers have to choose between employed anesthesiologists or those large anesthesia groups.
Q: So what should the payment model look like?
WJM: Medicare has to increase their reimbursement, but they're actually talking about a 3% cut. The payment model utilized by CMS needs to be reconfigured to represent actual costs and demand.
That's why hospitals have to subsidize anesthesia practices, because we have to take all patients when they come into the emergency room — whether they're self-insured, Medicare, Medicaid, whatever. We have to accept those payments to have a contract for anesthesia.
Q: What's the potential consequences with this increasing consolidation?
WJM: Private, multistate large practices are being bought out by private equity groups. And oftentimes they cut costs by cutting providers. The private equity groups have to make a certain profit, and they're going to make it one way or the other. In general, more and more hospitals can't afford to subsidize and the groups have to become larger to have leverage. That's the way it's evolving.