CRNA Compensation Trends and Why Costs Are on the Rise
May 22, 2024
Written by Ashleigh Surgeon and Caroline Dean, CVA
In recent years, the anesthesiology market has seen many changes in compensation trends and practice models. With continued provider shortages and a growing demand for anesthesia services, providers in this specialty are becoming increasingly valuable. Specifically, certified registered nurse anesthetists (CRNAs) have become some of the most sought-after advanced practice providers in the industry, leading to significant increases in compensation for these providers. In addition, hospitals and health systems are shifting to expanded CRNA utilization as opposed to physicians due to the ongoing push for cost-effective treatment options. Understanding the factors impacting CRNA compensation trends is crucial to anticipating and addressing potential challenges in the pursuit of CRNA arrangements.
Overview of CRNA Compensation
According to Becker’s ASC Review, the anesthesiology market is facing a projected shortage of 12,500 providers by 2033. As basic economic principle rules, a decrease in supply of any healthcare provider drives demand upward, forcing costs of anesthesia services and provider compensation upward as well. In 2023, median compensation for CRNAs in the United States was reported at $221,300, an increase in total cash compensation of 11.3% from 2022.
Source: Sullivan, Cotter and Associates, Inc. 2019-2023 Physician Compensation and Productivity Survey and 2019-2023 Advanced Practice Provider Compensation and Productivity Survey
This is a significant rise as compared to general physician assistants and nurse practitioners, who saw only a 5% increase on average from 2022 to 2023. This level of compensation is mostly accredited to the additional education and training required for the certification, as well as the increased risk and level of independence associated with their standard practice.
To receive certification from the National Board of Certification and Recertification for Nurse Anesthetists (NBCRNA), a candidate must first complete registered nurse training and the appropriate clinical experience. Then CRNAs complete a Nurse Anesthesia program, which grants the candidate a master’s degree. Program length varies from two to four years and includes a clinical experience requirement in addition to coursework. In total, the process of becoming a certified nurse anesthetist takes at least seven years to complete, surpassing a standard registered nurse by an average of three years in education and experience. As with any advanced degree, CRNAs often receive increased compensation due to a higher level of education and training than a standard practicing registered nurse.
Because of their advanced training, CRNAs have an increased level of independence in a clinical setting. Though anesthesiologists may manage high-acuity surgeries, CRNAs in many states and facilities may be responsible for primary patient care, including informing the patient, completing examinations, developing pain management plans, prescribing medications, administering and monitoring medications, and responding to adverse reactions or emergencies. A CRNA’s involvement in responsibility for patient care puts the provider in higher-risk scenarios when compared to other registered nurse professions. In 23 states, CRNAs may operate independently without the supervision of a medical doctorate. CRNAs are also typically the sole anesthesia provider in many plastic surgery centers, eye surgery centers, dental surgery centers, and gastrointestinal surgery centers. Additionally, in the U.S., many facilities in rural areas with limited healthcare providers use CRNAs for routine surgical services in the specialties of general surgery, obstetrics, and pain management. According to the American Association of Nurse Anesthesiology, CRNAs comprise over 80% of anesthesia providers in rural areas.
Drivers of Increased CRNA Compensation
Though CRNAs’ level of autonomy may vary depending on location, state government regulations and a facility’s scope of services, the importance of CRNAs is often constant across markets. With their ability to operate nearly identically to an anesthesiologist in most general cases, CRNAs also incur the same level of risk as physicians and the increased costs associated with such risk. Increased utilization, higher malpractice insurance expenses, and reimbursement difficulties play a large role in these higher costs for CRNAs, which create a competitive environment amongst healthcare systems when considering compensation in recruitment efforts.
Historically, anesthesiology services have been provided by a mix of physicians and CRNAs together. However, with continued physician shortages and health systems and facilities seeking more profitable provider options, CRNA-heavy care team models have risen to the forefront. In a care team model, one physician typically supervises between one and four CRNAs, allowing the facilities to rely on CRNAs as opposed to more expensive physician coverage. As CRNA utilization grows, so grows CRNA compensation as facilities are forced to offer more lucrative recruitment packages, inclusive of commencement bonuses and higher-dollar salaries to retain top CRNA talent and stay competitive. In addition, as many U.S. lawmakers are pushing to expand the scope of CRNA independent practice, it is likely CRNA utilization will continue to increase.
Additionally, according to the Centers of Medicare and Medicaid Services (CMS), average CRNA malpractice insurance in 2024 is $5,968—nearly 50% higher than the average for all other midlevel providers. This is most likely attributed to the large number of CRNAs practicing independently, and therefore solely liable for any case complications. The most common malpractice claims involving CRNAs include subpar performance during procedures, poor patient monitoring and improper positioning. All three of these claims are extremely serious and can result in recovery complications, severe injury, and even death. As a result, CRNAs face higher medical malpractice premiums than providers not solely responsible for a patient’s care. Health systems and facilities must consider this expense when employing CRNAs’ services, whether they reimburse, subsidize, or include the expense in compensation.
Lastly, anesthesia has seen a downward trend in reimbursement based on the CMS Medicare Physician Fee Schedules as Anesthesia Base Units (ASAs) reimbursement have decreased from $22.27 per unit in 2019 to $20.44 in 2024. In the states where CRNAs can practice independently, CMS will reimburse services provided by CRNAs at these rates. This reduction in reimbursement can impact a provider’s ability to collect sufficient revenue based on professional services alone, often requiring additional compensation or subsidization from a facility to sustain operational costs. This issue is commonly present for providers in a community highly comprised of governmental payors. Public payor rates, such as Medicare and Medicaid, reimburse medical services at a significantly lower rate than private insurance, less than 28% of median commercial rates in 2022. As such, facilities serving a population with a significant amount of governmental insured patients must offer providers a compensation plan not only to offset the practice’s operational costs, but also as an alluring salary serving as incentive to relocate to the market. With a CRNA shortage looming, these underserved areas must stay competitive in compensation offers to recruit and retain the essential services CRNAs provide to the community. This level of competition contributes largely to the upward drive of average CRNA compensation, as majority of the CRNAs are operating in the U.S. in lower-income markets.
The VMG Health Experience
In summary, the CRNA compensation market will continue to evolve in the coming years, and health systems and facilities must understand and address these changes to capitalize on the benefits associated with CRNA utilization. VMG Health is frequently engaged to provide fair market value and consultative services to ensure CRNA compensation packages are both competitive and compliant with government regulations. Utilizing in-depth analyses of revenue, market data, costs and recruitment expenditures, and expert experience in similar arrangements, VMG Health can assist in navigating the increasingly important CRNA market.
Sullivan Cotter. 2019-2023 Physician Compensation and Productivity Survey and 2019-2023 Advanced Practice Provider Compensation and Productivity Survey
Four Key Valuation Considerations When Converting the Imaging Operations of a Hospital Outpatient Department to a Freestanding Center
June 8, 2023
Written by Stephen H. Schulte, CVA, and Madison Higgins
The following article was published byVMG Health’s Imaging & Radiology Affinity Group
In recent years, the healthcare industry has experienced a shift toward freestanding sites of service as more patients opt for lower-cost, convenient, and specialized care. This trend is particularly evident in outpatient imaging services where patients are increasingly opting for the comfort and accessibility of freestanding imaging centers over hospital outpatient departments (HOPDs). As a result, hospitals and health systems are becoming increasingly eager to partner with established operators of freestanding imaging centers. These partnerships often include the acquisition of an ownership interest in an existing freestanding center but may also include the contribution of their HOPD imaging operations to an existing freestanding center or potentially to a new joint venture (JV). When considering the conversion of an imaging HOPD to a freestanding center, there are several important factors to consider from a fair market value (FMV) valuation perspective. These include the proper identification of the volumes to be included in the conversion, the potential impact on patient volumes and reimbursement, changes to the operating expense structure, and the contribution of necessary equipment.
Scan Volume
Correctly identifying the specific volumes that would be a part of this transition is one of the most critical factors to consider when valuing an imaging HOPD that will convert to a freestanding imaging center. Imaging volumes within an HOPD may include volumes related to different service lines such as emergency room visits, outpatient surgical procedures, routine outpatient imaging services, etc. Based on our experience in these situations, the volumes related to routine outpatient imaging services are the most likely to transition. With that said, the volumes related to emergency room visits and outpatient surgical procedures are less likely to transition due to logistics and other clinical factors.
Once the appropriate volumes have been identified, it is important to understand what impact, if any, there would be upon the transition to freestanding operations. The operations of an imaging HOPD may have a large volume of high-acuity scans for patients with more severe health conditions which could be at risk in a freestanding setting. Alternatively, freestanding imaging centers typically provide more convenience for patients since they are generally located closer to residential areas, have their own dedicated parking areas, and patients do not have to navigate the larger hospital environment. This convenience factor can lead to an increase in patient volumes across all modalities but is particularly evident for routine imaging procedures such as X-rays, mammography, and bone density scans. Additionally, as mentioned above, freestanding imaging centers tend to be the low-cost provider compared to an HOPD which may also positively impact volumes. Due to the complexity surrounding these factors, future volume expectations should be discussed in detail with those who are familiar with the current volumes, area demographics, and the competitive landscape in the local marketplace.
Reimbursement/Net Operating Revenue
Another key consideration is the potential shift in reimbursement rates and the impact on the net operating revenue. Reimbursement rates at an HOPD level may not be directly achievable for a freestanding center for a variety of reasons. HOPDs receive Medicare reimbursement rates according to the Outpatient Prospective Payment System (OPPS) set forth by the Centers for Medicare & Medicaid Services (CMS), while freestanding facilities receive Medicare reimbursement rates according to the Medicare Physician Fee Schedule (MPFS).
In general, OPPS rates tend to be higher than MPFS rates for the same service and can result in an expected decrease in Medicare reimbursement that must be accounted for in a valuation. Additionally, commercial payors typically reimburse at rates equal to or higher than Medicare. For valuation purposes, the assumed commercial payor rates should be theoretically achievable by any hypothetical market participant. The reimbursement rate for a given service will depend on many factors, including the location of the provider, local market dynamics, and changes in federal and state healthcare regulations.
Operating Expenses
Imaging HOPDs are typically accounted for as distinct operating units within the internal framework of the hospital. In many instances, the hospital will track certain elements of the cost structure to operate the unit, but detailed operating expenses are not available. The operating expenses accounted for may include costs that are simply allocated to the unit from the overall hospital operations and may not represent the true operating expenses needed to fully run the business. Additionally, the operating expenses that are reported internally may simply represent the direct costs that are easily identified and would not include the full picture. For instance, the internal financial statements for an HOPD typically do not include certain expenses such as facility rent, utilities, janitorial, and administrative functions such as billing and collection services, legal services, etc. In these situations, it is important to remember the intention of the valuation analysis is to simulate the business as if it were operating on a freestanding basis. Accordingly, the valuation will likely include adjustments to the operating expense profile to match the projected net revenues and volumes. In many cases, this will include a full build-up of operating expenses to include all applicable staff salaries and wages, benefits, occupancy costs, supplies, etc. This may be an iterative exercise that could include input from both the appraiser and the hospital to be certain the appropriate operating expenses are fully accounted for and are consistent with both industry and local market dynamics.
Equipment
When valuing an imaging HOPD, it is critical to account for the equipment needed to provide the projected volumes and net revenues. This equipment includes the imaging machines, computers, and software required to perform the imaging procedures. Depending on the structure of the imaging HOPD, certain pieces of equipment may be utilized to service both the outpatient and inpatient volumes of the hospital. In this case, the hospital may choose to retain the equipment and not contribute it as part of the potential transaction since it will continue to provide services at the hospital even after the properly identified outpatient volume is transitioned out of the HOPD. If the hospital chooses to retain the equipment or certain pieces of equipment, it is essential for the valuation to make a deduction to account for the equipment not being contributed. In addition, this dynamic has both operating and transaction implications since the freestanding imaging center will either need to be able to service the projected volumes with existing equipment or it will need to adequately plan for the capital purchase to acquire the additional equipment.
In summary, outpatient imaging joint ventures have been common in recent years with many hospitals and health systems considering the contribution of their HOPD imaging operations. With the continued focus of patients on convenience and their desire to utilize lower-cost options, it is expected that this type of transaction will continue to be a consideration for hospitals and health systems in the future.
Reviewing the 2023 Final Rule’s Potential Impact on Diagnostic Imaging and Radiology Providers
December 20, 2022
Written by David LaMonte, CFAand Max Swan
On November 1, 2022 the Centers for Medicare & Medicaid Services (CMS) released the calendar year (CY) 2023 Medicare Physician Fee Schedule (MPFS) final rule as well as the Hospital Outpatient Prospective Payment System (HOPPS) final rule with both rules going into effect January 1, 2023.
CY 2023 Final Rule – MPFS
Reimbursement decreases were seen previously under the MPFS annual rules for radiology in 2021 and 2022 when CMS first began phasing in the plan to reallocate reimbursement to physicians who consistently bill for E&M codes. However, these cuts were mitigated by legislation that increased the conversion factor in 2022 after the final rule was issued. Considering the previous precedent and similar political pressures, many industry participants are hoping for similar legislation in order to mitigate the cuts reflected in the final rule this year.
As the chart below illustrates, the CY 2022 Conversion Factor is adjusted to exclude the 3.0% one-time increase allowed by legislation which came after the final rule was issued. Additionally, the CY 2023 conversion factor reflects a reduction of 1.6% related to budget neutrality requirements. As a result, the MPFS Conversion Factor will decrease from 34.6062 in CY 2022 to 33.0607 in CY 2023 reflecting a 4.47% decrease.
Concerning radiology specifically, the final rule is expected to result in even further decreases in payment rates relative to CY 2022 levels. The table below illustrates changes in global, professional, and technical payment rates for specific modalities based on CMS’ published CPT-level payment data for CY 2022 and CY 2023. In addition to the conversion factor change, imaging and radiology providers have indicated the declines are attributable to changes in how relative value units (RVUs) are determined for several imaging procedures.
CY 2023 Final Rule – HOPPS
The final HOPPS rule included a 3.8% increase in the conversion factor relative to CY 2022 to reach 85.59 for CY 2023. The conversion factor, which is similar in function to MPFS, impacts all types of outpatient procedures and is updated annually. Below is a chart that outlines payment rates and growth relative to CY 2022 for the seven imaging ambulatory payment classifications (APCs). These APCs are also updated each year with weightings specific to individual procedure types that serve as an indicator of complexity and use of resources.
Transaction Implications for Owners & Operators
“With respect to our growth initiatives, we believe the opportunities for continuing consolidation could accelerate as a result of reimbursement pressures.”
– Mark D. Stolper, CFO of RadNet, Q3 2022 Earnings Call discussing the CY 2023 MPFS Final Rule
The reimbursement pressures noted above should continue to drive acquisition activity by larger operators of free-standing diagnostic imaging facilities. This is due to their ability to mitigate the impacts of reimbursement cuts with synergies realized from reduced overhead and other cost-savings that come from their scale and operational expertise. Outright acquisitions of these practices and facilities should continue in the future with the continuing drops in reimbursement under MPFS for most imaging modalities.
“Another one of our significant initiatives is expansion through hospital and health system joint ventures. In the past, we have stated that we see a path forward toward holding as much as 50% of our imaging centers in these partnerships. Most hospitals have been challenged by the loss of patient volumes to outpatient free-standing facilities who offer significantly lower pricing along with better and more convenient patient experience.”
– Howard G. Berger, CEO of RadNet, Q3 2022 Earnings Call
Reimbursement for imaging and radiology services under MPFS has created difficulties for operators for several years now. However, hospitals and hospital outpatient departments (HOPDs) struggle with a different set of problems as it relates to imaging and radiology services. Outpatient imaging volumes at hospitals have steadily declined as patients increasingly migrate to outpatient free-standing facilities due to more favorable costs for the patient. As noted above, larger independent operators of free-standing facilities expect that hospitals and health systems will continue to be targeted for partnership opportunities through joint venture models allowing them to retain some level of control and influence over the patient trajectory.
Q3 2022 Snapshot: A Look Inside the Earnings Calls of Public Healthcare Operators
December 15, 2022
By: Madi Whyde, Savanna Ganyard, CFA, Jordan Tussy, and Madison Higgins
VMG Health reviewed the earnings calls of publicly traded healthcare operators that reported earnings for the third quarter that ended on September 30, 2022. By focusing on the major players in select subsectors defined below, we analyzed the frequency of certain keywords including inflation, COVID-19, interest rates, premium labor, and others. We used these keywords to identify which topics commanded the room this earnings season. Highlights from the calls are summarized in this article.
Companies Reviewed:
Acute Care Hospitals: Community Health Systems, Inc. (CYH), HCA Healthcare, Inc. (HCA), Tenet Healthcare Corporation (THC), Universal Health Services, Inc. (UHS)
Ambulatory Surgery Centers: Surgery Partners, Inc. (SRGY)
Diagnostic Imaging: RadNet, Inc. (RDNT)
Dialysis: DaVita Inc. (DVA)
Diversified Managed Care: Humana Inc. (HUM), UnitedHealth Group Incorporated (UNH)
Laboratory: Quest Diagnostics Incorporated (DGX)
Physician Services and Other: U.S. Physical Therapy, Inc. (USPH)
Post-Acute: Acadia Healthcare Company, Inc. (ACHC), Amedisys, Inc. (AMED), Chemed Corporation (CHE), Enhabit, Inc. (EHAB), Encompass Health Corporation (EHC), Select Medical Holdings Corporation (SEM)
Risk-Bearing Organizations: Agilon Health, Inc. (AGL), CareMax, Inc. (CMAX), Privia Health Group, Inc. (PRVA), The Oncology Institute, Inc. (TOI)
Key Takeaway: Volume
Volume:Although volume trends are unique to each industry sector nearly all operators remained focused on the impacts of COVID.
Poll:Did the earnings call mention COVID-19?
Acute Care Hospitals
On a same-facility basis, admission volumes declined as much as 5.0% from the comparable prior year quarter (Q3 2021) for acute care hospital operators. Despite the weakening of COVID-19, the decline in volumes was attributed to higher-than-average cancellation rates (THC), the migration of certain procedures to outpatient status (CYH and HCA), and capacity constraints (HCA). Inpatient volumes generally remained at or below pre-pandemic levels.
Ambulatory Surgery Centers
Ambulatory surgery center (ASC) operators reaped the benefits of the migration to the outpatient setting and reported positive volume trends when compared to Q3 2021. Surgical volumes were reported as consistent with 2019 pre-pandemic levels (THC), and one operator claimed the business did not experience any material direct impact related to COVID-19 during Q3 2022 (SGRY).
Post-Acute
The post-acute sector reported mixed results in volume trends. One operator reported a year-over-year decline of 14.0% in hospice admissions, citing capacity constraints and reduced referrals from acute care hospitals (EHAB). However, another operator indicated that increases in admissions in the second half of the third quarter showed growth that they “haven’t experienced since the start of the pandemic” (CHE).
All Other
Volume trends among other industry players including dialysis providers, risk-bearing organizations, and physician services were also affected by COVID-19 in Q3 2022. Headwinds in dialysis volumes are expected to persist for the foreseeable future (DVA), and inpatient volumes for risk-bearing organizations remain below pre-pandemic levels (AGL). Notably, AGL also reported a rebound in physician office visits and outpatient volumes were in line with pre-pandemic levels.
Key Takeaway: Reimbursement
Reimbursement:Declining COVID-19 volumes mean less incremental government revenue for certain industry players who also now contend with an uncertain inflationary environment.
Poll: Did the earnings call mention inflation?
Acute Care Hospitals
Declining COVID-19 volumes resulted in lower acuity patients and reduced incremental government reimbursement. This softened the reimbursement per admission for the acute care hospital segment. Further exacerbated by inflation, these dynamics were evident in reported EBITDA margins which declined as much as 17.0% (CYH) over Q3 2021. In response, some acute care hospital operators are turning to commercial payor negotiations. Rate increases for the next year are anticipated to range from a minimum of 3.0% (THC) to upwards of 6.0% (CYH).
Post-Acute
The post-acute sector did not release specific figures regarding contract rate hikes. However, the sector is optimistically looking for high single-digit rate increases (SEM) to provide relief in the current inflationary environment.
Key Takeaway: Labor
Labor:Unsurprisingly, management teams across the sector were faced with questions about labor trends and management techniques during their earnings calls. Contract labor remained pivotal for the operations of some, but premium labor appears to have softened during the quarter.
Poll: Did the earnings call mention premium or contract labor?
Acute Care Hospitals
The reliance on contract labor continued its downward trend in Q3 helping moderate expenses. HCA even indicated overall labor costs were stable due to targeted market adjustments. However, contract labor and premium pay remain at uncomfortably high levels for most acute care hospital operators. UHS revealed during their call it will be unlikely to reach pre-pandemic levels in the near future.
Post-Acute
Staffing challenges persisted among the post-acute operators and directly impacted volume by as much as 60.0% (AMED). Increased indirect labor costs including orientation, training, and sign-on bonuses were the leading drivers of decreased EBITDA (AMED). Wage inflation, particularly for nursing positions, is expected to rise as much as 5.0% next year (SEM). However, several management teams are optimistic wages will stabilize to historical levels (SEM, EHC) in the near future.
All Other
Other industry players, including dialysis and physical therapy providers, also faced challenges with contract labor during the quarter. USPH reported labor costs were approximately 200 basis points higher than Q3 2021 levels, and DVA indicated such costs showed no improvement.
Key Takeaway: Go Forward Expectations and Guidance
Go Forward Expectations and Guidance:Considering the quarter’s performance, the companies we reviewed were divided relatively evenly in terms of revised FY 2022 revenue guidance, (i.e., raised, lowered, unchanged). In general, the quarter brought about a more pessimistic view of FY 2022 EBITDA, and the majority of public companies lowered their guidance for the year. Further, most stakeholders were left with no guidance for FY 2023.
Poll: Did the earnings call mention a recession?
Acute Care Hospitals
FY 2022 revenue and EBITDA guidance among the acute care hospital operators was generally left unchanged except for THC which lowered EBITDA guidance. However, all companies that were reviewed declined to provide FY 2023 guidance during the call, and primarily cited economic uncertainty (HCA).
Post-Acute
The post-acute sector appeared nearly unanimous in the outlook for the rest of 2022, and most operators lowered their revenue and EBITDA guidance. Unsurprisingly, no one offered FY 2023 guidance during the earnings calls.
Risk-Bearing Organizations
Interestingly, risk-bearing organizations mostly raised their revenue guidance for FY 2022 (AGL, CMAX, PRVA). However, EBITDA guidance was less predictable and was lowered (AGL, TOI), raised (PRVA), and unchanged (CMAX).
All Other
Most other healthcare operators followed similar patterns in terms of providing guidance for FY 2023. Of the companies we reviewed, only DVA revealed an outlook for the next year. The company anticipates revenue to be flat (driven by unfavorable volume trends) and margins to continue to feel the impact of labor market pressures.
Utilizing Telehealth Services to Improve Access to Behavioral Healthcare
August 9, 2022
By: Mallorie Holguin, Preston Edison, and Dane Hansen
Over the past few years, trends and events have occurred that have led to increased and continuing demand for mental health care services. First, the Affordable Care Act (ACA) expanded coverage and access to mental health care services.[1] Then, more recently, the COVID-19 Public Health Emergency (“PHE”), and corresponding citywide shutdowns, brought about a spike in anxiety and depression with these conditions increasing to four times pre-COVID-19 levels.[2,3] Healthcare workers were among some of the most heavily impacted with one study finding that almost half of healthcare workers reported serious psychiatric symptoms, including suicidal ideation.[4] While demand for mental health services has continued to increase, the number of providers actively practice in the United States is estimated to have the capacity to meet only 28% of all mental healthcare needs.[5]
As the COVID-19 pandemic increased demand for mental health care services, the healthcare industry rapidly expanded its offering of telehealth services. Specifically, telehealth services grew to represent up to 40% of outpatient care at the peak of the COVID-19 pandemic (up from less than 1% of outpatient care in 2019).[6] This increase in service offerings and patient care in the telehealth space was made possible by relaxed regulations related to the provision of telehealth services.[7] In the following sections, we discuss how healthcare organizations can implement or continue to expand telehealth services to meet demand for mental health care services in the communities they serve.
Implementing Telehealth / Virtual Care Services to Expand Access
As discussed, the gap between the supply of mental health providers and the demand for mental health services is notably widening. As of June 30, 2022, Health Resources and Services Administration (HRSA) has designated 6,300 mental health provider shortage areas.[8]
These designated shortage areas collectively contain over 152 million Americans, approximately 46% of the total population. As health systems and hospitals attempt to navigate these challenges, telemedicine has emerged as a potential avenue for bridging the gap between the supply and demand for behavioral health services.
The American Telemedicine Association (“ATA”) describes telemedicine as the “natural evolution of healthcare in the digital world.” Precisely, telemedicine promotes and improves the quality, access and affordability of healthcare through the use of rapidly evolving technologies. Specifically, telemedicine refers to the use of medical information exchanged between parties via electronic communications to improve a patient’s clinical health status. Electronic communication including videoconferencing, streaming media, transmission of still images, remote patient monitoring devices and many other telecommunication methods allow(s) physicians to closely monitor and/or provide clinical services that would otherwise be unavailable for the patient. Oftentimes, the electronic information is combined with electronic medical records (“EMR”) to formulate a more accurate consultation or specialist opinion. Telehealth allows practitioners and patients to interact without the requirement to be face-to-face in a hospital or clinic setting.
At the same time, remote, or tele-, work was implemented across many industries to combat the challenges of the COVID-19 PHE shutdowns. As a greater percentage of the workforce had the option to participate in a remote work setting, 9 in 10 remote workers want to maintain remote work to some degree going forward.[9] One of the top reasons employees desire a hybrid or fully remote work arrangement is that it increases personal wellbeing. Given the well-documented physician burnout rates exacerbating provider shortages, it would be prudent for health systems, hospitals, and practitioners to consider using alternative coverage models, including employing the use of telemedicine. By leveraging virtual care offerings, practitioners can experience the same advantages that have led the majority of Americans to respond with resounding positivity to remote work, potentially alleviating some of the stressors that contribute to provider burnout.
Telemedicine offerings can also be used to redistribute the supply of practitioners. The hub and spoke model was one of the first practical telehealth models and is a common way to structure virtual care offerings while leveraging the existing practitioner base and extend care to facilities or communities in need. In this model, the hub facility is typically a larger facility that has the resources to provide specialized care that many smaller and/or rural facilities lack. By scaling the existing resources of the hub, the spoke sites are able to close gaps in care without incurring the costs associated with a full-time provider or locum tenens staffing. Behavioral health providers focused on increased access to care and better quality of care outcomes for their patients will find success in a virtual care-driven future.
Telemedicine is a tool for healthcare entities that, if embraced and properly utilized, can help bridge the behavioral health care gap. To effectively leverage virtual care services, it is important to understand the compliance and regulatory implications of these offerings and to establish equitable compensation models for providers that consider any limitations remote workplaces on of their scope of practice.
Financial & Operational Considerations for Behavioral Health Operators
As of July 15, 2022, the COVID-19 PHE was extended through October 2022 by the Department of Health and Human Services (HHS) and, along with it, continued flexibility around regulatory compliance regarding telehealth and reporting deadlines. VMG’s Coding, Compliance, and Operational Excellence (CCOE) division has compiled current documentation and coding requirements for telehealth services, which are listed below. This list is not intended to be exhaustive, but rather an overview of important considerations related to a compliant telehealth service line.
Documentation Requirements:
Patient’s Verbal Consent
Modality (Audio + Video, Audio Only)
Location of Patient
Location of Provider
Session Start and End Time
Total Session Time
Add appropriate billing modifiers:
93: Synchronous Telemedicine Service Rendered Via Telephone or Other Real-Time Interactive Audio-Only Telecommunications System
95: Telehealth Service
FQ: Behavioral health audio-only services
In addition, the following guidelines should be considered when submitting claims to Medicare for virtual mental health services:
If the service is performed via audio only, the practitioner must have the capacity for real-time audio and visual technology.
The face-to-face service may be with a clinician of the same specialty in the same group.
The patient must be seen in-person once every 12 months, unless it is determined that would be “inadvisable or impractical” for the patient.
If the patient is not seen in person once every 12 months, the reason for the exception must be documented in the medical record.
Initial evaluations, psychotherapy, and crisis psychotherapy may be performed via real-time audio and visual communication or audio only.
Evaluation and Management (E/M) services (office visits 99202–99215) require real-time audio and visual technology.
Additionally, in its CY 2023 Proposed Rule, CMS has proposed to make hospital outpatient behavioral telehealth services reimbursement permanent, which could increase access to behavioral health services in rural and other underserved communities.[11] It is important to note that after the PHE ends, additional behavioral health and telemedicine requirements will need to be met including:
The patient must have had a face-to-face service with the clinician within 6 months of starting telehealth (except for substance use disorders treatment and patients in a geographically underserved area).
The face-to-face service may be with a clinician of the same specialty in the same group.
The patient must be seen in person once every 12 months, unless it is determined that would be “inadvisable or impractical” for the beneficiary.
If the patient is not seen in person once every 12 months, the reason for the exception must be documented in the medical record.
As virtual services become more common through further regulatory shifts, healthcare organizations can expect increased scrutiny towards telehealth services arrangement by governmental enforcement bodies. The Office of Inspector General (OIG) and Department of Health and Human Services (HHS) released a Special Fraud Alert (Alert) on July 20, 2022, related to the inherent fraud and abuse risk associated with physicians or other health care professionals entering into arrangements with telemedicine companies, which specifically addresses fraud schemes related to telehealth, telemedicine, or telemarketing services based on dozens of civil and criminal investigations. The Alert identified seven characteristics that the OIG believes could suggest a given arrangement has potential risk for fraud and abuse. To learn more, reference this article and OIG’s statement.
Conclusion
By using telehealth, behavioral health providers can better fill the gap between growing demand and limited supply, providing quality and efficient services to those in need, particularly to underserved and isolated communities. Compliant telehealth arrangements can promote more efficient financial operations for health systems, provide increased access to care for patients, and improve the well-being of behavioral health providers.
Private Equity: Piqued Interest in Medical Physics
August 2, 2022
By: Maxwell Swan, Savanna Dinkel, CFA, & Vincent M. Kickirillo, CFA
The private equity (PE) space is breaking records as the world continues to emerge from the COVID-19 pandemic. PE fundraising surged almost 20 percent in 2021 as firms looked to jump back in after the uncertain financial climate created by the pandemic. When looking to deploy this capital, PE firms have continued to take an interest in the healthcare industry. (1) Recently within this industry, PE firms made investments in the $4.47 billion medical physics industry that has maintained a 5.9 percent CAGR from 2013 through 2021. There are numerous reasons why PE firms have increasingly targeted the medical physics industry, such as the current industry composition along with the growth in the need and use of the specialty. (2) These characteristics set medical physics apart as a particularly interesting area for future investment.
Medical Physics Industry Landscape
Medical physics is a healthcare specialization focused on the application of physics to the treatment and diagnosis of disease. Most often, medical physics is seen in the form of nuclear medicine, diagnostic imaging, and radiation oncology. The medical physics industry is made up of numerous small-scale providers that operate in localized geographical areas. Only a handful of substantially sized enterprises operate in the medical physics space, resulting in a highly fragmented industry ripe for acquisitions and roll-ups into large-scale platforms. The fragmentation of the industry provides ample opportunities for PE to enter and expand its foothold in the medical physics industry. (3)
In addition to the extreme fragmentation, the demand for medical physics is expected to grow significantly over the next six years. Experts predict the medical physics market will grow at a healthy 6.2 percent CAGR through 2028, exceeding a $6 billion market valuation. This growth is driven by the increasing adoption and widening horizons of nuclear medicine across the healthcare landscape. (2) Additional growth is expected as hospital consolidation continues to increase the use of outsourced medical services. Even medical tourism is expected to contribute to industry growth as revenue comes in from those traveling to seek specialized medical care from countries like China, Brazil, or India. (4) This multisource growth is an appealing attribute for PE capital looking for favorable returns.
Lastly, significant barriers to entry exist for new medical physics operations, including high capital requirements for expensive machinery, increasing regulation required for the specialty, and most notably, the shortage of skilled providers in the medical physics space. In 2014 a mandatory residency was implemented to better prepare new medical physicists for the complex field. While the new program has produced well-prepared providers, it has also created a bottleneck that has put a strain on the industry’s ability to create new operations. (5) This shortage places established operators with experience at a significant advantage, setting them up as a prime target for PE investment.
Private Equity Investment Considerations
PE firms can be beneficial collaborators and partners to medical physics practices. As PE interest in the healthcare industry continues to increase, modern PE firms have gained the expertise to be effective partners to healthcare practices. One of the most effective ways PE firms can enhance a medical physics practice is through economies of scale. PE firms allow businesses to take advantage of efficiencies created through economies of scale. By improving and centralizing back-office business operations and providing greater access to technology, medical data, reporting and tracking systems, consolidated purchasing power, and marketing, private equity partners can create a more efficient business structure and free up providers to focus on patient care.
Similarly, continued hospital consolidation may require other providers within their spheres of influence to meet the greater demands and specialization needed in the industry. Some of these demands include the growing regulation required of medical physics practices. (6) Increasing regulatory demands may put monetary and staffing pressure on smaller operations. The resources offered by PE investment could help alleviate some of these pressures. (7) Furthermore, these resources could potentially improve the negotiating power of businesses, resulting in better commercial payor rates and increased earnings.
Finally, PE investors could provide exit opportunities for retirement-age providers. PE investment offers an exit strategy that enables these providers to monetize the business they have built while also allowing the business to remain as an employer and provider of needed care in its respective community. Based on an examination of the industry, as well as discussions with industry professionals, sellers of a medical physics practice may be able to expect a middle single-digit multiple on a given transaction. (4) For platform transactions, high single-digit or low double-digit multiples may be warranted in the market.
Major Players and Recent Activity
As PE groups increase their interest in the medical physics industry, there have already been several notable deals. Below is a summary of a few recent acquisitions, partnerships, and platforms:
Blue Sea Capital, a PE firm based in Florida with over $750 million in assets, partnered with mid-Atlantic firm Krueger-Gilbert Health Physics, LLC in April 2019 to form the platform company Apex Physics Partners. Soon after, Apex entered partnerships with Ohio Medical Physics Consulting, National Physics Consultants, Radiological Physics, and ZapIT! QA to enter the Ohio, Texas, and New Mexico markets. (8) In 2021 Apex added several new partnerships including Texas-based D. Harris Consulting, Indiana-based Advance Medical Physics, Indiana-based INphysics, and Pacific Island-based Gamma Corporation to its partnerships as the firm continued its expansion into new markets. (10, 11, 12, 13, 14)
L2 Capital, a PE firm based in Pennsylvania with over $100 million under management, acquired Associates in Medical Physics, LLC and Radiation Management Associates, LLC in May of 2017. L2 combined the medical physics service companies to create the platform company Aspekt Solutions in April of 2021. In May of 2021, Aspekt Solutions acquired Nordic Medical Physics to expand its geographical reach. (15, 16, 17)
LNC Partners, a PE firm with $500 million under management, completed a recapitalization of West Physics Consulting, LLC in May 2018. West Physics has since acquired Phoenix Technology Corporation and Radiological Physics Consultants, Inc. to become the largest diagnostic medical physics practice in the US. (18) West Physics operates in all 50 US states, its federal territories, the Caribbean, and the Middle East. (19, 20)
Fortive Corporation is a publicly traded, diversified industrial technology conglomerate company. Landauer provides outsourced medical physics services worldwide. Previously involved with Gilead Capital and T. Rowe Price Associates, Landauer was acquired by Fortive Corporation in October 2017. (21)
The Future of Investment in the Medical Physics Industry
The medical physics industry is increasingly becoming a hot target of PE investment. Although a few major players are emerging and consolidation is increasing, there are plenty of opportunities for PE partnerships to gain size and industry leverage due to the sheer number of small operators in the medical physics space. The benefits and resources brought by PE firms may be increasingly enticing to medical physics operators as the healthcare industry evolves. (6) The spread of usage, science, treatment, and understanding of the industry will continue to increase the demand for the care that these medical physics specialists provide.
