By: Nick Taglioli and Dylan Alexander
The following article was published by Becker's ASC Review.
As buyers and sellers are considering a transaction in the ambulatory surgery center (ASC) marketplace, all involved parties must consider and quantify potential revenue impacts as they relate to that ASC’s contracted managed care reimbursement.
Payor contract reimbursement is a critical component of revenue, as is an understanding of the impact that an acquirer’s managed care contracts have on a target’s revenue. A “black box” reimbursement analysis can help assess the overall impact on revenue by comparing the target’s and acquirer’s managed care reimbursement (as applied to the target’s utilization data) while maintaining the confidentiality of each party’s payor contracts and allowable rates. In addition, black box analyses can offer insight into why an acquirer’s managed care contracts perform favorably or unfavorably when applied to a target’s utilization.
There are several reasons why an acquirer’s contracts may perform more or less advantageously when applied to the target’s utilization data. Often, we hear expectations like, “we know our rates are better,” but there is far more to it than that. The primary reasons are: case mix, payor mix, and contract structure (payment logic).
By: Matthew McKenzie, CVA
The following article was published by the American Association of Provider Compensation Professionals (AAPCP).
A growing and aging population is increasing the gap between physician demand and supply in the United States. A recent study published by the Association of American Medical Colleges (“AAMC”) indicates there will be a shortage of between 37,800 and 124,000 physicians by 2034. While some of the increased demand for healthcare services can be met by increasing utilization of nurse practitioners, physician assistants, and other advanced practice clinicians, expanding the output of graduate medical education (“GME”) programs will also be key to reducing the shortage.
GME refers to the period of training in a particular medical specialty (residency) or subspecialty (fellowship) following medical school. Residents and fellows undergoing GME typically require some form of oversight and proctoring by board-certified physicians. The physicians who supervise and train these students dedicate significant time and energy to the GME programs. However, determining how to compensate physicians for these supervision and teaching services can be a difficult exercise, as physicians are often able to bill and collect, generate compensated work RVUs (“WRVUs”), or log hours towards their clinical compensation model while simultaneously teaching residents and fellows. The following section describes various ways of compensating physicians participating in GME programs.
By: Krista Patterson and Caroline Dean, CVA
The following article was published by the American Health Lawyers Association (AHLA) Fair Market Value Affinity Group.
As the health care industry shifts to value-based reimbursement, the benefits of including physicians in administrative roles are becoming more apparent. Medical director arrangements can be imperative to the smooth operation of a hospital or health care organization. Because physicians can provide firsthand knowledge and experience of providing patient care, utilizing physicians in leadership roles can provide immense benefits including improved quality and efficiency.
Physicians are knowledgeable about the current patient care landscape, as well as the nuances within their specialty and area of expertise. Additionally, they are typically respected and credible among their peers and can often assist in attracting new physician talent. As medical directors are in a position to generate or potentially steer referrals, there has been increased government scrutiny concerning these compensation arrangements. This article will discuss the various regulations surrounding medical director arrangements and key factors that organizations should consider in meeting the regulatory guidelines.
By: Jack Hawkins, Connor Green, and Colin Park, CPA/ABV, ASA
2021 has been an expansive year for the healthcare industry as it continued its rebound from the coronavirus (COVID-19) pandemic. While the healthcare industry as a whole has seen a speedy recovery, the Ambulatory Surgery Center (ASC) subindustry has seen an even more swift rebound to pre-COVID levels.
Along with expectations of an ongoing major, multi-site transaction in the ASC market in 2022, the ASC industry continued to consolidate throughout 2021. The ASC subindustry has seen recurring trends that started pre-pandemic: the shift of higher acuity procedures from the inpatient setting to the outpatient setting, increased Medicare reimbursement rates, consolidation of ASCs by management companies, and a push by hospitals to grow their ambulatory footprint with a particular focus on the outpatient setting.
For a detailed, macroeconomic analysis on the impact/recovery of the COVID-19 pandemic on healthcare M&A, please see VMG Health’s Healthcare M&A Report.
In March of 2020, the world was impacted by the spread of the COVID-19 pandemic, subsequently, 2021 was a hopeful year of rebuilding and recovering from the lasting effects brought on by the pandemic. ASC’s experienced a relatively quick recovery in 2020 with the hope that 2021 would reflect a full year of operations that mirrored pre-pandemic performance. Throughout 2021, additional variants of the original virus emerged presenting challenges for ASC’s. However, it appeared that ASCs learned from 2020 and were able to navigate the variants and continued to operate at a normal pace.
The percentage of hospitals financially subsidizing their anesthesia groups has been reported in excess of 80% for many years and is expected to rise even more. As a result, there has been an increased focused on this expense, along with fair market value requests from hospitals who are under pressure from their anesthesia groups to increase financial support. Looking into 2022, there are several factors which will likely put further pressure on an anesthesia group’s economics.
Anesthesia revenue per unit is likely to decline
The natural aging of America, and the corresponding change in payor mix, will have a disproportionately negative impact on anesthesia vs. most other specialty physician segments. The American Society of Anesthesia refers to the gap in commercial reimbursement to Medicare reimbursement as “the 33% problem.” The Medicare reimbursement for anesthesia is typically 33% of that for commercial payors. In modeling required financial support for an anesthesia service, one of the most important factors in determining the level of support is payor mix.
The following article was published by Becker's Hospital Review
As we move into the second half of 2021, we have much more clarity on where healthcare transactions and physician alignment models are headed.
First, we can say with confidence that transaction activity is on the rise. In fact, transaction deal volume in Q1 2021 was 75% higher than transaction activity in Q1 2020. Second, under the new Stark Law and Anti-Kickback Statute (AKS) rules, the flexibility created to encourage value-based care models with physicians has healthcare leaders racing to figure out new physician alignment models. We have only just begun to see new and creative strategic activity from these two movements within the healthcare industry.
Being proactive with strategy in 2021 will be essential for revenue growth, as well as solidifying key alliances in the upcoming year. If you are not thinking about what 2022 will look like for your healthcare company, you may be behind the curve. Nearly every sector within healthcare is active with transactions and rethinking their physician alignment models. In addition, there are new players in the market, such as management companies specialized in certain sectors, along with a surge of private equity players. The need to be thinking strategically has perhaps never been greater, and the breadth of knowledge required to succeed can be daunting. That said, there are ways to break this all down into bite-sized pieces – do you want to get involved with a specific healthcare sector, or update your physician alignment strategy, or both?
The following article was published by Becker's Hospital Review
As a business leader, it is important to be optimistic and make the best of any situation in order to lead your organization to success.
Obviously, this task is beyond challenging during a pandemic. But the truth is, organizations need to function, especially those within our healthcare system. Focusing on solutions to our current situation, or even new opportunities, will help stabilize jobs and keep the economy growing. The following outlines the current state and forward-thinking business insight for twelve key areas that function within the healthcare industry.
