How to Optimize the Value of PA and APRN Providers: Workflow, Coding & Compliance
July 18, 2024
Written by Christa Shephard and Maureen Regan, President Elect, NYSSPA
Physician assistants (PAs), soon to known as physician associates and advanced practice registered nurses (APRNs), like nurse practitioners (NPs), midwives, CRNAs, and clinical nurse specialists, have been around for decades. The first class of PAs graduated from Duke University in 1967, and in 1965, the first training program for NPs began at the University of Colorado. Since then, for many reasons, both professions have become integral to the quality delivery of healthcare. Although they have different education, training, and scope (PAs trained in medicine and APRNs in an advanced theory of nursing practice model) integrating these professionals into a practice can elevate the patient experience, as their access to the healthcare services they need will increase, and there could be an increase to the bottom-line financials of a practice as a result. Physicians experience greater job satisfaction, as PA and APRN integration helps to alleviate overburdened work schedules, including on-call obligations. Through these benefits, interprofessional integration leads to better patient retention, patient referrals, physician satisfaction, and stronger financial health for practices and health systems.
The Centers for Medicare & Medicaid Services (CMS) certainly plays a role in the practice and reimbursement environment of PAs and APRNs; however, most of the legislative and regulatory environment for practice is determined at the state level. Due to the evolution of each profession and the historical and ongoing shortage of physicians, it’s important for health systems and practices to stay abreast of primary source legislative and regulatory guidance changes regarding scope, documentation, and billing compliance. These factors are also important to ensure an employer is capturing maximum reimbursement for clinical work done by both professions while minimizing their risk of an audit and resulting penalties. Systems and practices must uphold an ongoing, longitudinal review of Medical Staff Bylaws, delineation of privileges, policies, and processes.
Mastering Billing and Coding
CMS recognizes qualified billing providers to render services independently and establishes billing and coding rules for PAs and APRNs to ensure accurate reimbursement and quality care delivery within the Medicare program. These rules outline the scope of practice and reimbursement guidelines for nurse practitioners, physician assistants, certified nurse-midwives, clinical nurse specialists, and certified registered nurse anesthetists who must adhere to specific documentation requirements, including maintaining accurate patient records and submitting claims using appropriate evaluation and management (E/M) codes, like physicians. Additionally, CMS provides guidance on incident-to billing, which allows certain services provided by PAs and APRNs to be billed under a supervising physician’s National Provider Identifier (NPI). Understanding and following CMS billing and coding rules are essential to navigate the complexities of reimbursement and ensure compliance with Medicare regulations.
Because CMS recognizes PAs and APRNs as qualified billing providers but not as physicians, they fall into a separate reimbursement category. When billing under their own NPI, the reimbursement level is less than what it would be if the physician were to bill for the same services. This reimbursement differential does not adversely impact a practice’s bottom line, as remuneration for a PA or APRN is less than a physician and malpractice cost is less.
Physicians may bill for a service that was rendered by a PA or APRN with incident-to services and with split/shared E/M services. VMG Health Managing Director and coding and compliance expert Pam D’Apuzzo says, “There’s two rules, which is where everybody gets themselves into trouble… Those two rules have specific guidelines, both from a documentation and a billing standpoint. The patient type, the service type—everything needs to be adhered to.”
To bill for incident-to and split/shared E/M services, practices must meet specific criteria outlined by Medicare. For incident-to services, the criteria include:
The service must be an integral part of the physician’s professional service.
The service must be performed under the physician’s direct (licensure) supervision.
The physician must be physically present in the office suite and immediately available to provide assistance if needed.
The services must be provided by qualified personnel, such as nurse practitioners or PAs, who are employees of the physician or the practice.
For split/shared E/M services, the criteria include:
The service must be provided by a physician and a qualified PA or APRN during the same visit.
The service must meet the requirements for both the physician and the PA/APRN to bill their respective service components.
The documentation must clearly indicate the contributions of both the physician and the PA/APRN to the service provided.
These criteria ensure that incident-to and split/shared services are billed appropriately and in compliance with Medicare guidelines. Medicare also dictates that the “substantive portion” of a split or shared visit is more than half of the time a physician or non-physician practitioner spends performing the visit or a “substantive part” of the medical decision making. Practices must continually educate and train all medical staff so that they can successfully adhere to these criteria to avoid billing errors and potential audits. Additionally, practices must continuously monitor to ensure all documentation, billing, and coding processes are followed correctly.
Risk Reduction
There are tools and services that allow for easier monitoring. “We utilize a tool called Compliance Risk Analyzer, which provides us with statistical insight on coding practices,” D’Apuzzo says. “So, we can data mine ourselves and see what’s happening just based on our views. And this is what the payers, specifically, and the government does as well: They can see the [relative value units] RVUs are for a physician or off the chart, or that a physician has submitted claims for two distinct services at two different locations on the same day.”
This is more common than you might think.
“What’s normally happening in those interactions is that [a physician with two locations] realizes he can’t keep up with all of that patient flow in two places, so they hire a PA and put them at location number two,” D’Apuzzo says. “But now all that billing goes under the physician, so it flags for Medicare.”
With VMG Health’s Compliance Risk Analyzer (CRA), practices can see the same data mining and areas of risk, as the program would flag the RVUs as a potential audit risk. This gives practices the opportunity to self-audit and refine their processes to ensure they are billing and coding appropriately.
VMG Health offers multiple comprehensive services that help health systems and practices implement and follow new procedures and new provider utilization without issue, from honoring existing care models to ensuring provider compensation is fair, compliant, and reasonable.
Cordell Mack, VMG Health Managing Director, says, “We’ve spent a lot of time trying to make sure we get that right, both in terms of the underlying, practice-level agreements as well as the ways in which the compensation model works for both the physicians and the PAs and APRNs.”
Practice Earnings and Patient Enjoyment
In many practices, physicians struggle to handle their case load, which means their busy schedules can prevent them from seeing existing patients and from taking on new patients. Bringing PAs and APRNs into the fold allows physicians to create capacity in their schedules so that they can see new patients.
BSM Consulting (a division of VMG Health) Senior Consultant and subject matter expert Elizabeth Monroe provides an excellent example: “Let’s say we have an orthopedic surgeon who really wants to spend most of their time in surgery. We would want to have that physician in surgery because that’s what their skill set, and licensure permits. With a nurse practitioner or physician assistant providing follow-up, post-operative care, that oftentimes is a much better model. It allows the physician to do the surgical cases only they can do, but it also eases patient access to care.”
This realignment of a physician’s schedule creates an opportunity to provide more patient services, which easily translates to improved patient satisfaction when, without this, they would likely be unable to see their provider when they felt they needed to be seen. While PA and APRN–rendered Medicare services are reimbursed at 85% instead of 100%, our experts say that the 15% differential shouldn’t dissuade practices and health systems from leveraging the integration.
“It’s a very short-sighted approach to just think about, ‘But we could be making 100% instead of 85% if we bill under the doctor,’ because ultimately, we are never able to do that 100% of the time, and it’s a higher risk than it is reward,” says D’Apuzzo.
Additionally, physicians with packed schedules and no other scheduling options may inadvertently rush through appointments to see each patient scheduled for that day. Patients who feel rushed may leave an appointment feeling unheard and like their problem is unresolved. Additionally, when a patient calls and asks for services but can’t be seen for multiple weeks or months, they may never make an appointment and instead turn to another provider for help.
All of this culminates in poor patient retention, which equals a loss of revenue for the practice. Dissatisfied patients will seek treatment elsewhere. However, when practices and health systems embrace an interprofessional team, patients are more likely to be able to schedule appointments when they feel they need to be seen, feel heard in an appointment and even spend less time in the office overall as they are not impacted by OR cases running late, and so on.
“Practices are better able to meet patient demand, and they’re able to really allow physician assistants, nurses… to add a tremendous value for the patients, offering them outstanding care,” Monroe says.
Strategic Rollout
With both patient demand and physician scarcity placing the U.S. health system in crisis, many practices and health systems know they need to integrate PAs and APRNs into their workflows, but they don’t know how. VMG Health offers strategic advisory services that can guide this implementation to ensure practices are educated, compliant, and working within the care model they prefer.
“Our team would want to spend time really trying to identify the underlying care model that practices are trying to, you know, work inside of,” says Mack.
One approach is to assess patient needs and practice capabilities to determine the most effective roles for PAs and APRNS, such as providing primary care, specialty care, or supporting services like telemedicine. Implementing policies and workflows can ensure efficient PA and APRN utilization while maintaining quality and safety standards.
Finally, ongoing training, quality monitoring are essential to ensure their interprofessional integration into the practice or health system effectively meets patient needs, and care provided by PAs and NPs should be included into physician quality and compliance review processes.
“It starts with getting your appropriate documentation in place… [with] supervisory responsibilities and collaborating physician agreements,” says Mack. “It migrates to, ‘What’s the operational agreement among the team?’ and how cases are presented, or how the physician is consulted. So, it’s getting an underlying clinical service agreement among those professionals.”
Optimal PA and APRN utilization shows up in the numbers. When practices increase patient access to care without overburdening physicians, they can accommodate more patients, leading to increased revenue generation. Moreover, because PAs and APRNs often bill at a lower rate than physicians, integrating them efficiently can improve cost-effectiveness, thereby enhancing the overall financial performance of the practice.
“It should realize an ROI, and that ROI should be something more in terms of duties and tasks that other teammates can’t do,” says Mack. “Meaning, it would be unfortunate if a qualified healthcare professional is working at such a capacity whereby duties some of the day-to-day responsibilities should probably be done by teammates working at a higher level of their own individual license.”
Physician Engagement
Changing existing workflows can be difficult, but the rewards heavily outweigh the risks. Physicians must support interprofessional integration to successfully navigate the transition. Physicians are typically the leaders and decision-makers within medical practices, and their support is essential for implementing any significant changes in workflow or care delivery models, which includes having front office staff, medical assistants, nursing and administrative staff rely and respect the roles of PAs and APRNs. Without physician buy-in, resistance to change may arise, hindering smooth integration and retention.
Physicians play a vital role in collaborating and ensuring a seamless care model is implemented and sustained. By endorsing and supporting the integration of PAs and APRNS, physicians can foster a culture of teamwork and mutual respect within the practice. This collaborative approach promotes a cohesive care team to provide high-quality patient care.
It’s important for physicians to trust and communicate that PAs and NPs are qualified and capable of providing excellent patient care. Allowing them to care for an established patient does not sever the relationship between the physician and the patient; it can actually enhance the patient’s experience and trust in the practice.
“We want patients who have had a long-standing relationship with an MD to be able to see that doctor, and then we want to help the doctor know and understand how to appropriately transfer care over to an APRN within their system or within their practice,” says Monroe. “So, that provider can be still linked to the doctor, and the doctor can still be linked to the patient.”
Furthermore, physician buy-in is essential for maintaining continuity of care and ensuring patients feel confident in receiving treatment from both physicians and PAs and NPs. When physicians actively endorse interprofessional integration and communicate the benefits of team-based care to their patients, it builds trust and acceptance of the practice model. It also fosters billing transparency if a patient gets an EOB with the name of someone other than the physician as the rendering provider.
Physician engagement is critical for the long-term success and sustainability of integration initiatives. When physicians recognize the value that PAs and APRNs bring to the practice, including increased efficiency, expanded access to care, and improved patient outcomes, they are more likely to champion these initiatives and advocate for their continued support and development.
The Path Forward for PAs and APRNs
The integration of PAs and APRNs into medical practices and health systems presents a strategic opportunity to optimize patient care delivery and operational efficiency. By expanding access to healthcare services and alleviating the workload of overburdened physicians, integration improves patient and employee satisfaction, and enhances patient retention. However, successful integration requires careful attention to regulatory compliance, billing, and coding practices. VMG Health offers comprehensive billing, coding, and strategy advisory services to support practices in navigating the complexities of integration, ensuring compliance with Medicare regulations, and maximizing reimbursement while minimizing audit risk.
Optimal PA and APRN utilization yields tangible benefits, including increased patient access to care, improved patient satisfaction, and enhanced financial performance. By understanding their education, training, and scope, and by leveraging their unique skill sets, practices can accommodate more patients, reduce wait times, and deliver high-quality care cost effectively. Physician engagement is essential for the successful implementation of integration initiatives, as physicians play a pivotal role in endorsing and supporting interprofessional responsibilities within the care team. Through collaborative leadership and effective communication, physicians can foster a culture of teamwork and mutual respect, driving the long-term success and sustainability of integration efforts.
In summary, strategic integration presents a transformative opportunity for medical practices and health systems to meet evolving patient needs, enhance operational efficiency, and achieve sustainable growth. By partnering with VMG Health for expert guidance and support, practices can navigate the complexities of interprofessional integration with confidence, realizing the full potential of this innovative care delivery model.
Maureen C. Regan, MBA, PA-C, FACHE, DFAAPA, is the President-Elect and Past President of the New York State Society of Physician Assistants (NYSSPA) and a Delegate for the American Academy of Physician Associates (AAPA). She is recognized as a Fellow of the American College of Healthcare Executives (FACHE) and a Distinguished Fellow of the American Academy of Physician Associates (DFAAPA). The views expressed in this article are her opinion and do not represent the opinions of any organization or association she is affiliated with.
Mujica-Mota, M. A., Nguyen, L. H., & Stanley, K. (2017). The use of advance care planning in terminal cancer: A systematic review. Palliative & Supportive Care, 15(4), 495-513. https://www.ncbi.nlm.nih.gov/pmc/articles/PMC5594520/
Written by Timothy Kent; Jordan Tussy, CVA; Molly Smith
GenesisCare, a prominent provider of cancer services worldwide, filed for voluntary reorganization under Chapter 11 of the U.S. Bankruptcy Code on June 1, 2023, in the United States Bankruptcy Court for the Southern District of Texas (Case No. 23-90614). The Australian-based company, once valued at $5 billion and backed by private equity firm KKR, faced financial difficulties due to high debt levels and operational challenges.
GenesisCare Growth and Bankruptcy
Founded in 2004 by Dan Collins, GenesisCare (the “Company”) served Australian cancer patients until 2015, when the Company expanded to Europe via its purchase of eight cancer centers from Cancer Partners UK. During 2016, GenesisCare continued growing its European operations through the acquisitions of 17 centers in Spain from IMOncology and Oncosur Group.
In late 2019, GenesisCare made headlines with the acquisition of U.S.-based cancer provider 21st Century Oncology for $1.5 billion. Two years prior, 21st Century Oncology filed for bankruptcy because of declining reimbursement and “regulatory costs concerning electronic records and legal expenses.” At the time of acquisition by GenesisCare, 21st Century Oncology operated 294 locations, including 124 radiation oncology centers, with an estimated $230 million of earnings before interest, tax, and depreciation (EBITDA).
While rapidly expanding GenesisCare’s footprint, the 21st Century acquisition left the Company with significant levels of debt and a new operations base that was reemerging from bankruptcy. GenesisCare faced significant challenges in its effort to turnaround the U.S. operations, including an aging equipment base and IT system, operational inefficiencies, and increased competition. Prior to GenesisCare’s Chapter 11 filing, they reported approximately $2 billion of total debt on its balance sheet, largely associated with the 21st Century acquisition.
In March 2023, CEO and Founder Dan Collins stepped down, and three months later, the Company filed for bankruptcy on June 1, 2023.
Reorganization
Five months after its initial filing, GenesisCare announced the U.S. Bankruptcy Court for the Southern District of Texas confirmed the Company’s Chapter 11 Plan of Reorganization after receiving support from approximately 95% of voting creditors. The plan included significant deleveraging of GenesisCare’s balance sheet, with a reduction in total debt by approximately $1.7 billion.
On February 16, 2024, GenesisCare completed its reorganization process and emerged from Chapter 11. As part of its reorganization plan, GenesisCare will operate as four distinct businesses in the U.S., Australia, Spain, and the UK, with an independent governance structure and Board of Directors for each business. Furthermore, the businesses will be responsible for the strategies and performance of their market. The Company also received approximately $56 million of new capital infusion from investor groups to help support the growth of the remaining businesses. As a result of the restructuring plan, the Company is prepared to move forward well capitalized with a relatively low level of debt and a more focused operational strategy.
In the U.S., GenesisCare will retain practices in the “fast-growing markets” of Florida and North Carolina, which will continue to offer similar cancer care services (medical oncology, radiation oncology, surgery, and imaging). Currently, the Company operates 145 locations across the two states. GenesisCare has sold or is in the process of divesting its remaining assets across 14 states.
Newly appointed chief executive officer David Young said, “I am confident that our independently run businesses are strongly positioned to capture the exciting opportunities available to them in the markets they serve while never losing sight of our core goal: delivering better life outcomes to patients.”
U.S. Asset Sales
A primary objective of GenesisCare’s restructuring plan was to divest all U.S.-based assets outside of North Carolina and Florida. This decision was part of its strategic plan to focus on core operations to ensure long-term sustainability.
According to bankruptcy filing documents, GenesisCare has divested 32 locations across 14 states. Assuming all of the transactions close at the defined purchase price in the transaction agreements, cash proceeds to GenesisCare would be approximately $113 million, with an implied equity value of approximately $131 million (see chart below). The assets have drawn interest from many different buyer types, including health systems, large oncology platforms, and practices. Dr. Shaden Marzouk, President of GenesisCare U.S., said, “The strong interest we received from a wide variety of buyers from across the U.S. is a reflection of what we have long known―that GenesisCare’s U.S. business benefits from an incredible team, a desirable footprint and a proven ability to care for patients.”
One notable transaction was OneOncology’s acquisition of two radiation oncology practices in South Carolina for $25.0 million (per the asset purchase agreement), expanding OneOncology’s service offerings in an existing market. CEO of OneOncology, Jeff Patton, MD, said, “For OneOncology, these are two great business assets that are really the only radiation facilities that are open in that market. It’s a market we were already in, so sometimes things match up well.” Specifically, OneOncology acquired a Myrtle Beach facility with three linear accelerators and a Conway Center with one.
California-based Sutter Health purchased five radiation oncology practices in Modesto, San Luis Obispo, Santa Cruz, Stockton, and Templeton, California. According to the purchase agreement, the total purchase price for these centers was $32 million. President and CEO of Sutter Health, Warner Thomas said, “We know how important it is for specialty services like cancer care to be offered close to home so patients can stay on track with their treatments. Keeping continued cancer care accessible in these communities was a driving force for Sutter to acquire these care centers.” Sutter also has certain capital investments in mind, including new radiation oncology equipment, technologies, and other support services.
Conclusion
Based on Kroll’s bankruptcy docket, there are medical and radiation oncology assets still available for sale, which could result in increased transaction activity with interest buyers, such as health systems, private equity–backed oncology platforms, and practice acquisitions. After successfully emerging from Chapter 11, GenesisCare is entering a new chapter, as emphasized by CEO David Young: “GenesisCare has achieved the goals it set out at the beginning of its restructuring process. We exit Chapter 11 with great businesses, each with a compelling future.” The Company’s focus on continuous growth is highlighted by the planned construction of three new radiation oncology centers in Australia, scheduled to open in 2024. With a more concentrated U.S. and global platform, GenesisCare has indicated that it is well positioned for future growth as a newly capitalized, low-debt entity committed to providing the highest level of care for its patients.
Patrick, A. (2019, December 13). Aussie cancer outfit makes first US move in $1.5b deal. Australian Financial Review. Retrieved from https://www.afr.com/companies/healthcare-and-fitness/aussie-cancer-outfit-makes-first-us-move-in-1-5b-deal-20191213-p53js7
Private Equity Stakeholder Project. (2024). Private equity healthcare bankruptcies are on the rise. Private Equity Stakeholder Project. Retrieved from https://pestakeholder.org/reports/private-equity-healthcare-bankruptcies-are-on-the-rise/
Concurrent Call Coverage: Key Considerations for a Compliant Structure
May 28, 2024
Written by Holden Godat, CVA; Taylor Harville; and Trent Fritzsche
In the traditional sense, call coverage was a mutual obligation for physicians in addition to their clinical duties. Many physicians would provide uncompensated call coverage to a hospital to secure hospital privileges, build their own practices, and ensure proper patient care with specialized services when needed. Due to the passage of the Emergency Medical Treatment and Labor Act of 1986 (EMTALA), which requires Medicare-participating hospitals to provide sufficient levels of physician coverage to their emergency departments, hospitals are facing difficult task of determining the appropriate level of physician coverage. Several factors—including physician work-life balance, growing uninsured patient populations, increasing professional liability insurance costs, and a declining supply of physicians—have contributed to a decline in uncompensated call coverage and a significant increase in compensated call coverage stipends.
The healthcare sector has seen an increasingly high demand for physicians over the past decade, and projections show that there is a shortfall in supply that does not appear to be going away any time soon. According to The Complexities of Physician Supply and Demand: Projections From 2019 to 2034, a report released by the Association of American Medical Colleges (AAMC), “the U.S. faces a projected shortage of between 37,800 and 124,000 physicians within 12 years.” Such a significant shortage of physicians has left health systems and hospitals with few options to remedy the potential lapse in patient care. To combat this problem, many care organizations have turned to concurrent call coverage arrangements as a potential, efficient solution. As these arrangements become more common, it is important to ensure organizations are compliant from a fair market value perspective.
Defining Concurrent Call Coverage
Concurrent call coverage is an arrangement whereby a physician may provide on-call coverage services to multiple locations and/or to multiple specialty panels simultaneously. These arrangements seek to provide an even distribution of work and ensure patients receive a sufficient level of care. Although concurrent call arrangements help to provide an efficient continuum of care, there are a few important considerations to weigh with each arrangement. Setting fair market value physician compensation for any concurrent call coverage arrangement brings forth a new set of difficulties and regulatory scrutiny that must be properly addressed.
Key Considerations
Burden of Call
In determining appropriate compensation for a call coverage shift, it is important to establish the actual burden of being on call. Factors impacting call burden include:
Collections Responsibility: A physician’s compensation structure, ability to collect, and exposure to emergency department payor mix are primary drivers in a call burden.
Volume: The number of times a physician is required to respond in person and over the phone to provide coverage are key drivers to establishing a call burden.
Acuity: Understanding that certain panels and trauma designations will lead to different types of procedures, resulting in different levels of acuity, can have meaningful impacts on a call burden.
Physician Supply and Demand: Lastly, the availability of additional physicians qualified to provide the expected coverage services has a direct impact on the call burden. If a physician is the only qualified individual who can provide the required coverage, that provider must constantly be available. Therefore, the burden is inherently greater for an individual physician when compared to a physician in a multi-provider group that has other providers available for back-up or substitute call coverage.
When determining appropriate compensation in a concurrent call coverage arrangement, it is important to consider the combined burden of call.
Required Specialty
An important value driver for any call coverage arrangement is understanding the required specialty needed to perform the coverage. Typically, concurrent call arrangements are required due to the need for one group of specialized physicians to provide coverage for two or more unique, call coverage panels. Due to the nature of these arrangements, the physicians providing the concurrent services must be able to effectively provide both panels of coverage. Select the appropriate specialty for the subject services to ensure the physician can adequately cover multiple panels and to ensure the physician is appropriately compensated for the services being provided.
Physician Availability
In a typical call coverage arrangement, the ultimate compensation rate contemplates the unrestricted availability of a physician for a given amount of time. When stacking panels or facilities to be covered in a concurrent setting, be aware of this availability and ensure the overall compensation does not account for the same time twice. Since physician availability is already being covered by an initial panel, stacking compensation related to additional panels could create overpayment concerns. Furthermore, concurrent arrangements often create additional efficiencies for an emergency department that should be reflected in the ultimate compensation. To ensure providers are appropriately compensated for the time they are providing coverage, it is common to use a discounted coverage rate on top of the existing stipend to account for the incremental coverage of additional panels or facilities.
To illustrate this point, consider a hypothetical Panel A and Panel B. Independently, Panel A and Panel B may be worth $500 per 24-hour shift and $600 per 24-hour shift, respectively. That does not necessarily mean that the concurrent coverage of Panel A and Panel B equals $1,100 per 24-hour shift. Each panel independently contemplates 24 hours of availability. When combined, there must be assurances that the availability of the physician is not compensated twice.
Sources of Compensation
One of the last and most critical pieces of setting up any concurrent call coverage arrangement is to fully understand the compensation terms for the services. While these do not drive value for the services in the way other factors might, the specific terms relating to the compensation are critical to understand in providing an appropriate valuation. Factors like whether the physician is employed or an independent contractor, understanding who retains the rights for billing and collection under each individual arrangement, and a thorough review of whether providers receive production credit toward outside employment agreements are all vital pieces of structure to consider when evaluating a concurrent call coverage arrangement.
Conclusion
The many unique considerations of concurrent call arrangements, such as establishing the appropriate burden of call, determining the correct specialty for services being provided, contemplating physician availability in a shift, and sources of compensation, often make these arrangements tricky to structure in a compliant manner. Although it may seem as simple as adding two shifts together, this is a major misconception. Increased scrutiny from regulators and the tricky healthcare landscape has made it more important than ever to obtain third-party fair market value guidance to ensure you meet a compliant call compensation system.
Sources
Association of American Medical Colleges. (2021). The Complexities of Physician Supply and Demand: Projections from 2019 to 2034. Retrieved from https://www.aamc.org/media/54681/download ssociation of American Medical Colleges. (2021). The Complexities of Physician Supply and Demand: Projections from 2019 to 2034. Retrieved from https://www.aamc.org/media/54681/download
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
How to Optimize the Value of Advanced Practice Providers: Workflow, Coding, & Compliance
May 8, 2024
Written by Christa Shephard, Maureen Regan
Physician assistants (PAs) and advanced practice registered nurses (APRNs), like nurse practitioners (NPs), midwives, CRNAs, and clinical nurse specialists, have been around for decades. The first class of PAs graduated from Duke University in1967, and in 1965, the first training program for NPs began at the University of Colorado. Since then, for many reasons, both professions have become integral to the quality delivery of healthcare. Through advanced practice nonphysician provider (APP) integration, patients experience increased access to the healthcare services they need, and they are more satisfied with the care they receive. Physicians experience greater job satisfaction, as APP integration helps to alleviate the burden on overburdened work schedules. Through these benefits, APP integration leads to better patient retention, physician satisfaction, and stronger financial health for practices and health systems overall.
The Centers for Medicare & Medicaid Services (CMS) certainly plays a role in the practice and reimbursement environment of PAs and APRNs; however, most of the legislative and regulatory environment for practice is determined at the state level. Due to the evolution of each profession and the historical and ongoing shortage of physicians, it’s important for health systems and practices to stay abreast of primary source legislative and regulatory guidance changes regarding scope, documentation, and billing compliance. These factors are also important to ensure an employer is capturing maximum reimbursement for clinical work done by both professions while minimizing their risk of an audit and resulting penalties. Systems and practices must uphold an ongoing, longitudinal review of Medical Staff Bylaws, delineation of privileges, policies, and processes.
Mastering Billing and Coding
CMS recognizes qualified billing providers to render services independently and establishes billing and coding rules for APPs to ensure accurate reimbursement and quality care delivery within the Medicare program. These rules outline the scope of practice and reimbursement guidelines for nurse practitioners, physician assistants, certified nurse-midwives, clinical nurse specialists, and certified registered nurse anesthetists. APPs must adhere to specific documentation requirements, including maintaining accurate patient records and submitting claims using appropriate evaluation and management (E/M) codes. Additionally, CMS provides guidance on incident-to billing, which allows certain services provided by APPs to be billed under a supervising physician’s National Provider Identifier (NPI). Understanding and following CMS billing and coding rules are essential for APPs to navigate the complexities of reimbursement and ensure compliance with Medicare regulations.
Because CMS recognizes APPs as qualified billing providers but not as physicians, APPs fall into a separate reimbursement category. When APPs are billing under their own NPI numbers, the reimbursement level is less than what it would be if the physician were to bill for the same services. Physicians may bill for a service that was rendered by an APP with incident-to services and with split/shared E/M services.
VMG Health Managing Director and coding and compliance expert Pam D’Apuzzo says, “There are two rules, which are where everybody gets themselves into trouble… Those two rules have specific guidelines, both from a documentation and a billing standpoint. The patient type, the service type—everything needs to be adhered to.”
To bill for incident-to and split/shared E/M services, practices must meet specific criteria outlined by Medicare. For incident-to services, the criteria include:
The service must be an integral part of the physician’s professional service.
The service must be performed under the physician’s direct supervision.
The physician must be physically present in the office suite and immediately available to provide assistance if needed.
The services must be provided by qualified personnel, such as nurse practitioners or physician assistants, who are employees of the physician or the practice.
For split/shared E/M services, the criteria include:
The service must be provided by a physician and a qualified nonphysician practitioner (NPP) during the same visit.
The service must meet the requirements for both the physician and the NPP to bill their respective service components.
The documentation must clearly indicate the contributions of both the physician and the NPP to the service provided.
These criteria ensure that incident-to and split/shared services are billed appropriately and in compliance with Medicare guidelines. Practices must continually educate and train so that they can successfully adhere to these criteria to avoid billing errors and potential audits. Additionally, practices must continuously monitor to ensure all documentation, billing, and coding processes are followed correctly.
Risk Reduction
There are tools and services that allow for easier monitoring. “We utilize a tool called Compliance Risk Analyzer, which provides us with statistical insight on coding practices,” D’Apuzzo says. “So, we can data mine ourselves and see what’s happening just based on our views. And this is what the payors, specifically, and the government does as well: They can see the [relative value unites] RVUs are for a physician or off the chart, or that a physician has submitted claims for two distinct services at two different locations on the same day.”
This is more common than you might think.
“What’s normally happening in those interactions is that [a doctor with two locations] realizes he can’t keep up with all of that patient flow in two places, so they hire a PA and put them at location number two,” D’Apuzzo says. “But now all that billing goes under the doctor, so it flags for Medicare.”
With VMG Health’s Compliance Risk Analyzer (CRA), practices can see the same data mining and areas of risk, as the program would flag the RVUs as a potential audit risk. This gives practices the opportunity to self-audit and refine their processes to ensure they are billing and coding appropriately.
VMG Health offers multiple comprehensive services that help health systems and practices implement and follow new procedures like APP utilization without issue, from honoring existing care models to ensuring provider compensation is fair, compliant, and reasonable.
Cordell Mack, VMG Health Managing Director, says, “We’ve spent a lot of time trying to make sure we get that right, both in terms of the underlying, practice-level agreements as well as the ways in which the compensation model works for both the physician and the APP.”
Practice Earnings and Patient Enjoyment
In many practices, physicians struggle to handle their case load, which means their busy schedules can prevent them from seeing existing patients when they need services and from taking on new patients. Bringing APPs into the fold allows physicians to offload some of their patient care so that they can see new patients while APPs see more established patients.
BSM Consulting (a division of VMG Health) Senior Consultant and subject matter expert Elizabeth Monroe provides an excellent example: “Let’s say we have an orthopedic surgeon who really wants to spend most of their time in surgery. We would want to have that physician in surgery because that’s what their skill set and licensure permits. With a nurse practitioner or physician assistant providing follow-up, post-operative care, that oftentimes is a much better model. It allows the MD to do the surgical cases only they can do, but it also eases patient access to care.”
This expansion of a physician’s schedule creates an opportunity to provide more patient services, which easily translates to improved patient satisfaction when, without this expansion, they would likely be unable to see their provider when they felt they needed to be seen. While APP-rendered services are reimbursed at 85% instead of 100%, our experts say that missing 15% shouldn’t dissuade practices and health systems from leveraging the APP integration.
“It’s a very short-sighted approach to just think about, ‘But we could be making 100% instead of 85% if we bill under the doctor,’ because ultimately, we are never able to do that 100% of the time, and it’s a higher risk than it is reward,” says D’Apuzzo.
Additionally, physicians with packed schedules and no APP support may inadvertently rush through appointments to see each patient scheduled for that day. Patients who feel rushed may leave an appointment feeling unheard and like their problem is unresolved. Alternatively, when a patient calls and asks for services but can’t be seen for multiple weeks or months, they may never make an appointment and instead turn to another provider for help.
All of this culminates in poor patient retention, which equals a loss of revenue for the practice. Dissatisfied patients will seek better treatment and better outcomes elsewhere. However, when practices and health systems embrace APP support, patients are more likely to be able to schedule appointments when they feel they need to be seen, feel heard in an appointment with an APP who has the time to sit and listen, and even spend less time in the doctor’s office overall, as patient wait times significantly decrease with APP appointments.
“Practices are better able to meet patient demand, and they’re able to really allow physician assistants, nurses… to add a tremendous value for the patients, offering them outstanding care,” Monroe says.
Strategic Rollout
With both patient demand and physician scarcity placing the U.S. health system in crisis, many practices and health systems know they need to integrate APPs into their workflows, but they don’t know how. VMG Health offers strategic advisory services that can guide this implementation to ensure practices are educated, compliant, and working within the care model they prefer.
“Our team would want to spend time really trying to identify the underlying care model that practices are trying to, you know, work inside of,” says Mack.
One approach is to assess patient needs and practice capabilities to determine the most effective roles for APPs, such as providing primary care, specialty care, or supporting services like telemedicine. Implementing standardized protocols and workflows can ensure efficient APP utilization while maintaining quality and safety standards.
Finally, ongoing training, supervision, and quality monitoring are essential to support APPs and ensure their integration into the practice or health system effectively meets patient needs.
“It starts with getting your appropriate documentation in place… [with] supervisory responsibilities and collaborating physician agreements,” says Mack. “It migrates to, ‘What’s the operational agreement among the APP and the doctor?’ and how cases are presented, or how the physician is consulted. So, it’s getting an underlying clinical service agreement among those professionals.”
Optimal APP utilization shows up in the numbers. When practices increase patient access to care without overburdening physicians through APP utilization, they can accommodate more patients, leading to increased revenue generation. Moreover, because APPs often bill at a lower rate than physicians, utilizing them efficiently can improve cost-effectiveness, thereby enhancing the overall financial performance of the practice.
“It should realize an ROI, and that ROI should be something more in terms of duties and tasks that other teammates can’t do,” says Mack. “Meaning, it would be unfortunate if an advanced practice professional is working at such a capacity whereby duties some of the day-to-day responsibilities should probably be done by teammates working at a higher level of their own individual license.”
Physician Engagement
Changing existing workflows can be difficult, but the rewards heavily outweigh the risks. Physicians must support APP integration to successfully navigate the transition. Physicians are typically the leaders and decision-makers within medical practices, and their support is essential for implementing any significant changes in workflow or care delivery models. Without physician buy-in, resistance to change may arise, hindering the smooth integration of APPs into the practice.
Physicians play a vital role in collaborating with APPs and delegating tasks effectively. By endorsing and supporting the integration of APPs, physicians can foster a culture of teamwork and mutual respect within the practice. This collaborative approach promotes a cohesive care team where APPs work alongside physicians to provide high-quality patient care.
It’s important for physicians to trust that their APPs are qualified and capable of providing excellent patient care. Allowing an APP to care for an established patient does not sever the relationship between the physician and the patient; it can actually enhance the patient’s experience and trust in the practice.
“We want patients who have had a long-standing relationship with an MD to be able to see that doctor, and then we want to help the doctor know and understand how to appropriately transfer care over to an APP within their system or within their practice,” says Monroe. “So, that provider can be still linked to the doctor, and the doctor can still be linked to the patient.”
Furthermore, physician buy-in is essential for maintaining continuity of care and ensuring patients feel confident in receiving treatment from both physicians and APPs. When physicians actively endorse the role of APPs and communicate the benefits of team-based care to their patients, it builds trust and acceptance of APP-provided services.
Physician engagement is critical for the long-term success and sustainability of APP integration initiatives. When physicians recognize the value that APPs bring to the practice, including increased efficiency, expanded access to care, and improved patient outcomes, they are more likely to champion these initiatives and advocate for their continued support and development.
The Path Forward
The integration of APPs into physician practices and health systems presents a strategic opportunity to optimize patient care delivery and operational efficiency. By expanding access to healthcare services and alleviating the workload of overburdened physicians, APP integration improves patient and employee satisfaction, and enhances patient retention. However, successful integration requires careful attention to regulatory compliance, billing, and coding practices. VMG Health offers comprehensive billing, coding, and strategy advisory services to support practices in navigating the complexities of APP integration, ensuring compliance with Medicare regulations, and maximizing reimbursement while minimizing audit risk.
Optimal APP utilization yields tangible benefits, including increased patient access to care, improved patient satisfaction, and enhanced financial performance. By leveraging APPs’ unique skill sets, practices can accommodate more patients, reduce wait times, and deliver high-quality care cost-effectively. Physician engagement is essential for the successful implementation of APP integration initiatives, as physicians play a pivotal role in endorsing and supporting APPs within the care team. Through collaborative leadership and effective communication, physicians can foster a culture of teamwork and mutual respect, driving the long-term success and sustainability of APP integration efforts.
In summary, strategic APP integration presents a transformative opportunity for physician practices and health systems to meet evolving patient needs, enhance operational efficiency, and achieve sustainable growth. By partnering with VMG Health for expert guidance and support, practices can navigate the complexities of APP integration with confidence, realizing the full potential of this innovative care delivery model.
Mujica-Mota, M. A., Nguyen, L. H., & Stanley, K. (2017). The use of advance care planning in terminal cancer: A systematic review. Palliative & Supportive Care, 15(4), 495-513. https://www.ncbi.nlm.nih.gov/pmc/articles/PMC5594520/
Sitting Down with Our Industry Experts: Debra Stinchcomb
May 7, 2024
At VMG Health, we’re dedicated to sharing our knowledge. Our experts present at in-person conferences and virtual webinars to bring you the latest compliance, strategy, and transaction insight. Sit down with our in-house experts in this blog series, where we unpack the five key takeaways from our latest speaking engagements.
1. Can you provide a high-level overview of what you spoke about at the Ambulatory Surgery Center Association Conference and Expo?
The title of my presentation was Anatomy of a Deposition. My co-speaker, Will Miller, from Higgs Fletcher & Mack in San Diego, and I discussed what a deposition is and how it fits into the steps of a lawsuit from patient injury to subpoena, the discovery phase and the trial itself. We discussed how to prepare for a deposition, the possible ramifications of not utilizing an attorney in the process, and how to answer questions during a trial honestly while learning from your lawyer’s cues. For example, if you’re asked a question and your lawyer objects and says the question is vague and ambiguous, you might take that as a hint that you need to ask for the question to be rephrased before you respond.
2. What do you think the audience was the most surprised to learn from your presentation?
I received feedback from someone who was there, and they said that the presentation was a great reminder to pay attention to their documentation practices. It’s important not to get complacent with the documentation and to ensure nursing staff document what they need to while watching the scope of practice and licensure of themselves and other employees at the facility. You must always be cognizant of whether they’re functioning within their licensure or certification, and this course was a great reminder of that.
3. How do you think your presentation helped healthcare leaders better prepare for challenges?
I’ve already heard from a few people who are taking this information back to their surgery centers, and they’re educating their staff on proper nursing documentation as well as risk management, and giving them a little taste of what a deposition might be like. The two cases we highlighted in our presentation included documentation issues, such as not documenting on the correct form, not adding post-op score accurately, and lack of physician orders. These issues highlight why staff must pay attention to what they document and be sure their medical record tells the story of the patient experience. Leaders can use this information to show their staff what improper documentation looks like to a jury, how it ruins credibility, and the importance of proper documentation.
4. What resources would you suggest for those interested in learning more?
ESupport is an annual subscription for ambulatory surgery centers (ASCs), and it includes a host of resources: updated policies and procedures, a forum where they can write to and learn from a consultant, tools they can use in just about every aspect of their ASCs, and continuing education modules. Specific to this issue, we have a one-page training document on nursing documentation and an hour-long webinar that dives deeper into the topic.
Within ESupport, there’s also a risk management page that talks about more than just depositions; it provides a nice overview of what risk management is and some of the tools that people can use in their risk management program.
5. If someone takes only one message from your presentation, what would you want it to be?
Go back to Nursing Documentation 101. The rules have not changed, so go back to the basics. Make sure you document everything going on with your patients. Your documentation should reflect a patient’s story; if I read your medical record, it should tell me everything that happened with that patient during their episode with you.
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Hospitals and health systems have been developing strategies for vertical integration with physician groups for decades. Through the premise of integrated care delivery, “defined as a coherent set of methods and models on the funding, administrative, organizational, service delivery and clinical levels,” U.S. policymakers, healthcare operators and payors expect to improve the quality, service and efficiency of healthcare services. Results of value generated through integrated delivery models are mixed, and the operating model is often confounded with varying market dynamics (payor concentration, culture, physician supply/demand, leadership, etc.) by community.
Regardless of integrated care delivery success, health system employment continues to increase and today accounts for greater than 50% of all practicing physicians. Interestingly and unknown to many, other strategics (private equity, Optum, CVS, etc.) account for approximately another 25%, leaving approximately a quarter of physicians organized in a private practice.
Figure 1: 2023 Physician Employment by Type
Source: Physicians Advocacy Institute: Physician Practice Trends Specialty Report
Across many integrated delivery systems, physicians are organized under a formal medical group structure, often with supporting leadership, governance, and practice management systems. This structure essentially groups the collective interests of primary care, surgical subspecialists, medical subspecialists, and hospital-based physicians together. Unlike independent, multispecialty practices who have an underpinning of sharing economics, most multispecialty groups in integrated delivery systems lack material financial alignment across subspecialties.
To this end, there are several challenges with a multispecialty group structure in health systems, including an aggregation of physician losses whereby various revenue streams (e.g., in-office ancillaries) have been integrated with hospital operations, sensitivity to practice losses based on confounding facts as to the true operating performance, silo board and/or decision making, and frustration by large clinical service lines due to widely held convention that everything needs to be the same for all physicians across the physician enterprise. Figure 2 outlines the most prevalent medical group structure and its multispecialty orientation.
Figure 2: Prevalent Medical Group Structure for Employed Physicians
Financial system reporting remains inconsistent across organizations; however, there are data repositories that suggest continued median subsidies for employed providers. As figure 3 outlines, regardless of timing and/or subspecialty orientation, there remains a significant net investment per provider.
Figure 3: Median Subsidy (Combined Subspecialty Mix)
Source: Kaufman Hall Flash Reports
Based on VMG Health’s experience, significant financial reporting subsidies lead to suboptimized decision making, as significant pressure is placed on medical group leadership to reduce practice losses and improve overall practice performance. This has led to a variety of strategic missteps for organizations operating in competitive markets.
As an alternative, VMG Health has been working with clients to reorganize physician enterprise offerings inside of integrated delivery systems, including the development of financial reporting, management, and governance systems that better align care delivery across service lines. These more contemporary structures, while variable system to system, are all designed to:
Boost physician loyalty to their primary clinical practice location (e.g., office based, value-based orientation, hospital, ASC, etc.).
Improve leadership, financial reporting, and budgeting so that business units are accountable for both facility- and professional-level operations and key performance indicators.
Afford focus on best-in-class infrastructure to support all professional practice applications.
Remove silo barriers and outdated concepts of medical group subsidies and associated strategic implications from an antiquated structure.
Figure 4: Contemporary Medical Group Structure
Conclusion
The landscape of physician organizational structures within hospitals and health systems remains in transition. While traditional, multispecialty group practice models remain prevalent, challenges such as physician losses and inconsistent financial reporting have spurred the need for more contemporary structures. Through strategic reorganization and improved governance, health systems can enhance physician loyalty, accountability, growth, and operational efficiency, ultimately optimizing care delivery and aligned (or improved) financial performance.
Sources
Heeringa, J., et. al. (2020). Horizontal and Vertical Integration of Health Care Providers: A Framework for Understanding Various Provider Organizational Structures. National Library of Medicine. https://www.ncbi.nlm.nih.gov/pmc/articles/PMC6978994/
In the rapidly evolving landscape of healthcare, traditional fee-for-service (FFS) reimbursement models are being replaced by alternative payment models that focus on value-based care in addition to, or even sometimes fully in replacement of, fee-for-service reimbursement. This shift from volume to value necessitates a strategic rethinking of compensation plans for healthcare providers to align incentives, optimize patient outcomes, and maximize revenue. The implementation of value-based compensation plans requires a deep understanding of the intricacies of different alternative payment models and the development of innovative strategies to ensure financial success while prioritizing quality care.
The Paradigm Shift: Value-Based Care and Alternative Payment Models
A key tenet of value-based care is the focus on delivering high-quality healthcare outcomes to patients while managing costs effectively. Alternative payment models, such as bundled payments, accountable care organizations (ACOs), and capitation, incentivize providers to prioritize preventive care, care coordination, and patient engagement while reducing unnecessary or inappropriate services.
These models differ from traditional fee-for-service, which rewards the quantity of services delivered rather than their outcomes. Under a fee-for-service reimbursement model, the more you do, the more you get. This is the case even if certain types of care or services are not warranted, are considered excessive based on the problem set presented by a particular patient, or do not lead to good patient outcomes.
However, under value-based contracts providers are rewarded not for the volume of services rendered, but for providing high-quality care to a large population of patients while also reducing unnecessary and/or inappropriate services.
The Compensation Shift: Designing Physician Compensation Programs to Maximize Revenue
While all value-based care models pay for value in some respect, the way various payment programs are structured will determine what compensation mechanism(s) will lead to better outcomes for both the physician and the organization.
Consider the following scenarios that are all focused on a hypothetical organization with $100 million of revenue and 200 FTE doctors ($500,000 in revenue per FTE).
Fee For Service + Value
Under a non-capitated value-based model where the organization continues to earn reimbursement under an FFS construct, with additional revenue opportunities through quality incentives, that organization might see $90 million of FFS revenue for the same book of business. In addition, that organization can earn up to an additional $20 million in value-based payments for a total possible range of $90-110 million of revenue.
Under this reimbursement structure, the organization will still be incentivized to have its physicians rewarded for productivity. After all, a sizable portion of the organization’s revenue, and most of the organization’s ability to increase the revenue pool (the $90 million), is through FFS reimbursement. As such, a compensation model under this construct might be a productivity model (with or without a base salary component). Also, it would include an additional incentive opportunity for value-based arrangements based on the metrics included in the organization’s value-based contracts.
Fee For Service + Value + Shared Savings
Another emerging component of value-based contracts is shared savings opportunities. If an insurer typically incurs costs of $10 million for managing a population of patients, and the subject organization can take high-quality care of the same population of patients for $9 million, insurers are increasingly sharing a portion of the cost savings back to the providers/health systems that are helping to achieve these savings.
Designing compensation arrangements to maximize shared savings opportunities is much trickier than under FFS and value models. After all, it is much more challenging to define metrics around achieving cost savings on a targeted population of patients than it is to measure things like hemoglobin A1c scores. As a result, we often see organizations either use shared savings dollars earned from insurers to fund larger quality incentives or pass through a portion of those earned dollars received from insurers to network physicians.
The latter option is complex in that it requires organizations to understand how those cost savings are achieved and to be able to allocate those savings earned down to the individual physician level or develop a proxy formula to estimate these factors for payment. As an example, we may see an organization decide to withhold 50% of funds earned to cover the additional costs incurred by the employer (such as hiring care coordinators to ensure patients with diabetes are getting back to the clinic for follow-up tests, etc.), and distribute the remainder by using a formula based on quality, wRVUs, or some other distribution formula.
Ensuring compensation remains consistent with fair market value under these types of arrangements is challenging. With that in mind, you will want to ensure you are working with counsel and a compensation design/valuation expert to ensure any compensation models remain consistent with fair market value.
Capitation
At the other end of the volume-to-value spectrum are capitation models which include an organization that receives a fixed payment on a per member per month basis for all members under its care. Under these models, if those 200 FTE physicians manage a panel of 50,000 patients, and the organization is reimbursed $166.67 per patient per month, that organization receives a total annual payment of $100 million.
Under these models, the organization receives a fixed payment regardless of its costs, assuming it has the same number of patients. An organization can only increase top-line revenue through growth in the patient population served, so compensation models tend to be a combination of fixed and variable. Specialists might be paid on a salary-type model (with or without incentives), while primary care providers might be paid on an acuity-adjusted panel size model whereby physicians are incentivized to take on more patients and grow the total capitated revenue of the organization.
These models may also include incentive payments tied to care coordination, quality outcomes, cost controls/reductions of unnecessary or inappropriate services, and the like.
Conclusion
The table below summarizes the options discussed. Note that the compensation models in the right-hand column are the most predominant compensation model structures for a particular reimbursement model. However, other models may be more appropriate depending on the facts and circumstances impacting the subject organization.
Transition Strategy
In addition to designing compensation models that allow for maximum revenue potential, organizations must enact robust change management processes to ensure their providers are not lost in the transition to a new compensation model. Providers need to understand the rationale behind the new models and how their efforts contribute to both patient care and financial success for the organization and the providers. Regular feedback loops and performance evaluations can help providers track their progress and make necessary adjustments.
Conclusions and Key Takeaways
As healthcare continues to shift toward value-based care, designing an effective compensation plan is becoming increasingly crucial for provider organizations to thrive under these alternative payment models. The suitable model for your organization might vary significantly from the compensation structure observed at the neighboring health system. This is especially true considering both organizations could be positioned at distinct points along the risk continuum.
The key success driver is for organizations to design models that will help them be successful wherever they are on the continuum. By aligning incentives with patient outcomes, leveraging innovative strategies to provide more cost-effective care, and adapting to changing market dynamics, organizations can optimize revenue and physician-earning opportunities while delivering high-quality care to their patients.
Strategic Partnerships in the Inpatient Rehabilitation Industry: Highlights, Opportunities, and Risks
September 5, 2023
By Sydney Richards, CVA, Patrick Speights, and Christopher Tracanna
Approximately 45.0% of acute care discharges are subsequently admitted to a post-acute setting nationwide, including approximately 4.0% who are admitted to an inpatient rehabilitation facility (IRF). An IRF is a freestanding inpatient facility or specialized unit within an acute care hospital that offers intensive rehabilitation to patients after illness, injury, or surgery. Now more than ever, investment demand for IRFs is strong due to the unique value propositions relative to other healthcare verticals, including strong clinical outcomes at an efficient price to payors, a period of stable regulations, rising patient demand, and a high margin for efficient operators.
In response to this demand and the potential for high returns, acute care operators may consider affiliating their existing inpatient rehabilitation units (IRUs) with platform post-acute operators to drive financial returns while improving patient outcomes. IRUs are operated as distinct departments of acute care hospitals, while IRFs are freestanding facilities. Going forward we will use the generic term IRF when discussing the inpatient rehabilitation industry.
Below, VMG Health experts highlight key industry facts driving up investment. Additionally, our experts detail the potential benefits and risks of common IRF affiliation models, such as joint ventures, joint operating agreements, divestitures, and management agreements.
5-Year High Medicare Margins
As presented in the table in the below, aggregated IRF Medicare margins were at a five-year high in 2021 at 17.0%. One driver of this increase is the Centers for Medicare and Medicaid Services (CMS) COVID-19 waivers that allowed flexibility in admission criteria and therapy requirements to maintain IRF status. Now that the emergency declaration has ended, margins may become more pressured as IRFs return to standard operating criteria. It is also notable that freestanding Medicare margins were 25.8% in 2021 compared to hospital-based margins of 5.8%. Many factors contribute to this difference, including:
Scale – Hospital-based IRFs typically have a lower bed count than freestanding IRFs.
Strategic Differences – Hospital-based IRFs typically support the operations of a broader acute care hospital or health system.
Proliferation of Strategic Post-Acute Buyers; Growth in Freestanding IRFs
In 2021, five IRFs closed while 22 new IRFs began operations, resulting in a net gain of 17 IRFs. According to MedPAC, the majority of new IRFs were freestanding and for-profit, and most closures were hospital-based nonprofits. As reflected in the chart on the right the top six freestanding IRF operators control approximately 91.5% of freestanding IRFs in the market.
Large Industry with Growing Patient Demand
In 2021, Medicare spent $8.5 billion on 379,000 fee-for-service (FFS) discharges across 1,180 IRFs nationwide. These FFS Medicare stays accounted for approximately 52.0% of IRF discharges on average.
Fragmented
Despite the proliferation of specialized post-acute IRF operators, the IRF industry remains fragmented with over 70.0% of all IRF locations being hospital-based IRUs. The remainder are freestanding facilities. However, based on their relatively larger size and bed counts, freestanding IRFs accounted for approximately 55.0% of Medicare discharges. Additionally, while for-profit IRFs make up about 37.0% of all IRFs, they account for approximately 60.0% of the total Medicare discharges.
Many of the aforementioned factors turned the IRF industry into an attractive sector for a strategic post-acute investor. For acute care systems, collaborating with a post-acute operator can offer significant benefits, including reducing the length of stay and readmission rates, and providing access to clinical and operational best practices. Collectively, these enhancements improve both patient outcomes and financial returns. We have identified several affiliation models for post-acute and IRF unit operators, as well as advantages and disadvantages to consider for each model.
Divestiture
Joint Venture
Joint Operating Agreement
Management Agreement
A post-acute care strategy is vital for acute care providers seeking to elevate patient outcomes while maximizing value to their organization. Forming strategic alliances with post-acute operators in inpatient rehabilitation may be one successful approach. Operators have many avenues to consider whether it is through the sale of an existing inpatient rehabilitation unit, joint venturing with a partner to create a de novo freestanding IRF, or employing a post-acute manager to drive performance in an existing IRF. No matter your path forward, VMG Health experts can provide actionable insights into the value of your existing IRF business and assist with a potential IRF partnership in a model that fits your post-acute strategy.
For those in the healthcare industry, telemedicine has been viewed as a way to increase access to healthcare, while mitigating the challenges of limited resources of physicians and healthcare providers. Although the use of telehealth has steadily grown over the past two decades, the challenges presented by the COVID-19 pandemic supercharged this growth. As the United States and the world move beyond the worst months and years of the pandemic, telemedicine usage will continue to change within the industry. This article will explore the state of telehealth immediately prior to and during the early years of the pandemic to provide context for the question, “What will be the next stage of telemedicine in the U.S. healthcare system?”
Telemedicine Prior to the Pandemic
Prior to the COVID-19 pandemic, many people in the industry believed telemedicine had the potential to make healthcare more accessible, especially for underserved communities. However, in 2016 only 15% of physicians worked in healthcare practices that used telemedicine in any fashion.1 Part of why utilization was low pertained to reimbursement rates. Physicians who utilized telemedicine were not reimbursed at the same level by Medicare as in-person services, and only a limited amount of visit types provided through telemedicine were reimbursable.2,3 In addition, Medicare outlined certain stipulations that allowed providers to use telemedicine for care, including requiring that the provider had a pre-existing relationship with a patient, limiting a provider to only providing services at the practice where they typically provided in-person services, and necessitating the provider was licensed and physically in the same state as the patient being treated.2,4Finally, the technology used to provide telemedicine had to meet the requirements of the Health Insurance Portability and Accountability Act (HIPAA), which required providers to invest in compliant technology to be able to offer care using telemedicine.5
Changes Spurred on by the Pandemic
During 2020, the COVID-19 pandemic became a catalyst that rapidly changed the direction of telemedicine in the U.S. From February 2020 to February 2021 telehealth claims volumes increasing 38x year over year.6 As the world, began implementing lockdown orders in February and March 2020 to limit the spread of COVID-19, legislators in the U.S. looked for a solution to assist the public in accessing the healthcare system while mitigating the public’s fear of contracting this virus. Various solutions were enacted as part of the CARES Act, which was passed in March 2020. These solutions were aimed at increasing the use of telemedicine by healthcare providers. Through CARES, many of the barriers that previously made it harder for providers to adopt the usage of telemedicine were relaxed. This created an unprecedented opportunity for providers to explore the capacity of this medium of care.
First, Medicare changed reimbursement for telemedicine visits to be the same as in-office visits.3 Additionally, physicians were given the ability to reduce, or even fully waive, the Medicare patient cost-sharing for telehealth services which made telemedicine more attractive to patients.3 The CARES Act also removed location barriers and made it possible for providers to see patients who were in different states from the provider during a visit.2 The CARES Act also allowed healthcare providers to offer more types of visits through telemedicine means, like emergency department visits, remote patient monitoring visits, and check-in visits.2 Additionally, providers who historically were not able to provide care through telemedicine, like occupational therapists and licensed clinical social workers, were able to use telemedicine as an option to treat patients.4 Finally, technology HIPAA requirements were relaxed such to allow more two-way audio-visual options, such as Facetime, Skype, Zoom, and audio-only telephonic services for telemedicine visits. This realty increased the ability for providers to offer this service to their patients.2, 5
Current Legislations Impacting the Future of Telemedicine
As the country moves beyond the public health emergency COVID-19 created, the future of telemedicine will depend on whether = regulations revert back to the pre-COVID state. States across the country, from Washington to New Hampshire to Virginia, are introducing legislation to expand telemedicine beyond the CARES Act.7 Despite different geographical locations and political leanings, states seem to agree about telemedicine’s ability to increase access to healthcare. For example, Oregon has introduced legislation to permanently allow out-of-state physicians and physician assistants to provide specified care to patients in Oregon.7 Texas has proposed legislation that would remove the requirement of being “licensed in this state” from an array of licensing and practice requirements for providers to practice telemedicine in the state.7 Virginia has also proposed legislation that offers a solution for telemedicine service provider groups that employ health care providers licensed by the Commonwealth. The legislations would establish that these groups do not need a service address in the Commonwealth to maintain their eligibility as a Medicaid vendor or provider group.7
At the national level, two active bills, HR 4040 and HR 1110, both contain pro-telemedicine legislation. HR 4040, passed by the House in July of 2022, extended certain Medicare telehealth flexibilities beyond the end of the COVID-19 public health emergency (PHE). The bill would allow for Medicare beneficiaries to continue receiving telehealth services in any location they wish until December 31, 2024, or the end of the PHE, whichever comes later..8 In addition, this legislation would continue to grant other healthcare providers, such as occupational therapists and physical therapists, the freedom to continue practicing telemedicine via the CARES Act.8 Finally, behavioral health services, alongside evaluation/management services, would still be allowed via audio-only technology.8 Within the industry, this bill has seen support, specifically from the American Telemedicine Association and the American Counseling Association.7, 9
HR 1110 is a report commissioned by Congress with the explicit purpose of expanding access to telehealth services to Medicare and Medicaid beneficiaries.10 Under this legislation, Congress would require that two reports be provided, one by the U.S. Department of Health and Human Services, and the second by the Medicaid and CHIP Payment and Access Commission (MACPAC) and the Medicare Payment Advisory Commission (MedPAC).10 In the report led by HHS, Congress would require HHS to provide a comprehensive list of telehealth services available during the PHE. This report would include details about the types of providers that could supply these services, a comprehensive list of actions the secretary of the HHS took to expand access to telehealth services, and the reasons for these actions.10 Additionally, this report would require a quantitative and qualitative analysis of the previously mentioned telehealth services, specifically calling out data regarding use by rural, minority, elderly, and low-income populations.10
Regarding the MedPAC and MACPAC report, Congress would require an assessment of the improvements or barriers in accessing telehealth services during the PHE. And in addition, the information MedPAC and MACPAC know regarding the increased risk of fraudulent activity that could result due to expanding telehealth services.10 To conclude the report, Congress has asked both MedPAC and MACPAC to provide recommendations for improvements to current telehealth services and expansions of these services, as well as potential approaches for addressing fraudulent activity previously outlined in the report.10 Ultimately, these reports would be vital in shaping future policies around telemedicine to increase access to and improve the effectiveness of telehealth.
The last few years there have been major changes in many aspects of life, including the ways healthcare is delivered. The U.S. was able to tap into the large potential telemedicine has to offer during the worst stages of the pandemic. However, as we move into the future, it will be important for local and federal governments to continue improving the regulations that impact telemedicine to help expand access.
