Requesting Hospital Assistance for Undercompensated Services

September 2024

Before requesting facility support, take an introspective look at the services you are providing and your relationship with the facility. Use the considerations and steps below to help you with your process.

1. Be prepared.
• Before requesting facility support, smart groups take an introspective look at the services they are providing and their relationship with the facility. It is helpful to have a clearly communicated value proposition and strong relationship BEFORE requesting assistance. Although the assistance you are requesting is to compensate the group for services you are being asked to provide that are not supported by revenue due to poor payer mix, sub-optimal utilization, or both, facilities often view these requests differently. As such, these negotiations always go better when the group has a solid relationship with facility administration and administration sees the group as a team player who brings value and does not make unreasonable requests. A great resource for this is “Creating and Communicating Your Value Proposition: RFP Response Essentials.”
2. Be reasonable.
• Only request what you really need to stabilize your workforce and facilitate recruitment. There is always a risk that the facility will decide to put out a Request for Proposal (RFP) and the group needs to think through how it would respond (this should be your request, nothing more than what you really need), how it would likely fare, and what alternatives it has if the facility decides to put out an RFP and the group does not win the bid. There are many alternatives in today’s market, but they may be disruptive, so it is important to understand your risk tolerance first and to not be greedy or arrogant.
3. Understand your market.
• Benchmarks –Medical Group Management Association (MGMA) or American Medical Group Association (AMGA) are typically best. Other surveys often co-mingle academic and/or government practices, which pulls the numbers down. Benchmarks are inherently outdated since they are based upon data that is at least eighteen (18) months old, but hospitals need them for their fair market value (FMV) analysis so they cannot be ignored. It is best to include them in your proposal with an explanation of what you are requesting and the inherent caveats of benchmarks.
• You can supplement with Gasworks and other local market knowledge (offers that colleagues have received or accepted) but you will also need published benchmarks to support your “ask.”
4. Define coverage currently being requested.
• Compare contractual obligations with what is currently being provided.
• Billing data can help define this, but you will need concrete data to support what you are doing, not just “impressions.”
• Define coverage hours by anesthetizing location (AL). Don’t forget to include non-operating room anesthetizing (NORA) locations.
5. Consider call coverage being requested/provided.
• How many slots are needed in-house at any given time? On beeper? Can call be covered by anesthetists or are physicians required (or indicated by acuity or service line)?
• Are specialty call slots required (e.g., cardiac, pediatric)?
• What is the likelihood of working each call slot?
6. Determine market cost of requested coverage.
• How many FTEs are needed to cover? Don’t forget to count vacation coverage and post call days, if warranted. Make sure you have enough FTEs to reasonably cover the call.
• What is the cost per FTE for anesthesiologists, nurse anesthetists and anesthesiologist assistants? Don’t forget to include reasonable benefits (e.g., retirement, health insurance, disability insurance, CME).
• What is the overhead cost including billing, malpractice insurance, corporate payroll taxes, payroll, scheduling, recruiting, practice management, accounting and legal, and consultants?
• Consider using benchmarks for all of this rather than actual practice costs.
7. Consider alternate staffing models.
• Are there benefits to including or excluding nurse anesthetists and/or anesthesiologist assistants?
• If beneficial, how can nurse anesthetists and/or anesthesiologist assistants most effectively be incorporated?
• Do call responsibilities preclude including them or limit how many can be incorporated? If so, can they help with call?
• Are nurse anesthetists and anesthesiologist assistants in your market willing to take call? If so, do they demand so much extra pay that it is cost prohibitive to consider? How does this impact the number of extenders you need? Be sure to consider and explain all this in your proposal.
8. Assess your revenue, case mix and payer mix.
• Is poor payer mix or case mix contributing to your need for support?
• Be able to explain specifically why there is a shortfall — poor payer mix, unprofitable case mix, or both. Also, if you have been able to mitigate the need for support with above market managed care rates, include that in your presentation. Or, if payer rates are particularly poor in the region and/or payers are unwilling to negotiate, explain this too as facility may want the opportunity to assist in negotiations to help reduce the shortfall.
• Make sure that your revenue cycle management (RCM) is optimized. If agreeing to pay support, the facility may decide to audit your RCM company and you do not want any surprises. Better yet, engage someone to do that audit yourself and be prepared to show the results to the facility at the time of making a support request.
9. Assess utilization of currently requested coverage.
• Evaluate billing data to determine current utilization (may need some outside help with this).
• Show them specifically what is being utilized, how it could potentially be consolidated, and potential cost savings that could be realized by doing this.
10. Consider alternate coverage models to align with current utilization.
• Are there opportunities to reduce coverage requirements to reduce cost?
• Can services be consolidated within the system?
• What about call — can this be consolidated to reduce cost?
11. Determine cost of alternate proposals.
• Same process as #6 above.
• Clearly outline the differences and what might be done to mitigate the need for support, even if it is a longer-term strategy.
12. Propose several alternatives.
• Put together a detailed analysis and professional report/presentation for facility administration.
13. Consider outside help.
• Even a seasoned group with a strong executive team should consider getting outside help from someone who does this for a living. You essentially have one shot at getting this right. While it may seem expensive for a smaller group, don’t be “penny wise and pound foolish” and miss your opportunity to get it right the first time as there may not be a second opportunity. This is complex calculus and someone with experience in these types of negotiations can add value to your presentation.
• It helps to have a third party to objectively go through staffing models and financing to bring ideas and give recommendations.
• The facility may hear your request as more credible when it comes from someone with national experience who can put your situation in context and will not directly benefit from any decision made to provide support.
14. Agree upon coverage requirements.
• Meet with facility to define coverage needs going forward. It may be one of the options you have proposed, or something else. Once the facility understands the costs associated with what they are requesting and how effectively it is (or is not) being utilized, they may change what they are requesting.
15. Agree upon reasonable costs.
• The facility will likely get their own FMV consultant to assist them in determining what is a reasonable cost per FTE (another reason it is good to have your own expert in your corner) and their numbers will likely be lower than what you (or your consultant) have produced. You will need to be able to defend your request and negotiate a reasonable cost per FTE, along with reasonable overhead.
16. Agree upon contract structure.
• Consider different contract models — support can be paid as a flat fee, as a revenue guarantee, on a “support per unit” basis, as a professional services agreement (PSA), along with many other structures. There are pros and cons to each for each party. Getting to the right number in the wrong structure (or the wrong number in the right structure) will likely mean you must do it all over again, sometimes within a year or less. Again, it is worth making the appropriate investments to get it right the first time.
17. Consider including surge staffing and pricing.
• Especially if the facility agrees to cut back on rooms, you may want to incorporate surge staffing or pricing, whereby they can request additional coverage with reasonable notice and they can pay you an hourly rate to provide. This has to be “best efforts” if it is not regularly staffed, but this can be an opportunity for the facility to feel comfortable cutting back baseline coverage and the group to be a team player by stepping up when needed.
18. Agree upon contract terms.
• Once you have agreed upon the financials and the structure of the contract, you will need to engage a good attorney who understands anesthesia to assist with negotiating the terms of the contract. There are many, many items to consider (see Chapter 9 of previously mentioned RFP Response Essentials).
• Consider including escalators to update the agreed upon cost per FTE on an annual basis and prevent frequent need to revisit contract.
• Consider a cost and notice period to increase or decrease an anesthetizing location from the base contract.
19. Consider whether you need help with locums or other temporary staffing.
• If you have already lost a significant number of anesthesiologists, nurse anesthetists and/or anesthesiologist assistants and/or are having to pay locums, you may want to consider incorporating something into the contract to have the facility assist with the cost differential between locums and regular staff. This can be a lot for the group to absorb, so, particularly if you have agreed to something less than what you wanted, you may need this assistance to ensure that the market salaries you just negotiated are not decimated by locum costs.
20. The end is just the beginning.
• Particularly if the facility has come forth with significant support, they rightfully expect that you will provide the service. Make sure that you are able to do this, even if you need an internal structure that rewards people who are willing to step up and cover extra if you are short staffed. If you are unable to do so, be sure to give as much notice as possible, explain what the issue is, and communicate your plans to prevent a future recurrence.
• Make sure your compensation system aligns with the new contract and your mutually established goals. If the compensation system does not align, you may still have difficulty retaining staff or producing desired behaviors.
• Establish and/or maintain relationships by meeting with administration regularly (quarterly) to assess how the new contract is going, understand their needs, consider expansion/subtraction goals, and to alert them to any issues you are having. Nobody likes to be blindsided so good communication is key. It is also an opportunity to subtly remind them that you are a team player and doing what you can to facilitate a stable workforce in a challenging environment.
• Always be thinking about the next negotiation. Make sure that you are demonstrating your value proposition and being a good partner. You may be in the driver’s seat now, but that may not last forever, and you want to be that good partner who demonstrates that they are considering the facility’s challenges as well as your own, one who is working collaboratively to address today’s workforce challenges as a team.

DISCLAIMER: The material presented here is provided only for informational purposes and does not constitute medical, practice management or legal advice or imply approval of any practices. While every reasonable effort has been made to ensure the accuracy of the content, the American Society of Anesthesiologists (ASA) and the authors do not warrant or guarantee that the content is exhaustive or error-free, and further disclaim all liability for loss or damage incurred by third parties arising from the use of the content. The content also should not be construed as representing ASA policy, making clinical recommendations, dictating payment policy, or substituting for the judgment of a physician and consultation with appropriate independent counsel. Specifics should be reviewed with your appropriate advisors before making a determination or taking any action.

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