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Anesthesia Business Consultants: Communique summer10
Anesthesia Business Consultants: Communique summer10
Anesthesia Business Consultants: Communique summer10
Anesthesia Business Consultants: Communique summer10
Anesthesia Business Consultants: Communique summer10
Anesthesia Business Consultants: Communique summer10
Anesthesia Business Consultants: Communique summer10
Anesthesia Business Consultants: Communique summer10
Anesthesia Business Consultants: Communique summer10
Anesthesia Business Consultants: Communique summer10
Anesthesia Business Consultants: Communique summer10
Anesthesia Business Consultants: Communique summer10
Anesthesia Business Consultants: Communique summer10
Anesthesia Business Consultants: Communique summer10
Anesthesia Business Consultants: Communique summer10
Anesthesia Business Consultants: Communique summer10
Anesthesia Business Consultants: Communique summer10
Anesthesia Business Consultants: Communique summer10
Anesthesia Business Consultants: Communique summer10
Anesthesia Business Consultants: Communique summer10
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Anesthesia Business Consultants: Communique summer10

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Communiqué features articles focusing on the latest hot topics for anesthesiologists, nurse anesthetists, pain management specialists and anesthesia practice administrators. …

Communiqué features articles focusing on the latest hot topics for anesthesiologists, nurse anesthetists, pain management specialists and anesthesia practice administrators.

Communique is created by Anesthesia Business Consultants (ABC), the largest physician billing and practice management company specializing exclusively in the practice of anesthesia and pain management.

ABC serves several thousand anesthesiologists and CRNAs nationwide with anesthesia billing software solutions.

Please send your email address to info [at] anesthesiallc [dot] com if you would like to join the Communique mailing list!

Visit www.anesthesiallc.com for more information!

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  • 1. SUMMER2010 VOLUME14,ISSUE7 ANESTHESIA BUSINESSCONSULTANTS As the use of diagnostic endoscopy for the evaluation of upper and lower gastrointestinal anatomy continues to increase across the country, anesthesia providers find themselves caught on the horns of a dilemma. On the one hand, public policy is clearly encouraging in- creased use of endoscopy for early detec- tion of a variety of intestinal disorders, and most Americans prefer to be well sedated given the potential for significant discomfort associated with these proce- dures. On the other hand, some payer policies appear to threaten the availability of anesthesia for these valuable preven- tative procedures. While endoscopy has proven a great boon to many anesthesia practices, there is a growing concern for the future financial viability of such ser- vices. In the meantime, the economics of anesthesia for endoscopy represent a fascinating case study in the intersection of public health and the interests of the payers who must ultimately underwrite ABC offers The Communiqué in electronic format Anesthesia Business Consultants, LLC (ABC) is happy to provide The Communiqué electronically as well as the regular printed version. The Communiqué continues to feature articles focusing on the latest hot topics for anesthesiologists, nurse anesthetists, pain management specialists and anesthesia practice administrators. We look forward to providing you with many more years of compliance, coding and practice management news through The Communiqué and our weekly e-mail alerts. Please log on to ABC’s web site at www.anesthesiallc.com and click the link to view the electronic version of The Communiqué online. To be put on the automated email notification list, please send your email address to info@anesthesiallc.com. ➤ INSIDE THIS ISSUE: Scoping Out Endoscopy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 Risks And Issues In Treating Anesthesia Group Professional Staff As Independent Contractors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 Practical Considerations In Converting Personnel From Independent Contractor Status To Employee Status . . . . . . . . . . . . 11 The Family Medical Leave Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 Managing For Success Requires Managing Risk . . . . . . . . . . . . . . . . . . 16 Managed Care Participation – Yes Or No? . . . . . . . . . . . . . . . . . . . . . . 18 Event Calendar . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20 Continued on page 4 Scoping out EndoscopyJody Locke, CPC ABC Vice President for Practice Management Hal Nelson, CPC ABC Director of Compliance and Client Services
  • 2. The Communiqué Summer 2010 Page 2 Knowing and Managing Our Risks “Endoscopy” is a word loaded with implications in our community. Providing anesthesia for this basic GI procedure is a major portion of many practices’ professional services. For some anesthesia groups, the volume of endoscopy cases is even growing. Over the past decade, we have all heard nu- merous warnings about the viability of this line of business because it appears to health insurers that sedation for rou- tine screening lower GI endoscopies does not invariably require the involve- ment of an anesthesiologist. Some of the largest private health plans have adopted and revised medical necessity policies restricting the availability of anesthesia for endoscopies. Medicare carriers in 19 states have Local Coverage Determinations in place, defining the patient conditions for which they will pay for anesthesia for endoscopies. More than a few practices have already adjusted to a smaller caseload. Many successful groups have jus- tifiable concerns about the future of their endoscopy services. The lead ar- ticle in this issue of the Communiqué, Scoping out Endoscopy, addresses those concerns and places them in the con- text of analyzing total, combined practice profitability. As ABC senior staff members Jody Locke and Hal Nelson conclude, “anesthesia for GI en- doscopy has been and continues to be a viable income source for anesthesia groups. The key to success is under- standing your payer policies, indicating underlying conditions and co-morbid- ities, and using advanced beneficiary notices so that you can balance bill the patient, when appropriate.” Equally important is the authors’ point that we must analyze each anesthesia line of business independently, not limiting our financial study either to overall profitability or to any one dominant procedure. Another issue that warrants your at- tention is common to all employers and employees, not just to anesthesia prac- tices. The rules defining independent contractor status have been tightening up. John Mulligan, Esq. describes recent enforcement developments at both the federal and state level in his article Risks and Issues in Treating Anesthesia Group Professional Staff as Independent Contractors. He recommends unequivo- cally that groups that characterize individuals who regularly work for them as independent contractors review the status of each “independent contractor” so as to minimize potential devastation in their qualified retirement plans and other assets. If you do find that some individu- als’ classification is questionable, you will also want to take note of the companion piece written by Mr. Mulligan with ABC’s Jill Thompson, Practical Considerations in Converting Personnel from Independent Contractor Status to Employee Status. The risks discussed in the indepen- dent contractor articles are among the many business risks that Mark Weiss, Esq. recommends treating strategi- cally in Managing for Success Requires Managing Risk. Some risks simply cannot be avoid- ed. Susan Firestone, Administrator at NYU Langione Medical Center and a member of the MGMA Anesthesia Administration Assembly (AAA) Executive Board is very forthright about the uncomfortable situation of patients whose managed care plan turns out not to cover the anesthesia care they have received (Managed Care Participation – Yes or No?) Ms. Firestone suggests placing notices re- garding anesthesia coverage in the surgeons’ and hospitals’ preoperative patient information packages, but she also notes the limitations of this effort. Counseling patients who call on how to approach their managed care plans re- quires time and patients, but according to Ms. Firestone, many patients have re- ported their success to her. Rounding up the current collection of articles is a summary of the Family Medical Leave Act by ABC staff member Stephanie Zvolenski. This discussion simply lays out the statutory require- ments with which certain anesthesia groups must comply, demonstrating in one more context that preparing for common events such as emergency leave requests is the way to minimize risk. The upside of risk is opportu- nity. Many management books advise searching for new opportunities when- ever there is an adverse event, and we agree with that idea. Over the last sev- eral years ABC has sought out solutions for some of the challenges that anes- thesia practices face and is pleased to have brought our clients the Quantum Clinical Navigation System™, the F1RSTAnesthesia Record (FAR) digital pen for completing anesthesia records and most recently the ePreop electronic preoperative record system. As we urge you to do, we will continue to identify practice needs and do our best to meet them through topnotch products and services – we are all in this together. With best wishes, Tony Mira President and CEO
  • 3. The Communiqué Summer 2010 Page 3 While generally anesthesia groups consider their physician and non-physician professional staff as “employees,” some groups treat certain, or even all, of their professional staff as “independent contractors.” What is sometimes forgotten is that this is not simply a matter of choice. It is the nature of the relationship between the group and the individual that determines whether the individual is an “employee” or “independent contractor.” Practice groups that treat some or all of their personnel as independent contractors typically do so for one or more of the following reasons: • Certain personnel are considered “PRN” or whose short-term services are obtained from a staffing agency. • The group desires to avoid having to make the payroll tax and withholding tax payments that are required in an employer-employee situation, sometimes as a means to maximize (or appear to maximize) the individual’s wages. • The group desires to avoid having to provide its personnel with retirement plan or other fringe benefits. • The group desires to try to reduce its potential liability for the acts or omissions of the personnel. The IRS Viewpoint on Treating of Workforce Personnel As “Independent Contractors.” The Internal Revenue Service has tended to view the charac- terization of regular workforce personnel as “independent contractors” as improper attempts to avoid having to pay payroll taxes and take withholding on wages. The IRS has issued numerous rulings and an- nouncements distinguishing an “employee” from an “independent contractor.” Current guidance on this subject can be found in IRS Publication 15A. A full examination of all of the factors that would be considered by the IRS in determining whether a physician, CRNA or AA is an “employee” of an anesthesia group practice or is an “independent contractor” is beyond the intended scope of this article. However, there are a number of factors that, if present in a particular relationship, would indicate that the individual was an “employee” of the group regardless of how the group may have characterized him or her. Of these factors, the most significant one is whether a business entity, such as a physician group, has the right to control the performance of services by the individual. The following factors would indicate “control.” • The business entity can control when and where the work is done. Risks and Issues in Treating Anesthesia Group Professional Staff As Independent Contractors John T. Mulligan, Esq. McDonald, Hopkins, LLC, Cleveland, OH Continued on page 8
  • 4. The Communiqué Summer 2010 Page 4 Scoping out Endoscopy Continued from page 1 such policies with appropriate payment guidelines. Currently endoscopy represents the fastest growing and most profitable line of business for a significant number of anesthesia practices in the United States. In Table 1 below, the three-year trend for an outpatient endoscopy service in the Mid-Atlantic region reveals consistent growth from January 2007 through December 2009, in both volume of cases performed and collections posted. Perhaps even more significant is the fact that, despite a general state of economic recession, key performance metrics such as average cases performed per provider day and the reimbursement per case have also been consistently strong in this example. From a productivity perspective, endoscopy also has a very positive impact on this practice’s overall financial picture. For calendar year 2009, revenue from endoscopy services represented 31% of total practice revenue for this practice. More significant though, is the impact on provider compensation. If, as shown in Figure 1, $2,000 per provider day is the target necessary to generate an MGMA median compensation, then at $3,500 per day, endoscopy is obviously a significant profit center. From an anesthetic perspective, there are several issues facing the anesthesia provider in considering each patient scheduled for endoscopy. The first is what level of anesthesia care is necessary for a given patient. Clinical studies have shown that the degree of sedation can affect the outcome of the examination, such that polyp identification often increases with the use of anesthesia. Higher levels of sedation increase the comfort of the patient and minimize the impact of the procedure. The second set of considerations pertains to the agent(s) that will provide the appropriate level of sedation and pain relief for the procedure. Increasingly, propofol has become the drug of choice for a number of simple and compelling reasons, such as faster turnaround time and higher patient satisfaction. Theoretically, a better patient experience leads to a higher volume of elective screening procedures, thus lowering overall healthcare costs. Thefinalconsiderationhastodowith the best person to provide the anesthesia care. Payer policy tends to assume that if certainriskfactorshavenotbeenidentified pre-operatively, only a moderate level of sedation will be required. Practitioners in the field know all too well that this an unrealistic approach. Anesthesiology has evolved as a discipline that anticipates the unexpected. The role and value of the anesthesiologist or CRNA is to manage an unexpected patientreaction to a particular drug, agent, or aspect of the procedure. As so often happens in the evolution of clinical techniques, practitioners drive the process with their use of new drugs and protocols. Over time, payers respond as they monitor the incidence of new services. Typically, providers look to CMS to provide the definitive policy guidelines, but this is not always the case. Perhaps the most dramatic development in the history of anesthesia for endoscopy was written by Aetna, when it published its now infamous policy in early 2009. As the following excerpt makes clear, Aetna is determined to limit the anesthesia provider’s role in the endoscopy clinic: “Aetna considers moderate sedation/ analgesia, provided by or under the direction of the endoscopist, to be appropriate and adequate for average risk individuals undergoing standard upper or lower endoscopic procedures. Consequently, Aetna considers not medically necessary the attendance of an anesthesiologist or anesthetist for average risk individuals undergoing standard upper or lower endoscopic procedures.” Cases and Collections - 500 1,000 1,500 2,000 2,500 3,000 3,500 4,000 2007 2008 2009 $0 $200,000 $400,000 $600,000 $800,000 $1,000,000 $1,200,000 $1,400,000 $1,600,000 Cases Collections TABLE 1
  • 5. The Communiqué Summer 2010 Page 5 It is significant that in its background discussion, Aetna questions the value of propofol as the anesthetic agent of choice for endoscopy, citing various studies that have looked at the benefits of propofol as having “conflicting results.” Their argument plays the policy of the ASA against that of the American Society of Gastrointestinal Endoscopy and argues that only in limited cases of patients with clearly identified risk factors is reimbursement for a separate anesthesia provider justified. It is an argument that is finely tuned to the economics of the issue as Aetna sees it. There is no doubt that economic interests may influence clinical judgment in such matters. Ultimately, a discussion about a particular line of business must focus on the financial viability of providing the service. This aspect of endoscopy can be particularly tricky to assess for several reasons. The number of facilities covered can greatly affect the overall profitability of the service. Since the key to profitability is directly related to productivity metrics, these must be carefully monitored to ensure a reasonable level of return; variability in yield and average daily productivity can be significant. There is also the question of staffing and the potential for financial leverage through medical direction of nurse anesthetists. The fundamental calculation of profitability is tied directly to the cost of providing the professional service as compared to the revenue generated by that service. The essential metric in this calculation is activity normalized per provider day. In simple terms, if it costs a practice $2,000 per day to cover the cost of a full-time anesthesiologist with benefits and the service generates more than $2,000 in revenue per clinical day, then the service is, by definition, profitable. It is a very common phenomenon in business and medicine that embarking on a new service will take a practice from profitability to unprofitability. Chronic pain practices are often good examples of this. The administration of nerve blocks in the recovery room typically stimulates an interest in developing a full- blown pain practice, but, almost always, yield per procedure and yield per hour of work goes down with the expansion of the service. The same is often true of endoscopy. Many physician-only practices will look at the productivity and profitability of their endoscopy business and conclude that the revenue potential for this line of business easily justifies their mode of delivery. Such practices will find they are effectively relying on endoscopy revenue to offset other, less profitable, lines of business. This raises a significant strategic Continued on page 6 Reimbursement per Provider Day $0 $500 $1,000 $1,500 $2,000 $2,500 $3,000 $3,500 $4,000 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 FIGURE 1
  • 6. The Communiqué Summer 2010 Page 6 Scoping out Endoscopy question. Is endoscopy best served by a physician or a “care team” model? A strong argument could be made that endoscopy services provide the perfect setting for a care team practice: regular hours, essentially healthy patients and cases of consistent duration and difficulty. Strictly viewing endoscopy from a financial perspective, one could conclude that the positive financial aspects of this service should be leveraged in every way possible, including an aggressive approach to staffing costs. Ultimately, payer reimbursement policy determines the profit potential for an endoscopy service. Thus far, the position of commercial insurers and the government has been favorable. However, these policies are constantly evolving based on a variety of patient-specific factors, such as ASA status and underlying conditions and co-morbidities. When looking at Medicare coverage criteria, one must consider the individual state Local Coverage Determinations (LCDs) that provide payable diagnosis codes of anesthesia for colonoscopy and EGD procedures. See Table 2. Currently, only 19 of the 50 states have such LCDs for this type of anesthesia (AK, AZ, CO, DC, DE, MD, MT, ND, NJ, NM, OK, OR, PA, SD, TX, UT, VA, WA and WY). All 19 stateswillpayanesthesiaforGIprocedures if there is a diagnosis code submitted for morbid obesity (ICD9-CM 278.01) or anxiety (300.00), which are common underlying conditions in many patients. Fourteen of the states cover anesthesia when the patient has a diagnosis code submitted for asthma (493.90). Four states in particular (DC, MD, NJ and PA) will also consider coverage for this service when documentation shows “low threshold for pain”, “combative patient”, “pediatric patient” or “use of Propofol/ Diprivan” (V58.83). It is crucial for anesthesia groups to be familiar with their states’ LCD policies and to incorporate common underlying conditions onto their superbill. All too often, patients have co-morbidities that could generate payment for the anesthesia service, but the group only bills out the diagnosis code for the surgical procedure, and not the covered diagnosis code representing the patient’s underlying condition. Conversely, it is also interesting to notethemostcommonlydenieddiagnosis codes by all insurance companies. Just like submitting a claim for any other anesthesia procedure, the greater the specificity of the diagnosis, the greater the chance for reimbursement. Generic ICD-9 codes like 535.50 (Unspecified Gastritis), 530.81 (Esophageal Refulx), 455.6 (Unspecified Hemorrhoids), 578.9 (Unspecified Gastric Hemorrhage) and 789.7 (Unspecified Abdominal Pain – Colon) make up five of the top ten diagnosis denials across the country. Routine screening codes V76.51 and V58.83 are also problematic if a pre- authorization has not been obtained and the patient has not signed an Advanced Beneficiary Notice, which typically allows you to bill the patient directly when a medical necessity denial occurs. See Figure 2. Continued from page Medicare covered diagnosis codes   278.01 Morbid Obesity 300.00 Anxiety 493.90 Asthma V58.83 Use of Propofol/ Diprovan Low threshold for pain (individual consideration) Combative Patient (individual consideration) Pediatric Patient - Medicare eligible (individual consideration) AK x x x         AZ x x x         CO x x           DC x x x x x x x DE x x x         MD x x x x x x x MT x x x         ND x x x         NJ x x x x x x x NM x x           OK x x           OR x x x         PA x x x x x x x SD x x x         TX x x           UT x x x         VA x x           WA x x x         WY x x x         TABLE 2
  • 7. The Communiqué Summer 2010 Page 7 Rarely do anesthesia practices have the flexibility to pick and choose which types of surgical cases they will cover and endoscopy is no exception to this. While there may be some endoscopy clinics that will approach anesthesia practices soliciting coverage agreements, these are the exception rather than the norm. For the most part a facility has one or two rooms dedicated to endoscopy and these must be covered as part of the overall anesthesia contract with the hospital or surgery center. So why perform a detailed analysis of just one line of business if there are no strategic options to be discussed? The answer, based on this review, is that each line of business may entail its own unique set of financial, compliance and staffing challenges. Practices should always be grateful for lines of business that are consistently profitable. They also need to know the likelihood that they will remain profitable into the future. Because specific types of cases may require greater attention to governmental and private payer policies than others, this becomes critical and useful information for the effective management of the billing process. When put in the context of the practice as a whole, the staffing requirements of one line of business may have a significant impact on the overall staffing requirements of the practice. This could be especially significant for a practice considering modifications to its staffing model, such as the ratio of physicians to CRNAs. In conclusion, anesthesia for GI endoscopy has been and continues to be a viable income source for anesthesia groups. The key to success is understanding your payer policies, indicating underlying conditions and co-morbidities, and using advanced beneficiarynoticessothatyoucanbalance bill the patient, when appropriate. Due to this fact, clinical coverage of endoscopy is likely to become more competitive in the future, especially between that of traditional anesthesia practices and CRNA services. Proposals for coverage may also start to involve more aggressive pricing and lower margins. The key to this discussion is not whether an anesthesia practice should pursue clinical opportunities to provide anesthesia for endoscopy (as this answer seems quite clear), but rather how to manage those coverage requirements that have already been committed to. In this sense, the complexity of variables associated with providing anesthesia for endoscopy is a preview of coming attractions and a reminder that today’s larger and more complex practices must manageeachlineofbusinessappropriately and with caution. It is not enough to look at the overall bottom line of the practice, but rather the specific factors that impact that bottom line. Endoscopy has proven to be a windfall for many practices over the past few years, but this bonus must be evaluated in terms of the value of its offset to other lines of business that may not be so profitable. In this sense endoscopy is a case study, and the same analytical criteria for this line of business should be applied to all other aspects of the practice in order to achieve success. * * * The authors gratefully acknowledge the assistance of ABC client Richard Bindseil, D.O. of Longmont, Colorado. % Denial By Diagnosis Code 0.00% 2.00% 4.00% 6.00% 8.00% 10.00% 12.00% 14.00% 16.00% 18.00% 211.3 V76.51 562.10 535.50 530.81 455.6 578.9 789.07 V58.83 569.3 FIGURE 2 Percentage Denial by ICD-9 Diagnosis Code Mr. Locke is respon- sible for the scope and focus of services pro- vided to ABC’s largest clients. He is also re- sponsible for oversight and management of the company’s pain management billing team. He will be a key executive contact for the group should it enter into a contract for services with ABC. He may be reached at Jody.Locke@anesthesiallc.com Hal Nelson, Director of Compliance and Client Services As a nationally known expert in the field of anesthesia, Nelson brings a variety of expertise to ABC cli- ents in helping medical practices resolve anesthesia coding, billing and compli- ance challenges. His experience navigat- ing through Medicare billing regulations, anesthesia and pain coding, payer audit defense, charge ticket review, compliance plan development and physician docu- mentation analysis ensures ABC clients have a safety net for these challenging is- sues. He has 20 years experience on both the payer and billing side and is one of the specialty executives in charge of support- ing sales, marketing, operations, auditing and compliance initiatives.
  • 8. The Communiqué Summer 2010 Page 8 • The business entity determines and provides the equipment and supplies. • The business entity determines who is to assist the individual in performing the work. • The business entity has the right to determine which specific individual is to perform which task, and in what sequence or order the work is to be done. • The individual is paid on a standard wage rate for weekly, hourly, or other period of time, rather than a flat fee for the job. • The individual is restricted in his or her ability to achieve a “profit” by, for example, performing the service in a more efficient manner or by subcontracting the work to someone to perform it at a lesser rate. • The relationship between the individual and the business entity is a long-term one. • The individual cannot perform other services either on his or her own behalf or for other business entities. • The entity is subject to an agreement with a third party (e.g., a hospital) that obligates it to exercise control over those individuals who render services for it. There are situations in which the relationship between a physician and a physician group is such that the individual can properly be considered an independent contractor. Examples of this would include a physician who provides services on a temporary locums basis, or a radiologist who performs teleradiology services for a teleradiology company, but provides those services out of her own home using equipment that she has purchased herself, has her own malpractice insurance, and provides services for multiple teleradiology firms. In the context of a typical anesthesia group it would be extremely difficult to argue successfully that full-time regular staff are anything other than employees. This would be true even if the physician or other professional had a service contract that stated that he or she was an “independent contractor,” or even if the medical practice contracted with a legal entity such as a corporation or limited liability company for the services of the individual. Payroll Tax and Withholding Issues. From a tax perspective, the risk in mischaracterizing individuals as independent contractors is that the group can be liable for the payroll taxes (primarily Social Security, Medicare, and federal unemployment) that employers are obligated to pay and for withholding tax obligations. The response that we have sometimes heardwhenwehaveraisedconcernsabout independent contractor characterization is that “we have been doing this for years and it has never been a problem.” While that may well be true, times are changing. Federal and state agencies and officials, in the face of record deficits, are beginning to aggressively pursue businesses that treat “employees” as “independent contractors.” The 2010 federal budget assumes that federal enforcement activities in this area will yield at least $7,000,000,000 of additional revenue over 10 years. A number of states have begun to step up activity as well. A report issued by the Ohio Attorney General, for example, estimates that Ohio currently has approximately 92,500 misclassified workers who have cost the state up to $35,000,000 a year in unemployment insurance taxes, up to $103,000,000 per year in Workers’ Compensation premiums, and up to $223,000,000 in income tax revenue. A bill pending in the Ohio legislature would create narrow criteria for independent contractor status and provide sweeping new investigation and enforcement mechanisms to combat what is viewed as rampant worker misclassification. Simply put, any physician group that characterizes its regular personnel as independent contractors should assume that at some point this characterization will be challenged by either state or federal agencies. Retirement Plan Issues. One of the reasons sometimes given for classifying Risks and Issues in Treating Anesthesia Group Professional Staff As Independent Contractors Continued from page 3
  • 9. The Communiqué Summer 2010 Page 9 personnel as “independent contractors,” is so “we do not have to include them in our pension plan.” Sometimes this occurs in a situation in which certain, selected personnel are treated as “employees” who participate in the plan while others are treated as independent contractors who do not. In other situations, everyone is treated as self-employed independent contractors who are free to establish their own personal pension plans, often through wholly-owned legal entities. The subject of what the Internal RevenueCodeandIRSregulationsrequire with regard to the inclusion of personnel in qualified retirement plans could be an article unto itself. Those requirements have evolved over the years often in response to creative efforts by businesses and their advisers to devise means to exclude personnel from participating. Simply calling an individual an “independent contractor” will not guarantee that a court or the Internal Revenue Service might not take the position that the individual is an “employee” who should be eligible to participate in a plan sponsored by the group practice or by the owners of the group practice. If a court or the Internal RevenueServiceweretodeterminethatan individual who had been characterized as an “independent contractor” was actually an “employee,” and if the individual otherwise met the test for participating in a qualified retirement plan sponsored by the group by virtue of age, length of service, and hours of service, failure to have included the individual as a participant in the plan could cause the disqualification of the plan and could give rise to a claim by the individual for benefits. The Internal Revenue Code abounds with concepts such as “affiliated service groups,” “controlled groups,” and “leased employees” all of which must be considered in determining whether a qualified retirement plan has met the participation standards necessary to assure tax qualified status. Of particular significance is the concept of a “leased employee” under which even a true “independent contractor” may be deemed to be an “eligible employee” if he or she renders 1,500 hours or more of service in a year for the group. An annual exercise for any group that maintains a qualified plan, or by any group physician who considers himself or herself an independent contractor of the group and who maintains his or her own retirement plan, is to apply the provisions of the group’s plan, or his or her plan, and the provisions of the Internal Revenue Code to each employee or independent contractor who provides services to the group. To the extent that an individual is not being treated as a participant in any such plan, the group or the physician should confirm that such non-participation is consistent with both what its own plan provides and with what the Internal Revenue Code requires. Liability and Insurance Issues. A person or business entity that engages the services of a true independent contractor is generally not responsible for the acts or omissions of the independent contractor. There are some exceptions to this principle. An entity will, however, be liable for the acts or omissions of its employees in the course of employment under the legal doctrine of respondeat superior. It would be difficult for a medical group to make a convincing case that, for example, an anesthesiologist who was regularly performing services for the group, and for whose services the group billed, should be considered anything other than an “employee” for liability purposes. From the standpoint of professional liability insurance, where professional personnel are treated as “employees,” generally the group will provide insurance coverage under one policy in which both the personnel and the group are named insureds. On an ongoing basis Continued on page 10
  • 10. The Communiqué Summer 2010 Page 10 Risks and Issues in Treating Anesthesia Group Professional Staff As Independent Contractors Continued from page 9 the only complication (at least where the insurance was of a “claims-made” type) involves “tail” coverage after an individual has terminated employment. Often, independent contractors are expected to provide their own professional liability insurance. While this can eliminate issues involving “tail” coverage in that, for example, a physician can retain the policy even after terminating his or her relationship with the group, other issues exist such as: 1. Does the group as an entity have any ongoing coverage for its li- ability for the contractor’s acts or omissions? 2. What is the source of coverage for non-physician professional staff, both during and following asso- ciation with the group? 3. Are the terms of the various liabil- ity insurance policies maintained by independent physicians in compliance with the requirements of the group’s service agreements (e.g., with its hospital)? 4. The involvement of a host of in- surance companies can create issues under the group’s contract with a hospital or medical facility that may require that any policy be rated at a certain level, or that the policy name the hospital or medi- cal facility as an additional insured or require notice of change or termination. Negotiating issues, such as indemnification obliga- tions, under hospital contracts is a simpler process where there is only one insurance company involved. 5. While independent contractors could be covered under one com- mon policy obtained by the group, this could be viewed by the Inter- nal Revenue Service as evidence that the independent contractors were actually employees, par- ticularly where the cost for the insurance was paid by the group. The existence of appropriate Workers Compensation coverage should be confirmed for each person who is treated as an independent contractor. An “employer-employee” relationship is more conducive to assuring compliance with Workers’ Compensation and Unemployment Compensation legal requirements. Having appropriate Workers’ Compensation coverage in place is extremely important in any situation involving a work related injury. It may be possible for a group to provide Workers’ Compensation coverage for independent contractors, or the independent contractors may provide their own coverage. However, confirming the existence of contractor provided coverage may be difficult. A lack of coverage can present the group with a significant financial loss. Summary If your group uses the services of inde- pendent contractor personnel, whether they be health care professionals or other personnel, you should reassess your situ- ation. Given the announced scrutiny that independent contractor status is receiv- ing at both the state and federal level, what may have “worked” or been “under the IRS radar” in the past will not likely continue to do so in the future. John T. Mulligan is a member of the law firm McDonald Hopkins, LLC, in its Cleveland, Ohio office. McDonald Hopkins has other offices in Chicago, Detroit, Columbus, West Palm Beach, and Dennis, Mass.  Mr. Mulligan’s practice focuses on the representation of physicians and physician groups, with a particular focus on the representation of hospital-based groups. He is listed in the “Best Lawyers in America” for health care law. He can be reached at (216) 348-5435 or jmulligan@mcdonaldhopkins.com.
  • 11. Some physician groups, including anesthesia groups, treat certain of their personnel (physicians, CRNAs, office staff) as independent contractors rather than as employees. From an operational standpoint, the primary differences between independent contractors and employees are that independent contractors are paid a gross amount of wages, with no withholdings or payroll taxes being taken or paid on those amounts, and receive no fringe benefits. Many medical practices which have treated certain personnel as independent contractors are reassessing this treatment. This reassessment has been prompted by recent announcements by federal and state taxing authorities that they view in- dependent contractor treatment as a de- vice that costs them tax revenues, and that they will be aggressively challenging it on the grounds that many “independent con- tractors” are actually “employees.” It is the purpose of this article to describe some of the issues involved in converting indi- viduals previously treated as independent contractors to employee status. 1. The Starting Point. The starting point for any practice that treats personnel as independent contractors is to determine whether, in fact, the practice has been improperly treating individuals who were actually “employees” as “independent contractors”. There is nothing necessarily illegal or otherwise improper in treating a particular individual as an independent contractor if, in fact, the nature of the relationship between the practice and the independent contractor can justify that treatment. To the extent that you have determined that certain personnel should not be treated as independent contractors given the nature of their relationship with your practice, the next step is to determine if there is something you can do to change the nature of the relationship going forward so that you can justify independent contractor treatment. In many cases it may be difficult if not impossible to sufficiently change the nature of the relationship (particularly with respect to the key ingredient which is the control by the practice of the services of the individual) to such a degree that independent contractor status can be justified on a going-forward basis. Assuming that you have reached the determination that some, if not all, of your independent contractor personnel should be treated as employees, then you face a number of practical issues and questions. 2. When To Make The Conversion. From an administrative perspective, the ideal effective date for the conversion would be January 1. If your practice has a fiscal year which ends on a date other than December 31, you could consider using the firstdayofyourfiscalyearastheconversion date. However, making the conversion on a date other than the start of the calendar year will result in the individual receiving both a 1099 and a W-2 for the same year, a fact that may increase the likelihood of scrutiny by taxing authorities. The Communiqué Summer 2010 Page 11 Continued on page 12 Practical Considerations in Converting Personnel from Independent Contractor Status to Employee Status John T. Mulligan, Esq. McDonald, Hopkins, LLC, Cleveland, OH Jill E. Thompson, CPA ABC Vice President of Financial/Consulting Services
  • 12. The Communiqué Summer 2010 Page 12 That being said, the sooner you correct the situation the sooner you will end the period for which you could experience tax-related or other problems, and any date during the year could be used. 3. Be Committed To Seeing The Conversion Process Through. The two primary stumbling blocks that you will likely face in converting independent contractors to employee status are: (a) as discussed further below, it may increase your personnel costs; (b) some of your personnel may be resistant to the change. Youneedtobepreparedforresistance on the part of at least some of your independent contractors. Be prepared to hear something such as: “My accountant [wife/husband/next door neighbor] told me I qualify as an independent contractor, and I don’t have to do this. She [he] also said it would cost me money.” Some of your independent contractor personnel will have grown accustomed to thatstatus. Someofthemmayhavecreated their own fringe benefit or retirement plan structure. Some of them may even have formed their own corporations or limited liability companies. They may see a host of tax planning or other advantages in their independent contractor status, most or all of which will be affected, if not eliminated, by becoming employees. They may well have an exaggerated view of the significance of these “advantages.” Some of these “advantages” may exist only because they or their advisors have taken some questionable actions with regard to the recognition of income or expenses. Because you may well encounter resistance and difficulties in the conversion process you need to be committed up front to seeing the process through with regard to every individual who should be treated as an employee— no exceptions. 4. Assessing The Financial Impact On Your Independent Contractor Personnel And On Your Practice. The most immediate impact on your independent contractors is that no longer will they receive a flat dollar amount as wages. Instead, they will receive some form of time-based rate or salary, with federal, state and local taxes taken out, and with payroll taxes being paid. Trying to maintain the same out-of- pocket dollar cost for an individual as an employee that you had for that individual as an independent contractor, while at the same time keeping the individual in the same relative economic position, will be difficult. Simply as an example, assume that you were paying an independent contractor $15,000 a month. Your total out-of-pocket expenditures over the course of a year would be $180,000. Assume for this example that the practice is also providing professional liability insurance. If you view the $180,000 as a maximum “economic package,” once you convert the individual to employee status, those wages will no longer be paid in equal monthly installments of $15,000 but, instead, will be allocated among a variety of items such as: • Employee and employer half of social security and medicare; • Withholding taxes; • Workers compensation and unemploy- ment compensation premiums; • Health and other benefits; • Cme allowance, dues, etc.; • Retirement plan contribution; • Net salary or hourly amount – meaning whatever is left. Your independent contractors will want to know in advance how this allocation of their wages will impact them, particularly in terms of net “dollars in my pocket.” What makes an assessment difficult is that every individual’s situation will be different. Much of the challenge that you will face will be in educating affected personnel on the true implications of the conversion. That will take time and effort. You will need to appreciate how the change will affect them. There will need to be advance discussion with your independent contractors with regard to the economic impact of the change. From an employee morale perception, you obviously do not want to be in a situation where at the end of their first month as “employees” they are shocked to receive a pay stub that shows their accustomed $15,000 reduced to a net paycheck of $8,000 or perhaps even less. Make certain that you have consulted with your professional advisers before you Practical Considerations in Converting Personnel from Independent Contractor Status to Employee Status Continued from page 11
  • 13. have discussions with your personnel and before you make promises with respect to financially related adjustments. For example, an individual who wishes to maximize his or her take home pay may request that you exclude them from participation in your qualified retirement plan. This may not be possible under the tax laws that regulate qualified retirement plans. You obviously cannot promise something that is not possible. Depending on the circumstances, you may find that the only way to make the conversion economically palatable to your personnel is to increase the amount you pay them. If so, you need to decide how much additional cost your practice can handle. 5.Adopting New Service Agreements With The Affected Individuals. If you have had written agreements with independent contractors such as physicians or CRNAs, those agreements should be formally terminated and replaced with written employment contracts that contain language consistent with an employer-employee relationship. If you have not previously had written service agreements with the independent contractors it is recommended that you enter into written employment contracts with each of them (or at least with physicians and CRNAs), clearly identifying them as “employees” subject to your control. If nothing else, these new contracts would support an argument that the nature of the relationship between the practice and the individual has changed. 6. Issues Involving The Practice’s Qualified Retirement Plan. Except, perhaps, under the “leased employee” concept discussed below, the independent contractorshaveprobablynotbeeneligible to participate in any qualified retirement plan that the practice maintains. You should review the practice’s current plan document. How does it address (if at all) participation by independent contractors? Does it deal with the participation rights of individuals who under federal pension laws are considered to be “leased employees?” The practice may find that it has been administering its retirement plan in a manner not consistent with what its own plan document or the Internal Revenue Code provides or requires. Remedying any such problem can be expensive, but it is preferable to risking the tax qualification of the plan. Of all the issues that surround converting independent contractors to employees, few are as potentially complicated as those involving retirement plan participation. For example: (a) When will the former independent contractors become participants in the plan? (b) Is there any way to exclude them from participation? (c) If the plan has a vesting schedule, must (or should) it give them vesting credit for the years in which they were independent contractors? (d) How much will be contributed to the plan on their behalf, and what impact will this have on the overall cost of maintaining the plan? One of the risks of treating personnel as independent contractors who are not eligible to participate in the practice’s qualified retirement plan is that if the Internal Revenue Service were successful in demonstrating that they were, in fact, “employees”or“leasedemployees,”thefact that they were not included in the plan will create tax qualification issues for the plan. To minimize any risk, it would generally be recommended that individuals being converted from independent contractor status to employee status be brought into the plan effective upon their conversion or, in effect, be given credit for eligibility and vesting purposes for all of their years of service as independent contractors. This may create issues. The indepen- dent contractors may have been maintain- ing their own retirement plans that they would prefer to maintain. They may have been maintaining no retirement plan, and have become accustomed to a higher level of earned income. They may have been content with IRA contributions. There is no way for an “employee” to contribute to his or her own qualified retirement plan based on wages received as your practice’s employee, and qualified plan participants with income above a certain level cannot contribute to IRAs. From the practice’s perspective, including them as retirement plan participants may significantly increase overhead costs unless the plan contribution cost can be offset by a wage reduction. One way to resolve the problem of increased operating expenses is to exclude the former independent contractor personnel from participating in the plan. There are ways in which persons who are consideredhighlycompensatedemployees can be excluded from participating in the plan. However, excluding employees from participating in a qualified plan in this manner is something that should be approached with great care. Do not attempt to accomplish this by having them execute “waivers” of participation. The Communiqué Summer 2010 Page 13 Continued on page 14
  • 14. The Communiqué Summer 2010 Page 14 Another approach to control retirement plan costs may be to redesign your plan. For example, many practices have been able to reduce their employer contribution costs by utilizing age weighted plans or by incorporating 401(k) provisions under which a large component of the overall contribution is from the employee and not from the practice. The starting point for any practice in dealing with this issue would be to meet with your accountant, your attorney, or retirement plan consultant or advisor and consider the options that may exist for cost control while at the same time bringing the former independent contractors into the practice’s qualified plan. A comprehensive retirement plan assessment will take time. The process should begin a number of months in advance of the effective date of any change so as to enable everyone to understand the issues, consider the alternatives, and adopt a course of action. A practice will need to address the issue of whether an individual who has beenimproperlytreatedasanindependent contractor could assert legitimate a claim for prior retirement plan benefits of which he or she was deprived. Some of the former independent contractors may say to themselves something like: “If I am now an ‘employee’ but nothing has really changed, wasn’t I really an ‘employee’ all along and don’t I have a claim for past retirement plan benefits?” Such a claim is possible. Dealing with this by making “catch-up” retirement plan contributions may be out of the question for a variety of reasons. Asking former independent contractors to “waive” any claim for past benefits will create issues as well. An effective waiver would need to be supported by “adequate consideration.” An independent contractor would need to be provided information with respect to how much the retirement plan benefits he or should would have received had he or she been treated as a participant in the plan. Trying to obtain a waiver may cause more problems than it would solve. 7. Other Benefit Plans. The implications with respect to other benefit plans such as health insurance, disability insurance, group term life insurance, cafeteria plans, or medical expense reimbursement plans also need to be considered. The implications of the new federal healthcare reform legislation, the provisions of which are beyond the intended scope of this article, would need to be considered. Historically, the only such benefit programs common to group medical practices that were affected by legal participation requirements were medical expense reimbursement plans, cafeteria plans, and group term life insurance plans. The questions that will arise in the context of these plans involve whether the practice will need to provide benefits to the individuals being transferred to employee status, and at what level. In the case of some plans, such as medical expense reimbursement plans, there are specific nondiscrimination rules under the Internal Revenue Code. 8. Professional Liability Insurance Considerations. If the practice has been covering independent contractors under its professional liability insurance, converting independent contractors to employee status may not entail complications. If the independent contractors have been maintaining their own insurance, the implications of this transition on their insurance coverage will need to be considered. For example, if they will be transitioned into the practice’s coverage, will that coverage pick up their “prior acts”, or will “tail” coverage be needed on their prior coverage? To the extent that the former independent contractorsbecomecoveredbythegroup’s insurance policy, how will “tail” coverage in the event of subsequent termination of employment be handled? Dealing with these issues will necessitate close coordination with the practice’s insurance agent. It will also necessitate an understanding of exactly what coverage the independent contractors currently have. Summary. Theconversionofindependent contractors to employee status is a complicated and time consuming process. If done incorrectly, it can create personnel related problems. As a practice embarks on this process its leadership needs to give itself sufficient time to consider and resolve all the issues which will be presented. The close, coordinated involvement of professional advisors will be critical. Practical Considerations in Converting Personnel from Independent Contractor Status to Employee Status Continued from page 13
  • 15. The Communiqué Summer 2010 Page 15 As American professionals continue to try to strike an appropriate work/ life balance, many physicians and nurse anesthetists are asking the question to their employers or prospective employers, “What is your policy on family leave?” A federal statute, the Family and Medical Leave Act of 1993 (FMLA) mandates protection for employees who need time off from work due to personal and/or family medical matters. Although the application of this legislation depends upon the number of employees in an organization, all employers are faced with the need to address this issue for their employees. To help you gain a brief understanding, we have included here a general overview of the FMLA as well as some guidance on creating your own organizational policy. Fundamentals of FMLA: The FMLA is a federal government mandated leave benefit that employers with more than fifty (50) employees are required to provide. Under the FMLA the employer is required to protect an employee’s position with the employer should the employee need to be away from his or her job for any period of time up to twelve (12) weeks annually (calendar year or any twelve month period) if certified by his or her physician for a medical reason for him/herself or a family member. Under the FMLA, although the employer is required to maintain the employee’s position while away from work, the employer is not required to pay the employee. It is at the employer’s discretion to develop a policy by which to administer the FMLA benefit for its workforce. The employer can either require an employee to use his or her accumulated paid time off (PTO), or the employer can require the employee to take the time off without pay, or some combination. If the employee is covered by a group and/or individual short-term disability (STD) insurance policy, he or shemay apply for the benefits under that policy in accordance with all rules and provisions of the policy. As stated, the employer has the ability to determine the specifics of the group’s administration of the FMLA benefit, so long as the policy is non-discriminatory and available to all employees. Groups not required to follow the FMLA: Even though compliance with the FMLA is only required for employers who employ fifty (50) or more employees, many smaller groups struggle with handling cases where employees need to be away from their jobs for an extended period of time, such as pregnancy leave. In order to protect the employer and the employee, the employer should again decide upon a policy for handling situations where employees need to be away from their jobs for an extended period of time when certified by a physician for a medical need. Each group will opt to implement the policy that best meets its needs considering both coverage needs and expense management. Most Common Scenarios: • Employee is required to use PTO time in order to be paid while off work • Employee is required to take time off without pay, but may use his or her STD if applicable • Employee is required to use a percentage (%) of his or her accumulated PTO and take the remainder without pay • Employee may take a portion of the time off without pay and must then use his or her PTO for any additional time needed. For some anesthesia practices administration of the anesthetics and care of the patient becomes the less stressful part of their day. The administrative responsibilities of managing the group practice can be overwhelming, especially when facing issues of staff management and policies and procedures. It is always advisable to maintain and regularly update your practice’s administrative handbook to address items such as discussed above. Certainly you should be careful to always contact your corporate attorney for guidance for assistance with drafting and managing your administrative handbooks in accordance with all federal and state laws and non-discrimination regulations. The Family Medical Leave Act Stephanie J. Zvolenski, MBA ABC Financial Manager
  • 16. The Communiqué Summer 2010 Page 16 Opportunity and risk. Risk and opportunity. Janus-like sides of the same coin. Of course, the greater the opportunity, the greater the risk. In a medical practice sense, anesthesiologists are surrounded by risk and are supremely aware of its existence. On a daily basis, you administer drugs that under other circumstances would be deadly. You’re also cognizant of the risk- reward analysis made by your patients in undergoing surgical procedures, as well as your own need to obtain informed consent from them. But many anesthesiologists are oblivious, or even averse, to the risk- reward duality in a business sense as it impacts their anesthesia group. Inthegroupbusinesscontext,success, that is, opportunity, is associated with the income side of the equation: increasing realized income per unit, increasing the number of well-reimbursed units generated, and increasing the amount of hospital stipend dollars received. Anesthesia groups are generally less impacted by the risk, or expense, side of the equation. But note the word generally, because it fails to take into account the enormity of the impact on the group of an adverse event – an essential step in risk analysis. It’s a mistake to assume that the probability of an event is the same as its risk: both the probability of an event and the severity of its potential impact must be estimated to properly assess risk. For example, returning for a moment to the medical practice, as opposed to business, context, even though one might believe that a malpractice claim is a rare occurrence, the enormity of a potential adverse award drives most physicians to carry malpractice insurance. Business side risk is inherent in any anesthesia group. It exists within the group itself as well as from outside sources. And, it’s a fallacy to believe that business risk can be avoided. It can only be managed. Let’s look at several examples of anesthesia group business risk and the ways that it can be managed. EXAMPLE 1. Your Group’s Services Are No Longer Needed Despite the fact that your group has been providing services pursuant to an exclusive contract with St. Mark’s Community Hospital for years, the hospital’s CEO has been seen giving a guided tour of the facility to the leader of a competing anesthesia group. The next thing you know, the CEO is mumbling about sending out an RFP instead of simply starting the usual contract renewal negotiations. You may have believed that the probability of nonrenewal is low, but if the result is the mooting of your group’s existence and the need for each of your group members to find new positions (and possibly sell their homes and find new schools for their children) the “cost” could be extremely high. What proactive steps has your group taken over the course of years to maximize surgeon support, to provide a level of service that cannot be duplicated, to “burrow” yourselves so deeply within the hospital’s operation that replacing your group would wreak havoc on the core operation of the hospital? What steps has your group taken to assure that it has an existence beyond simply providing services at St. Mark’s? If the answer is “nothing,” what alternatives do your group’s members have in the event that the contract with St. Mark’s is not renewed? Note also that these latter steps also apply in two other related risk situations: The risk of St. Mark’s closure and the risk that St. Mark’s imposes a staff model solution in which your group’s physicians are not invited, or do not wish, to participate. EXAMPLE 2. I Deserve To Be A Partner Dr. Smith has been providing services through your group for five years as a subcontracted anesthesiologist. He has done all assigned cases, has never caused any trouble, and is regarded as a Managing For Success Requires Managing Risk Mark F. Weiss, J.D. Advisory Law Group Inc., Los Angeles, CA
  • 17. competent anesthesiologist. Your group has been in existence for fifteen years. You, and each of you four partners, devote substantial time to administrative duties in addition to full caseloads. Each has invested significant sums in the group in order to get it though past cash flow crises. Dr. Smith announces that he “deserves” to be a partner and should be admitted without any, or perhaps only a token, buy-in. He either does not understand, or purposefully ignores, the business risk that you and your partners took in forming the group and continue to take in respect of its operation. On the other hand, the group’s organizational documents do not contain any partnership protection language – to the contrary, Dr. Smith asserts that the language of his subcontract makes him the owner of his own independent practice and claims that “his accounts receivable” are indeed his, and that he will “take them” if he is not made a partner. How has your group coordinated its organizational documents and its agreements with employed and subcontracted physicians to minimize this risk? EXAMPLE 3. The Surgery Center Is My Own Deal Dr. Jones is a shareholder in your group, Orange Leaf Anesthesia, Inc. For thepastseveralyears,she’sbeenscheduled by Orange Leaf to cover a slot at an ASC that generates significant collections for the group.Jones now announces that she is leaving your group and that she will be covering the ASC for her own account. What steps has your group taken to control or prohibit competition? If covenants not to compete are enforceable in your state, have you utilized them? If they are not, have you implemented non- compete proxy techniques in your group’s agreements to dissuade competition? Example 4. You’ve Mismanaged The Group, So Give Me My $500,000 As the senior partner of your group, you’ve been in charge of its business operations for many years. Despite the growing Medicaid and Medicare populations in your main facility’s service area you’ve been able to expand the group’s business to other facilities and have advanced the group members’ compensation. Nonetheless, two of your partners claim you have mismanaged the group – had you managed it “properly,” the group’s profits would have been significantly higher and those profits would have increased partner distributions. They sue. Your group has obtained malpractice coverage for each of its doctors, has purchased entity coverage from your malpractice carrier in respect of claims against the group itself, and has even purchased general liability coverage insuring the group against third party property damage and bodily injury claims. But has your group obtained directors and officers (known in the insurance industry as “D&O”) coverage? D&O insurance protects directors and officers, and in the context of a partnership, its managing members, from liability arising from actions connected to those positions. Different forms of D&O exist to expand coverage beyond the basic level. For example, some D&O policies provide employment practices liability coverage protecting against employment related claims such as wrongful termination and sexual harassment. And, has your group placed limitations on liability, forum selection provisions and, potentially, arbitration provisions,initspartnership/shareholders agreements and agreements with employed or subcontracted personnel? In Conclusion Risk cannot be avoided as it goes hand in hand with opportunity. Although risk can never be eliminated, it can be managed. Successfully managing risk requires that you take a proactive approach: Although some elements of risk can be managed after the event, you’re strongly advisedtoengageintheproperstrategizing and implementation far in advance. The Communiqué Summer 2010 Page 17 Mark F. Weiss is an attorney who specializes in the businessandlegalissues affecting anesthesia and other physician groups. He holds an appointment as clinical assistant professor of anesthesiology at USC’s Keck School of Medicine and practices nationally with the Advisory Law Group, a firm with offices in Los Angeles and Santa Barbara, California. Mr. Weiss provides complimentary educational materials to our readers at www.advisorylawgroup.com. He can be reached by email at markweiss@ advisorylawgroup.com.
  • 18. The Communiqué Summer 2010 Page 18 Managed Care Participation – Yes or No?Susan K. Firestone Administrator, Department of Anesthesiology NYU Langone Medical Center, New York, NY Executive Board, MGMA Anesthetic Administration Assembly As the sole anesthesia provider in a large academic medical center, we have been advised by School and Hospital administration that they would prefer we be participating with all managed care plans. Trying to honor that request with some of the managed care contracts offered to us provides us with an on going dilemma. How do we keep our bottom line in the black and continue to stay in the good graces of the administration? Admittedly this is quite the balancing act and some days we tip to one side. We struggle with contracts that have been made with all other clinical departments, and we include clauses that providers will pre-certify all care, bill using CPT codes instead of ASA codes, provide proof of referral, and when providing “non-covered services,” adhere to policies such as the following: In the event that an Enrollee requires or requests a service that is not covered or authorized by Plan, and such service is also not covered by the Program through which Enrollee is entitled to receive services, Provider or Personnel must: 1. inform the Enrollee that the Enrollee will be personally responsible for all fees related to the service and the estimated fee for the service. In the event that Provider or Personnel has not been given a list of Health Care Services by Plan and/ or Provider or Personnel is uncertain as to whether a service is covered, Provider or Personnel shall contact Plan and obtain a coverage determination prior to advising an Enrollee as to coverage and liability for payment and prior to providing the service 2. obtain an executed acknowledg- ment of financial responsibility from Enrollee or Enrollee’s legal representative prior to the time such services are provided 3. obtain Plan’s express prior approval 4. obtain patient signature authori- zation for non-covered services, maintain all medical records, etc. Managed care companies that will not “fine tune” agreements that include clauses such as these place us in uncomfortable positions. So, how do we handle it when untenable clauses will not be deleted and rates are below what we know we are able to negotiate elsewhere? We do not participate. As such, we get many unhappy patients. We have provided letters to all the surgeons (600+) who provide care in our hospitals and requested they share the letter with their patients who are being scheduled for surgery. The letter is our attempt to advise the patient that they will be having
  • 19. The Communiqué Summer 2010 Page 19 surgery and that they should contact their insurance company to determine if we participate with them and to contact our billing company should they wish to get an idea of the cost. We have explained to the surgeons that this letter also helps their office staff and them as they often bear the brunt of patient complaints when an anesthesia bill is received. Additionally, we have placed the letter in the patient packet that the hospital gives out and have made the same letter available in Pre-Admission Testing. Despite all of these avenues we still receive patient complaints. Whenthepatientcontactsourbilling company to say that they were not aware they were going to have anesthesia, that they did not realize anesthesia would be a separate bill or that they had requested a participating anesthesiologist and did not get one and therefore should not be responsible for the co-payment, co- insurance, deductible or full bill, the patient is referred to me. Clearly this is high on my list of items I do not like about my job. With as much patience as possible I explain to the patient that we have attempted to let them know ahead of time about the anesthesia portion of their care and ask if they received the letter from the surgeon’s office. The majority of times the patient says no, they did not receive such a letter. We have since revised our policy and requested that the surgeon’s office have the patient sign the letter and keep a copy in their file. Now, when the patient says they didn’t know, we will contact the surgeon’s office to see if the signed copy of the letter is in their file. Although we have tried to cover all bases, we have learned that many surgeons, for a multitude of reasons, do notwishtogivethelettertotheirpatients. In those instances we reaffirm that the letter was also in the packet they received from the hospital. We suggest to the patient that they contact their insurance company and explain that they went to a participating hospital and a participating surgeon and did not have the option of a participating anesthesiologist. They have adhered to everything they could have per their contract and since they could not go around the corner to a participating anesthesiologist and back to the hospital, they expect the insurer to cover the bill in full. I have received many phone calls back from patients advising that this has worked for them. As with many issues in healthcare this is not a good system. Patients are caught in the middle at the worst possible time, when they are recuperating from surgery, and confusing medical bills fill their mailboxes. Would I love to have this issue go away by accepting every contract put before me? Yes. However, I have a job to do and one of the primary functions of that job is to insure there are sufficient funds to cover anesthesiologists’ salaries, benefits, malpractice, etc. Without the funds to cover these costs there would be no anesthesiologists to render the care patients need. Talk about being stuck between a rock and a hard place! Susan K. Firestone is the administrator of anesthesiology at NYU Langone Medical Center in New York City. She has worked in private and academic anesthesia practices for the past 14 years and can be reached at Susan.Firestone@nyumc.org.
  • 20. Professional Events ANESTHESIA BUSINESS CONSULTANTS 255 W. Michigan Ave. P.O. Box 1123 Jackson, MI 49204 Phone: (800) 242-1131 Fax: (517) 787-0529 Web site: www.anesthesiallc.com Date Event Location Contact Info Sept. 24-26, 2010 Ohio Society of Anesthesiologists Annual Meeting Hilton Columbus/Polaris Columbus, OH www.osainc.org Sept. 24-26, 2010 North Carolina Society of Anesthesiologists Annual Meeting Pinehurst Resort Pinehurst, NC www.ncsoa.com Sept. 23-26, 2010 New England Society of Anesthesiologists Annual Meeting Wentworth-by-the-Sea Hotel & Spa New Castle, New Hampshire www.nesa.net Oct. 16-20, 2010 American Society of Anesthesiologists Annual Meeting San Diego Convention Center San Diego, CA www.asahq.org Oct. 21, 2010 Jackson Business Showcase Allskate Fun Center Jackson, MI www.gjcc.org Oct. 24-27, 2010 American Osteopathic College of Anesthesiologists Annual Convention San Mateo Marriott San Mateo, CA www.aocaonline.org Nov. 13, 2010 Midwest Anesthesiology Conference – Illinois Society of Anesthesiologists Intercontinental Hotel Chicago, IL www.isahq.org Dec. 10-14, 2010 Postgraduate Assembly in Anesthesiology New York Marriott Marquis New York, NY www.nyssa-pga.org Jan. 28-30, 2011 AJA Practice Management Conference Houston, TX www.asahq.org

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