Anesthesia Business Consultants: Communique summer10

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
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➤ 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

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

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

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

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

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

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.

• 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

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

Risks and Issues in Treating Anesthesia Group Professional
Staff As Independent Contractors
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.

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.

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

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

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.

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

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

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

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.
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.

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

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.

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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