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Anesthesia Payor Contracts: What Hospitals Need to Know

The cost for hospitals to provide quality medical care continues to rise while many sources of revenue are decreasing. It’s critical to ensure that all appropriate reimbursements and payments are billed and collected. However, we see many hospitals underbilling for anesthesia services. One of the primary reasons for this underbilling is that the hospitals’ commercial contracts haven’t kept pace with regional price increases for anesthesia services. If you suspect that may be the case for your hospital, you should take a hard look at your contracts with payors.

In this post, we outline the key factors in the negotiation process and outline steps to follow for optimal results.

Remember that anesthesia payor contract negotiation is both an art and a science.

Anesthesia Billing is Complex

Many hospitals use a single service for all their billing, which commonly utilizes systems and expertise designed to maximize revenue across all specialties and departments. This practice makes it more challenging to optimize billings for specialties like anesthesia where payment terms and rates deviate from the norm. This can result in reduced reimbursements for anesthesia services.

hospital contract negotiation - anesthesia contracts - contract

Private vs. Government Reimbursement Rates

The first step in optimizing payment rates is understanding your payor mix. Anesthesia is impacted more than any other specialty by the vast disparity between private and government reimbursement rates. Whereas the majority of specialties collect 1.5-2.5X more from private payors vs. government, for anesthesia the disparity is typically closer to 4x. 

While there isn’t much that you can do about your rate of reimbursement from the government, besides ensuring that your billing company is billing and collecting for all procedures appropriately, for private contracts there are actions you can take.

It’s crucial to ensure that your private contracts reflect market rates. We often encounter departments that haven’t been proactive in keeping their payor contracts competitive.  With the rapid rate of medical inflation, this can quickly result in rates that are 20, even 30 percent below market. This can be extremely damaging to your department’s financial health.

We often find that contracted rates are out of date and as low as 20-30% below market.

Key Points to Address
in Your Next Payor Contract Negotiation

We recommend the following practices:

hospital contract negotiations - anesthesia contracts - checklist
  • Do your homework: Research market rates for services in your region before your negotiations begin. Coming in with the right data is critical.
  • Utilize data: Arm yourself with department data and analytics to prepare your offer. Run the numbers on all the factors that figure into total costs and revenue.
  • Aim for a win-win: When done skillfully negotiations for anesthesia contracts allow your financial needs to be met, while the insurer improves their metrics as well.

Think of negotiations as an ongoing
collaborative relationship, not a one-off adversarial process.

We commonly find that the majority of hospital anesthesiology departments are leaving 5-15% of their contracted payments on the table due to inappropriate billing, not reconciling contracted and actual amounts collected, or other fundamental mistakes.

Want Some Additional Support in Your Next Contract Negotiation Session?

Fusion Anesthesia’s practice management team provides both sides of the table with new data and insights that expand negotiations from a zero-sum game to a mutually beneficial exploration of possibilities. A good deal leaves everybody happy.

If you think you are outside of market rates, let’s talk. We’d be happy to look through a sample of recent cases and tell you if we see anything that should be setting off alarm bells.

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Anesthesia jokes are funny - getting underpaid isn′t.

Contact us to learn how you can maximize your take home.

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