When managing an anesthesiology practice focusing on what matters most increases your chances of financial success. Through our work with practices of all sizes across multiple geographies, we’ve identified the anesthesia metrics with the greatest impact on profitability. By focusing on these you can see a massive improvement in the financial health of your practice.
In this post, we examine the impact of the payor mix between government and private reimbursement rates. As one of the most significant anesthesia metrics, it’s crucial that you understand its impact and manage it effectively for optimal financial results.
Your government versus private payor mix has a huge impact on your financials – it’s critical that you understand how it works and how you can manage it for optimal finances.
The Impact of Reimbursement Rates
Anesthesiology suffers from a vast disparity between private and government reimbursement rates– more than any other medical specialty. While most other specialties collect 1.5 to 2.5 more from private versus government payors, for anesthesia practices the disparity typically comes closer to 4 times that amount.
This means that if your practice experiences even a small increase in the percentage of your group’s government work compared to private payors there will be a massive negative impact on your finances if left unaddressed.
Anesthesia is a unique specialty and changes in your payer mix can have potentially huge impacts on your practice finances.
Let’s Do the Math: Payor Mix Impact Example
For example, take a hypothetical 30-person group (22MDs and 8 AAs) with a 55% government/private mix. Say they experience a trend where their payor mix slowly changes at the rate of 1% a year… many practices wouldn’t even notice a year-to-year movement in their payor mix that small. However, over five years, they will have gone from 55% government to 60% government payments. That’s huge. A group of this size would need an additional $600k in hospital subsidies… or face an effective 6.5 % decrease in their effective hourly wages!
Best Practices: Watch Closely
We recommend you closely watch your payor mix for any increase in the percentage of government work. If you do notice a shift, you need to demonstrate this to the hospital and negotiate an increase in your stipend. We also recommend you prepare for this by considering your hospital contract negotiations as an ongoing collaborative relationship, rather than a one-off adversarial process every five years.
Closely watch your payor mix for any increase in the percentage of government work. If this happens you need to demonstrate this to the hospital and negotiate an increase in your stipend.
Focusing on the anesthesia metrics that matter most allows you to create a profitable practice – regardless of medical inflation, regulatory changes or any other variables. In this post, we’ve examined the impact of just one of these key metrics. Now we invite you to measure its impact in your own practice.
Want to See How Payor Mix Impacts Your Practice?
Read our eBook Anesthesia Group Profitability:The Five Metrics to Focus On.