What are the implications of a single-payer health system in which private insurance would be eliminated and practice finances would be solely based on Medicare as it exists today. This paradigm would be a unique and especially problematic issue for anesthesiologists. Presently, the profession is faced by an inimitable discrepancy in the Medicare payments for anesthesia services. This is known as the “33% Problem.” While Medicare reimbursement payments for other specialties represent between 75% and 85% of their commercial rates, compensation for anesthesia services is less than one-third of commercial rates. In fact, recently it has been concluded by some that actual Medicare payments are probably in the mid-20% range. If this was the universal payment system, it would introduce a significant threat to the long-term stability of most anesthesiology practices. Many groups address the compensation “shortfall” described above by negotiating to fill the revenue gap with payments from hospitals. In the absence of commercial payments, the incentive to retain any given anesthesia entity would probably be removed.
This situation is complicated by the No Surprises Act (NSA). Procedures outlined in this legislation for anesthesiology groups to negotiate fair payments for out-of-network services are heavily skewed in favor of payers. The impact of all these developments on contracting is to position the Medicare rate as the benchmark for negotiations under the NSA. Even in the absence of the creation of a nationwide single-payer system, the Medicare conversion factor is becoming the standard. If the default compensation rate is 20% of Medicare allowable since private insurance will disappear, then the impact would be devastating.
The goal of this study is to analyze the effects of a complete replacement of the current blend of payers to a single Medicare-only conversion factor for a single physician providing full-time clinical services in a physician-only practice setting. The analysis is based only on clinical compensation and does not take into account hospital support, care team models, or nonclinical financial support that can influence revenue. The simplicity of this study is intentional to clearly define the effect on collected clinical revenues from a complete conversion to Medicare payment rates. The result of this analysis demonstrates the magnitude of revenue loss in percent and absolute dollars for a typical anesthesiologist in practice to document the effect on clinical revenue. Anesthesia administrators can then use this to estimate the affect in their specific practice setting.
To determine the productivity measures used in the calculations, we sampled productivity and salary data from affiliated departments of members of the ASA Committee on Economics. This data was validated against known national databases that report on clinical productivity and physician salaries to ensure that the sample practice data used in these calculations is representative of an average academic or private practice setting. Initially, the intent was to report separate data for private practice and academic practices; however, after review of the sample data and comparison to national databases, it is apparent that these settings do not have significant variability that would warrant separate analysis. There are potential errors in how ASA RVG and RBRVS RVUs are potentially blended or reported separately in the different data sets. These variabilities should not affect the applicability of this analysis in demonstrating the effect of a total Medicare model.
Figures 1 and 2 show the payer mix for the model used in this analysis for both an academic practice and a private practice. Figure 3 shows the effect on total collections for these model practices, including the current breakdown between commercial and Medicare revenue.
In this model, the number of units billed annually for a typical provider was set at 12,020 for an academic practice and 12,100 for a private practice. The samples from different practices were remarkably consistent and were validated as being in the low range of the 50%-75% quartile of Medical Group Management Association data. The payer mix was determined as a blend of the sample practices from the ASA Committee on Economics and is representative of a typical practice. The decrease in revenue for a typical physician working in this sample practice would be approximately 55% of current collections. The absolute value decrease for this model was $331,855. A decrease of this amount would significantly affect the ability of practices to cover practice expenses, with little remaining for physician salaries. Conversion to Medicare-only payment would significantly increase the need for salary support to maintain viability of anesthesia practices.
This analysis confirms the expected outcome that payments at the Medicare rate are inadequate to support anesthesia practices. Should the Medicare conversion factor become the dominant contractual payment rate, practices will need to find support for personnel expenses, or anesthesia practices will face declining viability. This would have a significant effect on anesthesia patient care, as the economic incentives would encourage physicians to choose other specialties, resulting in a shortage of anesthesiologists to provide necessary care for patients who need it.