The Centers for Medicare & Medicaid Services (CMS) received bipartisan support for accelerating a transition from traditional fee-for-service to performance-based health care payments that link compensation to quality outcomes. Given the significance of perioperative services to a hospital’s financial performance, this transition to value-based payments has profound clinical and business implications for the practice of anesthesiology. Anesthesiologists must ask two fundamental questions:

  1. Are departmental infrastructure and workflows optimized for the delivery of high-quality and cost-effective perioperative care?
  2. Are there financial incentives for anesthesiologists to make the foundational investments needed to succeed in value-based payment models?

Co-management agreements (Figure), hospital quality and efficiency programs (HQEPs), and clinically integrated networks (CIN) are three examples of organizational relationships that allow anesthesia groups to collaborate with perioperative stakeholders and health systems on shared goals. Co-management agreements do not require a high level of integration but do allow anesthesia groups to collaborate with health systems on achieving common goals. Compensation can consist of fixed payments for the time spent on administrative functions and variable payments based on achievement of predetermined quality or efficiency objectives, usually with respect to a single service line. HQEPs are broader in scope and involve multiple service lines across the health system, and therefore can target performance objectives that require coordination of care across multiple service lines.

Figure: A co-management arrangement based on a fair market valuation incentivizes physicians to implement a PSH and ensures equitable compensation for stakeholders.2

Figure: A co-management arrangement based on a fair market valuation incentivizes physicians to implement a PSH and ensures equitable compensation for stakeholders.

A Clinically Integrated Network (CIN) offers the broadest platform by allowing members to participate in payer contracts without necessarily being financially integrated. Participants have maximum flexibility in care coordination and development of evidence-based care pathways that address quality, cost, and access. CINs can also serve as a platform for providers to form Accountable Care Organizations (ACO), which are risk-based contracting arrangements focused on managing the total cost and quality of care for a defined population.

Anesthesiologists must demonstrate their value through leadership in their institutions and align patient, hospital, and physician goals and incentives through the continuum of perioperative care. The conceptual and organizational frameworks inherent to the Perioperative Surgical Home (PSH) serve as a launching pad for collaboration with our surgical colleagues on process improvement, quality assurance, cost-effectiveness, and optimal surgical outcomes. HQEPs build on this collaboration, as hospitals build alignment across clinical service lines and departments. Below are two case studies demonstrating how the PSH offers a blueprint for collaboration for anesthesiology departments, ranging from independent hospital contracted practices to those contracting with an ACO through an HQEP.

Anesthesiology groups that contract with a hospital ACO to provide anesthesia services for its attributed population interact with every phase of patient care across service lines and are uniquely positioned to build stakeholder alignment and effect systemic change. This case details the successful implementation of an HQEP in a community-based teaching hospital to improve outcomes and financial performance of the organization. Furthermore, it showcases how a payment structure that compensated surgeons and anesthesiologists for achieving mutually agreed-upon performance-based targets incentivized and drove improvements.

The situation

New Hanover Regional Medical Center (NHRMC) is a nonprofit, 800-bed teaching hospital. In 2014, NHRMC’s total joint program had wide variation in reported metrics for two surgeons, leading to avoidable cost and quality problems. Case cancellations, inefficient OR scheduling, and unnecessary clinical interventions deepened the financial impact of outcome and process variability. In addition, CMS readmission penalties in orthopedics alone were costing the hospital approximately $1 million per year.


The anesthesia group and a dedicated nurse navigator championed the PSH concept collaboratively to demonstrate how it could reduce net costs and drive value. Seeking a way to avoid approximately $1 million in readmission penalties, hospital leaders agreed to pilot a PSH in the orthopedics service line.

Building the program began with a Lean process improvement that brought all stakeholders together. Implementation included initiatives across the care continuum, with broad buy-in for measures that had decisive impact on patients, surgeons, efficiency, and profitability.

Implementation: Aligning outcomes and incentives

Through the PSH, NHRMC achieved improved patient experience, patient satisfaction, and profitability. Outcome measures included mortality, length of stay, cost, complications, and readmissions. A PSH program piloted in orthopedics saved the hospital $4.2 million in the first year. With proof of concept and demonstrated return on investment, the PSH was scaled to encompass 16 service lines that produced an annual ROI of up to $12 million.

The monetary value of the services provided by the anesthesia group to build the PSH was calculated based on an independent, fair market value appraisal, and the HQEP defined the payment structure for achieving the mutually defined performance targets. The compensation structure had a fixed and variable portion. The fixed portion was provided to agreement stakeholders for the time spent organizing and implementing the program based on fair market value. The variable portion, which comprised most of the total compensation, was tied to improvement in service line-specific or OR-wide initiatives that aligned with hospital goals. Metrics could be revised annually to continuously improve performance.

Private practice anesthesiologists who are not part of an ACO face a more challenging pathway to APM participation. Without the option, or the mandate, to participate in an existing structure, these groups must seek out a different framework to engage in an APM. This case study represents the successful implementation of a PSH in a community hospital-based private practice.


New York Cardiovascular Anesthesiologists, P.C. (NYCA) is a private, physician-owned anesthesia group consisting of 37 anesthesiologists and 13 CRNAs contracted to work at three health centers and several private office-based locations. Although known for cardiovascular-based care, St. Francis Hospital and Heart Center initiated an effort to diversify surgical case mix, with emphasis on lower-extremity joint replacements. The care of these patients varied based on the preferences of the orthopedic surgeon, anesthesiologist and other clinicians involved.


Under anesthesia departmental leadership, a PSH for hip and knee replacements was formed. A team was created consisting of clinicians representing each portion of the patient’s perioperative journey, and a literature review was conducted for best practices. Multidisciplinary meetings were held monthly, including stakeholder representation from surgery, anesthesiology, surgical APPs, preadmission testing, surgical OR staff, physical therapy, med-surgical nursing, care management, and home care. A clinical pathway was standardized from when the decision to have surgery was made in the physician’s office until 90 days post-discharge. The pathway continues to be updated periodically based on recent literature and clinical experience, and results are shared with all stakeholders.

Implementation: Aligning outcomes and incentives

Outcome measures, including postoperative analgesia, time to ambulation, blood utilization, length of stay, patient satisfaction, and discharge disposition, were all measured and shared with the PSH committee and surgeons. Early success on all metrics led to widespread adoption for all patients scheduled for lower-extremity joint replacement.

The planning and implementation of the PSH was relatively time-consuming, and there was no direct financial compensation to the anesthesia group from the hospital. However, NYCA captured value through increased case volume and improved competitive positioning from hospital and surgeon loyalty.

The anesthesiology groups at NHRMC and NYCA experienced improved standing and enhanced visibility as leaders in optimizing patient experience, efficiency, and perioperative outcomes. The operational and organizational experience gained while implementing their PSH programs allowed for increased management efficiency and expansion into new service lines. Furthermore, both groups were consulted by their respective hospital administrators looking for leadership expertise in navigating transitions to electronic medical records and advanced payment models.

The expansion of value-based payment models by CMS and commercial payers presents new opportunities for anesthesiologists to provide value for their patients and contracting facilities. Individual-based pay-for-performance models, episode-based bundled payment models, and population-based ACOs are categories of APMs that currently have participating anesthesiology practices and provide opportunities for more to become involved. It is crucial for anesthesiologists to understand the evolving frameworks of APMs in order to properly prepare, engage, and succeed when opportunities arise. As the definition of value in health care relates to increasing quality while reducing costs, these two case studies exhibit how this can be achieved regardless of anesthesia practice model.

As the push toward APMs increases across all payers, anesthesiology practices are well positioned to deliver and capture value through co-management agreements and contracting vehicles such as HQEPs. ASA has an expanding amount of APM resources to help guide members – from APM payment basics and criteria to an APM assessment framework and spreadsheet, along with podcasts and articles. These resources are meant to assist ASA members in navigating the APM value-based payment approach. Understanding the different payment models from a scope, governance, payment, risk, and quality standpoint, along with calculations for financial viability, can help assist members who are currently being approached about an APM and those who may be in an APM but need performance improvement strategies.