As workforce shortages perpetuate and payer challenges continue to escalate, many practices find themselves needing to request assistance (or increase the amount of existing assistance) from their facility partners. Without this lever, practices face the risk of a debilitating mass exodus, which has implications not only for the group but also their facility partners. How, physicians ask, do we prepare for the process of obtaining the critical facility support needed to stabilize the workforce?

Be prepared: Before requesting facility support, smart groups take an introspective look at the services they are providing and the group’s relationship with the facility. It is helpful to have a clearly communicated value proposition and strong relationship before requesting assistance. Objectively, facility support for anesthesia practices plug the revenue gap of services provided that payers do not fully cover. This can be due to a poor payer/case mix, below market contract rates, high labor costs, suboptimal utilization, or a combination of factors. Although this support often allows groups to achieve fair market compensation for the work they are providing, facilities often view these requests differently. As such, negotiations always go better when the group has a solid relationship with facility administration and administration sees the group as a team player who brings value. A great resource in preparing for this introspective exercise is to review an article written by the Committee on Practice Management, “Creating and Communicating Your Value Proposition: RFP Response Essentials” (asamonitor.pub/4eeNdEq).

Appoint a negotiation team: Understand that not everyone can be involved in the negotiation and that it may not even be prudent to share details of the negotiation with all group members until it is complete. These discussions are sensitive, and you do not want people talking about them in procedural spaces, with friends, or even with their family. It is important to delegate these responsibilities to a small team (ideally including two to three physicians and one nonphysician administrator) and entrust them with negotiating the best deal they can for the group. Once negotiations are complete, it is reasonable for this team to bring it back to group leadership or possibly the whole group for approval before committing. In the case of the later, this should simply be a vote of assent (thumbs up or down), not revisiting the mechanics of the negotiation.

Be reasonable: While it may be tempting to capitalize on your current position of strength (namely the lack of competition in the market due to workforce shortages), it is important to only request what you really need to stabilize your workforce and facilitate recruitment. There is always a risk that the facility will decide to put out a request for proposal (RFP) if they are unhappy with your request. It is essential the group thinks through how it would respond to an RFP, how it would likely fare, and what alternatives it has if the facility decides to go in this direction and the group does not win the bid. There are many alternatives in today’s market but they may be disruptive so it is important to understand your risk tolerance first and not to be overly greedy or arrogant.

Understand your market: Benchmarks, benchmarks, benchmarks. The Medical Group Management Association (MGMA) and American Medical Group Association (AMGA) are typically the best, along with local recruitment listings and knowledge of alternative offers group members have received. Benchmarks are inherently outdated since they are based upon data that is at least 18 months old, but hospitals need them for their fair market value analysis, so they cannot be ignored. Other surveys can include academic and/or government practices, so if including survey data, MGMA and AMGA are preferred. It is best to include them in your proposal with an explanation of the inherent caveats of benchmarks. Productivity benchmarks are inherently flawed and cannot be relied upon. For a detailed explanation of this, and how to better evaluate productivity, consider this November 2023 article from Anesthesiology (Anesthesiology 2023;139;684-96).

Define the coverage: Carefully compare contractual obligations with what is currently being provided. Billing data can help define this, but sometimes it is simply what the facility expects you to cover, even if you are not actively anesthetizing. You will need concrete data to support what you are doing, not just “impressions.” Define the staffing model in detail and coverage hours by anesthetizing location (AL), and don’t forget to include nonoperating room anesthesthetizing (NORA) locations.

Consider call coverage: How many slots are needed in-house at any given time? Or at-home on call? Can call be covered by anesthetists, or are physicians required (or indicated by acuity or service line)? Are specialty call slots required (e.g., cardiac, pediatric)? What is the likelihood of working each call slot? Again, you need real data, not just impressions.

Determine the market cost of requested coverage: How many FTEs are needed to cover? Don’t forget to count vacation coverage and post-call days, if warranted. Make sure you have enough FTEs to reasonably cover the call. What is the cost per FTE for each provider type (physician, CRNA/CAA)? Don’t forget to include reasonable benefits (retirement, health insurance, disability insurance, CME, etc.). What is the overhead cost of running your practice – billing, malpractice insurance, corporate payroll taxes, payroll, scheduling, recruiting, practice management, accounting and legal, consultants, etc.? Consider using benchmarks for all of the above rather than actual practice costs.

Consider alternate staffing models: If you do not currently use APPs, how can CRNA/CAAs most effectively be incorporated? If you currently use APPs, are they optimized? What are financial and other benefits of including CRNA/CAAs? Can they help with call? Are CRNAs/CAAs in your market willing to take call? If so, do they demand so much extra pay that it is cost prohibitive to consider? How does this impact the number of extenders you need? Be sure to consider and explain all this in your proposal. Hospital administration often lacks the understanding of the complexity of anesthesia staffing.

Assess your revenue, case mix, payer mix, and revenue generated per billable hour: Be able to explain specifically why there is a shortfall – poor payer mix, unprofitable case mix, or both. Also, if you have been able to mitigate the need for support with above-market managed care rates, include that in your presentation. Or, if payer rates are particularly poor in the region and/or payers are unwilling to negotiate, explain this too, as the facility may want the opportunity to assist in negotiations to help reduce the shortfall.

Ensure revenue cycle management is optimized: If agreeing to pay support, the facility may decide to audit your revenue cycle management company, and you do not want any surprises. Better yet, engage someone to do that audit yourself and show the results to the facility at the time of making a support request. Proactivity goes a long way to setting the negotiation off on the right foot.

Assess utilization and coverage models: Evaluate billing data to determine current utilization (you may need some outside help with this). Show the facility specifically what is being utilized, how it could potentially be consolidated, and potential cost savings that could be realized by right-sizing and/or adjusting coverage models.

Propose several alternatives: Put together a detailed analysis and professional report/presentation for facility administration.

Consider outside help: Even a seasoned group with a strong executive team should consider enlisting outside help from someone who has specific expertise with these types of analyses and negotiations. You essentially have one shot at getting this right. While it may seem expensive for a smaller group, don’t be “penny wise and pound foolish” and miss your opportunity to get it right the first time, as there may not be a second opportunity. This is complex calculus, and someone with experience in these types of negotiations can add significant value to your presentation. It helps to have a third party to objectively go through staffing models and financing, to bring forth ideas, and give recommendations. Finally, the facility may hear your request as more credible when it comes from someone with national experience who can put your situation in context and will not directly benefit from any decision made to provide support.

Finalizing coverage and cost: Agree upon coverage requirements. It may be one of the options you have proposed, or something else. Agree upon reasonable costs. The facility will likely get their own fair market value consultant to assist (another reason it is good to have your own expert), and their numbers will likely be lower than what you (or your consultant) have produced. You will need to be able to defend your request and negotiate a reasonable cost per FTE, along with reasonable overhead.

Finalizing contract structure: Support can be paid as a flat fee, as a revenue guarantee, on a “support per unit” basis, and as a professional services agreement, along with many other structures. There are pros and cons to each for each party. Getting to the right number in the wrong structure (or the wrong number in the right structure) will likely mean you must do it all over again, sometimes within a year or less. Again, it is worth making the appropriate investments to get it right the first time. A well-executed agreement is worth its weight in gold.

Enhancing chances for success: Particularly if the facility agrees to cut back on rooms, you may want to incorporate surge staffing or pricing, whereby they can request additional coverage with reasonable notice and can pay you an hourly rate to provide. This has to be “best efforts” situation if it is not regularly staffed, but it can be an opportunity for the facility to feel comfortable cutting back baseline coverage and the group to be a team player by stepping up when needed.

Contract terms: Once you have agreed upon the financials and the structure of the contract, you will need to engage a good attorney to assist with negotiating the terms of the contract. There are many, many items to consider (see chapter 9 of the previously mentioned “RFP Response Essentials” for a list).

Short term assistance: If you are in the midst of a staffing crunch, consider whether you need help with locums or other temporary staffing. If you have already lost a significant number of providers and/or are having to pay locums, you may want to consider incorporating something into the contract to have the facility assist with the cost differential between locums and regular staff. Locums pricing can be significantly higher than baseline negiotated staffing costs, so you may need this assistance to ensure that the market salaries you just negotiated are not decimated by locum costs. Also consider whether you need assistance with signing and/or retention bonuses, as well as recruitment costs.

Last but not least, the end is just the beginning: Remember, you have just signed a legal contract. If the facility has come forth with significant support, they rightfully expect that you will provide the service. Make sure that you are able to do this, even if you need an internal structure that rewards people who are willing to step up and cover extra shifts if you are short-staffed. If you are unable to do so, be sure to give as much notice as possible, explain what the issue is, and communicate your plans to prevent a future recurrence. Make sure your compensation system aligns with the new contract and your mutually established goals. If the compensation system does not align, you may still have difficulty retaining staff or producing desired behaviors. Establish and/or maintain relationships by meeting with administration regularly (quarterly) to assess how the new agreement is being received by both parties. Make sure to understand their needs, consider expansion/subtraction goals, and alert them to any issues you are having. Nobody likes to be blindsided, so good communication is always key. It is also an opportunity to subtly remind them that you are a team player and doing what you can to facilitate a stable workforce in a challenging environment.

Always be thinking about the next negotiation: Make sure that you are demonstrating your value proposition and being a good partner. You may be in the driver’s seat now, but that likely will not last forever. You want to be remembered as a good partner who has consistently demonstrated consideration of the facility’s challenges as well as your own, and one who is working collaboratively to address today’s workforce challenges, standing shoulder to shoulder with the facilty.

In conclusion, facility support for undercompensated services will likely continue to be the norm for anesthesiology for many years to come. Successfully negotiating this agreement can make or break your practice’s success, so be sure you align yourself properly before, during, and after the negotiation to ensure an optimal result.