Stipend Analysis

Most hospital administrators do not understand anesthesia economics very well, so convincing them of the need for financial support is an uphill battle.  Unfortunately at the same time anesthesia groups often do not have a very good handle on their own financial situation.  The two sides enter negotiations with very different ideas about the level of financial support required to maintain the department.  The hospital wants the number to be zero while the anesthesia group wants it to be as big as possible or at the very least as large as the rumors about the amount of the cross town anesthesia group are receiving.  What both parties must understand is if an unacceptable coverage agreement cannot be agreed upon initially it will be the anesthesia practice that is the immediate financial loser.  However the failure to cover the practice’s expenses will ultimately hurt the hospital as well.

Here are eight steps to the process of stipend analysis and negotiations:

1) The first and most important part is when an anesthesia group is perceived by surgeons, OR managers and hospital administrators as being “service oriented” it encounters less difficulty in negotiating hospital support.

2) Define the hospital’s service goals by identifying the anesthetizing locations and what services are to be covered.  This might also include labor and delivery, pain clinic, ICU, radiology, any special procedures outside the main OR, ER, code blue team and an ASC if the hospital owns one.  For the main OR, you must identify the number of rooms and hours open while taking into account call and post call requirements.

3) Define the anesthesia staffing requirement.

4) Define the costs that each type of anesthesia provider gets reimbursed.

5) Define the group’s current revenue.

6) Define the effectiveness of the group’s billing and collection process.

7) Define the required financial support necessary to provide the service desired by the hospital.  This is obtained by subtracting the group’s current revenue (5 above) from the employee costs of providing the service (4 above).  Remember to calculate the cost of billing and collections, practice overhead, payroll taxes, CME reimbursement, retirement, insurance costs including malpractice, health and disability if provided.

8)Define monitoring mechanisms to include built in mechanisms for monitoring performance and adjusting the support level.  For example most hospitals will want monthly financial statements from the group.

The viability of the anesthesia practice and ultimately the hospital depend on the success of the stipend analysis.  Follow these eight steps and both teams of negotiators can work through a variety of problems and possibilities while staying focused on the bottom line for both parties.