Transcript
Katherine Grichnik, MD: It is my pleasure to talk to you today about a topic that is near and dear to all of our hearts — finding win-wins for our surgical services during the anesthesia labor and revenue crisis. In speaking about the overall healthcare environment, this should actually be a great time for ambulatory surgery centers. We have a giant surgical market and much of it is inefficient and could benefit from site-of-service shifts as ASCs can potentially provide a 45% savings to the consumer, based on site-of-service shifting and the reduced facility fees. We know that we have an anticipated growth of surgical care in our ambulatory surgery centers, and it should be outpacing all other sites of service. And in this graphic, we can see the difference between our 2018 volumes and our 2028 volumes across inpatient, hospital outpatient departments (or HODs), ambulatory surgery centers, and even our physician offices. This should be a great time.
And within that it is the site-of-service migration that leads to this increasing surgical volume in our ASCs. This is especially true, and as an example, for orthopedic and spine surgery, which have benefited from policy changes, from returning surgical care after our pandemic, and from some of the economic pressures that accelerate these shifts. And from this graphic, you can see the outmigration from the hospital to the HOPD into the ASC with the giant amount of growth across those areas in elective and hip and knee surgery, as well as lumbar and thoracic spine surgery. Certainly, we should see reduced length of stay, enhanced recovery, better patient satisfaction, and an optimal ASC infrastructure. Now, here comes the challenging part. We have significant OR overall healthcare pressures in our operating rooms. We have a tight and hot labor market in our economy today. We also have returning surgery service volumes. More people want surgical care today than they did three and four years ago.
This creates a Bermuda Triangle of surgical services—from staffing challenges on the nursing side, on our OR and other technical staff sides (such as sterile supply), such as the problems that we see with our anesthesia clinicians in inadequate labor. So, let’s first talk about our payer and our revenue challenges.
We know that the surgical volume is shifting to the lower costs of care, as we’ve discussed, and some of this is because the payers are imposing this shift and even challenging us when we have a patient that is scheduled for inpatient when they really should be scheduled as an ambulatory procedure. We also see the changes in our patient acuity and our procedural complexity, in that shift, and we need to then acknowledge that the payers are pushing some of these cases into our ambulatory setting with more complex patients.
As a part of the final rules through OPPS, we do have an increase to the ambulatory surgery center facility fees, but the physician fee schedule may still see a decrease on the professional fee side. These final rules are just now being put into place. The capacity crunch is real. We have an aging population, more of us are living to greater and more advanced ages, and there is a proposal that between 2015 and 2050, that the world’s population greater than 60 will more than double. We certainly had elective surgery that was postponed during the pandemic and people are rushing back. And as I said, it used to be that we thought that 75 was old to have surgery. Now, I’d say it’s more like 95. And then there’s our staffing challenges. The one of the greatest and acute shortages is as our nursing labor force. We have had high turnover rates, high average vacancy times, and it has crept up to look at the turnover, the vacancy rates, and the time-to-fill remain elevated. And in some places estimating more than 95 days to fill an RN open position.
What does this mean? That means the costs go up. Just to replace one nurse could cost around $40,000. We know that we have lower nursing school enrollment, in some places, with fewer new graduates coming out. Because of this, we have increases in the labor cost, how much a nurse can command for salary. We have a higher risk of burnout. And if we don’t have enough nurses, for example, we have decreases in case volume and inability to take care of all the patients that we want to.
And then there’s the physician shortage. Certain specialties, including anesthesiology, have a high percent of physicians who are greater than 55 years old. These very same physicians are retiring or opting not to work even at a pre-retirement age. We know that there have been a lot of physicians who have simply stopped working in the last two years. And, for example, in anesthesiology, around 45,000— if we assume 45,000 people in 2022—we may have seen up to a 17% loss in the labor pool. And certainly for all physicians, as we’ve just discussed, there’s an escalating demand for physician services while the supply is simply not keeping up. And now I’m going to turn the over to Lindsay Lauder to speak to the anesthesia-specific healthcare environment and its challenges.
Lindsay Lauder: Thank you so much, Dr. Grichnik. As Dr. Grichnik said, I’m Lindsay Lauder. I’m the Vice President of the Anesthesia Services for SCA Health. Happy to be here with you today to talk about this important topic and to zoom in a little bit on some of the anesthesia specifics in the topics Dr. Grichnik introduced for us in the first section. So I don’t need to tell anyone listening to this podcast about how important anesthesia services is. It really is a critical component of the entire scope of the services provided in the ambulatory experience—all the way from the initial decision to have procedure performed in a surgery center through to the moment of discharge for the patient. So each of the steps along this timeline on the slide here are parts of care that the anesthesia provider is critically involved in, and where the anesthesia provider can have a meaningful impact on patient experience, on care decisions, and on all of the components of care delivery. Because of that, we like to say that typically no anesthesia, no surgery, right? If you can’t have these providers in our facility and performing care, we’re not simply not going to be able to perform the care. And that has led to a realization of the importance (or a continued realization of the importance) of anesthesia services and a reflection in what we need to do as we address the shortages that Dr. Grichnik introduced and that I’m sure many of you are aware of in your business.
Specifically, the anesthesia landscape has changed dramatically in the last 18 to 24 months. We have seen significant increases in labor costs because of some of those labor shortages. And the downward pressure on payer rates and revenue that anesthesia providers can bring in has created a crunch. We’ve seen these changes driven by a number of different factors. So, the older workforce that Dr. Grichnik referenced has led to additional retirements. The Covid crisis also drove a number of resignations (and a disproportionate amount of resignations) in the anesthesia workforce. The industry overall has shifted from a W2 model, where providers traditionally worked for one company or more consistently for one company, to a 1099 model where providers are more likely to be independent practitioners and to work for multiple companies at once. We are seeing changes in reimbursement that are significant, driven by some of these workforce shortages. So significant salary increases overall for CRNAs, even more so than anesthesiologists, but for all providers in the anesthesia landscape.
And that leads to hospitals, and ASCs, and other service providers or venues for services competing for that workforce overall. And it’s leading to increasing subsidies being paid out by those facility providers to the anesthesia companies. We are seeing an increase in terminations of anesthesia contracts, often with very short windows of notice. Where we are not seeing terminations, in many cases, we’re seeing anesthesia providers unable to staff rooms because of the workforce shortage. And overall, that’s going to lead to a reverse migration of care back into higher-cost settings, where the anesthesia care is available. And as part of all of this landscape, a request for high and increased subsidies and costs to the system overall.
The increased demand is what is driving this labor shortage. And you can see on this slide the job postings on Gasworks. The orange line is for CRNAs, the blue line is for MDs, and the openings are continuing to increase over time with a significant uptick. And that is part of what’s driving the increased labor costs—more openings, more demand, and more of a workforce need overall. And this is happening at the same time that Medicare is dramatically decreasing reimbursement for anesthesia providers. So, the providers are in a tight spot. The labor costs are going up. It’s costing them more to staff our facilities, and it is at a time when reimbursement is going down. This trend has continued overall and is continuing the pressure from Medicare.
This is a long-time problem. The last graph showed over the last several years that downward trend, but this is really has its roots in a system that Medicare set up more than 30 years ago with only tiny changes happening over time to the Medicare reimbursement. And the initial formula used was flawed and has resulted, over time, in a system that looks very different for anesthesia reimbursement than it does for other specialty services and other provider types within the Medicare system.
So overall, we see that other specialties receive about 80% of their commercial rate from Medicare when they file a Medicare claim. So, it’s less than Medicare, but it’s not dramatically less than Medicare. In the anesthesia world that is very different picture, and a Medicare claim gets only 33% of what the reimbursement and anesthesia provider typically receives from a commercial payer. And what that means is the anesthesia book of business looks very different when the government payers make up a healthy proportion of the volume. And that creates a significant problem for anesthesia’s providers when they are attempting to cover, again, that increasing labor cost overall. So this is just a significant driver of the concern is how government payers reimburse anesthesia overall—again, with roots over 30 years ago in a formula that is problematic.
And what that means when we look for how to address this from a facility perspective—from an ambulatory surgery perspective—is we really need to take a look at our business, at our ambulatory surgery business, from the perspective of the anesthesia company. We need to think like an anesthesia provider in order to understand their business and really think about how they can cover their costs so that we—the ASCs—are not in a position of setting up a structure where we are going to have the anesthesia provider have an inefficient day and not be able to cover their labor costs. So, one way to think about this is to look at what kind of reimbursement our facilities’ procedures can drive for an anesthesia provider.
And the chart here shows some very general numbers for what the costs might be. An anesthesiologist might cost $2,800 per day, and a generous blended average reimbursement per case on the high side would be a $480. So, looking at that math, you might need a little bit under six cases a day for an anesthesiologist to break even. Again, we’re looking at how can these anesthesia providers cover their costs. How can we in the ASC industry organize our days so that the anesthesia providers can cover their costs and not come back and request stipends or revenue guarantees from our facilities and our partnerships. How can we really all work together and look at the anesthesia providers as partners and as aligned businesses so that we can make the day efficient for everyone involved.
And really, it’s important to recognize that many of the factors that drive anesthesiologists’ profitability and revenue are not factors that are in the control of the anesthesia group. When they come into our facilities, they don’t control the room utilization, typically. They don’t control the payer and the procedure mix of the cases that they’re working on that have been brought to the facility and referred by the surgeons. And typically, the cost of staffing is driven by the model that the facility and the surgeons are requesting in terms of the coverage. And it’s also driven by the labor costs in the market. So a lot of these factors are not directly controlled by the anesthesia group, and it’s our job as facility leaders to work together to create an efficient day that allows the providers to cover their costs.
And to talk a little bit more about that, I’m going to hand the mic over to Barb to talk about OR optimization and organization, and how to do that effectively within your surgery centers. So thanks.
Barbara McClenan: Lindsay, thank you so much. I’m Barbara McClenan of Surgical Directions, and I’d like to share with you some of the ineffective utilization challenges that we’re facing today.
So, first off, anesthesia providers often encounter challenges that do impact their daily routine, their overall job satisfaction. We’ll delve into some of these key issues that are faced by anesthesia providers. We’ll look at some strategies to bridge these gaps, and we’ll also look at opportunities to enhance operational efficiency, which ultimately elevate both the provider satisfaction and patient care.
So first off, we see gaps within the provider’s schedules. The anesthesia providers may experience gaps throughout the day, which leads to decreased satisfaction as well as potential income loss, as Lindsey referred to earlier. They can result from various factors, patient cancellations, changes in procedure length, or it could be inefficient scheduling practices. Some of the resource allocation challenges are related to their staffing levels. Overstaffing during low demand periods, and understaffing during peak demand, can truly adverse the effect of job satisfaction and contribute to work quality as well as burnout. Some of the operational inefficiencies will result in unnecessary costs, and this could be supplies, equipment, SPD, overtime, and primarily staff replacement. And last are anesthesia-driven protocols. Inconsistent protocols will lead to delays and potentially decrease quality of patient care. Addressing the challenges is paramount for the wellbeing of the providers as well as the population in which they serve.
So now I’d like to share with you a real situation. So, within this graph, you can see in the first section—before the first case of the day, there was significant delay, and this is deemed by being over one minute late. And in this situation was significant turnover. Turnover time is escalated between cases one to two, two to three, et cetera, throughout the day. In an optimal situation, which is the diagram below, we’ll see that the case starts on time, turnaround time between 25-30 minutes…for a regular case in ASCs, we want to keep them down to 10-15 minutes depending on the procedure. The case all have appropriate turnaround time, and in this example, the team was able to complete six cases in less time than it took to complete five cases because of the extended turnaround time and first case delays.
Now I’d like to turn that into some dollars. So, in this example, the sunk costs over one year leads up to $42 million. The cost for each staff and unused OR results in $2,300 in fixed anesthesia costs. And just moreover, this example, it doesn’t include some of the other fixed costs, which are your RN, your surg techs, and your support staff. So by improving your utilization truly can result in increased revenue for the organization, as well as for the anesthesia providers.
To address some of these challenges, we propose a comprehensive strategy aimed at enhancing the patient presurgical preparation, aligning staff levels with predicted volumes—and it’s based on predictive analytics. So I’d like to drill down into the various ways to improve scheduling block allocation, reduce turnaround times, enhance analytics, and as well as your presurgical optimization.
Your roadmap to success is by implementing efficient scheduling practices. By adopting advanced tools and methods, we can enhance the coordination, reduce the downtime (your idle time), and have a more predictable workflow. Your anesthesia providers will know what to experience when they’re coming in. It’s aimed at increasing satisfaction as well as boosting income, as you could see by the example I provided previously. We were able to complete an additional case in less time. The next strategy is to reduce the gaps in optimize block time allocation to make sure that your resources are utilized efficiently. We look at various strategies and implement processes that are hardwired for a smoother workflow and better resource allocation. Reduce those turnaround times, reduce the delays. We want to identify bottlenecks and eliminate those if cases are held up because of recovery room. So we want to evaluate every portion in the continuum of the patient’s experience in the surgical journey. We want to look at your data analytics to demand forecasting and truly be focused on your anesthesia providers. Anesthesia should be positioned as a focal point and by actively engaging with your surgeon, nurses, and administration, streamline the communication channels, identify challenges, and implement collaborative solutions with your anesthesia providers.
Reduce your operational costs, and through that, we want to streamline your first case on time, starts and have better scheduling. By leveraging advanced analytics, you can anticipate some of your peak demand periods and align your staff appropriately. Staffing-to-demand is key and utilizing predictive analytics to determine what your staffing needs would be for the following week. So, it’ll not be a surprise when the providers come in. Another big piece is to evaluate your provider compensation. And as we heard a little bit from Lindsay—how it is a challenging situation right now—you want to look at your industry benchmarks, regional trends, and truly the unique set of your individual providers to ensure they are having a fair and competitive pay. Improving your anesthesia-driven protocols will streamline your patient contact and expectations. Having standardized presurgical testing guidelines (testing guidelines) that are based on the patient’s comorbidity. Oftentimes we’ll see that the surgeon will drive the testing, when in fact they may be over-testing and not necessarily have all the tests that your anesthesia provider prefers to have for this procedure. Utilizing patient engagement software helps to streamline contact with your patients and truly establish standardized expectations for the patient to prepare preoperatively. And utilizing standard care pathways throughout the entire continuum, preoperatively, interoperatively, postoperatively—as well as long-term. Implementing the strategies that are listed here will significantly reduce your gaps and drive efficiency within your department.
So, in conclusion, by enhancing patient care, streamlining your operations, it will lead to increased revenues, improved satisfaction, and help drive data decision-making. Your facility will have a competitive advantage with satisfied staff and providers. By embracing data-driven insights and fostering this collaboration, you can position yourself to enhance the overall effectiveness and satisfaction within perioperative services.
Katherine Grichnik, MD: Thank you so much for being a fabulous audience for this presentation. Thank you, Barb. Thank you, Lindsay. And please know that we will provide you with contact information on our website through a contact us form for any of your questions or follow up concerns.
Learn more with our white paper: Surgical Services Solutions During an Anesthesia Crisis
This webinar was created
with Lindsay Lowder,
Group Vice President,
Operational Innovation & Strategy
at SCA Health
