Correlation does not equal causation.

One fresh demonstration of the truth of this axiom appears in an article in this month’s issue of Gastroenterology (Wernli KJ, Brenner AT, Rutter CM, Inadomi JM. Risks Associated With Anesthesia Services During Colonoscopy. Gastroenterology 2016; 150: 888-894).

The research team, from the Group Health Research Institute in Seattle, performed a prospective cohort study of nationwide claims data from 3,168,228 colonoscopy procedures in adults aged 40 to 64 in the Truven Health MarketScan Research Databases from 2008 to 2011. Moderate sedation was performed in 65.6 percent of the procedures included in the study; deep sedation (in most cases using propofol) was provided by anesthesiologists or nurse anesthetists in 34.4 percent. The study authors found a correlation between use of anesthesia services and a 13 percent higher risk of any complication within 30 days: specifically, higher risk of perforation, bleeding, abdominal pain, complications due to anesthesia, and stroke and other neurological events.

Dr. Wernli et al. attributed the higher risk of anesthesia to clinical factors, noting that “There are plausible reasons as to why deep sedation with anesthesia during a colonoscopy could increase patients’ risks of adverse outcomes, such as aspiration when a sedated patient cannot protect their airway, or perforation when patients are not able to provide feedback to the endoscopist regarding excessive pressure. (Citations omitted.)”

Both rates of use (53 percent in the Northeast vs eight percent in the West) and rates of complication (12 percent in the Northeast vs 60 percent in the West) varied significantly by geographical region. The use of anesthesia services was associated with a higher risk of any complication in all regions except the Southeast, where there was no association between use of anesthesia services and complications from colonoscopy. The researchers raised the question of potential “confounding by comorbidity status” but did not pursue an answer beyond stating that “we did not find systematic differences in patient characteristics by anesthesia services across regions.”

Norman A. Cohen, MD, Clinical Professor of Anesthesiology and Perioperative Medicine at Oregon Health and Science University, offered a more extensive analysis in a personal communication. Dr. Cohen wrote the following:

The [study] authors note a higher relative risk for complications with an anesthesia service compared to moderate sedation. The complications attributable to anesthesia are a bit problematic. Notably, they attribute infection to anesthesia care. One could argue that many infections could as easily be attributable to the procedure itself; however, for the sake of this analysis, let us ignore that and keep the attributions the same. Let us also ignore the fact that a retrospective study like this only demonstrates associations and not causation and that the attribution of complications in administrative claims analyses are statistically problematic compared to a randomized trial or even a registry based analysis.

The data demonstrate geographic variability both in prevalence of anesthesia care and relative risk of complications. The western U.S. had the lowest prevalence but the highest complication relative risk with anesthesia. The northeastern region had high prevalence but relatively low relative risk.

Given the low prevalence in the West, one may hypothesize that patients receiving anesthesia care have greater comorbidities. The numerous medical necessity policies in place in the West during the period of the study support that hypothesis. My anecdotal knowledge does as well. If the patients are more complex medically, then having a higher complication rate in the anesthesia group makes some sense. It also makes sense that the relative risk in the Northeast is lower. Because a much greater percentage of the population is receiving anesthesia care, it follows that a greater number of healthy patients are undergoing anesthesia. The overall risk of complications is likely lower in a healthier population receiving a given treatment.

So we may have increased complications in the anesthesia group because the patients are sicker, an observation that applies to both procedural risk and anesthesia risk—and we may also have an incremental increase in risk due to anesthesia compared to moderate sedation.

While many facilities require anesthesia involvement for patients who are ASA 3 or greater, healthy patients may receive either moderate sedation or an anesthesia service depending on patient or endoscopist preference. These preferences account for most of the regional differences in anesthesia use.

If anesthesia care independently increases risk, then regions with higher anesthesia prevalence would have a higher risk of complications across the entire population of patients having endoscopies. In other words, the Northeast with its higher prevalence of anesthesia care should have a total complication rate higher than the West. This assumes that overall health status is the same.

The calculations below show a very modest increase in risk that can be attributed to the use of anesthesia services:

The risk of a complication of any type for moderate sedation patients will be called baseRisk with a value of x.

baseRisk=x

We know from the study that the complication rate under anesthesia is 60 percent greater in the West than for moderate sedation, or 1.6 times the baseRisk.

anesRiskWest=1.6*x

Similarly, the risk in the Northeast is 12 percent greater. anesRiskNortheast=1.12*x The prevalence of anesthesia care in the West and Northeast is eight and 53 percent respectively.

rateWest=8%
rateNortheast=53%

The all-patient relative risk for complications compared to the baseline risk with moderate sedation is determined by the following calculations:

popRiskWest=anesRiskWest*rateWest+baseRisk*(1-rateWest)=>1.048x popRiskNorthEast=anesRiskNortheast*rateNortheast+baseRisk*(1-rateNortheast)=> 1.0636x

Dividing the all-patient relative risk for the Northeast by the all-patient relative risk for the West results in the relative risk attributable to anesthesia only since the base risk cancels out.

relativeRisk=popRiskNorthEast/popRiskWest=>1.0149

Accounting for health status, the increased risk attributable to anesthesia alone is thus 1.5 percent. This is certainly clinically insignificant. Not having the data set, I doubt, but cannot affirm, that the risk is statistically significant.

Dr. Cohen’s calculations can be performed for any other region of interest in the study by replacing the prevalence rate and the complication rate for the Northeast with the new region's rate and then using the same formulas. This will relate the new region to the data from the West, which has the lowest moderate sedation and highest complication rates.

Wernli et al. conclude that “the overall risk of complications after colonoscopy increases when individuals receive anesthesia services”—but Dr. Cohen has shown that the fact of anesthesia by itself does not account for more than a minimal share of the risk. Could it be that many endoscopists prefer the involvement of anesthesiologists and/or CRNAs because the deeper level of sedation allows endoscopists to work more quickly? And that working more quickly and aggressively [would] explain the non-life threatening complications” evaluated in the study, a comment attributed to Jeffrey W. Apfelbaum, MD of the University of Chicago? (Ready T. Anesthesia Use for Colonoscopy Attracts New Scrutiny. HealthLeaders Media online, April 13, 2016.)

Anesthesiologists tend to believe that the growth in the volume of colonoscopies performed with anesthesia—the use of anesthesia services for colonoscopy patients rose from approximately 14 percent in 2003 to more than 30 percent in 2009 to close to 50 percent in 2013, according to a series of reports from the Rand Corporation—is driven by endoscopist and patient demand. Many gastroenterologists and quite a few anesthesiologists believe that the profitability of anesthesia for colonoscopy is a strong motivating factor.

That profitability, combined with geographic variations in prevalence, makes anesthesia a target for cost-cutters. The Wernli article could be helpful to health plans seeking to reduce payments for anesthesia for colonoscopy. John A. Martin, MD of the Mayo Clinic commented on the article thus: “we must now ask ourselves and discuss with our patients honestly, not only whether the added cost of anesthesia is reasonable—but also whether the apparent added risk of anesthesia justifies perceived benefits.” (Martin JA. Anesthesia during Colonoscopy May Not Be Worth the Cost. GI & Hepatology News, April 1, 2016.) Dr. Martin, of course, did not have the benefit of Dr. Cohen’s analysis. His comments might be different if he did.

Anesthesiologists who find themselves defending against the study would do well to remember Dr. Cohen’s analysis, including his observation on the limitations of administrative claims data as a tool for assessing outcomes. The use of anesthesia services by itself increases the risk of complications by a mere 1.5 percent. The benefits of anesthesia include patient comfort and satisfaction, rapid sedation followed by quick recovery and faster overall procedure turnaround time. In all likelihood, these outweigh the well-known but minimal risks. 

On July 13, 2015, we informed you of CMS’s Two-Midnight Rule.  After much pushback from industry stakeholders and from the judicial system since our alert, CMS proposes to eliminate the notorious payment reduction under the Two-Midnight Rule in its FY 2017 Medicare Inpatient Prospective Payment System (IPPS) Proposed Rule (Proposed Rule).  Though not slated to be finalized until the latter part of 2016, hospitals and their partners can be optimistic that the penalty under the Two-Midnight Rule may soon be a memory.

The Two-Midnight Rule, effective beginning October 1, 2013, was enacted with the intent of curbing payment for inpatient hospital admissions (i.e., Part A).  The Two-Midnight Rule generally states that payment under Medicare Part A is appropriate if the admitting physician has a reasonable expectation that the patient’s stay would span at least two midnights.  For patients expected to stay less than two midnights, payment under Medicare Part B (i.e., outpatient services) is appropriate.  Moreover, in an effort to offset an expected $220 million spike in inpatient encounters, in 2014, CMS enacted a 0.2 percent decrease in payments under Medicare Part A.  Since its inception, the Two-Midnight Rule has been strongly opposed by hospitals with dozens filing suit against the Department of Health and Human Services (HHS). 

Shands Jackson Medical Center v. Burwell is a case (one of many) challenging the authority of the Secretary of HHS (Secretary) to impose a 0.2 percent reduction in payment under Medicare Part A.  The court stated, in pertinent part, that the Secretary’s methodology in determining the 0.2 percent reduction lacked “sufficient notice of the actuarial assumptions and methodology” and that “disclosure of this information was essential to communicate the basis for the proposed adjustments and to permit meaningful public comment.”¹  The court continued to state, “[t]he undisclosed information was central to the analysis that led to the Secretary’s conclusion that 40,000 discharges would shift to inpatient status in 2014, and, without that information, commenters had no basis to understand or to critique the Secretary’s conclusion.”²  As such, the court ordered the Secretary to further explain its methodology and permit an opportunity for comment.

In the December 1, 2015 Federal Register, CMS explained the basis of the 0.2 percent reduction in payment and solicited comments from the public.  As a result of the public comments, CMS issued its Proposed Rule.

In an effort to “offset the estimated increase in IPPS expenditures as a result of the 2-midnight policy,”³  CMS proposes to eliminate the payment reduction under the Two-Midnight Rule.  In fact, it also proposes a temporary prospective payment increase in FY 2017 of 0.6 percent to make up for the 0.2 percent reduction for FYs 2014-2016.⁴  Unsurprisingly, hospitals are pleased with the news that the Two-Midnight Rule may be abolished.  In a statement released by the American Hospital Association (AHA), AHA’s president, Rick Pollack, states, “[t]oday’s rule includes a very important outcome because it reverses the inappropriate and unfair 0.2 percent payment reduction for inpatient services that was implemented as part of the original ‘two-midnight’ policy.”

Although CMS proposes eliminating the payment reduction after much pushback from industry stakeholders, it does not admit fault in implementing the 0.2 percent reduction, stating it believes its “assumptions underlying the 0.2 percent reduction to the rates put in place beginning in FY 2014 were reasonable at the time.”⁵  CMS continues to state, “[w]hile we generally do not believe it is appropriate in a prospective system to retrospectively adjust rates even where we believe a prospective change in policy is warranted, we take this action in the specific context of this unique situation….”⁶

Regardless of CMS’s justifications for implementing the payment reduction under the Two-Midnight Rule or for eliminating it and regardless of whether it believes the payment reduction was a disaster, hospitals can breathe a sigh of relief that the haunting payment cut may soon be issues of the past.  Notwithstanding this update and though this does not affect anesthesiologists directly, anesthesiologists should stay informed on this issue to continue to be better partners with their hospitals.  CMS is accepting comments to its Proposed Rule until 5pm on June 17, 2016.

Deciding on new models for an anesthesiology practice is one of our very biggest challenges. It is not realistic for anesthesiologists to continue believing that if they consistently provide good quality care, all of their financial and business issues will take care of themselves. “The beliefs and strategies that have gotten us to where we are today will not get us to where we want to be tomorrow,” as ABC Vice President Jody Locke writes in his article The Road Not Taken in this issue of The Communiqué.

The transition to value-based payment, combined with the strong trend toward larger anesthesia groups and tight affiliations with national anesthesia companies and/or with health systems, has changed the landscape for traditional independent practices. Bill Britton sums up the current environment in Critical Issues to Consider When Exploring the Sale of Your Practice: hospitals are facing mounting pressures to minimize operating costs, including the costs of subsidizing anesthesia groups; coordinated care is pressuring margins, and uncoordinated quality reporting mandates are increasing operating costs for all.

Mr. Britton, who runs a private equity firm he co-founded, believes that it will become more and more difficult for anesthesia groups to remain independent and that every such group “should begin discussing preparation initiatives that will streamline operations, reduce costs, improve financial transparency, and other specific measures to increase their overall enterprise value.” It may be tempting to consider employment by the hospital or a bigger group, but this option does not realize the equity value of the practice. He urges group leaders instead to consult with the “right M&A advisor” to steer them through the six- to twelve-month process of negotiating a one-time sale to a strategic partner.

A very different option comes from Rick Bushnell, MD, MBA who is working with his hospital in Pasadena, CA to put in place a perioperative surgical home (PSH). An anesthesiology group that, like Dr. Bushnell’s, offers its hospital partner a solid PSH may secure its place with that institution at least for the medium term while CMS rolls out the Merit-Based Incentive Payment System and other pay-for-value programs. In the third of his series of articles on the experience, The Perioperative Surgical Home: Of Economics and Value, Dr. Bushnell lays out the calculations for revenue streams that will help to support the PSH taking shape at his facility.

There are some difficult decisions to be made. Mr. Locke’s article is a plea to groups to be very sure whether to sell or merge or whether to fix one’s own practice, through a PSH or any other strategy that truly enhances the value of the practice.

Will Latham, MBA, CPA explains in detail how to improve an anesthesiology group’s board meetings and decision making in his article Strengthening Your Board. This manual could not be more timely as the pace of change continues accelerating. As evidence of that pace, Computer-Assisted Personalized Sedation—The Beginning of the End of the Anesthesia Provider? by Steven Boggs, MD, MBA was written just before Ethicon ended sales of the Sedasys^® system. Dr. Boggs used the opportunity to remind us all that anesthesia providers are going to remain indispensable for the foreseeable future. What technology could replace their combination of “deep technical expertise, human flexibility, problem solving [skills], creativity and compassion?” Once again, we salute the professions of anesthesiology and nurse anesthesia.

“Patient Safety Issues Spur NIH Shake-Up” was an above-the-fold headline in the Washington Post on May 11, 2016.  NIH Director Francis Collins, MD is replacing top leadership at the 200-bed Clinical Center with a new management team with experience in oversight, compliance and patient safety in the wake of an independent review that found that safety had become “subservient to research demands.”

Also in the news recently was a study published in The BMJ (BMJ 2016; 353 doi: http://dx.doi.org/10.1136/bmj.i2139 [Published 03 May 2016]) by researchers at Johns Hopkins urging the Centers for Disease Control (CDC) to list medical error, broadly defined, as the third most common cause of death in the U.S. after heart disease (611,105 deaths per year) and cancer (584,881 deaths per year).  According to the study, the annual number of U.S. deaths attributable to medical error is approximately 251,454—more than three times higher than the 98,000 preventable deaths cited by the Institute of Medicine in its famous 1999 study To Err is Human.

The number in The BMJ study may be much higher than the reality.  We should all be extremely concerned if indeed medical error is to blame for nearly ten percent of deaths.  The point here, though, is just that patient safety is a major health policy issue today and that anesthesiologists, who have a deservedly outstanding reputation in matters of safety, are well placed to lead the charge against preventable errors. 

Lack of transparency and of accountability may lead to an environment in which errors are overlooked, which seems to have been a big part of the problem at the NIH Clinical Center.  Both of those values can be transformed into a drive for improvement.  One familiar tool for improvement is the clinical checklist.  Although there are “mixed results regarding the clinical utility of checklists, the anesthesia community is increasingly interested in advancing research around this important topic,” noted Behrens et al. in their article The Ryder Cognitive Aid Checklist for Trauma Anesthesia appearing in the May 2016 issue of Anesthesia & Analgesia (doi: 10.1213/ANE.0000000000001186).

The Agency for Healthcare Research and Quality (AHRQ) defines a patient safety checklist as “an algorithmic listing of actions to be performed in a given clinical setting, the goal being to ensure that no step will be forgotten.  Although a seemingly simple intervention, checklists have a sound theoretical basis in principles of human factors engineering and have played a major role in some of the most significant successes achieved in the patient safety movement.”  AHRQ observes, further, that “[c]hecklists are a remarkably useful tool in improving safety, but they are not a panacea.  As checklists have been more widely implemented, it has become clear that their success depends on appropriately targeting the intervention and utilizing a careful implementation strategy.”

One of the most recent research reports to come out of an anesthesiology department was presented at the 2015 New York State Society of Anesthesiologists Postgraduate Assembly in Anesthesiology.  New PACU Handoff Checklist Improves Information Exchange (Anesthesiology News, March 29, 2016), an abstract presented by Christopher Potestio, MD, lead study author and CA-3 resident at Medstar Georgetown Hospital, showed that using a checklist for handoffs to post-anesthesia care unit (PACU) nurses took only 26 additional seconds to exchange 20 percent more information.  Communication errors between healthcare providers during PACU handoffs can easily occur in the “high-risk environment” of the PACU; an increase in the amount of key information is one way to mitigate the problem.

The Joint Commission (TJC) estimates that 80 percent of medical errors involve miscommunication during care transitions.  TJC currently requires hospitals to implement a standardized, interactive process to handover communications. 

The Physician Quality Reporting System (PQRS), too, reflects a consensus that has emerged regarding the benefits of using checklists in care transitions.  PQRS Measure #426 (Post-Anesthetic Transfer of Care Measure:  Procedure Room to a PAC) captures the “percentage of cases in which a post-anesthetic formal transfer of care protocol or checklist which includes the key transfer of care elements is utilized.”  Anesthesia departments looking for a sample checklist to follow or adapt might consider one published by Lin et al. in the May 2014 issue of the ASA Newsletter (Anesthesia Handovers:  Why Are They So Complicated?).  The mnemonic “PUTS PATIENT FIRST” makes this checklist very user-friendly:

Measure #427 (Post-Anesthetic Transfer of Care: Use of Checklist or Protocol for Direct Transfer of Care from Procedure Room to Intensive Care Unit) is analogous.  (Note:  these two measures can only be reported via a registry or a Qualified Clinical Data Registry [QCDR] such as the one offered by ABC.)

Another checklist measure is available to anesthesiologists who report their PQRS compliance through the Anesthesia Quality Institute’s QCDR:  ASA Measure #20 (Surgical Safety Checklist – Applicable Safety Checks Completed Before Induction of Anesthesia).  Noting that “In 2009, the World Health Organization (WHO) Safe Surgery Saves Lives Study Group published a study showing that utilization of a surgical safety checklist resulted in reduced perioperative mortality and complication rates.  Since then, surgical safety checklists have been widely implemented around the world.  Further studies confirm the WHO findings that implementation of the surgical safety checklist improves communication among members of the surgical team and reduces perioperative morbidity and mortality,” the AQI offers QCDR participants the opportunity to report on “patients, regardless of age, who undergo a surgical procedure under anesthesia who have documentation that all applicable safety checks from the World Health Organization (WHO) Surgical Safety Checklist (or other surgical checklist that includes the applicable safety checks for the specific procedure) were performed before induction of general anesthesia.”

The rationale for including ASA Measure #20 in the set of AQI-QCDR measures is, in part, that “compliance with surgical safety checklists and safety checklist protocols has been shown to vary widely.  The level of checklist compliance has been shown to vary depending on the implementation strategy.”  The potential penalties for PQRS under-reporting may not themselves be sufficient to motivate clinicians to spend the time to use checklists properly.  A successful strategy requires extensive preparatory work to maximize safety culture in the unit where checklists are to be used, engage leadership in rolling out and emphasizing the importance of the checklist, and rigorously analyze data to assess use of the checklist and associated clinical outcomes, according to AHRQ. 

Others have written of the critical role of culture and commitment for checklists to achieve their purposes.  Berry et al., in an editorial entitled “The Surgical Checklist:  It Cannot Work If You Do Not Use It” published in February 2016 in JAMA Surgery, observed that effective implementation poses ongoing challenges, such as requiring a 100 percent completion rate in order to improve significantly the effect of the checklist on patient safety, and that “A focus on the systems of care and promotion of a culture of safety at the institutional level is necessary to optimize checklist implementation.”

The province of Ontario required its hospitals to begin using surgical safety checklists by July 2010.  The effort failed to reduce the number of complications or deaths, as reported in the New England Journal of Medicine in March 2014.  Peter Pronovost, MD, who helped pioneer the use of clinical checklists, expressed concern that broad implementation without proper training and coordination of staff could interfere with rather than promote safety, according to an article published in Modern Healthcare on March 15, 2014 (Reality Check on Surgical Checklists), and also that government regulation of checklists was too slow to keep up with the changes in evidence-based practices.  In an editorial accompanying the NEJM study, Lucian Leape, MD, JD stressed the need to foster the hospital-specific customizations that would make checklists work in specific settings. 

Above all is the imperative of securing the commitment of the key players.  A structured initiative to get every hospital in the state to use a pre-surgical safety checklist process has been underway in South Carolina since 2013.  The South Carolina Hospital Association found that:

[A]cceptance of the checklist process varied from hospital to hospital, but those that had the most success had committed to following all of the steps needed to become high-reliability organizations—they offered leadership support, financial resources and cultivated staff members who were dedicated to the enterprise. They also allowed staff to customize the process.
…
To that end, the group brought in engineers with expertise in process improvement to visit every hospital, observe its procedures, and make recommendations to help each facility tailor the tool to meet its needs.

(Rice S. Making Checklists Work: South Carolina’s Statewide Experiment.  Modern Healthcare, January 23, 2016.)  One of the participating hospitals, Kershaw Health, succeeded with its own 25-item customized surgical safety checklist by taking the following steps:

• Surveyed all staff about what hindered checklist use
   
• Identified a physician champion to get surgeons on board
   
• Did monthly assessments to track how often the checklist process was skipped
   
• Used peer pressure because “no one wants to be seen as the outlier”
   
• Allowed staff to continually update and tweak the checklist
   
• Prominently posted reminders in the OR about timeouts and debriefs

In sum, implementing checklists is not a simple process, but it can be a rewarding one.  Some of the resources noted in this e-Alert may help readers get their own new or improved checklists off the ground.

“Transparency” is a word that you will encounter more and more frequently in health policy articles, including ABC’s publications.  Information transparency is a key for enabling healthcare purchasers to make value-based decisions concerning the quality and price of services.  Those data are slowly becoming more available, but they remain largely inaccessible to most potential users.

CMS recently released the third year of information from the Medicare Provider Utilization and Payment Data: Physician and Other Supplier database.  The database is comprehensive and offers the following information for every physician or Part B supplier who submitted claims in 2014:  name, address, gender, specialty, procedure (by HCPCS/CPT™ code), place of service, number of services, number of Medicare beneficiaries, average payment amount, average allowed charge and average submitted charge.  What is missing is any information on patients or on outcomes.  This being a Medicare database, it excludes the two-thirds of patients who are not in the Medicare fee-for-service program.  Its greatest utility is in revealing what an individual physician collected from Medicare for a given service or procedure, and how often he or she performed it.

There is a growing effort to making prices transparent to patients up front, before they obtain medical services.  To many observers, this only makes sense.  Marty Makary, MD, in an interview entitled Get Ready for Surgical Price Transparency posted on the website of the ORExcellence conference that will take place in October 2016 conference, said:

We wouldn’t consider the current business model acceptable in any other setting. Take the supermarket.  Imagine that you couldn’t see the prices at the store until after the cashier charged you, and you weren’t allowed to ask for a refund or take items back.  And when the products were rung up, you would see that items like oranges had a 4- or 6-fold markup.  You would be shocked, and probably consider it an incompetent marketplace with tremendous waste. Essentially, that’s what we have in healthcare right now with nontransparent markets.

Medical and hospital charges continue to increase at rates that outpace inflation.  Health insurance deductibles and co-payments are growing even faster.  From 2010 to 2015, the proportion of insured workers covered by high deductible health plans increased from 13 percent to 24 percent, according to the Kaiser Family Foundation.  Consumers who are now paying large sums out of pocket want to know what healthcare services they are buying and at what price.  

Malcolm Bird, a nervous first-time parent, took his one year old to the local emergency department (ED) for a cut on her finger.  The ED physician washed the child’s hand and put a Band-Aid on her finger.  Bird was shocked to receive a bill for $629.00.  The amount for which he was actually liable under his health plan, not yet having met his annual deductible, was $440.30.  When questioned by a reporter about how the hospital calculated its ED facility charge, the hospital wrote off the entire bill, which it had refused to do when Bird had protested.  According to the reporter, a simple “solution might be transparency—requiring hospitals to post their facility fees on the door so that patients have a sense of what the base price is for entry.  Bird says that would have helped in his situation; if he’d seen the typical charges, he probably would have just called a friend who was a doctor.”  (Kliff S. The case of the $629 Band-Aid—and what it reveals about American healthcare.  Vox Science & Health, May 13, 2016). 

It is very difficult for most consumers to ascertain ED charges because facility fees vary hugely and apparently arbitrarily—Kliff cites a study showing that ED bills for common procedures can vary from $15 to $17,797—and because hospitals rarely make them public.  When hospitals do make price information available, it is usually presented as an average figure, with predictable disclaimers about possible variation based on “complexity,” e.g., MetroHealth in the Grand Rapids, MI area.

A very few ambulatory surgery centers (ASCs) have opted to post fixed prices for certain procedures—beyond the self-paid cosmetic and LASIK procedures that started the trend.  In our eAlert of January 27, 2014 (Payments for Anesthesia Services in the Sunshine), we noted that the six-O.R. Surgery Center of Oklahoma in Oklahoma City, founded and managed by two anesthesiologists, listed more than 100 procedures on its website, each with an all-inclusive price covering the facility fee, the surgeon’s fee and anesthesia (but not hardware and implants).  The Center kept its prices relatively low in part by requiring up-front payments from self-pay patients, and by not participating with Medicare or most private payers.  The 47 surgeons who performed between 600 and 700 cases per month were all financially invested in the facility and thus have a shared interest in maintaining high quality.  The Center had attracted the attention not just of patients with no insurance or with high deductibles, but also of self-insured employers, and even of a neighboring full-service hospital, to which the Center sent patients needing “another day or 2 to sleep it off after their surgery” for a predetermined per-day price.  (Burger J. Is Surgery Ready for Price Transparency?  Outpatient Surgery Magazine Online, September 2013.)

The St. George Surgery Center in southern Utah goes farther in what it includes in the current total of 210 package prices available through drop-down menus on the opening screen of the ASC’s website.  The prices cover implants, hardware and a stay of up to 23 hours in addition to the surgeons’ and anesthetists’ fees.  One pre-op and one post-op visit are included, but diagnostic tests and imaging are not; nor is the treatment of complications. 

St. George spent months determining exactly what they spent on each procedure, gathering “surgical nurses, personnel in charge of buying supplies and the staff who manage our current supply inventory, combing through surgeons’ preference cards and used data management software to look up how much we spend on the 50 to 100 items used by each surgeon for every case.”  (Hadlock J.  Shopping for Surgery: How to Make the Self-Pay Model Work for You and Your Patients.  Outpatient Surgery Magazine Online, June 2015.)  The ASC negotiated fixed fees with its surgeons.  Below are the package prices listed under “Pain Procedures:”

The Oklahoma City and St. George ASCs offer a clear attraction to self-pay patients—but only to self-pay patients. Their prices may be a fraction of what patients expect to pay elsewhere. The ASCs save considerable billing and collection costs by requiring direct payment at the time of scheduling.

Patients with insurance, and the employers who purchase the insurance, have a growing number of innovative options for comparison shopping and limiting their financial exposure for healthcare services.  Among these are:

• Healthcare Bluebook.  A website that asks the user to enter a city or zip code and a procedure, test or service, for which it then produces a “fair price.”  As an example, the fair price for an anterior cruciate ligament repair in Arlington, VA is $9,388, broken down as follows:
  • Outpatient facility services $6,144
  • Surgeon fee for procedure and routine post-op care $2,195
  • Anesthesia (average surgery time; may vary) $999
• For each of these components, the Healthcare Bluebook offers a downloadable, printable detailed pricing agreement that patients may use to negotiate with the service provider.
• clearhealthcosts.com.  A search engine that uses reported pricing from patients and providers to relay the cost of procedures performed in New York City and its suburbs, San Francisco, Los Angeles, Houston, Dallas, San Antonio and Philadelphia, with more cities being added.
• pratter.us.  A secure portal where hospitals and surgery centers upload their prices for procedures, providing access to self-pay patients.  The portal provides links to participating facilities’ homepages to direct interested individuals whose employers have contracted with the service.
• medibid.com.  Gives elective surgery patients who are willing to pay out of pocket the ability to choose from a range of physicians and hospitals bidding, eBay-style, to provide the surgery.

Although there are only a few ASCs or hospitals that make it easy for the public to determine prices in advance of receiving healthcare services, and a very limited number of services that provide comparative information today, the handwriting is on the wall.  Consumers who are going to pay thousands of dollars for their care are going to be shopping for the best value.  “Value” includes quality, and although the medical professions and hospital administrators may challenge the validity of current quality metrics, consumers are going to use the performance measures that are made available.  The St. George Surgery Center, for example, provides and explains its surgical infection rate as well as patient satisfaction scores.

Anesthesiologists need to understand the costs of their services, to measure “quality” using standard metrics and to prepare to negotiate on the basis of transparency.

Computers and improvements in modern anesthesia delivery have gone hand-in-hand. In 1952 Himmelstein and Scheiner reported that they began using an instrument called the cardiotachoscope and found it useful during surgery. In 1958 Ben Ettelson and James Reeves started Spacelabs to develop systems for the United States Air Force for monitoring vital signs of U.S. astronauts.¹ This technology returned to earth, with the 1970s witnessing the expansion of digital electronics in operating rooms (ORs) and critical care units (CCUs). The 1980s saw clinical penetration of modularity and utilization of saturation and end-tidal carbon dioxide monitoring. As pharmaceuticals developed shorter and shorter clinical half-lives and microprocessor technology continued to improve, the concepts of closed-loop (CL) anesthesia, targeted-controlled infusion (TCI) devices and other computer controlled delivery systems moved from theoretical possibilities to clinically relevant systems.²

In the late 1990s Dr. Randy Hinkle, an anesthesiologist, formulated the initial concept that ultimately became Computer- Assisted Personalized Sedation (CAPS). Ethicon manufactured and distributed the only FDA-approved CAPS system, named Sedasys^®, until it decided to “pull the system to focus on other opportunities.”³ It is unclear at present whether another company will take over this technology or if the healthcare facilities in which Sedasys is in use will continue to use it. Nonetheless, the technical, safety and cost implications of systems such as Sedasys are an interesting case study.

The actual specifics of how the system functions are beyond the scope of this article. Company material and peer-reviewed literature describe the operation of the system. Significantly, Sedasys is neither a CL delivery system nor a TCI device. Propofol is delivered via continuous infusion rather than a bolus dose and Sedasys integrates oxygen saturation, exhaled carbon dioxide, non-invasive blood pressure and heart rate (EKG) monitoring. As recommended by the ASA Practice Guidelines for Sedation and Analgesia by Non-Anesthesiologists, patient responsiveness is also monitored by an Automated Response Monitor (ARM). Studies have shown that patients lose response to the ARM before they transition from Moderate Sedation (MS) into Deep Sedation (DS). Importantly, Sedasys is intended for the administration of mild to moderate sedation (MS) for either a colonoscopy or an esophagogastroduodenoscopy (EGD) (not both procedures on the same patient).

Ethicon slowly introduced Sedasys into the market. Initially, only two sites used the device. Then the Virginia Mason Medical Center (Seattle, WA), the Grace Clinic (Lubbock, TX), Promedica Toledo Hospital (Toledo, OH) and Loma Linda University Medical Center (Loma Linda, California) adopted the Sedasys system. Other centers were ready to begin using the system prior to the announcement that Ethicon was exiting the market, but the company did not release the names of those centers.

Virginia Mason initially started with two devices, increasing this number gradually to the current number of eight Sedasys units. Both Dr. Andrew Ross, Section Head for Gastroenterology and Dr. Wade Weigel, Section Head of out-of-OR anesthesia at Virginia Mason have indicated that the Sedasys system achieved several objectives for the hospital, for the gastroenterology department and for Virginia Mason patients. It provided efficiency gains within the endoscopy unit. Both patients and gastroenterologists have been satisfied with the system and there have been no severe airway or cardiorespiratory complications in more than 8,500 cases performed to date.⁴

There are several limitations imposed on the users of Sedasys. As specified in the FDA approval, an anesthesia provider must be immediately available if required should airway management or other patient management issues arise. The unanswered question here is, “How immediately available is immediately available?” This precludes the use of the device in isolated gastroenterology offices and restricts its use to larger centers. Even in these centers, however, it is unclear how anesthesia provider availability will be allocated.⁵ Also, there is a limit to the amount of concomitant medications the patient can receive in addition to the propofol infusion.

There is also the issue of revenue and costs. Based on the information from my colleagues at Anesthesia Business Consultants, total anesthesia payment for both EGD or colonoscopy (not both at the same time) procedures from January to June 2015, excluding government payees, was approximately $300.00. When I spoke with Ethicon about their pricing models prior to their decision to pull the system from the market, the comment was, “We have presented a couple of different sedation delivery models to selected regional payers including models that include payment for anesthesia medical direction or anesthesia patient selection and assessment are actively working with two payers to develop pilots that provide reimbursement to those willing to adopt those models. We would like to invite any of the readers to contact us should they be interested in exploring new business models leveraging this technology.”

In current payment systems, the gastroenterologist receives her/his fee and the anesthesia payment is separate from that fee. There are growing financial incentives in the U.S. healthcare system to develop new methods of both payment and procedural sedation that decrease anesthetist involvement in certain cases. Throughout Europe most colonoscopies and EGDs are performed without an anesthesiologist. This is especially the case in Germany and Switzerland and their outcomes are no worse than those seen in the USA.⁶ Also, in the United States, from 2003 to 2009 there was a significant expansion of anesthesia involvement in sedation for colonoscopies. This expansion was greatest in patients classified as either ASA I or II, not in patients having multiple comorbidities.⁷

In the past Sedasys could be purchased or leased for approximately $200,000.00. In this case, the per-procedure charge for disposables was lower (approximately $110.00 – $120.00). More recently, one could buy only the disposables on a per-case basis at a slightly higher charge if the machine were not purchased (approximately $150.00 for disposables per procedure). In the former case, at least 2,000 cases per room each year would have to be performed to optimize financial performance.

Constraints on the healthcare budget will only grow in severity. As our healthcare system transitions from a fee-for-service to a value-based payment model, anesthesiologists will have to collaborate with other specialties to reduce total costs. The Rand Corporation conducted a study for the ASA in 2013 and its likely projection is that the supply of anesthesiologists will peak in 2017 and decline thereafter.⁸ If you couple this forecast with the explosive growth of NORA procedures, the need for anesthesiologists will not be eliminated. Alternative payment models where reimbursement for the department of anesthesiology’s contribution to net hospital revenue and involvement in a unit with Sedasys or other CAPS systems will need to be created.

Meanwhile, data from the CDC demonstrate that our country is not screening all of the patients we should for colorectal cancer. Colorectal cancer remains the second leading cause of cancer death in our country and the annual expenditure for this specific diagnosis was $14 billion dollars in 2012.⁹ We do need to expand our screening of patients but we must do so in a cost-effective manner.

One critical issue concerning the use of Sedasys or any other technology for the administration of mild-to-moderate sedation is the framing of patient expectations. Most clinicians in anesthesiology are familiar with the dread look one receives when discussing a regional block with an orthopedic patient whose orthopedist has forgotten to mention a nerve block to them. Likewise, with a system such as Sedasys which provides mild-to-moderate sedation, it is critical that the gastroenterologist explain to the patient that they may remember parts of the procedure and experience some discomfort. The patient should not anticipate “having the best sleep of their life” and they should not anticipate being unconscious for the procedure.

Anesthesia providers have voiced several concerns about technologies such as Sedasys.¹⁰ It must be emphasized that Sedasys is only the first and will not be the last of more and more advanced systems for the administration of either sedation or the intraoperative management of depth of anesthesia. Its introduction was delayed by a lengthy FDA approval process. The anesthesia community will and must continue to articulate and advocate for patient safety recognizing that with systems such as Sedasys patient selection is a critical area for both patient selections and exclusion criteria.

Experienced anesthesia providers also note that they can efficiently sedate patients for EGDs and colonoscopies more rapidly than can be achieved with the Sedasys system. This fails to account for total process time. As many other industries have recognized, rapid processing at one step is not the objective.

Rather, the objective is total production (manufacturing) or patients treated (healthcare). The concept of “task time”¹¹ recognizes that each step in complex processes must be coordinated. Total output rather than sub-step performance is the objective.

Computers will continue to help us deliver more precise and safer care to patients. Yet for the foreseeable future anesthesia will not become redundant. The United States Department of Labor Occupational Information Network still lists anesthesiology as a “Bright Outlook Occupation.”¹² This means that anesthesiology is projected to grow much faster than average occupations. A fascinating study was conducted by Frey and Osborne of Oxford in 2013. They looked at “The Future of Employment: How Susceptible are Jobs to Computerization?”¹³ They discovered that three variables—social intelligence, creativity and perception and manipulation—are primary determinants in whether a job may be computerized. Dishwashers, court clerks and telemarketers all have jobs at high risk of being computerized. Anesthesiology does not. To further this theme, I contacted David Dautor, PhD, Associate Department Head of the Department of Economics at the Massachusetts Institute of Technology.¹⁴ Technological change is one of his areas of expertise. His thoughts on computers in anesthesia are that:

• Anesthesiologists will remain indispensable
• Computers may reduce the number of anesthesiologists required per patient admission
• If anesthesia becomes cheaper and safer there may be an output expansion effect (increased volume)
• Medical occupations demand:
  • Deep technical expertise
  • Human flexibility
  • Problem solving
  • Creativity
  • Compassion
• Virtuous pairing of skills makes these jobs hard to replace with either machines or non-highly-trained workers

Surgery, procedural medicine and anesthesia techniques have advanced significantly. The techniques of proceduralists and surgeons progress continually to less invasive approaches. Each of these groups is treating patients with significant comorbidities who only a few decades ago would have been classified as being “too sick for anesthesia.” The computer power available to us has grown each decade and this trend will not diminish. It can be anticipated that computers and new anesthetic delivery systems will only increase in their capabilities. While the future of Sedasys as a system is unclear, we can anticipate other systems to enter the marketplace. Anesthesiologists need to adapt to these new technologies, demonstrating that we can provide outstanding anesthetic care to sicker patients, more efficiently, in a more cost effective manner with the humane treatments that our patients deserve and expect.

¹http://www.referenceforbusiness.com/history/Sh-St/Spacelabs-Medical-Inc.html
²Shafer SL, Egan T. Target-Controlled Infusions: Surfing USA Redux. Anesth Analg. 2016 Jan; 122(1):1-3.
³http://www.outpatientsurgery.net/outpatient-surgery-news-and-trends/general-surgical-news-and-reports/%20ethicon-pulling-sedasys-anesthesia-system--03-10-16%20
⁴Personal communication(s), Drs. Andrew Ross and Wade Wiegel.
⁵ https://www.asahq.org/advocacy/fda-and-washington-alerts/washington-alerts/2014/01/asa-offers-recommendations-for-using-sedasys?page=17
⁶World J. Gastrointest Endosc 2015 16; 7(2):102-109
⁷Liu H, Waxman D, Main R et. al. Utilization of Anesthesia Services During Outpatient Endoscopies and Colonoscopies and Associated Spending in 2003-2009. JAMA, 307(11)178-184.
⁸http://www.anacalfornia.org/bifolder/bifolder2015-17/AB890RAND_RR650_AnesthesiaManpower_2013.pdf
⁹ http://www.cdc.gov/vitalsigns/colorectalcancerscreening/
¹⁰ Urman RD, Maurer WG. Computer-assisted personalized sedation: friend or foe? Anesth Analg. 2014 Jul;119(1):207-11.
¹¹ Liker JK. The Toyota Way: 14 Management Principles from the World’s Greatest Manufacturer. Chapter 8. Principle Two: Create Continuous Process Flow to Bring Problems To the Surface. McGraw-Hill, 2004.
¹² http://www.onetonline.org/help/bright/%20
¹³ http://www.oxfordmartin.ox.ac.uk/downloads/academic/The_Future_of_Employment.pdf
¹⁴ Personal Communication, http://economics.mit.edu/faculty/dautor/papers Moravec, Hans. Robots: Mere Machine to Transcendent Mind. Chapter Three: Power and Presence: Numerical Data for the Power Curve. Oxford University Press, 1998. Figure updated. http://www.transhumanist.com/volume1/moravec.htm

For patients who undergo a surgical procedure, the anesthesiologist’s bill sometimes comes as a surprise.  If the hospital and the surgeon are participating in the patient’s health plan but the anesthesiologist is not in the network and bills the difference between his or her full charge and what the health plan paid, the amount that the patient owes can be a nasty shock.  Large balance bills are often stressful for patients and are a major source of medical debt.

Balance billing is a significant issue across the U.S.  As insurance companies have narrowed provider networks to keep premiums down, the number of patients who inadvertently receive out-of-network care has jumped at hospitals, particularly with regard to contracted physicians such as anesthesiologists.

In March 2015, the Consumer Reports National Research Center conducted a survey of 2,200 adults that revealed that nearly one third of privately insured Americans received a surprise medical bill where their health plan paid less than expected during the two years prior.  “Among those respondents, nearly one out of four got a bill from a doctor they did not expect to get a bill from. Survey findings also suggest that consumers overall seem largely confused when it comes to their rights to fight surprise bills.”  (Consumers Union, Consumer Reports survey finds nearly one third of privately insured Americans hit with surprise medical bills.)

State Legislation

More than half of the state legislatures have passed laws limiting balance billing at least when the patient goes out of network in an emergency situation.  Most recently, on April 14th, Florida Governor Rick Scott (R) signed a comprehensive bill to protect patients from surprise out-of-network medical bills into law. The new law will ensure that patients in both emergency and non-emergency situations are not held liable for out-of-network rates if they do not have the ability or opportunity to be treated by a participating provider. As stated by the ASA, which together with the Florida Society of Anesthesiologists strongly opposed the legislation,

Reimbursement for services shall be the lesser of:

• The provider’s charges;
   
• The usual and customary provider charges for similar services in the community where the services were provided (which is not defined in law and will be determined only if contested which involves a financial burden on the provider); or
   
• The charge mutually agreed to by the insurer and the provider within 60 days of the submittal of the claim.

This new law is very concerning as it removes any patient responsibility whatsoever, even in nonemergent settings, and places insurers in the position of independently dictating payment for emergency and nonemergency health services. Under this law, providers are at the whim of insurers’ determination on usual and customary charges as no independent benchmarking system is provided within the language.

There are four basic approaches followed by the states that have adopted restrictions on balance billing, in various combinations.  According to a report published by in June 2015 by Jack Hoadley and colleagues at the Georgetown University Health Policy Institute’s  Center for Health Insurance Reforms (Balance Billing: How Are States Protecting Consumers from Unexpected Charges?), these four approaches are:

1. Disclosure and Transparency. It is the standard in many states to require insurers to have language in notices and plan summaries about the financial consequences of going out of network. Some states go beyond that to require notices to consumers at the point of service describing the potential for seeing a non-network provider and receiving a balance bill.
2. Balance Billing Prohibitions. Several states protect consumers more directly by prohibiting non-network providers from billing patients, beyond any allowed cost sharing, in certain situations. States are more likely to address the emergency setting, but some states have also sought to address surprise billing in circumstances where the patient has sought out an in-network facility and providers to perform a procedure, but is also treated unexpectedly by non-network providers. In some states, the ban applies only if the non-network provider accepts payment for the claim directly from the insurer based on an assignment of benefits.
3. Hold Harmless Provisions. An alternative to a ban on balance billing places the risk on the health plans, requiring that they hold plan members harmless by paying providers their billed charges (or some lower amount that is acceptable to the provider) in situations such as emergency care. 
4. Adequate Payment.  There are two ways that states may seek to ensure adequate payment:
   • Establish specific rules to set payment rates, for example requiring that insurers pay non-network providers at the usual and customary rates they pay to network providers; or
   • Refer providers and insurers to an independent mediation or dispute resolution process to settle on a fair rate of payment.

The new Florida statute, described above, employs both “adequate payment” strategies.  New York’s law, which went into effect on March 31, 2015, includes disclosure and transparency provisions, as well a process for the arbitration of payment disputes.  Balance billing is barred altogether for providers in emergency situations; if, in a number of other surprise billing scenarios, the patient assigns the provider’s claim to the health plan, he or she cannot be balance billed.  (See ABC Alert Restrictions on Billing Anesthesia Patients Who Go Out of Network,  October 13, 2014.)  Colorado treats covered services by non-network providers at a network facility as if they are in network and requires health plans to hold their members harmless in both emergency and surprise billing situations when patients are treated in network facilities, as well as for referrals when the plan’s network is deemed inadequate.

The foregoing is a general overview of the methods by which state legislatures have tried to protect residents from surprise bills.  Anesthesiologists and other physicians who balance-bill out-of-network patients should familiarize themselves with any applicable laws or regulations in their own states.  Medical societies and hospitals’ general counsels should have information readily available.

Not all attempts to pass legislation restricting balance billing are immediately successful.  This spring, members of the New Hampshire Society of Anesthesiologists worked with the New Hampshire Medical Society to derail a bill that would prohibit balance billing by out-of-network providers who provide services at in-network facilities, among other things.  The bill was sent for study and will not be reconsidered unless it is reintroduced in the next legislative session.  (ASA, Physicians Halt Out-of-Network Legislation in New Hampshire, March 4, 2016.)

Federal Legislation and Regulation

The Affordable Care Act (ACA) requires health plans to provide coverage for emergency services even if the providers are out of network. Specifically, the plan must pay these out-of-network providers the greatest of (1) the plan’s median payment amount for in-network providers, (2) a payment based on the methods the plan generally uses to determine payments for other out-of-network services (e.g., a percentage of usual and customary fees), or (3) the amount that Medicare would allow for the service.   Thus the ACA only protects patients against liability for out-of-network emergency care.

Within the last year, both Congress and the Administration have shown interest in restricting balance billing and surprise bills.

A bill introduced in the U.S. House of Representatives by Rep. Lloyd Doggett and 26 co-sponsors on October 20, 2015, the Ending Surprise Billing Act of 2015, would bar out-of-network physicians from balance-billing patients who receive emergency services in an in-network hospital. In the case of non-emergencies, patients cannot be balanced billed unless they are given 24 hours’ notice that an out-of-network specialist is providing care and an estimate of the charges and then provide written consent to those charges.  The Ending Surprise Billing Act has not been referred to any committee.

President Obama’s 2017 budget for HHS (PDF) contains a provision to “eliminate surprise out-of-network healthcare charges for privately insured patients.”  There are no details, but the Administration would require physicians who “regularly provide services in hospitals” to accept in-network rates, even if they do not participate in the given network. Hospitals would also have to “take reasonable steps” to ensure patients see in-network physicians. 

On March 8, 2016, the Centers for Medicare and Medicaid Services (CMS) issued a final rule (Patient Protection and Affordable Care Act; HHS Notice of Benefit and Payment Parameters for 2017)  to begin to address surprise medical bills for non-emergency services for individuals covered by ACA qualified health plans offered through the health insurance exchanges (HIEs) . New standards would apply when an enrollee receives care for essential health benefits from certain out-of-network providers in an otherwise in-network setting.  Applicable providers would be limited to those providing ancillary services (for example, anesthesia services for surgery performed in an in-network hospital) but would not include providers who render the primary service (for example, the surgeon.) 

Plans would be required to apply out-of-network cost sharing for such care toward the plan’s annual out-of-pocket limit for in-network cost sharing, beginning in 2018.  This requirement would be waived whenever plans notify enrollees in writing in advance that such surprise medical bills might arise. Plans can notify enrollees as part of the pre-authorization process for a service, if applicable, or up to 48 hours before the service is rendered, whichever is longer. Balance billing charges arising from surprise medical bills would not be limited or counted toward the enrollee’s annual out-of-pocket maximum spending. Significantly, this standard would not affect enrollees of HMO or exclusive provider organization plans that do not cover non-emergency out-of-network services at all. Such plans comprise 73 percent of all the qualified health plans offered through the HIEs in 2016.

The Department of Health and Human Services, on April 27th, convened a meeting of providers to discuss initiatives needed to tackle balance billing.  ASA First Vice President James D. Grant, M.D., and Sherif Zaafran, M.D., Chair of the organization’s Ad Hoc Committee on Out-of-Network Payment, represented ASA at the meeting.  According to an April 29th Washington Alert on the ASA website (ASA Leaders Participate in Federal Out-of-Network Payment Roundtable),

Dr. Zaafran highlighted the need for a Patient’s Bill of Rights, that an out-of-network deductible apply to an in-network deductible, and that insurers must have an adequate number of physicians in the plans that they sell. The Bill of Rights would outline patient rights, provide a solution for what really is an insurance gap, and advise how to know what the insurance product is as well as what is and what is not covered.

At the event, attendees shared that the challenge with this topic is as much about patients being unaware of what their plans actually covered as it is about the unexpected bill they received. As it stands, providers may know their charges but are not aware of a carrier’s payment for the health services to be rendered, especially with the complex array of different insurance products offered to consumers. As such, while patients are responsible for educating themselves on their coverage, the insurers must be made to be more forthcoming with information. Moreover, insurers should do more to educate patients that when they schedule a procedure/surgery, others - such as a physician anesthesiologist, radiologist, or pathologist - may be involved and it is important to determine their network status as well.

With the complexity of plans, the narrowing of networks and increasing use of network tiers where a provider may be in one tier and not the other, the carriers were again noted as the single source for where patients could go for such information. The group also discussed that while the media has promoted out-of-network payment as an emerging issue, the data still points to this being an important matter that impacts a very small percentage of patients. Proposed solutions to the challenge included references to states that are using an independent database of billed charges to address benchmarking for out-of-network concerns.

Conclusion  

The volume of activity on both sides of the balance-billing issue has been growing, and it will continue to grow.  Provider organizations like ASA and state medical associations are engaging in the political process and attempting to influence surprise-bill legislation.  On the patient advocate side, the Consumers Union launched the End Surprise Medical Bills campaign to help put an end to these unfair bills for good.  Consumers can visit EndSurpriseMedicalBills.org to share their surprise medical bill story, sign a petition, or use an insurance complaint tool for state-specific assistance, resources and information.  Consumers Union actively lobbied for proponent of the laws banning balance billing in California, Connecticut and New York, and is currently at work in other states.

What can anesthesiologists do to protect their professional income if and when balance billing is barred or severely limited in their states?  The obvious answer is, attempt to participate in all the plans with which your facilities are in-network.  There are likely to be some in which you will not participate.  If so, determine whether there are legal restrictions in your state, and exactly what is prohibited and what the exceptions to the law’s requirements might be. 

Focus on avoiding the surprise element.  Work with your hospitals to give elective surgical patients advance notice, in writing, that they will incur charges for the anesthesia service, and, if possible, an estimate of the range of those charges.

The shifting of financial responsibility onto patients and legislative efforts to shield them from at least the “unfair” consequences are part of the changing healthcare marketplace.  The ability to collect one’s full charges by not participating in given health plans seems to be disappearing in the rear view mirror.  Many anesthesiologists are already accustomed to such restrictions through their hospital contracts and/or medical staff bylaws.  You have in large measure adapted admirably—and will do so again.

With best wishes,

Tony Mira
President and CEO

Given the heightened level of interest in acquisitions of independent anesthesiology groups, physician shareholders are being confronted with a myriad of questions. Many are finding that anesthesiology groups in the local region are being acquired by larger medical groups. What should their practice do? What would be the value of their practice if they sought to be acquired? What does the acquisition process look like and how could maintaining a steady course of non-action not result in the best long term outcome?

Your Practice has Equity Value

Over the years, long-standing relationships have been developed with other healthcare providers and service contracts have been established with medical facilities, securing work for all the practice-employed physicians. A practice will accumulate a substantial amount of sweat equity, which has an equally substantial amount of economic value associated with it. Opportunity currently exists to monetize the value of this equity, and depending on regional market activities and the overall global economy, this opportunity may not always be available or as lucrative as it can be today.

Uncertainty is Prevalent

Anesthesiologists are currently enjoying high and steady market compensation rates with incomes that fall in the upper echelons within the healthcare physician provider spectrum. However, considering the current landscape of the industry these statistics likely won’t maintain their relative position forever—especially in markets that are experiencing consolidation since rates will become more competitive, resulting in downward pressure.

As hospital service contracts come up for renegotiation through the RFP process, practices entrenched in these hospitals may find their subsidies and other benefit offerings thinning. Hospitals are facing increasing pressures to minimize operating costs and are being met with an increasing number of alternative providers as options to obtain necessary services. These alternatives are becoming bigger, more competitive and are offering more benefits to the hospitals, making the market as a service provider that much more competitive.

Additional uncertainty over reimbursement rates and models is increasing. Coordinated care is pressuring reimbursement rates down. The industry is experiencing a shift from fee-for-service to pay-for-performance, increasing burdensome requirements to report and maintain quality metric levels by the practice, resulting in greater operating costs and impacting smaller practices disproportionately to larger ones.

Bargaining Power

The industry is at a point in its life cycle when size matters, and many of the large buyers are bundling different physician and multispecialty services to gain critical mass and achieve greater bargaining power for contracts and resources. The regulatory environment is becoming increasingly tumultuous with recent legislated healthcare reforms, such as bundled payments, pay-for performance, value-based purchasing and accountable care organizations.

Partnering with a larger organization in most cases provides your group access to greater resources, existing infrastructure and established business platforms to help address these challenges today, as well as the unforeseen obstacles that will arise in the future. It gives practices the support they need to negotiate with insurance carriers to improve (or at least maintain) current reimbursement rates. They have people whose full-time jobs are to look at managed care, figure out contracts and manage the collection of quality data that is used to improve outcomes. Sophisticated, tried and true systems are in place to process billing and insurance claims and manage administrative functions to improve the overall process without having groups solve these problems on their own. Physicians can focus on their clinical responsibilities without the administrative burden or managing the practice; overhead costs can be lowered.

Status Quo

The evolution of the anesthesiology industry is heading in a direction where the smaller, independent physician practice will encounter difficulties in competing with bigger and more capable competitors in the upcoming future. At the very least, this will result in a decrease in overall profitability. To maintain parity with today’s levels, a group would need to experience an increase in reimbursement rates and/or growth in the practice’s customer base, either via organic or inorganic growth maneuvers (pain clinics, ASCs, etc.) or through vertical integration (multi-specialty practices).

Inevitably, external market forces will threaten the ability of many practice models to continue independently. Regardless of any immediate plans or desire to undergo the transaction process, every independent anesthesiology practice group should begin discussing preparation initiatives that will streamline operations, reduce costs, improve financial transparency and other specific measures to increase their overall enterprise value. Furthermore, the group leadership should evaluate and keep apprised of the options available, so that when the necessity arises, familiarity exists with the process and educated decisions can be made.

One-Time Sale

Large strategic buyers with practices spanning regional and national geographies may be interested in acquiring your physician practice—in order to establish their presence in a new market or strengthen their position in an established one. These buyers may seek for the acquisition of up to 100 percent of the practice. Five to seven year employment commitment contracts for the selling physicians at fair market salaries and standard non-compete agreements are typical expectations from the buyer in return for this “cash-out.” In some deals, the buyer will seek to have ancillary transaction consideration tied to performance-based “earn-out” arrangements in order to incentivize post-transaction performance by the service provider group.

Financial Recapitalizations

Private equity firms (referred to as “financial buyers”) may be looking to invest in your practice via infusion of financial capital in return for a controlling stake in the practice—a cashout of up to 80 percent of the equity value in the practice. They back privately held mergers and acquisitions (M&A) companies generally seeking to create a financial “exit” for themselves, typically through the sale of the company to an even larger company or, less commonly, by attempting to “go public” and selling shares on the stock market. Their strategy is not to hold forever—they focus on a growth strategy where they make their businesses large enough to pull returns from their investments. These buyers are most suitable as partners to a practice where the leadership is interested in an active approach to growth. These firms typically bring financial and operational expertise to the table to undertake a rapid top-line and bottom line expansion campaign. Once the growth strategy has been executed (in three to five years’ timeframe), the firm will look to sell ownership of the practice to another buyer, resulting in a cash-out of remaining ownership interest held by the original shareholders (commonly referred to as the “second bite of the apple”) at a substantially higher enterprise valuation.

Alternative Employment

If the opportunity to partner with a strategic or financial acquirer is no longer on the table, the group may continue its regular course or it may seek to be absorbed into employment within another group or with the hospital itself. While this provides opportunity to secure work and income with another group, this means any of the equity value and goodwill that was associated with original practice will be foregone—never to be realized. Physicians will receive fair market value salaries, but employment contracts are likely only to be short-term. This is often the least desirable scenario. With proper consultation and planning with the right M&A advisor—not a single dollar worth of value will be unnecessarily left behind.

Transaction Process

A physician group that decides that it wants to move forward with bringing another business partner into the picture should expect a transaction process that will run anywhere from six to twelve months. The stages of the process can be defined according to the following process chart:

Data Collection/CIM Creation—advisors work closely with key practice management and administration personnel to gather key financial and operational information about the practice to build a Confidential Information Memorandum (CIM), which will be used to market your practice. This will serve as an introduction to prospective buyers on what makes your group attractive and as a means of highlighting strengths of the practice. A qualified M&A advisor will work closely with you to develop this comprehensive brochure in order to expand on various aspects, including:

• General overview—history and background of the group, locations serviced, understanding of the ownership and reporting structure lines
• Management and operation model—key personnel biographies, staffing and service delivery models
• Operational and financial performance—case statistics and analysis of revenues, charges, collections and other accounting trends

Tactical Marketing—a campaign is thoughtfully planned and coordinated to reach the desired group of qualified transaction partners able and interested in merging with your practice. A qualified M&A advisor will solicit interest from these prospects on your behalf, coordinate for meetings with these suitors and strategize subsequent steps with your group in considering all viable options. In this stage, attention is given to differentiating characteristics among the buyers, particularly:

• Strategic vision—prospective acquirer’s business plan alignment with the interests of practice stakeholders
• Synergies/value-adds—business relationships, reporting and information systems, shared resources, negotiation leverage and payer rate arbitrage

Letter-of-Intent (LOI)—once the most suitable partners have been evaluated, the process of narrowing down the potential acquirers takes place. M&A advisors are critical in this stage, as they aid in the negotiation to arrive at favorable terms for the selling practice. Review of key factors, not limited to the cash that is being offered for the ownership, include:

• Consideration offered—ancillary to cash offer and any contingencies tied to future receipts 
• Employment and benefits—post transaction compensation rates, employment conditions and terms, and benefits packages

Preliminary terms of sale and an exclusivity agreement are drawn up in the form of a LOI and entered into between the parties, consummating the due diligence process for the buyer and limiting the ability of the seller to solicit offers from any other suitors.

Due Diligence—the buyer will initiate the comprehensive audit review process of the practice, performing procedures to assess the reliability of any assumptions upon which the buyer based its purchase price valuations. This process requires the business to submit numerous legal and financial records requests to the buyer for their evaluation, involving a significant amount of secondary requests and follow-up inquiries. A qualified M&A advisor will prepare the practice and its management to efficiently complete the process, will assume the bulk of the responsibilities in order to limit the impact on everyday business operations, and will help overcome obstacles encountered along the way.

Closing—upon conclusion of the diligence process, a Definitive Purchase Agreement is drafted according to the final terms agreed upon between the parties. Business continues as usual under the new ownership structure.

Selection Of Advisor

Before heading down the route selling of the practice, it is important for leadership to understand that hiring the right advisor is crucial for executing a successful transaction. The ideal M&A professionals will understand it is not only about selling your practice; it is also about understanding your practice, your partners and your unique value—in addition to finding both the optimal economics, as well as “the right fit and best partner” for your group.

The right M&A professionals will have extensive experience specific to the anesthesiology sector in order to advise you on a successful transaction. They will have completed numerous transactions with other independently-owned physician practices and have worked intimately with all of the prospective buyers of anesthesiology groups. A qualified M&A team will have an advisory board of healthcare professionals, including anesthesiologists, who have practiced, sold their groups, worked for large national anesthesiology companies and consulted on mergers and acquisitions of anesthesiology groups.

The right M&A professionals will be experts in handling communication among all of the interested parties within the transaction. They will recognize the importance of appropriate, timely and well-designed, on-point communication to the various internal constituencies.

• The Executive Committee or Equivalent—keeping them involved on issues and updated on progress being made, walking them through the offers and differentiate the relative pros and cons
• Shareholders—keeping them incrementally informed, educating them about the process, potential structures, employment provisions and other details of the transaction as it impacts life after the deal with their new partner 
• Employees—leading town hall meetings with all the stakeholders to help introduce the Buyer and explain, amongst other things, how compensation and benefits will work post-closing
• Customers—strategizing on when and how best to inform them of the transaction

The benefits of hiring the most suitable M&A advisors when your group is investigating a transaction opportunity by far outweigh any cost savings thought to have been realized when considering anything less. The prime opportunity for the sale of your independent practice will only come around once—this is a consideration that deserves to be taken seriously. Have the best professionals on your side of the negotiation table.

Most anesthesiologists know in general fashion that there are "compliance" issues with professional courtesy, co-payment waivers and discounts for cash payments.  Yet confusion persists about exactly how to handle these situations.

The legal principles have not changed in the nearly two decades since the HHS Office of the Inspector General (OIG) issued its Compliance Program for Individual and Small Group Physician Practices.  The basic standards are still as spelled out by the OIG:

In general, whether a professional courtesy arrangement runs afoul of the fraud and abuse laws is determined by two factors:  (i) How the recipients of the professional courtesy are selected; and (ii) how the professional courtesy is extended.  If recipients are selected in a manner that directly or indirectly takes into account their ability to affect past or future referrals, the anti-kickback statute—which prohibits giving anything of value to generate Federal health care program business—may be implicated.  If the professional courtesy is extended through a waiver of copayment obligations (i.e., ‘‘insurance only’’ billing), other statutes may be implicated, including the prohibition of inducements to beneficiaries [citation omitted].  Claims submitted as a result of either practice may also implicate the Civil False Claims Act.

The following are general observations about professional courtesy arrangements for physician practices to consider:

• A physician’s regular and consistent practice of extending professional courtesy by waiving the entire fee for services rendered to a group of persons (including employees, physicians, and/or their family members) may not implicate any of the OIG’s fraud and abuse authorities so long as membership in the group receiving the courtesy is determined in a manner that does not take into account directly or indirectly any group member’s ability to refer to, or otherwise generate Federal health care program business for, the physician. 
• A physician’s regular and consistent practice of extending professional courtesy by waiving otherwise applicable copayments for services rendered to a group of persons (including employees, physicians, and/or their family members), would not implicate the anti-kickback statute so long as membership in the group is determined in a manner that does not take into account directly or indirectly any group member’s ability to refer to, or otherwise generate Federal health care program business for, the physician.
• Any waiver of copayment practice, including that described in the preceding bullet, does implicate section 1128A(a)(5) of the Act if the patient for whom the copayment is waived is a Federal health care program beneficiary who is not financially needy.  For example, we have previously stated that providers that routinely waive Medicare cost-sharing amounts for reasons unrelated to individualized, good faith assessments of financial hardship may be held liable under the anti-kickback statute.  See, e.g., OIG Special Fraud Alert on Routine Waiver of Medicare Part B Copayments and Deductibles, 59 Fed. Reg. 65372, 65374 (Dec. 19, 1994).  Such waivers may constitute prohibited remuneration to induce referrals, as well as a violation of the civil monetary prohibition against inducements to beneficiaries. 

There are several fundamental points here.  First, “professional courtesy” refers to the waiver of payment from fellow physicians or their family members or employees.  When it consists of waiver of the whole fee, or a flat percentage of the fee, it is generally legal, unless targeted solely to actual or potential referral sources.  In contrast, waivers of co-pays are generally illegal absent financial hardship, at least in the case of federally-insured patients (e.g., Medicare or Medicaid), including waiver of co-pays to physicians and family, as a professional courtesy.

Second, the federal anti-kickback statute is about remuneration for referral of Medicare/Medicaid business.  If the patient is not in a position, even potentially, to refer Medicare/Medicaid patients to the physician, then the statute is not implicated—but that is a very rare situation.  The Civil Monetary Penalties (CMP) statute imposes penalties against any person who gives something of value to a Medicare or state health care program (including Medicaid) beneficiary that the benefactor knows or should know is likely to influence the beneficiary’s selection of a particular provider.  The federal prohibitions only come into play, therefore, when there is intent to induce or reward referrals of Federal health care program business.  State statutes may cover broader categories of patients.

Third, if an anesthesia practice is going to offer either professional courtesy of waivers of co-pays, it should have a written policy describing the terms of the offer.  Advice of counsel is recommended.

Practical Application

1. Professional Courtesy.  Generally, it is legal to provide courtesy to physicians in the community, their families and their staff.  Professional courtesy is illegal is when it is targeted to those physicians or other persons who are in a position to refer Federally-insured patients to the practice.

It is dangerous to target professional courtesy to potential referrers because this may constitute an illegal kickback for the referral of Medicare patients.  The waiver of the anesthesiologist’s usual fee can be viewed by as "non-cash remuneration" for potential future referrals.

Extending professional courtesy to pre-determined groups of individuals is the best way to avoid an appearance that the purpose of the fee waiver is to obtain referrals of Medicare patients.  As stated by the OIG (above),  a “physician’s regular and consistent practice of extending professional courtesy to groups will not implicate the anti-kickback statute] so long as membership in the group receiving the courtesy is determined in a manner that does not take into account directly or indirectly any group member’s ability to refer to … the physician.”

It is not necessary for the anesthesiologist who provides professional courtesy discounts to avoid all physicians who might be in a position to refer Medicare patients to the anesthesia practice.  Professional courtesy can be offered to physicians and their families, including good referrers.  What the practice cannot do is limit the availability of the free services to only the actual or potential referrers.  As an example, an anesthesia practice may not limit professional courtesy to high-volume surgeons on the hospital medical staff.   

2. Waiving Co-Pays; Accepting “Insurance Only.”  Waiving patient co-pays or accepting “insurance only” as payment in full is similar to waiving the entire fee in a professional courtesy situation, in that both arrangements involve a discounted or reduced cost to the patient.  Waiver of co-pays, however, is generally illegal. 

Waivers of co-pays for Medicare patients violate the federal CMP statute, which prohibits the offer of "remuneration" to a Medicare or Medicaid beneficiary that the health care provider "knows or should know is likely to influence" the patient to seek medical care from the provider who is offering the co-pay waiver. One observer has speculated:

Arguably, waiving the entire fee, as in professional courtesy, is also likely to "influence" the beneficiary (who doesn’t like free medical care?).  But the government (through the Office of Inspector General – "OIG") only cites this statute with respect to waiver of co-pays.  It does not seem to think that waiver of the entire fee as a professional courtesy is illegal, unless targeted to actual or potential referral sources, as noted above.  The waiver of the full fee does not increase the cost of services to the Medicare program which is likely why it is not addressed.

The bottom line is this.  The OIG has long targeted waiver of co-pays when extended to the public.  It does not want medical practices to build their Medicare patient volume by offering "insurance only," since this encourages over utilization by the general Medicare population.  The government also views waiver of co-pay as a fraud on the government, since it results in a "misstatement" of the Practice’s normal fee.

The OIG has never strenuously opposed or targeted "insurance only" in the context of professional courtesy to physicians and family, or to the practice’s staff and family.  Nonetheless, it is technically illegal, for Medicare patients.  It may also be illegal for commercial patients, depending on state law and the payer’s contract with the provider.  Therefore, the best course is to avoid "insurance only" under all circumstances.

Co-Pays and Courtesy: Clearing Away the Confusion (Monroe County Medical Society, reprinted with permission from The Health Care Group, Plymouth Meeting, PA)

It is important to realize that “insurance only" billing has also been deemed insurance fraud by some states.  The theory is that the real fee is less than the fee the practice bills to the insurance company; with a $100 charge and a waived $20 co-pay, the real fee should be $80, to use the familiar example.  

“Insurance only” billing may also be prohibited by the participation agreement with the patient’s health plan, i.e., the contract may stipulate that the practice must collect co-pays and deductible amounts.  In addition, many private health plans and some federal programs have a "most favored nation" clause in their contracts with physicians.  This entitles the plan to pay the lowest charge the physician bills to anyone.  Any pattern of discounts could result in a reduction in the physician’s allowable reimbursement schedule to the discounted amount.

3. Exception for Financial Hardship.  There is one very limited exception to the prohibition on co-pay waivers.  This is a waiver based on demonstrated financial hardship.  It is permissible for the practice to waive the co-pay, even for Medicare patients, so long as such waivers are granted with reasonable, consistently applied hardship criteria and are not provided as a matter of course.  The practice should establish a process in terms of what documentation (e.g., tax return, unemployment compensation documentation) must be provided by the patient to qualify.

Absent financial hardship, practices should always charge and collect the co-pay.  It is not sufficient for the practice merely to go through the motions by billing the patient for the co-pay but failing to make any good faith effort to collect it, or by telling patients that the practice "has to" bill the co-pay to comply with the law but that the patient should simply disregard the bill.

4. Discounts for Cash Payment.  To avoid the costs and uncertainties of seeking payment from insurance companies, many medical practices offer patients discounts for cash payments.  While the practice of bypassing insurance altogether is perfectly legal, anesthesiologists need to check whether undercutting their own negotiated rates violates any of their health plan contracts.  They also need have in place  rigorous administrative controls so that they do not erroneously bill the patient’s health plan after having received payment in cash.  The policy should be in writing, and followed uniformly.

Conclusion

The rules pertaining to professional courtesy and waivers of co-pays are superficially simple enough.  The devil is, as the saying goes, in the details—which every practice that extends the discounts must state in written policies.  While there has been little enforcement activity in so far as professional courtesy is concerned, waivers of co-payments extended to the public have raised prosecutorial interest.  The safest course is to avoid granting co-pay waivers, except in cases of well-defined and documented hardship, as a matter of policy.

With best wishes,

Tony Mira
President and CEO

One of Robert Frost’s most popular poems is The Road Not Taken. It is about two paths that diverge in the woods. It is a wonderful and powerful metaphor for the decisions we make in life. By selecting one option we inevitably forgo another. More often than not this results in endless speculation as to whether it was the right choice. And so it is with the strategic decision to sell one’s anesthesia practice. The allure of being part of a bigger, stronger and better-managed entity is a powerful draw but does it really result in a more secure practice situation? That is the question of the day.

Anesthesia providers are a curious breed. They are credited with having the shortest decision cycle in medicine. They routinely make critical life and death decisions in a matter of seconds. Ironically, despite their facility in the operating room, when presented with major strategic decisions pertaining to their practice they often freeze like deer caught in the headlights. One can explain this on the basis of their training, which involves clinical decision trees that have been assiduously memorized. In other words they perform consistently in the known environment of the operating room and delivery suite. We often joke that physicians and CRNAs are not business people. Although some are, many have simply focused their energy on their professional training and clinical skills. Such an intense focus on managing patients safely through the trauma of surgery has resulted in a population of providers who tend to be extremely cautious and risk-averse in their personal and business lives. Their comfort zone is defined by the operating room and the processes over which they have learned to exercise a modicum of control.

Anesthesia providers are known for their independence. For them anesthesia is both art and science; a unique creation that responds to the unique requirements of patient, surgeon and surgical procedure. Some have suggested that even the notion of an anesthesia practice is an anachronism. Most anesthesia groups operate more as professional business fraternities than as rigorous business entities. The typical American anesthesia practice provides just enough structure and focus to ensure a viable franchise that collects an adequate income to provide a reasonable income to its members without imposing any undue constraints or limitations on the clinical activities of its members. For most, partnership or shareholder status is the medical equivalent of tenure where cause for termination is almost unknown.

How curious is it, then, that so many of these loose confederations of providers are willingly and eagerly selling out to aggregators which offer so little in the way of long term security or protection? What does this say about the current state of healthcare in this country? What does it say about the nature of the specialty and its practitioners? What is the problem to which selling one’s practice is the perceived best alternative? And when a practice decides to merge or sell out, how do its members know they have chosen the best path? There is a lot of wishful thinking in such decisions, but more than anything it is blind faith since no one can really predict the outcome.

Such change can only be motivated by fear or hope, and in the case of what is taking place in the specialty of anesthesia, it is obvious that fear is the predominant motivator. Consider some of the most significant recent developments in U.S. healthcare. There is nothing to reassure providers that things will work out for the best. Just the opposite occurs, from a provider’s perspective; each new regulation, consolidation or proposed quality metric only reinforces a perception that the system is out of control. More service will be required for less pay.

If U.S. healthcare is a boat that has been quietly cruising a predictable course these past few decades, most would agree that it has suddenly been thrust out into uncharted waters. The passage of HIPAA was the first wake-up call. While compliance had been a topic of discussion prior to 1996, the year of HIPAA’s enactment, it became a major concern. One could even say that U.S. medicine has evolved through three phases over the last few decades. In the seventies and eighties one collected what one billed. In the late eighties and nineties managed care changed the rules of engagement so that one got paid what one negotiated. Now it can be said—with only slight exaggeration—that one gets to keep what does not get taken away in a compliance audit.

While most physicians could deal with the implications of HIPAA, the passage of healthcare reform and the implementation of the Affordable Care Act, aka Obamacare, has been an entirely different matter. It is the very nature of the legislation that it presupposes structural changes in the market for healthcare, few of which are actually defined. At every level of healthcare delivery entities are struggling to envision a future that is as clear as the forest paths Frost described and to position themselves to be serious players. Never has U.S. healthcare seen such an explosion of activity. Two themes appear to be driving all the strategic considerations: quality and cost, for the underlying assumptions of Obamacare are that U.S. healthcare is too inconsistent and too expensive. Americans pay a huge premium for less than optimum care.

Capital has a curious way of finding its way into such situations. Investors love to think that one man’s challenge is another’s opportunity. Businessmen are eager to bring order to the chaos of healthcare. The amount of venture capital that has flowed into the specialty of anesthesia in recent years is impressive. It is the availability of such capital to buy and aggregate anesthesia practices that is so dramatically changing the landscape. Obviously there are those who believe that the application of better management will result in better, cheaper and more profitable healthcare. By all accounts, however, one must acknowledge that the proposed outcome is still much more of a concept than a reality.

The current environment has given new life to an old aphorism. The beliefs and strategies that have gotten us to where we are today will not get us to where we want to be tomorrow. American anesthesia providers have always believed that if they consistently provided quality care all the rest of their issues would take care of themselves. Ironically, they may have done too good a job. Quality is now a given. Anesthesia care has become a commodity.

And so anesthesia providers have become increasingly anxious about the future of their practices. They are starting to feel impotent, that the game is rigged, that they cannot compete with bigger,slicker and more aggressive competitors. And so they ask themselves, is bigger better? With increasing frequency they conclude that it must be, not because they know this to be true, but because it appears to be the only alternative.

As scientists, anesthesia providers like to analyze things objectively. The art of administering anesthesia is based on a feedback paradigm where the availability of reliable data about a patient’s physiology allows for effective decision-making. How, though, does one make business decisions when the desired feedback is so illusory and delayed? While the desired outcome of each anesthetic is clearly defined a priori, what is the desired outcome of strategic decision-making? Thoughtful observers suggest three:

• Job security
• Increased income for work performed
• Control over one’s destiny

If the motivation to sell or merge one’s practice is concern for the future, which is the most common concern of most practices today, then this requires careful due diligence. While it is true that larger entities have the ability to ensure providers will have work, they cannot necessarily guarantee any specific work situation. There is growing evidence that hospital administrations are increasingly concerned about the power of anesthesia mega-groups. Many an anesthesia practice has aggressively pursued a merger or acquisition only to learn that such an act would result in termination of the contract.

While it is true that large anesthesia practices have the ability to negotiate better rates with payers, this does not necessarily translate into better physician or CRNA compensation. For those entities that are investor owned, increased contract rates are viewed as integral to generating profits as is the ability to drive down the cost of providing care. Most observers agree that the more aggregation that occurs in anesthesia, the more this will result in reduced provider compensation. The strategy is simple. Today’s aggregators offer new graduates lower salaries but predictability in lifestyle, a formula that seems to be playing well. What they also offer is a career path for those who have management ability. The formula ties the reward of higher compensation to the risks of managing other providers and reducing the overall cost of care.

And to the third litmus test, control over one’s destiny, what is the impact of adding one’s name to a longer list of providers? Clearly it diminishes an individual’s influence or control, unless that individual is politically astute and can be an active member of the management team. But this objective may actually be a chimera. While anesthesia providers love to think they have a certain degree of autonomy and independence, this probably only refers to what happens within the four walls of the operating room. Outside the O.R. no specialty is more captive to the requirements and expectations of its customers.

So why do so many practices and providers so willingly give up what seemed so important to them? Quite simply, most have come to believe they have no alternative, or at least no better alternative. Many may be right but most are simply unwilling to make the changes necessary to meet new market conditions. This perspective is consistent with the long-held belief that all that really matters is good outcomes. Most practices that see themselves as being vulnerable or at risk could probably fix their practice and secure their own future. To do so would be a challenge. What happens instead is that they let someone else impose a better solution.

There is a classic admonition that one will never get rich working for someone else. Most anesthesia providers do not pick the specialty to get rich. Most pick the specialty because they are fascinated by the science, like the work and want to make a difference in patients’ lives. They see themselves as problem-solvers and decision-makers. It is ironic that the very skills that make most anesthesiologists and CRNAs so effective in the management of their patients don’t get applied to the management of their practices. Some large anesthesia practices and aggregators appear to have developed a successful formula for success but these are the exceptions. Many others are still focused on getting big without really having formulated a strategy to ensure security, income and control of destiny.

Ultimately, this is a classic buy-ormake decision. We pay for a service that we cannot provide for ourself. Anesthesia practices either do their own billing or they outsource it to a vendor. The decision to sell or merge should be viewed through the same lens. If the proposed solution does not create more value than you could create yourself then you might be deluding yourself by thinking it is a better option. Frost was prescient. How often do we pick a path just because we think it will be better or easier and how do we know whether it was the right path? That is the question that will haunt us for years to come.

Have you ever found that you could not make heads or tails of a Medicare regulation?  Have you wondered whether even CMS could decipher and coherently apply its own rules?  The sheer volume of regulations makes it difficult to be certain of one’s interpretation:

Medicare is, to say the least, a complicated program. The Centers for Medicare & Medicaid Services (CMS) estimates that it issues literally thousands of new or revised guidance documents (not pages) every single year, guidance providers must follow exactingly if they wish to provide health care services to the elderly and disabled under Medicare’s umbrella. Currently, about 37,000 separate guidance documents can be found on CMS’s website.

Caring Hearts Personal Home Services, Inc. v. Burwell (No. 14-3234) (10th Cir. 2016).  Caring Hearts, a home health agency, had been ordered to refund more than $800,000 to CMS on the grounds that some of the physical therapy or skilled nursing services it had performed were not provided for “homebound” patients and were not ”reasonable and necessary” as required by the statute.  The Administrative Law Judge (ALJ) upheld CMS’s decision as did the federal district court.

The Court of Appeals for the Tenth Circuit reversed the decision, finding that CMS had applied regulations that did not exist in 2008, when the services were provided, and that CMS was unaware of this until the litigation.  The regulations that defined the criteria for deeming a patient “homebound” and services “reasonable and necessary” in 2008 were much more vague and liberal than the ones that replaced them several years later.

Textual differences between the “homebound” regulation that was in effect in 2008 and the one on which CMS relied—use of the words “shall” and “must” in contrast to “should” and “will”—were material to the decision.  The later version was much more onerous than the 2008 regulation.

As for the “reasonable and necessary” requirement, the relevant statute (42 U.S.C. § 1395y(a)(1)(A)) states simply that charges must be “reasonable and necessary,” without offering providers any guidance as to what might and might not qualify.  It does not dictate any specific documentation.  Under current regulations, providers must meet a stringent documentation requirement to prove medical necessity of physical therapy services, but the Court ruled that this was not retroactive to the time period at issue.  Instead, 42 C.F.R. § 409.44(c)(2)(I), as it stood in 2008, required simply that the services meet the “accepted standards of medical practice”—a benchmark that Caring Hearts met.  The Court also applied the less exacting standard for skilled nursing medical necessity documentation.

CMS’s final argument was that 42 U.S.C. § 1395pp, which gives the agency power to forgive provider mistakes relating to “reasonable and necessary” and to “custodial care,” would not allow it to relieve a provider of liability if the dispute centered on whether a patient was homebound.  The Court rebuked CMS by stating that “here too it seems CMS is unfamiliar with its own law,” noting that although the statute 30 years ago did preclude relief related to homebound condition, that is not the current status of the law.

The Court concluded:

This case has taken us to a strange world where the government itself—the very “expert” agency responsible for promulgating the “law” no less—seems unable to keep pace with its own frenetic lawmaking. . . . whatever else one might say about our visit to this place, one thing seems to us certain: an agency decision that loses track of its own controlling regulations and applies the wrong rules in order to penalize private citizens can never stand.

Vacating the lower court’s decision, the Court went one step further and suggested in its opinion that Caring Hearts could reasonably seek attorney’s fees from the agency.

The 19-page Court opinion is without doubt an embarrassment to both CMS and to its lawyers.  Cases are normally litigated on the basis of how the law applies to the facts at hand—not on whether the parties are relying on statutes and regulations that did not exist at the time the controversy arose.  But CMS can perhaps be forgiven because of the enormous workload imposed on it by Congress, which passes the laws that CMS must implement by regulation, and by the sheer numbers of beneficiaries, providers and suppliers who may challenge its decisions.

A Very Brief and Selective History of CMS

1937 – U.S. Surgeon General Thomas Parran proposed that National Health Insurance first cover Social Security beneficiaries.

1965 – Medicare and Medicaid were enacted as Title XVIII and Title XIX of the Social Security Act, providing hospital, post-hospital extended care and home health coverage to almost all Americans aged 65 or older (i.e., those receiving retirement benefits from Social Security or the Railroad Retirement Board)—but not physicians’ services, thanks to the efforts of organized medicine—and providing states with the option of receiving federal funding for providing health care services to low-income children, their caretaker relatives, the blind and individuals with disabilities.  At the time, seniors were the population group most likely to be living in poverty; about half had health insurance coverage.  To implement the Health Insurance for the Aged (Medicare) Act, the Social Security Administration was reorganized and the Bureau of Health Insurance was established on July 30, 1965.  This bureau was responsible for the development of health insurance policy.  Medicaid was part of the Social Rehabilitation Service at the time.

1966 – Medicare was implemented and more than 19 million individuals had enrolled by July 1.

1977 – The Health Care Financing Administration (HCFA) was established to administer the Medicare and Medicaid programs.

2001 – HHS Secretary Tommy Thompson renamed HCFA the Centers for Medicare & Medicaid Services (CMS) following a competition among HCFA staff.

Today CMS has more than 6,000 employees serving more than 100 million beneficiaries.  In 2014, total CMS expenditures amounted to $910.3 billion, of which $892.8 billion went to Medicare and Medicaid benefit payments.  About 4,000 employees are located at CMS headquarters outside Baltimore.  The remaining employees work in Washington, D.C., in 10 regional offices, and in various field offices throughout the United States.

If CMS cannot keep up with its own regulations—and Caring Hearts is one instance where clearly the agency could not—then it falls to providers to show ALJs and judges the applicable rules.  Anesthesiologists and others who seek to overturn CMS decisions will need to check whether the regulations allegedly violated were in effect at the time of the activity CMS has challenged.  Remember that ALJs have about 15 minutes to hear each party’s arguments.  As in all litigation, your representatives should make it easy for the decision-maker to find in your favor.

With best wishes,

Tony Mira
President and CEO

In the Winter 2016 issue of The Communique, we offered Part I of a summary of state laws (Alabama through Iowa) involving the peer review process. Here we are continuing that summary with the remaining states (Kansas through Wyoming).¹

The ASA adopted its Statement on Principles for Alarm Management for Anesthesia Professionals at its annual meeting in October 2013.  The introduction to the Statement provides as follows:

As Anesthesia Professionals, we interact with many different types of monitors, machines, infusion pumps and other equipment; many of these devices have audible and/or visual alarms.  We rely on alarms to signal us when set parameters/ thresholds are violated and/or when a potentially abnormal situation has occurred.  A given alarm’s clinical usefulness depends on numerous factors including attributes of the patient (e.g., baseline clinical status and vital signs), the clinical situation at the time (e.g., anesthetic and procedural factors), the intended recipient(s) (e.g., experience, hearing acuity), unintended recipients (who may be distracted or worried), and the physical environment (e.g., noise and light levels).  Management of these alarms becomes challenging, especially in that we must rapidly discern when a trigger is trivial, meaningful or life threatening.

After five years of heading ECRI’s list of Top 10 Health Technology Hazards, missed alarms are now in the number two position.  “Missed alarms” include those occurring “when the condition is communicated to clinical staff, but not appropriately addressed—whether because staff fail to notice the alarm, choose to ignore an alarm that warrants a response, or otherwise respond incorrectly.”  Failing to notice or ignoring an alarm is often the result of the clinicians’ “alarm” or “alert fatigue.”  

Case Report 14-4 from the Anesthesia Quality Institute’s Anesthesia Incident Reporting System AQI-AIRS) defines alarm fatigue as “the process in which providers, exposed to excessive or irrelevant alarms and alerts, modify their responsiveness to alarms—from ignoring alarms to silencing them altogether.”

Anesthesiologists and nurse anesthetists rely on a panoply of monitors to care for their patients on the operating table and in the critical care unit.  One among many examples of the importance of these monitors in triggering life-saving actions comes from a 2014 Ohio malpractice case.  In Burk v. Fairfield Ambulatory Surgery Center, the premature release of a tourniquet placed for a Bier block caused a bolus of lidocaine to be introduced into the plaintiff’s system, which in turn caused her to suffer an arrhythmia and to stop breathing.  Although the blood pressure monitor, pulse oximeter and EKG all had alarms, none sounded, and the patient quickly coded.  She was resuscitated, intubated and transferred to the hospital, where she stayed for 23 days.  The patient sued the surgery center and the anesthesiologist and his group, citing numerous injuries, including cardiac arrest, anoxic brain injury, and memory and speech deficits.  The Ohio appellate court reversed the trial court’s denial of the defendants’ motion for summary judgment and sent the case back to the trial court.

The AQI-AIRS report cited above notes that “The problem of alarm fatigue results from clinical alarms systems functioning as screening rather than diagnostic studies, favoring sensitivity and negative predictive value over specificity and positive predictive value.  The zeal to detect and alarm for every potentially dangerous situation has ironically decreased patient safety by creating an epidemic of false-positive alarms leading to alarm fatigue.” and lists five scenarios showing alarm fatigue that will probably be familiar to many anesthesia professionals.  Some of these scenarios are:

1. Transferred patient from O.R. (kidney/pancreas transplant) to the ICU ... Nurses were busy attaching ECG leads while I packed up portable monitor.  SpO2 is 88 percent, no alarms sounding. O2 Sat number blinking red, but nobody is paying attention to it. Placed mask back on patient and encouraged him to breathe.  SpO2 back to 100 percent.
    
2.  Default alarm volumes on multiple anesthesia machines are found to have been set to the lowest (inaudible volume) value.
    
3. Attending is insisting that all alarms be disabled prior to giving an anesthetic on all cardiac patients.  Anesthesia technicians have been instructed to accomplish this.  I don’t feel this is safe.

In all of these cases, useful alarms were turned off or muted, presumably in response to the distraction or annoyance of false alarms.  Anesthesia clinicians may sometimes set alarm conditions too high, turn alarm volumes down or off, or neglect to adjust alarm default settings for specific patients or populations.  In some instances, the anesthesiologist or CRNA may not hear an alarm, or they may be distracted and might hear the alarms only after a significant amount of precious minutes have lapsed.  In other instances, a series of cascading minor alarm failures is the culprit.

While most clinicians recognize the critical role alarms play, they often become desensitized to alarms and overwhelmed by all the noise.  According to the Joint Commission, one single hospital patient can set off several hundred alarms each day, depending on the severity of their condition, while as few as one percent of all alarm signals even require clinical intervention. 

Keith Ruskin, MD and Dirk Hueske-Kraus, MD noted in their article Alarm Fatigue: Impacts on Patient Safety in the December 2015 issue of Current Opinions in Anesthesiology that “Electronic medical devices are an integral part of patient care.  As new devices are introduced, the number of alarms to which a healthcare professional may be exposed may be as high as 1000 alarms per shift.  The US Food and Drug Administration has reported over 500 alarm-related patient deaths in five years.”  Shefali Luthra, in Screen Flashes and Pop-Up Reminders: ‘Alert Fatigue’ Spreads Through Medicine (Kaiser Health News, June 15, 2016), quoted an assistant professor of medicine at Harvard Medical School as saying that “Clinicians ignore safety notifications [from electronic health records] between 49 percent and 96 percent of the time.” 

Anesthesiology is far from the only clinical specialty in which alarm fatigue is a problem.  “There is general agreement that clinical alarm fatigue is an important safety issue,” stated The Joint Commission in 2013, announcing its National Patient Safety Goal (NSPG) 06.01.01 on clinical alarm safety that was to be implemented in two phases:

Phase I, which was effective on January 1, 2014, required hospitals to establish alarm safety as an organizational priority by July 1, 2014, and to identify during 2014 the most important alarms to manage based on their own internal situations.

Phase II, which began on January 1, 2016, set the expectation that hospitals would establish and implement specific components of policies and procedures for managing the alarms identified in Phase I and begin educating staff about the purpose and proper operation of alarm systems for which they are responsible.

This is one more area in which anesthesiology groups can create value for their hospital relationships.  If there is general agreement that alarm fatigue is a real problem, there is no consensus on the specific ways in which to reduce its effects, only a general agreement that individual hospitals must determine the most important alarms to manage consistent with their own needs and prioritization.

Despite the top five alarm-related knowledge gaps identified in the Association for the Advancement of Medical Instrumentation (AAMI) Foundation’s 2015 Clinical Alarm Management Compendium, i.e., 

1. Lack of documentation and data to analyze reported events and near misses to understand root problem(s)
2. Lack of evidence-based rationale for the configurations of alarm settings
3. Lack of understanding of the best types of alarm signals to elicit a response
4. Lack of knowledge regarding who should be monitored and for how long
5. Lack of understanding about the best secondary alarm notification systems,

hospitals must, this year, implement specific components of policies and procedures for managing alarms and begin educating staff.  Anesthesiologists can lead or at least participate in this process. 

You can update your institution’s identification of its own alarm-related challenges using the Compendium’s List of Alarm Management Challenges on pages 10-11.  The 10 Ideas for Safe Alarm Management on page 12, which “represent approaches common to robust, multidisciplinary teams,” are as follows:

1. Issue a call to action, championed by executive leadership, which recognizes the challenges and risks—and opportunities—of alarm management and commit to solving them.
2. Bring together a multidisciplinary team to spearhead action and build consensus.
3. Gather data and intelligence to identify challenges and opportunities—and be open to surprises.
4. Prioritize the patient safety vulnerabilities and risks to target with alarm management improvements.
5. Set and share goals, objectives, and activities to address patient safety vulnerabilities and risks.
6. Develop and pilot potential solutions.
7. Evaluate the effectiveness of improvements and make adjustments as needed.
8. Develop policies and procedures.
9. Educate to build and maintain staff competencies.
10. Scale up and sustain by creating ownership at the unit level and with continuous improvement.

The best place to start is in your own domain, the OR suite.  The ASA Statement on Principles referenced at the beginning of this Alert starts with the proposition that “Each facility should have an Alarm Management Policy (… AMP) pertaining to Anesthesia equipment and/or devices used by anesthesia professionals.”  and that “the AMP should describe the equipment and alarms found in each care environment (OR, PACU, ICU, Pain clinic, special procedures, etc.).”  It goes on to state that anesthesia professionals who use or monitor the equipment and medical devices with alarm systems “should be involved in the creation and maintenance of the AMP.”  Furthermore,

• Alarm system settings must balance patient and provider safety risks against unintended consequences (distraction, alarm fatigue, intrusiveness).  Thus, ALARM SYSTEM SETTINGS should be locally customized to reflect the patients, the practice, and the perceived risks of the alarm conditions in each care environment.
   
• The AMP should delineate the process for familiarizing all Anesthesia Professionals with the recommended use of Alarm Systems in use in the facility.  The nature and occurrence of such familiarization for each Alarm System should be documented.
   
• Anesthesia Professionals should adjust Alarm settings as appropriate for a particular patient prior to starting an anesthetic.  Clinicians should not indefinitely silence or disable alarms on any device, unless necessary because:  (a) the device or module is not in use, (b) the device or module has malfunctioned, or (c) the patient’s medical condition supports using the AUDIO OFF or ALARM OFF modes. 
   
• In general, individual Anesthesia Professionals should not be able to change default alarm settings of any Anesthesia Equipment.  The AMP should specify an institutional process for changing default alarm settings.

AQI-AIRS Case Report 14-4 (above) gives some pointers on the content and implementation of an anesthesia AMP, stating that it should include specification of various alarm default settings and mandate participation in training and familiarization sessions with the alarm systems for all anesthesia professionals and providing the following examples of desirable content:

1. Establishing an appropriate default anesthesia alarm volume so that the alert would always be loud enough to hear, and
2. Training should include anesthesia technicians and others who could turn off phantom alarms during case turnover to reduce alarm desensitization.
3. Setting specific alarm settings appropriate for the individual patient and case could become a part of the preoperative readiness checklist.
4. Prohibiting the disabling of alarms. 
5. Choosing “process over technology:  The utility of each alarm must be assessed with the overall goals of patient safety and a reasonable work environment. ... It would be reasonable for the alarm policy to include guidelines for alarms alerts arising from related systems, such as the electronic medical record.”
6. Lowering the noise level in the OR and improving acoustics “to make alarm tones easier to detect without worsening the problem of workplace noise with louder alarms.  Use of visual alerts and the development of tactile alarms may also reduce the noise of the O.R.”
7. Increasing alarm delay where appropriate, e.g. where the pulse oximeter or arterial line will be degraded during noninvasive blood pressure measurement when it is necessary to have both these monitors on the same extremity and hence there will be a high frequency of alarms.

The value proposition for the anesthesiology group is clear enough.  Alarm fatigue leads to missed alarms; missed alarms may cause a surgical patient to deteriorate rapidly before the triggering event is noticed.  Injured patients or their families may bring and win malpractice lawsuits against the hospital contractors or employees who rendered alarms inaudible.  The providers’ reputations may suffer.  No one is better able to figure out which alarms require their intervention, and which do not, than the anesthesiologists themselves.  Why not solve a problem for the hospital and do well by doing good?

With best wishes,

Tony Mira
President and CEO

All physicians, group practices and other providers who participate in Medicare are required to resubmit and recertify the accuracy of their enrollment information every five years through a revalidation process.

Section 6401 (a) of the Affordable Care Act established new screening requirements for providers; required them to be revalidated under those new requirements, and reinforced the revalidation regulations at 42 CFR §424.515.  The first cycle of enrollment revalidations ended as the second cycle began in March 2016.

Required Actions

Physicians and other clinicians must submit their revalidation applications by the last day of the month in which they are due.  Your Medicare Administrative Contractor (MAC) is expected to notify you of the due date within two to three months of your revalidation deadline, by email or by regular mail.  Generally, this due date will remain with you throughout subsequent revalidation cycles. 

Centers for Medicare & Medicaid Services (CMS) also maintains a list of individual providers and their due dates at www.data.CMS.gov/revalidation.  A “TBD” (to be determined) notation means that your due date is more than six months away.  Due dates are updated every 60 days at the beginning of the month.  The revalidation lookup tool has a crosswalk linking it information on the employers to whom the clinician has reassigned his or her benefits.  Anesthesia professionals should check the list periodically to determine whether their due date is approaching.

The MACs will continue to issue revalidation notices in addition to the posted list.  If you are within two months of your listed due date but have not received a notice from your MAC to revalidate, CMS nevertheless encourages you to submit your revalidation application using the Internet-based Provider Enrollment, Chain and Ownership System (PECOS) at www.PECOS.cms.hhs.gov or the appropriate CMS-855 form.  PECOS is, of course, the fastest option.  If you have a fee due, use PECOS to pay.  Once a physician submits their application online they are required to immediately print, sign, date, and mail the certification statement along with all required supporting documentation to their contractor.

If a revalidation application is incomplete, your MAC may request additional information.  Practices should respond to all MAC requests within 30 days.

Contents of the Revalidation Application

Revalidate your entire enrollment record either via PECOS (most efficient) or on paper.  Include all active practice locations and current reassignments of benefits, and see the Revalidation checklist.  Note in particular that non physician practitioners (NPPs) such as CRNAs must provide a copy of board certifications.

Anesthesia professionals who reassign their benefits to several groups must ensure that all of their enrollment information for each group is included in a single revalidation application.  Individual physicians and NPPs are responsible for ensuring that when they submit their revalidation application, all solo practice locations (if applicable) and groups to whom they reassigned benefits are accounted for. If a practice location or group reassignment name is missing from the revalidation application, practice locations and missing group reassignments could result in deactivation of the associated Provider Transaction Access Numbers (PTANs).

In its Revalidation FAQs, CMS answered a question regarding whether “large groups continue to be contacted separately for revalidation” stating:

All providers, including large groups will receive a request to revalidate. Separately, the MAC will also send each practitioner a request to revalidate. If the group is completing the revalidation on behalf of the practitioner and the practitioner reassigns to multiple groups, CMS encourages the groups to work with their practicing practitioners to ensure that the practitioner’s revalidation application is complete and addresses all active practice locations and reassignments and that it is submitted by the due date.

The MACs will continue to contact large groups (200+ members). Large groups will receive letters from their MACs detailing their reassigned practitioners who are required to revalidate in the next six months. A spreadsheet detailing the applicable practitioner’s Name, National Provider Identifier (NPI) and Specialty will be provided. We encourage all groups to work together as only one application from each provider/supplier is required, but the practitioner must list all groups they are reassigning to on the revalidation application submitted for processing. MACs will have dedicated provider enrollment staff to assist in the large group revalidations.

Consequences of Being Too Early/Too Late

Unsolicited revalidation applications submitted by practices or clinicians who are not due to revalidate will be returned.  (Physicians and nurses are not due to revalidate if they display a TBD on the Revalidation Lookup Tool, and a revalidation notice has not been received from their MAC requesting them to revalidate, or if the application is submitted more than six months in advance of the due date). 

If the physician’s application is received after the due date, or if he or she provides additional requested information after the due date (including an allotted time period for U.S. or other mail receipt), that physician’s enrollment record will be deactivated.  Deactivated providers will be required to submit a full and complete application in order to reestablish their provider enrollment record and related Medicare billing privileges.  The provider/supplier will maintain their original PTAN; however, an interruption in billing will occur during the period of deactivation resulting in a gap in coverage.  There will be no retrospective payment for any services performed during the period of deactivation, so it is very important to maintain your enrollment status. 

The Medicare provider enrollment revalidation effort does not change other aspects of the enrollment process.  Providers should continue to submit changes (for example, changes of ownership, change in practice location or reassignments, final adverse action, changes in authorized or delegated officials or, any other changes) as they always have.  If you intend to submit a change to your provider enrollment record, submit a ‘change of information’ application using PECOS or the relevant form CMS-855.

We hope that this information is helpful.

With best wishes for the Fourth of July holiday,

Tony Mira
President and CEO

The transition to the International Classification of Diseases and Related Health Problems 10th revision (ICD-10) appears to have gone well so far, despite widespread anxiety that it would wreak havoc across healthcare as providers struggled to comply with the new coding structure, heightened specificity and documentation requirements.  The Centers for Medicare and Medicaid Services (CMS) reports that total claims denials and other claims metrics remained essentially unchanged from the historical baseline to the fourth quarter of calendar year 2015.

In a blog post, Andy Slavitt, CMS acting administrator, likened the healthcare industry’s anticipatory concerns surrounding ICD-10 to the Y2K information technology disaster that never took place.  “With preparation, planning, a focus on the customer, collaboration, clear accountability, and metrics, the dire Y2K fears didn’t come to pass.  Instead, ICD-10 became like what actually occurred on Y2K, an implementation and transition most people never heard about,” he said.

So far, so good.

Nonetheless, providers still face significant hurdles in two main areas as the ICD-10 transition continues.  According to Sharon Merrick, director of payment and practice management for the American Society of Anesthesiologists (ASA), it is not yet clear how much of the ICD-10 implementation’s success so far stems from the first-year concessions for providers negotiated by the American Medical Association in collaboration with the CMS.  These flexibilities allow providers to be reimbursed for wrongly coded claims as long as the erroneous code submitted is in the same broad family as the correct one.  Providers will no longer be reimbursed for these wrongly coded claims when the “grace period” ends on September 30, 2016.

In addition, following a five-year freeze on the addition of codes, a backlog of 5,500 ICD-10 codes will go into effect on October 1.  This backlog, accumulated by the ICD-10 Coordination and Maintenance Committee, includes approximately 3,650 new ICD-10-PCS codes and approximately 1,900 new ICD-10-CM codes, as well as 500 revised ICD-10-PCS codes and 351 revised ICD-10-CM codes. 

Coding expert Stanley Nachimson of Nachimson Advisors said work will be needed to implement these additional codes, “but not like the full ICD-10 implementation.”

The new codes relate to devices, the addition of bifurcation as a qualifier, additional body parts, congenital cardiac procedures and placement of intravascular neurostimulators.  Approximately 97 percent of the ICD-10-PCS codes are in the cardiovascular system section.  Changes to ICD-10-CM cover a greater list of body systems and sections of the code book. 

What Now? 

If you haven’t already done so, it’s not too soon to assess how your practice has fared to date with ICD-10 implementation, identify areas in need of improvement and start implementing solutions. 

An article in Health IT Outcomes stresses the role of accurate coding in helping providers navigate the shift from volume to value through participation in federal programs, such as the Physician Quality Reporting System (PQRS).

“Using invalid and outdated codes and not properly reporting patient encounters causes increased work hours to deal with problems, and can cause your facility to lose eligibility for participation in these important programs,” according to the article.  “Missing benchmarks due to invalid codes can prevent eligibility for pay-for-performance programs that offer your facility valuable financial incentives based on performance.  Keeping your working terminologies up-to-date will prevent your patients and clinicians from losing out on many important incentives.”

Fortunately, a plethora of resources and tools is available to help you avoid these pitfalls and continue with your transition to ICD-10. 

The Next Steps Tool Kit and a companion Infographic, available from CMS, offer a process for evaluating your ICD-10 efforts based on three steps:

1. Assessing progress using key performance indicators (KPIs) to compare your practice’s performance before and after October 1, 2015 (when ICD-10 went into effect).  Examples of KPIs include:
   • Days to final bill—number of days from time of service until provider generates and submits claim
   • Claims acceptance/rejection rates
   • Claims denial rate
   • Incomplete or missing diagnosis codes
   • Payment amounts—amounts provider receives for specific services, with a focus on high-volume, resource-intensive services
   • According to CMS, it is not necessary to track all 18 suggested KPIs listed in the Tool Kit.  Even small efforts to identify and track the KPIs most relevant to your practice will help improve your productivity and cash flow.  CMS suggests tracking KPIs separately by payer to help pinpoint root causes of problems.
2. Troubleshooting findings by developing a feedback system to document issues and share findings among staff; checking clinical documentation and code selection; identifying issues in your practice management systems, electronic health records or coding tools that could increase days to final bill and claims rejection rates; resolving issues with payers; and conducting hospital chart audits with a focus on high-risk cases.
3. Maintaining progress by keeping your systems and coding resources up to date with regular reviews of the ICD-10-CM and ICD-10-PCS General Coding Guidelines.  (Proposals can be submitted at least two months in advance to the ICD-10 C & M Committee for review at its meetings held in March and September.)

The CMS website Road to 10:  The Small Physician Practice’s Route to ICD-10, includes an overview, webcasts, action plans, checklists, interactive case studies, quick references, resources and contacts.  Marc Leib, M.D., chair of the ASA Committee on Economics, who has delivered webcasts on ICD-10 for pain procedures and surgical and obstetrical anesthesia (see below), recommends Road to 10 because it compiles information from numerous other CMS ICD-10-related websites into a single location.

Anesthesia Business Consultants offers F1RSTCode, an anesthesia-specific ICD-10 documentation application for clients that guides providers through the logic of ICD-10 and provides intuitive support on the correct level of detail needed in a diagnosis.  For more information, contact info@anesthesiallc.com.

A two-part series in ICD-10 Monitor delves into strategies for clinical documentation improvement using KPIs.  ICD-10 Monitor also sponsors Talk Ten Tuesdays, webcasts featuring industry experts and providers who share their experiences with the transition to ICD-10.

ICD-10 Coding Concepts:  A Refresher

Although physicians do not have to know the codes, primary responsibility for the accuracy of ICD-10 coding remains with them, David A. Lubarsky, MD, chief medical and systems integration officer at the University of Miami said in Anesthesiology News.  “Coders simply won’t be able to ‘build’ ICD-10 codes without all of the building blocks of information being in the chart.”  

In his webcast presentations at the Road to 10 website, Dr. Leib presents the key coding concepts of ICD-10 with an emphasis on anesthesia for pain management and surgical and obstetrical procedures.  Following are some of the highlights of the presentations:

• Despite the fact that ICD-10 contains 69,000 codes, most physicians and anesthesiologists included, will use only a small percentage of them.  The number of ICD-10 codes used by anesthesiologists is not much larger than the number of codes used in ICD-9.
• Some of the most important areas of change from ICD-9 to ICD-10 are:

Laterality:  Correct ICD-10 coding designates right or left side.
Initial versus subsequent:  Correct ICD-10 coding requires documentation of whether the encounter is an initial or followup visit.  Indicating “patient returns” or “seeing patient for the first time with____” will allow your coding professionals to select the proper seven digit code.
Disease acuity:  Unlike ICD-9, ICD-10 allows the clinician to indicate whether the disease state was mild, moderate or severe.  If clinicians cannot document and communicate how sick patients are to begin with, they will not be able to explain why treatment took longer or why more resources were used.
Complications:  ICD-10 contains single codes that include the underlying disease as well as the common complications or comorbidities.  For example, only one code is needed to describe Type 1 diabetes with kidney disease and dialysis, whereas in ICD-9, two, three or four codes were needed to describe that condition.
Underdosing:  An important new concept in ICD-10, underdosing refers to patients who do not take their medications as directed and who do not get well or do not get well as quickly as if they had taken their medication correctly.  These patients can end up in the ER or the hospital, both of which count as negative occurrences in the quality systems being implemented by CMS and private insurers.  However, if the patient is being readmitted because they did not take the medication or take it correctly, that must be recorded.

• Describe the patient to the best of your knowledge at the time you see them.  If you know the diagnosis, there will be a code.  The unspecified codes should only be used when you don’t have the information necessary to select a specific code.  Gone are the days of defaulting to the “not otherwise specified” (NOS) code.  Payments for claims using the old default code are typically curtailed or denied in ICD-10.
• Know your role:  The role of the clinician is to document as accurately as possible the nature of the patient’s condition and the services performed to maintain or improve that condition.  The role of the coding professional is to ensure that coding is consistent with the documentation.  The role of the practice manager is to ensure that all billing is accurately coded and supported by the documentation.
• Ensure that coding supports the patient story, but coding must be supported by what is in the medical record.
• Avoid “over-coding.”  If it isn’t relevant to the visit, don’t code unless it is a condition that presents additional complexity and risk.
• Use the right codes for pain procedures:  Pain can be caused by a number of different factors, including psychological factors, postoperative pain, neoplasm related pain, medical device pain, chronic pain or chronic pain syndrome.  It is important to note the cause of the pain to select the proper code. 
• If the reason for the encounter is pain management or the placement of a neurostimulator for pain management, G89 is used as the general pain code.  The reason for the encounter is the first code listed, but if the patient is there specifically for pain treatment, G89 is the first code.  If you are treating the underlying condition and pain management is the secondary part of that treatment, list that condition first, then use G89 as the secondary code. 
• If the encounter is for postoperative pain, whether you do a block postoperatively or in the recovery area or even in the preoperative area prior to surgery, but the block’s purpose is strictly for postoperative pain control, not for surgical anesthesia, then use G89 as the secondary code and the surgical procedure that will cause the pain as the primary code.  Each surgical procedure will have a code for postoperative pain.  Your coder should list that first and the G89 will be the secondary code.
• Neoplasm-related pain:  If the cause of the chronic pain is due to some type of neoplastic process and that is the primary reason for the encounter, then use G89 as the first code with the specific neoplasm code as the secondary diagnosis.  If you are seeing the patient because of the neoplasm (not likely to happen), and happen to treat the pain as well, then the malignancy would be listed as the primary diagnosis and G89 is the secondary code.  The primary purpose of the visit will determine which code is listed first. 
• If the pain disorder is exclusively psychosocial, use behavioral health code F45.41.  If the pain disorder exists alongside a psychological disorder, use F45.42 and G89 as the secondary code.
• If the reason for the encounter is pain related to an implanted medical device, then that is a complication of the implant.  List complication of implant as the primary code and the code for acute or chronic pain as a secondary code.
• Spinal regions differ by code.  Each different type of diagnosis may have different divisions of the spinal region.  For example, the spondylopathies each have eight different regions of the spine.  If you are dealing with a spondylopathy you need to specify which of those eight areas are affected. 
• Whenever possible, use the same codes the surgeon uses to support the procedure.  This should reflect the post-operative rather than the pre-operative diagnosis.  If the surgeon does not have the information needed to accurately select the ICD-10 code, use the hospital electronic health record or other records as a guide.  For a patient undergoing laparoscopic cholecystectomy for calculus of the gallbladder, for example, ICD-10 includes 40 codes to describe why the patient is undergoing the procedure.
• Carefully document the medical conditions of the patient that are necessitating the surgery to enable your coders to find and determine the correct codes to use when filing claims.  It is up to the anesthesiologist to document the medical condition of the patient in a way that will allow coders to use their expertise to select the proper codes.

Conclusion

Although jokes about the specificity of ICD-10 coding abound (W61.33: Pecked by a chicken; Z63.1: Problems in relationship with in-laws), the new system is expected to yield significant improvements in quality measurement, public health, organizational monitoring and performance, health information technology and reimbursement.  It behooves providers to evaluate and fine-tune their programs now in preparation for the changes that will go into effect on October 1, 2016.

With best wishes,

Tony Mira
President and CEO

Prior to addressing the main topic of today’s alert, we felt it necessary to inform our readership of the recent proposed changes made by the Centers for Medicare and Medicaid Services (CMS) in its CY 2017 Proposed Physician Fee Schedule (PPFS).  In the CY 2016 PPFS, CMS proposed reexamining the anesthesia codes reported in conjunction with colonoscopy procedures (i.e., 00740 and 00810) as potentially misvalued.  In the CY 2017 PPFS, CMS continues to maintain that 00740 and 00810 are misvalued and it “look[s] forward to receiving input from interested parties and specialty societies for consideration during future notice and comment rulemaking.”  Moreover, CMS notes that although sedation services are included in certain endoscopic procedures, that anesthesia is being separately reported.  As such, “[i]n the CY 2017 PFS proposed rule, CMS is proposing values for the new CPT moderate sedation codes and proposing a uniform methodology for valuation of the procedural codes that currently include moderate sedation as an inherent part of the procedure.  CMS is also proposing to augment the new moderate sedation CPT codes with an endoscopy-specific moderate sedation code, and proposing valuations reflecting the differences in physician survey data between gastroenterology and other specialties.”¹  As always, we encourage our readers submit comments to CMS or to reach to their professional associations and encourage them to submit comments.  CMS will accept comments until September 6, 2016.

In September of 2010, we issued an alert entitled, Using Your Inner Child to Negotiate Anesthesia Contracts.  In that alert, we provided some useful tips and tactics on how anesthesiologists could use their skills to successfully negotiate contracts on their, or their groups’, behalf.  Because the topic of negotiating contracts is never a stale one, we thought to revisit the issue with some more tips and strategies on how you can take your negotiation technique to the next level. 

In our previous alert, we reviewed negotiating strategies presented by Bill Adler and Ron Shapiro.  While we continue to maintain the importance of the strategies presented by those experts, we provide you with some more strategies that can be added to your toolbox:

1. Rank What is Important to You

Oftentimes, each side has a deal breaking item on which it cannot budge (e.g., compensation).  Instead of approaching negotiations from the perspective that the deal hinges on compensation, both sides should consider ranking what is important to them and sharing with the other side their list of priorities.  What they may learn is that, while compensation is of utmost importance, services or obligations making up the compensation may be less important and may be negotiable, thereby opening up the compensation issue for negotiation.

2. Honesty and Truthfulness Can Go a Long Way

It is not uncommon to approach negotiations by keeping your hand very close to the chest.  However, revealing something at the outset of negotiations can open the door for optimal outcomes.  That something need not be material to the negotiations, but discussing general hopes or concerns, or a little about yourself may be a small effort that can go a long way in making the other party receptive to a discussion.

3. Make the First Offer

This seems counter intuitive because, as with the previous point, many like to keep their hands very close to the chest.  However, the first offer is always the starting point of negotiations.  More often than not, the party that makes the first offer is closer to its target position at the conclusion of the negotiations.

4. Don’t Negotiate Against Yourself

When negotiating a contract, parties may strike whole provisions stating the provision, as written, is not agreeable.  One’s instinct may be to propose an alternative to which that party *thinks* the other side will agree.  Why give away your upper hand by making the proposal?  Remember: the stricken provision was the first offer.  The next offer should come from the other side.  Don’t negotiate against yourself.

5. Make Smart Counteroffers

Two points on making counteroffers: (a) make them, and (b) be smart.

(a) Make Counteroffers

If an issue is important, even if it satisfies what you are looking for, do not feel compelled or obligated to accept it; use it as a bargaining chip.  For example, make the point that you are only agreeing to the payment terms if the indemnification language is more favorable. 

(b) Make Smart Counteroffers

Coming off our previous point about not negotiating against yourself, making counter offers can be an art.  It is important not to come in too low (or, conversely, too high) to keep the negotiations alive, to be taken seriously, and to be respected as a future business partner.  Counteroffers should be reasonable, practical, and realistic.

While there is no finite list of tips and strategies, we hope these additional tips will assist you in your current and future contract negotiations.  Good luck!

With best wishes,

Tony Mira
President and CEO

Introduction

To hospitals, the Centers for Medicaid & Medicare Services (CMS) is acting like the terrible Wicked Witch of the West from the movie the Wizard of Oz because of their proposed plans for site-neutral rate reductions.  The proposed modifications in reimbursement are included in the 2017 Hospital Outpatient Prospective Payment System (OPPS) and Ambulatory Surgical Center (ASC) Payment System (CMS-1656-P) proposal submitted on July 6, 2016.  The law provides for payment system policy changes, quality reporting provisions, and reduced pay rates that many hospitals would prefer to douse with water and have them disappear like the Wicked Witch rather than have payments reduced at their off-campus facilities.

CMS is proposing a number of policies they believe will improve the quality of care Medicare patients receive.  A key piece of the 2017 proposed legislation is the implementation of Section 603 of the Bipartisan Budget Act of 2015, which will affect how Medicare pays for certain items and services furnished by certain off-campus outpatient departments.  In addition, CMS is proposing to remove the pain management dimension of the Hospital Consumer Assessment of Healthcare Providers and Systems (HCAHPS) survey for purposes of the Hospital Value-Based Purchasing Program (VBP). 

The OPPS and ASC proposed rule is one of several slated for 2017 that reflect a broader administration-wide strategy to create a healthcare system that results in better care, smarter spending, and healthier people.

The American Hospital Association (AHA), a not-for-profit association that advocates for provider organizations that include nearly 5,000 hospitals, healthcare systems, networks, other providers of care and 43,000 individual members, disagrees with CMS.  Tom Nickels, the Executive Vice President, Government Relations and Public Policy for the AHA issued a statement on July 6, 2016, expressing its disappointment with CMS' "short-sighted" proposal.

"Hospitals and health systems and more than half of the House and the Senate requested that CMS provide reasonable flexibility when implementing Section 603 of the Balanced Budget Act of 2015 in order to ensure that patients have continued access to hospital care," Nickels, with the AHA, said.  "Instead, the agency is proposing to provide no funding support for outpatient departments for the services they provide to patients.  This does not reflect the reality of how hospitals strive to serve the needs of their communities.  Also, CMS' refusal to continue current reimbursement to hospitals that need to relocate or rebuild their outpatient facilities to provide needed updates and ensure patient access is unreasonable and troubling."

The AHA is not the only industry group that disagrees with CMS.  America's Essential Hospitals (AEH), a trade group that represents safety-net providers, said that CMS “appeared to ignore Congress' intent” to use a different payment system for new hospital-owned outpatient facilities.  “Hospital systems that otherwise would seek to enhance access by establishing new clinics in underserved areas will not do so, as this damaging payment policy makes new outpatient centers economically unsustainable,” the organization said in a statement.  Based on comments to date from providers it appears that CMS will have its work cut out for them as they sift through the public’s feedback.  They will accept comments on the proposed rule until September 6, 2016, and will respond to comments in a final rule.  The rule is available in the Federal Register and can be downloaded at https://www.federalregister.gov/public-inspection.

The fundamental changes in the OPPS, and ASC payment system proposed rule include: 

1. Site-neutral payment provisions for emergency departments
   Under the proposed rule, services provided in a dedicated emergency department would continue to be paid under the OPPS and CMS proposed certain restrictions on off-campus provider-based departments that began billing under the OPPS before November 2, 2015.
2. Payment update
   CMS has proposed updating the OPPS rates by 1.55 percent in 2017.  CMS arrived at its proposed rate increase through the following updates: a positive 2.8 percent market basket update, a negative 0.5 percent update for a productivity adjustment and a negative 0.75 percent update for cuts under the Affordable Care Act.  After considering all other policy changes included in the proposed rule, CMS estimates OPPS payments would increase by 1.6 percent and ASC payments would increase by 1.2 percent in 2017.
3. Hospital Value-Based Purchasing Program
   Beginning with the fiscal 2018 program year, CMS has proposed removing the pain management dimension of the HCAHPS survey of the VBP.  It is their belief that leaving the section in the rule puts pressure on hospital staff to prescribe more opioids and that is ill advised.
4. Electronic Health Record Incentive Program
   To offer greater flexibility in the meaningful use of the Electronic Health Record Incentive Program (EHR), CMS has proposed a 90-day EHR reporting period in 2016 for all eligible professionals and hospitals.  The reporting period would be any continuous period of 90 days between January 1, 2016, and December 31, 2016.   Also, CMS noted that it is not feasible for physicians and hospitals that have not demonstrated meaningful use in a prior year to attest to the Stage 3 objectives and measures in 2017.  Under the proposed rule, these new participants would be required to attest to Modified Stage 2 by October 1, 2017.
5. Hospital Outpatient Quality Reporting Program
   CMS offers hospitals a financial incentive to report the quality of their services.  The hospital reporting program provides CMS with data to help consumers make more informed decisions about their healthcare.  For 2017, CMS has proposed adding seven measures to the Outpatient Hospital Quality Reporting Program for the 2020 payment determination and subsequent years.  Some of the hospital quality of care information gathered through the program is available to consumers on the Hospital Compare website at: www.hospitalcompare.hhs.gov.

In addition to the changes proposed for site-neutral rates in OPPS and ASC, the 764-page draft rule proposes adjustments to the following:

• Proposed Comprehensive Ambulatory Payment Classifications (C-APCs) for 2017;
• Proposed Packaged Services Policy Refinements;
• Device-Intensive Procedure Policies;
• Device Pass-Through Applications;
• Inpatient Only List Paid Under The IPPS;
• ASC Payment Update;
• Partial Hospitalization Program (PHP) Rate Setting;
• Hospital Value-Based Purchasing Program;
• Organ Transplant Enforcement;
• EHR Incentive Program; and
• Ambulatory Surgical Center Quality Reporting Program.

Conclusion

CMS is expecting numerous comments on their rule changing proposals.  I’m sure many stakeholders who are vying to change the proposed OPPS and ASC wished they had the all-knowing Wizard of Oz on their side to help them build a compelling case in their favor.  

Based on AHA and AEH's comments, you would think CMS has become an arch-nemesis flying around on a broomstick trying to do harm to their members.  It is the job of the AHA and AEH to protect its members, so it is no surprise they are stepping up to guard their interests. 

Does the proposed rule change make sense?  The law seems to discourage organizations from expanding or duplicating services and this may play a part in reducing healthcare costs.  Perhaps encouraging providers to consolidate services into one location would offer some benefits.  Combining specialties into one place would improve parking and access for the sick and elderly population who otherwise have to navigate their way around large campuses.  Consolidation of services impacts workflow, timeliness, and efficiency and would reduce maintenance and other building costs, and eliminate duplicate staffing.

Unfortunately, many facilities have limited land for contiguous expansion.  They will be forced to build upward to avoid the negative financial repercussions the new law will pose.  Since CMS is actively seeking comments on a number of their proposals; there is a good chance that many items inside of the rule will change.  Will CMS’ site-neutral payments rule save Medicare about $500 million in 2017 as they projected?  Only time will tell.

An anesthesiology group decides not to provide labor epidural anesthesia to women with limited English proficiency (LEP).¹

A nurse ignores an African-American woman in the ER who needs medical attention and makes her wait for an hour, but provides prompt attention to a white male who enters the ER after her.

A hospital refuses to treat men with breast cancer because it believes doing so would make female breast cancer patients uncomfortable.

As you’ve probably guessed, these scenarios illustrate examples of discrimination under Section 1557 of the Affordable Care Act (ACA).

On July 18, 2016, healthcare entities that participate in federally-funded programs, including Medicare, Medicaid and the Meaningful Use Electronic Health Record Incentive Program, became subject to the final rule implementing Section 1557, which was published on May 13, 2016 by the Department of Health and Human Services Office of Civil Rights (HHS OCR). 

Section 1557, which prohibits discrimination based on race, national origin, sex, age or disability, has been in effect since the ACA’s passage in 2010.  However, the final rule delineates for the first time how healthcare providers and insurers must uphold the law and the steps they must take to inform patients of their rights and address complaints of discrimination.  The final rule includes provisions for patients with LEP and disabilities.

Pain specialists:  If you haven’t already, now would be a good time to review the final rule, train staff in Section 1557 and make sure your practice meets the procedural requirements, some of which go into effect on October 16, 2016.  These include developing a grievance procedure and a language assistance plan, and posting a notice of your practice’s nondiscrimination policies in physical locations and in print and electronic communication.  

Anesthesiologists:  Check with your hospital administration about their plans to meet the requirements and train staff.

HHS OCR strongly encourages covered entities to train staff in Section 1557 and recommends that training include physicians, physician assistants, therapists, nurses, nurse practitioners, pharmacists, medical technicians, medical assistants, home health workers, administrative assistants and others who interact regularly with the public.  

To assist covered entities, HHS OCR has developed a variety of materials, including a presenter’s guide and a slide deck.  These materials can be used to supplement any practice-specific Section 1557 training and procedures you might already have in place. 

According to Timothy Jost, J.D., of the Institute of Medicine, writing in Health Affairs Blog, anti-ACA litigation has plateaued, but an increase in litigation claiming protection of the ACA could be on the horizon.  HHS OCR provides summaries of some case examples of enforcement under Section 1557.  Anesthesia providers should review these examples to familiarize themselves with the rule.

The final rule requires covered entities to take remedial action if they are found to have discriminated.  Covered entities may also voluntarily improve their procedures if discrimination is not found in response to a grievance.  Enforcement of Section 1557 can occur through informal mediation, the reduction or elimination of federal assistance, or referral to the Department of Justice for litigation.  Private individuals and entities also can sue in federal court to challenge alleged violations of Section 1557.

An Overview

The final rule, Nondiscrimination in Health Programs and Activities, supports the ACA’s goals to expand access to healthcare, eliminate health disparities among underserved, uninsured, and often excluded populations, and achieve equity in the delivery of healthcare services and coverage. 

The final rule reflects established federal civil rights laws, such as the Americans with Disabilities Act and Title VI of the Civil Rights Act of 1964, which prohibits discrimination in programs and activities receiving federal financial assistance, such as Medicare and Medicaid, based on race, color and national origin. 

It is the first federal civil rights regulation, however, to bar discrimination in covered health care services based on sex, including pregnancy, certain medical conditions, termination of pregnancy, gender identity and sex stereotypes.  As such, the final rule strives to educate patients and covered entities about sex discrimination in the healthcare setting.

The rule also provides important new civil rights protections for members of the LGBT population because it broadens the definition of sex discrimination to encompass gender identity, including gender expression, transgender status and non-binary gender identity.  

“These protections are critical because, despite advances in public acceptance of LGBT issues over the past decade, LGBT people and their families continue to encounter discrimination when seeking health coverage and care,” states Kellan Baker, a senior fellow with the LGBT Research and Communications Project at American Progress, in a recent article in Health Affairs Blog.

Procedural Requirements

Covered entities that employ 15 or more people must develop a grievance procedure² that incorporates appropriate due process standards and resolves grievances in a timely and fair manner.  They also must designate at least one employee to serve as a Section 1557 compliance coordinator.  This role includes responsibility for investigating grievances.  A model grievance procedure is included in Appendix C of the final rule.  (Covered entities with fewer than 15 employees are not required to have a grievance procedure.)

The final rule requires covered entities to file a form assuring compliance with Section 1557 and to post a notice regarding their nondiscrimination policies by October 16, 2016.

The notice must be posted in physical locations where members of the public can see it, on the website in a conspicuous place accessible from the home page and in significant communications, such as handbooks and outreach publications.  Smaller publications, such as postcards, can include a shorter statement.³  OCR offers a sample notice, statement and taglines translated into 64 languages; however, covered entities are free to create their own notices.

Covered entities must present the notice in English and include taglines in the top 15 languages spoken by individuals with LEP in their state.  They can also post the notice in other languages if they wish.  Small significant publications may include taglines in the top two non-English languages spoken in their state instead of 15.  An interactive map showing the most common non-English languages spoken by state can be found here.

Key Provisions

In other key provisions:

Section 1557 encompasses discrimination related to sexual orientation in which evidence shows that the discrimination is based on gender stereotypes.  The rule does not resolve whether this extends to discrimination based on a person’s sexual orientation status alone.  Under the rule, OCR will evaluate complaints of sex discrimination based on an individual’s sexual orientation to determine whether they can be addressed under Section 1557.⁴

The final rule does not contain a new exemption based on religion.  However, it notes the ability of a covered entity to claim existing religious exemptions in federal laws such as the Religious Freedom Restoration Act (RFRA) noting that some employers may believe they have a valid religious reason to refuse to cover health care services such as treatments related to gender transition.⁵

Sex-specific health programs and activities are prohibited unless the covered entity can show that the program is related to a health or scientific objective.  This standard should allow medical researchers to justify most sex-specific clinical trials; however, researchers would be required to provide justification for studies that lack a scientific or clinical reason for the limitation.⁶

In keeping with the provisions of the Americans with Disabilities Act, the final rule requires covered entities to provide auxiliary aides and services for people with disabilities, such as sign language interpreters, and to ensure the accessibility of electronic and information technology programs, unless doing so would create an undue financial or administrative burden.⁷

The rule also requires covered entities to take reasonable steps to provide meaningful access to individuals with LEP and to develop a language access plan “appropriate to its particular circumstances” with regard to geography, size, programs and services and other factors.

According to HHS OCR, the standards incorporated into the rule are flexible, “taking into account factors such as the nature and importance of the communication, and, as relevant, the frequency with which the covered entity encounters the language spoken by the individual, the resources available to the covered entity, and other considerations.”⁸

The data point to a substantial need for language services in healthcare. In 2013, approximately 61.6 million individuals, foreign and U.S. born, spoke a language other than English at home, and 41 percent (25.1 million) were considered LEP, the Migration Policy Institute reports. The LEP population in the U.S. rose from six percent in 1990 to 8.5 percent in 2013.  The most dramatic period of growth was the 1990s, when the LEP population rose by 52 percent. 

Conclusion

Nondiscrimination in Health Programs and Activities provides important new civil rights protections for healthcare patients.  Review the final rule, train your staff and make sure you comply with the procedural requirements that already have or will go into effect soon.  For questions about Section 1557, contact HHS OCR at 1557@hhs.gov.

With best wishes,

Tony Mira
President and CEO

¹Harvard Asian American Policy Review Journal, http://hksaapr.com/233/#_ednref6
²Nondiscrimination in Health Programs and Activities, Office for Civil Rights, Department of Health and Human Services, May 18, 2016 http://www.nclrights.org/wp-content/uploads/2016/05/2016-HHS-1557.pdf, p. 67
³Ibid, p. 76
⁴Ibid, p. 53
⁵Ibid, p. 12
⁶Ibid, p. 121
⁷Ibid, p. 177
⁸Ibid, p. 5