How do anesthesiologists get paid?

The 2011 National American Society of Anesthesiologists meeting is coming up on October 15-19. My program like many others around the country will be sending a number of delegates to the meeting including residents, faculty, administrators. No doubt much of the discussion at the meeting will be about the impending budget crisis and its trickle-down effects on medicare reimbursement and anesthesiologist reimbursement. In the popular anesthesiology literature most put out by the ASA and other anesthesiologists the rallying cry is that Anesthesiologists are getting underpaid. These arguments cite data such as anesthesiology getting reimbursed 34% of commercial rates by Medicare compared to more than double that for other specialties. I thought I would look into how an anesthesiologist gets paid relative to say a PCP office visit.

So beginning with a little background, a “regular” doctor is paid according to something called the Relative Value Unit system which is a schedule set by the Centers for Medicare and Medicaid which decide how much doctors are paid. This system determines how much a physician is paid based on several factors including physician work (52%), practice expense (44%), and malpractice expense (4%). These factors combine in determining the Relative Value Units (RVUs) a physician gets which is then adjusted for the costs in their particular region (for example, there is an upward adjustment in higher cost regions such as New York City compared to Iowa City, Iowa). This is then multiplied by something called a conversion factor (CF) which is ties the reimbursement to overal economic conditions and prior year healthcare expenditures to “adjust” the rate that a physician is paid. It serves as an automatic benchmark rate that tries to keep aggregate healthcare spending in line from year to year. The components of this conversion factor include the current year’s 1) Update Adjustment Factor (which incoporates last year’s target total healthcare expenditures relative to the actual expenditures, target healthcare expenditures relative to actual healthcare expenditures for a base year 1996-current, and the Sustainable Growth Rate which ties this factor to systemic changes like GDP, rate of growth in medicare beneficiaries, growth in physician fees) and 2) the current year’s Medicare Economic Index (an estimate of medical inflation) and 3) the prior year’s conversion factor.

For example, a primary care physician seeing a patient for a routing visit (CPT code 99213 which is incidentally the most popular code in the country) in Baltimore would get paid $72.77 which equates to approximately 2.14 RVUs times $33.97 conversion factor (see Medicare Fee schedule calculator: https://www.cms.gov/apps/physician-fee-schedule/overview.aspx). Clinically, depending on the visit and physician I have seen these visits take from 30-60minutes.

Interestingly, Anesthesiologists have a different structure for getting paid. In addition to RVUs which are determined by ASA’s Relative Value Guide (RVG) fee schedule which assigns RVUs or “base units” to 270 different types of procedure codes (keep in mind this is far less “granular” than the 4000 code schedules that other specialties like surgery have) , we also have time units which are 15minute chunks added to our base units which multiplied by our conversion factor would determine our billing for a given case. Note, our conversion factor is different from the conversion factor calculated for other providers. The latest conversion factor for Maryland for example is $21.87 compared to the National rate for anesthesiologists of $21.05.

So to summarize, for an anesthesiologist, we are paid by
(Base Unit + Time Unit) X Conversion Factor. So for example, an anesthesiologist administering anesthesia to a patient in Baltimore undergoing a cataract surgery CPT code 00142 would be reimbursed at 4 Base Units and 4 time units (approximately 60 minutes for the total procedure including preop and pacu stay). This is multiplied by the conversion factor $21.87 results in a medicare reimbursement of $349.92 or $87.48 per 15 minute block.

Based on this simple analysis, Anesthesiologists are actually paid quite well and certainly no less per 15 minute time period worked. What is missing in these calculations however is a risk adjustment of the severity of the patient’s condition. A routine office visit may be complicated by a patient who is actively experiencing chest pain. A routine anesthetic for a cataract extraction can be complicated by the patient who obstructs their airway or has an allergic reaction to one of the sedative medications. Another issue is that of outcomes. None of these calculations takes into consideration appropriate outcome measures to keep both physician and patient accountable to optimizing their health. For example, could there be a clawback provision for the anesthesiologist who ignores a patient’s allergy and causes an allergic reaction that prolongs the surgery(Medicare is trying to do this with Never events to some degree). Interestingly, the anesthesiologist does not care (economically) if a case is prolonged due to complications because of the time component of their reimbursement which continues to adjust their reimbursement upward whereas the PCP with the complex case is tacitly disincentivized to develop a complication.

Either way the key issue is not whether we as anesthesiologists get paid enough but rather whether we are paid for doing the right thing. In some ways our time component frees us as providers to focus on our imminently vulnerable patient laying on the table in front of us. If a complication arises, we are not punished for focusing on our patient. Our classification system is implicitly built into our reimbursement model. We have a risk stratification system in which ASA 1-2 patients are not upwardly adjusted from a reimbursement standpoint while ASA 3s,4s,5s are as our emergent patients.

The alignment of a specialty in anesthesiology which has these unique features as well as a focus of attention on reimbursement, I believe represents a unique opportunity to shift the focus of the debate and for Anesthesia to take a leadership role in innovating a reimbursement model tied to patient outcomes.

The following link goes into more detail about the terms described above
http://www.cms.gov/SustainableGRatesConFact/Downloads/sgr2011p.pdf
incorporates a year to year adjustment for all physicians (except anesthesiologists)

The following link is to all the medicare payment schedules for Anesthesia:
https://www.cms.gov/center/anesth.asp