2010 ASA Survey of Commercial Fees for Anesthesia

Editor's note: This article by Tony Mira, president and CEO of Anesthesia Business Consultants, an anesthesia & pain management billing and practice management services company, originally appeared in Anesthesia Business Consultants eAlerts, a free electronic newsletter. Sign-up to receive this newsletter by clicking here.

If you haven't already looked at the Oct. issue of the American Society of Anesthesiologists' Newsletter, you will want to make sure you have a copy. The results of ASA's latest survey of commercial fees paid for anesthesia services appear in the Practice Management article that starts on page 44. After more than a dozen years, these are still the best publicly available data on contractual rates for anesthesia. They will become even more useful now that ASA has begun conducting the survey annually instead of every two years.

The survey, conducted online from May 26 through June 30, asked each respondent for the conversion factor in five different payer contracts. The result is that the summary statistics are reported as ranges, from highest contractual conversion factor to lowest. The national average conversion factor has increased since the 2009 survey, as shown below:

To understand the significance of these increases, recognize that the larger change ($10.37, or 18 percent) is for the lowest conversion factors reported. It is more than twice the increase at the upper end ($4.97, or 7 percent). It makes sense that the lagging rates will have increased more than the conversion factors that were at the top end of the range already.

Compare a 7 percent growth rate in nongovernmental payment rates for anesthesia services with skyrocketing health insurance premiums. Anthem Blue Cross/Blue Shield just received approval from Connecticut to raise its premiums for individual coverage by amounts ranging from 19 percent to 47 percent, depending on the type of coverage involved (it has 17 products in the market for individual coverage). Anthem will be filing its proposed group insurance rates soon, and one recent forecast says that these rates will average 11 percent greater than in 2009. (Hartford Courant, Courant.Com, Oct. 14, 2010.)

Aetna was granted a 14.2 percent to 18 percent increase in its HMO rates, having sought a 24.7 percent hike. Many readers who are responsible for securing health insurance for their own groups are probably beginning to see similar premium jumps, as are employers across the country.

The insurance companies are justifying their requests for double-digit increases by pointing to new mandates imposed on them by the Patient Protection and Affordable Care Act signed into law last March. Interviewed by the Hartford Courant, the Anthem spokesperson cited expanded benefits required under the PPACA such as elimination of lifetime dollar maximums, no cost share for preventive coverage and extension of dependent coverage to age 26. The third example is interesting because adding relatively healthy young adults to the insurance pool usually lowers overall spending on health care – and they do pay premiums. Incidentally, a new study from the Commonwealth Fund indicates that the PPACA will add about 12 million young adults to both private insurance plans through new health insurance exchanges and to Medicaid. According to the report, Realizing Health Reform's Potential: Young Adults and the Affordable Care Act of 2010, the reform law's mandate that all individuals must purchase health insurance will help bring young adults into the insurance market. 'The compliance of young adults will be particularly important in terms of creating broad and diverse risk pools in the exchanges and individual markets,' the report said.

A more compelling argument against the commercial insurers' rate hikes is their current "medical loss ratios," or the amount of each dollar collected in premiums that goes to pay health care providers. According to Richard Blumenthal, the Connecticut Attorney General who is challenging the increases, Aetna's filing shows that it paid 53 cents on medical expenses for every dollar collected in premiums in 2009. The PPACA will require medical loss ratios of at least 80 percent beginning next year. Some health plans' profit margins are going to decrease dramatically.

Although the PPACA does not explicitly address anesthesiologists' margins, it has the potential to cause much damage. We are aware of one nascent Affordable Care Organization that expects to pay its anesthesia providers 70 percent of Medicare. Payment at Medicaid levels, if the private insurance market or hospital systems try to implement a reduction of that magnitude, is not going to keep anesthesiologists or nurse anesthetists on board. Most payers will quickly find that out, if they don't know it already. There is also nothing in the PPACA, however, that will allow anesthesia groups to pass PPACA-driven cuts on to either the third party payers or to patients directly.

If only we had it as good as the insurance companies whose premium increases are being approved because of the PPACA!

Please consult the ASA Newsletter article by Jason Byrd and Loveleen Singh for regional and national conversion factor ranges, numbers of respondents for each statistic (there were 235 usable responses reporting on a total of 1,001 managed care contracts) and methodology. The article is likely to be important in your hospital as well as health plan contract negotiations over the next year.

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