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How Does Anesthesia Billing Work?

This seemingly simple question is very confusing to most people. We will endeavor to simplify the process to allow understanding without diving into the minutiae that can require experts to sort through.

Whereas many surgical specialties have global, all encompassing fees, anesthesiologists bill for their services incrementally. Is it fair to charge a 16 year old the same as you charge an 80 year old? What about a healthy patient or a patient with partially compensated CHF? Is a coronary artery bypass the same charge as a cataract? What if one surgeon takes three hours for a Laparoscopic Cholecystectomy, and another takes one hour. Should these be charged the same? These are all issues addressed in anesthesia charges.

If you are confused, don’t worry…you’re not alone. William Hsiao, PhD, a Harvard Professor, set out to create a Resource-Based Relative Value Guide (RVRBS) for Health Care Financing Administration (HCFA) in the 1980s. When they came to billing for anesthesiologists, they were struck by the complexity of the system, and set it aside to deal with later. When they were ready to publish, they realized that they had allocated all of the funds without addressing anesthesiology. At the last minute, they valued an anesthetic for an adult hernia repair as the same relative value as a well baby visit. This was the origin of the “30% problem” of which anesthesiologists often speak. More on this later.

Anesthesia billing has been compared to a taxi fare. It is broken down into components.

  • Start Up Units: These reflect the complexity of the surgical procedure and anesthetic, and range in value from 3-25 units.
  • Time Units: The valuation here fluctuates by contract, as a time unit is anything the contract says it is. Some contracts have 5 units per hour, others have 4. Some contracts have the next unit start with the first minute of the time period, others at the 5th minute, and Medicare pays a fraction for every minute. Time accrues while the physician assumes care of the patient, remains continuously in attendance caring for the patient, and until the patient is handed off and report has been completed.
  • Modifier Units: This is a smorgasbord of units that addresses items such as Emergency, Age, Patient Physical Condition, CRNA supervision, Controlled Hypotension, Controlled Hypothermia, Unusual Position, Field Avoidance, and a host of other items. I will not delve into this abyss in this document. And these are not always paid by the insurer.
  • Additional Procedures: This group includes arterial lines, central lines, Swan-Ganz catheters, nerve blocks, TEE, and other services that anesthesiologists provide that are not bundled into the procedure. These can be paid in units, or as a flat fee.

To get to the charge, we have a few more terms to cover.

  • Full Price: The price charged when the patient’s health plan is not contracted with the anesthesiologist.
  • Contracted Rate: Contractually agreed upon rate between anesthesiologist and insurance provider.
  • National Anesthesia Conversion Factor: used by Medicare

To calculate the charge to the patient, we use the following equation.

(Start Up Units + Time Units + Modifier Units) * Full Price = Anesthesia Charge

The full charge is sent to the insurer (or the patient, if they are uninsured). The insurer then reduces the charge using the following formula.

(Start Up Units + Time Units + Modifier Units) * Contracted Rate= Allowable Anesthesia Charge

The insurer reports the difference between the Anesthesia Charge and the Allowable Anesthesia Charge as “Network Savings.” The insurer then pays their portion of the bill to the anesthesiologist, and the anesthesiologist is responsible for collecting the patient’s portion.

Documentation is critical to successful billing. The old adage “if it isn’t documented, it didn’t happen” applies. You need to document start and end times and any other events that trigger modifier units. Your billing company will be able to apply charges from your record. Legibility is also critical, so be sure to write clearly.

It is imperative that the anesthesiologist makes a reasonable effort to collect the patient’s portion. If they do not, it could be construed that the physician is willing to work at a discounted rate to their true contracted rate, and extra collections would be fraudulent. Years ago, physicians used to provide courtesy care for other physicians, accepting only what insurance paid. That practice has been legislated away.

In the 1980s, Medicare paid ~75% of Full Price for anesthesiologists. Today, Medicare pays ~25% of the Contracted Rate. (Medicaid pays even worse.) What impact does this have on the practice of anesthesia? In the 80s and 90s, there was no such thing as hospitals providing stipends to an anesthesia group. As the percentage of patients on Medicare and Medicaid increased, and reimbursement from government payers fell, there was a compensatory increase in private payer charges. Around 2005, the tipping point was reached where collections alone could not reach market rates, making hospital support necessary…and the disparity continues to grow! The ASA is working on addressing this issue, but it is difficult in an era where there is no appetite to further increase healthcare spending.  Refinement and Expansion of the Harvard Resource-Based Relative Value Scale: The Second Phase

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