Going into the Business of Anesthesia - Juan Quintana

Going into the
Business of Anesthesia

... but Why
For many, the attraction of setting up a
business is the independence
provided by being your own boss and
the chance to have the lifestyle you
want.

Traits of Successful Self
• Motivated
Starters
• Not necessarily a “risk taker” - Controllable
factors
• Drive: responsibility, vigor, initiative,
persistence
• Thinking ability: original, creative, critical,
analytical
• Communications skills: verbal (expression
and comprehension), written
• Technical knowledge: comprehension of the
physical product services, utilization of the
information

Should I Start a Business
• What is your relevant experience and
expertise
• Is there a market and how will you reach it
• Who will be your main competitors
• What makes you different
• How will you fund your idea Does it make
financial sense
• What might go wrong
Define Success.

What is a SUCCESSFUL
anesthesia practice
Meeting your priorities in life = success
•Money
•Practice Models/Practice Atmosphere
• ACT
• Group
• Autonomous
•Location
•Time (Juan’s choice)

Successful Traits to Cultivate
• Noticing the importance of people
• Working effectively with a group
• Paying attention to how you communicate
• Being sensitive to others
• Working well with those in authority
• Balancing the big picture with the details
• Being aware of customer needs and learn to
network
Frankel, P. Jump-Start Your Career: How the "Strengths" That Got You
Where You Are Today Can Hold You Back Tomorrow, published by
Three Rivers Press).

Advantages
• Independence and flexibility
• Being your own boss can give you the
choice to work more convenient hours -
such as working around your children's
school hours and holidays
• Lifestyle
• Payoff in financial terms
http://www.businesslink.gov.uk

Disadvantages
• Longer hours
• Difficult to separate work and home life =
extra demands on your family
• Stress
• Loss of perks such as pension plans,
holiday pay and sick leave
• Financial difficulties, especially at start up
http://www.businesslink.gov.uk

What is a W2
W-2
Employer withholds and pays:
Income taxes (required by the IRS)
Federal Income Tax
State Income Tax
FICA
Social Security
Medicare
Employer taxes:
FICA (Social Security and Medicare)
FUTA (Federal Unemployment Tax)
SUI (State Unemployment Tax)

What is 1099
1099-misc
Individual paid on an Untaxed basis
It is the responsibility of the individual to file and
pay the appropriate taxes.

Independent Contractors
Rules
Work with several clients
Role is to accomplish a final result
Determines the best way to achieve result
Defines the agreed upon "result" in contract
Pays their own taxes and files required gov’t forms
Obtains licenses as needed
Social Security taxes IC’s sole responsibility
Obtains his/her own benefits
Can deduct business expenses from his/her
income tax.

IRS
How much control
Three Main IRS Factors
-20-Point Checklist
1. How much control the employer has over
the worker’s behavior and work results.
(Who controls training, equipment, where
and what time the person works)
2. How much control the employer has over
finances (Does the employer have primary
control over profit or loss)
3. What is the relationship between the
parties (Does the worker receive benefits
Is it a long-term relationship)

So why 1099, contractors
IRS
Individuals responsible for paying
his/her own taxes, etc., tend to take full
advantage of any potential business
deductions so that they pay less in
taxes.

How about employers
Managers are trying to meet budget
constraints.
• Avoids the cost of employee benefits
(healthcare)
• Avoid taxes, etc. (13-19% pay)
• Avoid restrictions to termination

Do I need to form a Corporation
Alphabet Soup
• Sole Proprietorship
• LLC/PLLC
• C corporation
• Subchapter S
Get a CPA or/and Attorney!!!
http://www.smallbusinessadvantages.com/

Sole Proprietorship
• A sole proprietor has total control,
receives all profits from and is
responsible for taxes and liabilities of
the business

Sole Proprietorship Advantages
• Easiest and least expensive form of
ownership to organize
• Sole proprietors are in complete control,
and within the parameters of the law, may
make decisions as they see fit
• Sole proprietors receive all income
generated by the business
• Profits from the business flow directly to
the owner's personal tax return
• The business is easy to dissolve, if desired

Sole Proprietorship
Disadvantages
• Sole proprietors have unlimited liability,
legally responsible for all debts- business
and personal assets are at risk
• Disadvantage - raising funds, Difficulty
motivating individuals to work with the
business
• Some benefits such as owner's medical
insurance premiums are not directly
deductible from business income (only
partially deductible as an adjustment to
income).

LLC/PLLC
A flexible enterprise blending
elements of partnership and
corporate structures. It is a legal
form of company providing limited
liability to it’s owners.
FL - Articles of Organization (~$140/year)

LLC Advantages
• Limited Liability - business debts
• Pass-Through Taxation. Owners report
profits/losses on personal tax returns
• Citizenship- No requirement
• Management Flexibility unlimited # of owners.
• Simple Recordkeeping
• Deductible Expenses
• Flexible Profit & Loss Allocations LLC is not
required to allocate profits and losses in proportion to
ownership interest ("member interest')
• Nationally Recognized

LLC Disadvantages
• Earnings subject to self-employment
tax
• Incentive stock options not available
• Investor uneasiness
• Some states tax LLCs

Corporations
• Legal entity - exists separately owners
• Limits owners from personal liability
• Taxes levied on corporation and
shareholders
• Sale of stocks or bonds can generate
additional capital
• Longevity of the corporation can
continue past the death of the owners.

Corporation Advantages
• Limited liability for debts or judgments
• Accountable for your investment in stock of
the company
• Raise additional funds via sale of stock
• Cost of benefits to officers/employees
deductible
• Can elect S corporation status if
requirements are met = taxed similar to a
partnership

Corporation Disadvantages
• Process of incorporation involves
more time and money
• Monitored by federal, state and some
local agencies = more paperwork to
comply with regulations
• Incorporating may result in higher
overall taxes. Dividends paid to
shareholders are not deductible from
business income; thus it can be taxed
twice

Sub S Corporations
• A tax election only; enables the
shareholder to treat earnings and
profits as distributions and have them
pass through directly to their personal
tax return. The catch, the shareholder
working for the company + profits,
must pay him/herself wages, and must
meet standards of "reasonable
compensation".

Business Plan
• An unpublished study completed at
Babson College by Lange et al. (2007)
suggests that for those who are not
seeking outside funding, having a
formal business plan before start up or
not having one really made no
difference in the ultimate success of
the business.

Naming your business
• Start by deciding what you want your name
to communicate. Company name should
reinforce the key elements of your business
• The more your name communicates to
consumers, the less effort you must exert to
explain it
• Search/Register your name
http://www.entrepreneur.com/

The Pitch
• Learn how to tell a good story
• Develop a format that flows easily
• Timing is everything: less than 15
minutes
• Provide contact information
http://hubpages.com/hub/How_to_Pitch_Your_Small_Business_Idea_With
_Success

Know Your Market
• Will you market to businesses, to consumers,
or to both
• What are their traits
• Is the need for your product or service not
currently being met or is it already
saturated
• Is there something that will allow you to beat
your competitors
http://homebusiness.about.com/od/getstarted/ss/10StepsB4_2.htm

Leg Work
• Tax Id number
• Corporate Veil - fact or myth
• Company NPI number
• Medicare
• Medicaid
• Private Insurance

Negotiating Contracts
The real work starts here!!
• Once you’ve established your company,
you will need to negotiate a contract in
order to work.
• Research and experience are the great
equalizers in contract negotiations.

Negotiation Basics
Volumes of literature are available on the
art of negotiation.
“Fearless Negotiating” by Michael C.
Donaldson – easy to read,
great start
__________________
• Wish – shoot big, frame it nicely
• Want – your expected agreement point
• Walk – issues that are unacceptable

Negotiations
Recognize negotiations occur everyday
• Patients
• Physicians
• Hospital Staff
• Administrators
(recognize your customers!!)

Tips
• Figure out what you want: unless you're clear,
chances are you won't get it
• Ask for what you want
• Realize you have something valuable
• Written contracts are not set in stone
• Listen/make compromises, Make it a "win-win"
proposition
• Learn to smell trouble
• Learn from others in your field
• Get it in Writing
• Learn how to say "No“. Be willing to walk away

Contracts
Ingenuity wins
Some examples
• Fee for Service
• Stipend – Flat fee
• Income guarantees
• Shared Contracts
• Locums

Contract Writing
• Establish your own “standard” contract
• Use plain English
• Cannot protect you from everything
• Experience decreases traps
• Get legal counsel to assure compliance
with state laws

What am I worth
"Success doesn't come to you... you go
to it.”
- Marva Collins –

Compensation
Compensation varies (You determine the
bottom line)
_________________________
Compensation = Salary + time off
or
Salary + benefits = Salary + ~30%Salary

Billing Anesthesia
CRNAs/MDAs bill (utilizing – CMS 1510
form)
• Medicare
• Anesthesia - billed Medicare part B
• Hospitals bill
• Medicaid
• Inpatients Medicare part A
• Outpatients Medicare part B
• All other private insurers (BCBS, Aetna..)
• Private pay/no pay

Payer Mix
Payer Mix is the percentage of the
patients in each of the categories.
This varies according to practice
setting.
e.g.
70% Medicare
20% Private Insurance
5% Medicaid (OB = higher %)
5% Private payer/no pay

Payer Mix
Medicare
Medicaid
Private Pay
Insured

Billing Medicare Part B
Anesthesia is billed: base unit + TM (time
units). TOS 7
• Relative Value Guide – Published by the ASA
establishes the CPT codes and base units for
each procedure (also Crosswalk)
Anesthesia for procedures: Central lines,
Pain Procedures etc… base units only
(no time component) TOS 2

Billing Base Units + TM
Relative Value Guide is divided into
anatomical sections:
E.g..
• Lower Abdomen
•00832 Ventral / Incisional Hernias
•6 base units + time
•Time = 1unit/Q15min (usually)
Note: No differentiation for type of anesthetic

Example bill – Medicare
Ventral Hernia
Patient Case: 68 y.o. male with ventral
hernia. - smoker, HTN
Procedure takes 1 hour
Medicare coverage
Conversion Factor (CF) ~$21.00/unit

Example bill - Medicare
continued
00832 Ventral Hernia
6 base units + 1hr (4units) = 10units
10 units x $21.00/units = $210.00
(Medicare pays 80% = $168.00)
(Patient pays 20% = $42.00)

Your Billable $$$$
In the previous case a total of $210.00 were
generated for an hour case
Medicare!!
30min turn around time + 30min lunch
+ x2 15min breaks
Can do 5 anesthetics/day
5 x $210 = $1050 (generated)/day

Billing Private Insured
Ventral Hernia
00832 Ventral Hernia
6 base units + 1hr (4units) = 10units
______________________________________
East Coast - CF range $30.00-$95.00/unit
Median $55.00
______________________________________
10 units x $55.00/unit = $550.00
For a 1hr case!!!
Fees Paid for Anesthesia Services: 2007 Survey Results
Karin Bierstein, J.D., M.P.H. Associate Director of Professional
Affairs

Average Daily
Generated Income
Consider 5 elective cases
4 medicare/1 privately insured
_____________________________
Payer Mix = 70% Medicare
20% Pvt. Insured
4 cases x $210/case = $840.00
1 case x $550/case = $550.00
Total = $1390.00/day

Average Weekly/Yearly
Averaging $1390/day x 5 days/week
$6950.00
(consider 5 weeks off a year)
52 weeks/year – 5 weeks = 47 weeks
__________________________
$6950.00 x 47weeks =
$326,650.00/year
avg. CRNA income :O)

Anesthesia Practice Models -
Choosing a model
Anesthesia Care Team (ACT) – medically
directed model
Anesthesia Care Team – supervised
model
Groups – may have CRNAs only, MDAs
only or CRNA/MDA “consultation” all
paying into one account
Solo practices

Medical Direction is a choice!!
Utilization of the medical direction model
is a choice…
A poor choice, nevertheless a
choice.
Let’s figure out why.

ACT – Medically Directed
Anesthesia model in which the MDA (1)
medically directs concurrent (2-4max) CRNAs
________________________________________
1 MDA bills QK, meets TEFRA rules, gets
reimbursed 50% of each case- $190/2 = $95
$95 x 4 cases = $380/hr
4 CRNAs bills QX, gets reimbursed 50% of
the case - $95/hr - each

ACT – supervision model
ACT model in which the MDA supervises
more than 4 concurrent procedures.
MDA bills AD, gets 3units/case, 1
additional unit if available for induction
Leaves $$$ on the table
3-4 possible units billed

ACT supervision model
MDA billing AD
e.g. – Medicare case
MDA - Could have billed 5 units will only bill 4.
4 units ($19.00/unit) = $76.00/case
8 cases x $76.00 = $608/hr
Could have billed with 2 MDAs $760/hr or by
allowing CRNAs to bill QZ - $760/hr
CRNAs still bill QX, 50% or $95/hr

Group (collaborative)
Model/Solo Model
Each provider bills utilizing their own
modifier. 100% reimbursed /case, No
additional rules to follow.
MDA = AA
CRNA = QZ
Best possible system with least potential
for fraud r/t TEFRA rules. 100% billed
with 100% potential reimbursement

Back to Choices
Referencing the different billing models:
ACT – medical direction -100%/case
ACT – supervision - < 100%/case
Group (collaborative)/Solo - 100%/case
Avoid ACT supervision billing model to
optimize reimbursement

TEFRA FRAUD
• Outpatient Surgery Magazine
• December 2007
• Jay Horowitz CRNA /Lou Stanfield Phd CRNA
• January 2008
• Barry Cranfill CRNA MBA
www.outpatientsurgery.net

Back to Choices
2 Models remain
Group (collaborative) model billing 100%
ACT model + TEFRA /medically directed
100% of available reimbursement
MDAs – group employed (hospital employed
rare – teaching facilities, company model)
CRNAs – group employed
CRNAs – Hospital employed

Back to choices
MDAs and CRNAs in the same group =
$$$$ go into the same account.
Salaries are determined by the Group.
Each case is billed 100% of it’s
potential reimbursement, no TEFRA
rules are broken, even accidentally.

Problematic Choices
MDAs work for the group, while CRNAs work
for the facility
• TEFRA is onerous for the MDA, BUT…. they bill
an extra 100%.
The facility pays for CRNAs - gets 50% on
Medicare patients / some private insurance.
Serves as an additional stipend for the MDAs
• In some instances private insurance Co. do not
split bill (QK,QX) so the MDA group gets the
entire amount, the facility gets- nutin’ (0).

Problematic choices
MDAs work for the Group, CRNAs work
for the facility.
The facility absorbs all CRNA cost with
1/2 the reimbursement
Add Stipends!!
Result - Facilities seek alternatives to the
current anesthesia practice model

Summary
You define Success.
Form a corporation that reflects your needs
Negotiate – Wish, Want, Walk
Contracts – Be creative, Be careful
Know your worth /How to bill it.
Encourage utilization of Practice Models that
optimize reimbursement w/o all the traps

Sleepy Anesthesia Associates
PLLC
Juan F. Quintana CRNA, DNP
a_sleeper2@yahoo.com