1. 1 Anesthesia Financial Models KOAMA San Juan January 2007 Joe Laden joeladen@aalouisville.com

2. 2 ABC Anesthesia - 2006 Patient Receipts Less Refunds6,000,000 Hospital Stipend1,200,000 Total Income7,200,000 Billing and Collection Expense 360,000 Corporation Expense 75,000 CRNA Expense (14)2,450,000 Non-shareholder MD Expense 360,000 Net to Shareholders3.955.000 Shareholders 9 Shareholder Total Compensation 439,444 Insurance, Retirement, Tax, etc. 100,000 Shareholder W-2 339,444

3. 3 Anesthesia Metrics You Should Know Revenue per Unit ($20-$50) Revenue per Hour ($200-$450) Unit Reimbursement Rate of Major Payers Revenue Per OR ($300k-$700k) Average Shareholder MD W-2 ($250k-$400) Total non-W-2 Costs per MD ($60K-$110k) O.R. Utilization (40%-80%) Ye Units Billed per MD per Year

4. 4 Anesthesia Metrics You Should Know % Work After Hours (0-30%) CRNA Cost Per Hour Billed ($120-150) CRNA Cost Per Unit Billed ($14-$18) MD Hours In Hospital Per Week (40-55) % Corporate Overhead & Administration (2%?) % Billing Cost (3%-8%) % Medicare Units (10%-60%) Units Per Hour (7-10)

5. 5 Key Metrics Revenue Per O.R. Revenue Per Unit Billed O.R. Utilization Rate % Hours Billed/Worked After Normal OR Shift CRNA Cost per Hour/Unit Billed MD:CRNA Ratios (Concurrency) Weeks Worked per Year MD non-Salary Costs Units per Hour Units Billed per MD FTE

6. 6 CRNA Cost Per Hour/Unit Billed Hourly Rate = $60 Hourly Rate with Benefits & Taxes at 33.3%  $80 Hourly Rate for Hours Worked (40 days PTO)  $95 Hourly Rate for Hours billed @ 70% Utilization  $135 Overtime, Shift Differential & Call May Increase Converts to about $16-$17/unit Can This Metric Be Controlled?

7. 7 MD:CRNA Ratios (concurrency) Nominal Ratio May Be 1:4, 1:3, 1:2, However: Some MD-only O.R.’s Different Ratios: (some O.R. 1:2, some 1:3) Ratios Change As Cases Start and Stop Floaters Should Be Counted

8. 8 MD:CRNA Ratios (concurrency) Practice Ratio Average Number of MD’s Scheduled to Work Divided by Average Number of CRNA’s Scheduled to Work

9. 9 MD:CRNA Ratios (concurrency) Practice Ratio Example: 10 OR’s Normally Scheduled as Follows: 8 CRNA’s in 8 O.R.’s 2 M.D.-Only O.R.’s 6 O.R.’s @ 1:3 2 O.R.’s @ 1:2 Total M.D.’s  5 Practice Ratio  5:8 or 1:1.6

10. 10 MD:CRNA Ratios (concurrency) Cost Ratio Divide Total Revenue by Total CRNA Cost Example: Total Revenue $12,000,000 CRNA Cost$ 4,000,000 Cost Ratio33% Result – One Third of Revenue is Consumed by CRNA Costs.

11. 11 MD:CRNA Ratios (concurrency) Cost Ratio Therefore, 33.3% of Units Billed Per MD or Hours Billed Per MD or Revenue Per MD would need to be subtracted to compare to another practice with no CRNA’s or a different ratio of CRNA’s.

12. 12 MD:CRNA Ratios (concurrency) Summary The Effect of Concurrency is Difficult to Calculate It Makes Comparison to Surveys Problematic However, the MD:CRNA is Controllable by the Anesthesia Practice and Can Have a Significant Influence on MD Income.

13. 13 Weeks Worked Per Year Eight Weeks Time Off is the Average Significant Differences Will Be Reflected in MD W-2 Wages. Value of a Vacation Week Calculation: Total MD Compensation/Cost Divided by Number of Weeks Worked $440,000/44  $10,000/week

14. 14 Anesthesia Financial Models

15. 15 Diagram Model

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17. 17 Spreadsheet Model

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24. 24 Graphical Model

25. 25 Click Above to Activate Slide: Click Here to Advance to Next Slide

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28. 28 Situations Were Models Are Useful Evaluating Additional O.R. Coverage Advocating for Improved O.R. Utilization Analyzing Proposed Change in MD:CRNA Ratio Additional Facility to Cover Additional Personnel to Improve Lifestyle Changes in Vacation for Some or All MD’s Changes in Payer Mix Changes in Payer Reimbursement Stipend Requests (New and Changed) Probable MD Income in Future

29. 29 Steps to Develop & Use a Model Objective Inputs and Outputs Determine Form Gather Data Validate Compare to Surveys and Benchmarks Project, Manipulate in Real time

30. 30 Model Software References http://www.modeladvisor.com http://www.xcelsius.com