Answer: Build the forecast around contractual payer rates and actual payer and case mix. Compare that expected revenue with actual revenue for the same period. Keep charges, allowable payment and actual revenue distinct. For commercial activity, the written payment terms matter, including any provisions for physical status, modifying units and qualifying circumstances. Denials, patient responsibility and payment timing remain separate questions for the forecast.
The short answer
A state health department report explains Medicare anesthesia payment as base units plus time units, multiplied by an anesthesia conversion factor. Base units represent service complexity and physician work. Each 15-minute increment of anesthesia service equals one time unit.
A practice management executive explains a revenue comparison that applies contractual payer rates to actual payer and case mix. Expected revenue is then compared with actual revenue for the same period. A single Medicare conversion factor applied across commercial activity does not reflect that contract-based calculation.
Another practice management executive distinguishes charges from allowable payment. Most anesthesia charges and payments use base and time units, typically with a 15-minute time unit. Total billable units for each case are multiplied by the practice conversion factor to determine charges. The payer conversion factor determines allowable payment.
What usually goes wrong
Calling every figure revenue makes the calculation hard to follow. Charges, allowable payment and actual revenue have separate roles in the comparison. The practice management executive assigns different conversion factors to charges and allowable payment.
Modifiers also need context. The state health department report explains that provider arrangement modifiers identify an anesthesiologist working alone, an anesthesiologist working with nonphysician anesthetists, or a nonphysician anesthetist.
A compliance auditor discusses a different part of the calculation: commercial contract provisions for per-unit payment, physical status, modifying units and qualifying circumstances. The auditor says those terms can be loaded into the revenue cycle system.
For denials, patient responsibility and payment timing, the owner discussion needs explicit questions: What collection assumptions are being used? How are those assumptions connected to actual revenue? What receipt period does the forecast represent? The contractual payment calculation alone does not answer those questions.
What a veteran checks first
- The practice conversion factor used for charges and the payer conversion factor used for allowable payment.
- The base and time units underlying the calculation, including what each represents.
- The actual payer and case mix used to calculate expected revenue.
- Written commercial payment provisions for physical status, modifying units and qualifying circumstances.
- Provider arrangement modifiers, considered separately from those commercial payment provisions.
- The period covered by expected revenue and actual revenue, plus the assumptions about collections and receipts.
What the payment framework says
The state health department report connects Medicare payment to service complexity, care time and an anesthesia conversion factor. It also explains the role of provider arrangement modifiers.
The compliance auditor connects commercial payment provisions to the written contract and explains that those provisions can be entered into the revenue cycle system.
One practice management executive separates the charge calculation from allowable payment. Another says comparing contractual expectations with actual revenue, using actual payer and case mix for the same period, can help assess whether the group is achieving its revenue potential or close to it.
Questions to bring to the partner meeting
- Which figures represent charges, allowable payment and actual revenue?
- Which contractual payer rates appear in the forecast?
- What actual payer and case mix does the analysis represent?
- Which commercial payment provisions are represented in the revenue cycle system?
- Do expected revenue and actual revenue cover the same period?
- What assumptions address denials, patient responsibility and payment timing?
Sources
- David J. Platt, Senior Vice President, Anesthesia Division
- Devonna Slater, president and senior compliance auditor, ACE
- Jody Locke, MA
- Maryland Department of Health
- Maryland Department of Health, Maryland Health Care Commission
