As a new graduate CRNA, understanding the financial dynamics of an anesthesia practice is crucial for your career success. While your primary focus is on patient care, comprehending how the practice generates revenue directly impacts your role and earning potential. Let’s break down the key components.
Practice models you may be employed in
Solo Practice
A solo practice involves a single CRNA owning and operating their own anesthesia practice. This model is often associated with fee-for-service billing discussed below, but can also incorporate other payment models. A CRNA is likely to be billing their own services if they are practicing solo. However, that’s not always the case. CRNAs may also be in solo practice while having a contractual relationship with an anesthesia practice management organization.
An organization known as a practice management organization is a type of business that will typically have a contractual relationship with a facility providing medical services requiring anesthesia; such as dental surgery, plastic surgery, orthopedic surgery, pain management procedures, endoscopy, etc. They may also have a relationship with one or multiple Hospitals across one or more states.
Key characteristics:
- Independence: The CRNA has complete control over their practice.
- Financial responsibility: The CRNA assumes all financial risks and rewards.
- Challenges: Can be isolating, requires strong business skills, and may have difficulty negotiating contracts with facilities.
Group Practice
A group practice involves multiple CRNAs sharing ownership and responsibilities. This model can offer economies of scale, risk sharing, and shared decision-making.
Key characteristics:
- Shared ownership: Multiple CRNAs share the practice’s profits and losses.
- Shared responsibilities: Tasks like billing, marketing, and administration are often divided among the group.
- Potential benefits: Increased bargaining power with facilities and insurers, shared financial risk, and support network.
- Challenges: Potential for disagreements among partners, complex legal and financial structures.
Comparison Table
| Feature | Solo Practice | Group Practice |
| Ownership | Individual CRNA | Multiple CRNAs or MDs |
| Revenue Stream | Agreed upon fee for service to patient/insurer or facility | Can vary |
| Financial Risk | High | Shared |
| Administrative Burden | High | Shared |
| Revenue Generation | Direct | Shared Responsibility |
| Flexibility | High | Moderate |
| Support Network | Limited | Strong |
Understanding the Revenue Stream
Anesthesia practices whether Solo or Group practices generate revenue primarily through two main sources:
Direct Insurance Billing:
- Insurance Reimbursements: The practice submits claims to insurance providers for the anesthesia services rendered. The amount paid by the insurer is determined by negotiated rates or fee schedules between that anesthesia practice and the insurance payer.
- Patient Responsibility: Patients often have co-pays or deductibles, which may be collected directly by the practice.
Facility Fees:
- Bundled Services: In some cases, the facility where the surgery takes place charges a fee for the use of their operating room and equipment. This fee is often bundled with the anesthesia service and billed together.
Billing Models
Fee-for-service & Value-based billing models represent contrasting approaches to anesthesia reimbursement.
Fee-for-Service Model
In a fee-for-service model, Providers of anesthesia services bill directly for their services to patients, facilities or insurers.
How it works:
- Direct billing: The CRNA or practice submits billing claims to insurance companies or patients for each service provided.
- Revenue generation: The CRNA directly generates revenue for their Solo or Group Practice.
- Financial risk: The CRNA or Group Practice assumes full financial risk, including unpaid bills and overhead costs.
- Benefits: Potential for high earnings. Revenue depends on the volume and complexity of procedures performed.
- Challenges: High administrative burden, financial risk, potential for payment delays, and need for robust business acumen and experience.
Value Based Model
Conversely, value-based billing compensates providers based on the overall quality of care and patient outcomes rather than the quantity of services provided. This approach encourages efficiency, patient satisfaction, and cost-effectiveness. While fee-for-service remains prevalent, the healthcare industry is gradually shifting towards value-based care models, emphasizing the importance of providing high-quality, cost-effective anesthesia services.
Factors Affecting Practice Revenue
Several factors influence an anesthesia practice’s revenue, including:
- Payer Mix: The percentage of patients with different types of insurance (e.g., Medicare, Medicaid, private insurance) significantly impacts revenue due to varying reimbursement rates from each type of insurance payer.
- Contract Negotiations: The practice’s ability to negotiate favorable contracts with insurance providers is crucial for maximizing revenue. Practices with the highest negotiating power get the most hospital contracts, and practices with the most hospitals have the most negotiating power.
- Economic Conditions: Economic downturns can affect patient volume and insurance reimbursement rates.
- Regulatory Changes: Changes in healthcare regulations can impact billing practices and reimbursement. The recent conversion factor reductions by CMS contribute to the financial strains practices continue to experience.
- Competition: The level of competition in the market between competing practices can influence pricing and customer (facility) acquisition.
How This Relates to Your Career
Understanding how an anesthesia practice generates revenue can help you:
Negotiate Compensation:
Knowledge of practice finance dynamics can strengthen your position when negotiating salary or contract terms.
Relationships with Employers:
Some practices are large enough that they can create what many consider a monopoly. See our blog about the FTC vs USAP lawsuit here. This means your relationship with any particular practice might affect your ability to work at other hospitals in the future.
Risk Management:
Awareness of financial challenges your practice is going through can help you make informed decisions about your career path. It’s unlikely that you will be privy to the financial struggles your practice is facing, but you can use context to intuit whether or not there’s a possibility your practice’s relationship with your hospital has gone sour. And whether that means another group is taking over.
Factors Affecting Your Market Value
Several factors influence your market value as a CRNA, and consequently, the revenue a private practice can generate from your services:
Experience:
Years of experience and specialized experience like cardiac anesthesiology or regional block skills enhance your value.
Certifications:
Additional certifications, such as those in pain management can increase your earning potential, although further certifications can be in short supply for CRNAs.
Location:
Geographic location impacts demand for CRNAs and, consequently, salary rates. The less CRNAs there are within a given geographical radius, the more market value, and therefore earning potential you have.
Case volume and complexity:
The types of cases you handle, their complexity, and the volume of cases you manage or do affect your value to the practice.
Negotiation skills:
Your Group’s ability to negotiate contracts with facilities and insurance providers can significantly impact your earnings, and your available career opportunities. Your negotiation skill are important in securing advantageous roles as well.
How to Determine Your Market Value
To assess your market value, consider the following:
- Research salary data and benchmarks: Utilize resources like the American Association of Nurse Anesthetists (AANA) annual compensation survey report or Lokum’s 2024 CRNA Pay Trends Report to benchmark salaries based on your experience, location, and specialty.
- Analyze job postings: Compare salary ranges and requirements for CRNA positions in your area. Download Lokum App for a personalized job feed to stay up-to date on what trends are in your area.
- Network with colleagues: Discuss compensation packages and practice structures with other CRNAs.
- Consider the cost of living: Factor in the cost of living in your area when evaluating salary offers. A salary in California will look very different from a salary in Arkansas for example.
- Utilize Negotiation Tips: Use these 6 Negotiation tips to be successful in your career.
By understanding these factors and conducting thorough market research, you can effectively negotiate your compensation and maximize your earning potential.