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1 HEALTH CARE AND HUMAN SERVICES POLICY, RESEARCH, AND CONSULTING - WITH REAL-WORLD PERSPECTIVE. Cost-Effectiveness Analysis of Anesthesia Providers June, 2010
2 Outline Purpose Cost-Effectiveness Analysis of Anesthesia Providers and Delivery Models Literature Cost Simulation of Providers/Delivery Models Education Cost Literature Cost Model and Results Summary 2
3 Purpose Assess the cost effectiveness of CRNAs and Anesthesiologists to include: Cost-effective delivery model Quality of care Economic cost of education 3
4 Cost Effectiveness Literature Simulation Analysis 4
5 Cost effectiveness: Literature Literature is largely based on simulation analyses Abenstein et al (2004), using outcome data from Silber et al (2000) finds that a medical direction model is more cost effective with respect to years of life saved than a model in which CRNAs act independently. Data is not based on mortality due to anesthesia complications Variation in delivery models may be correlated with variation in other factors affecting quality of care or patient risk. Glance (2000) finds that an anesthesiologist alone is not a cost-effective delivery model. Direction-models are cost effective, with ratios varying optimally based on risk class of case. Subjective estimates of risk Not clear how a given setting could adjust quickly to different models depending on risk Quintana et al (2009) estimates the costs associated with a number of different delivery models, under the assumption that outcomes are held constant. They find that anesthesiologist intensive forms of delivery are less efficient, and more likely to require subsidization by the hospital. p 5
6 Cost Effectiveness: Simulation Analysis Model simulates the billing (payer) revenue and economic cost of providing anesthesia under seven different delivery models Anesthesiologist only CRNA acting independently Direction model 1:1 through 1:4 Supervisory model 1:4+ Quality does not vary with delivery model Model is stochastic Variation in the flow of patients into ORs is stochastic But with planning for optimal utilization Complexity of cases, measured by base units, is stochastic Time required is stochastic 6
7 Cost Effectiveness: Simulation Analysis The model user may specify: Distribution of patient demand Distribution of procedure types (base units) Distribution of time units per procedure Other variables For each delivery model, we estimate Billing attributed to CRNA-total and average per procedure Billing attributed to anesthesiologist-total total and average per procedure Economic cost per procedure Annualized results for 12 station case 7
8 Billing Rules in Baseline Case Medicare Rules: Direction Model: CRNA bills (base units+time units)*conversion factor*.5 Anesthesiologists bills (base units+time units)*conversion factor*.5 Anesthesiologist alone model: Anesthesiologist bills (base units+time units)*conversion factor CRNA independent model: CRNA bills (base units+time units)*conversion factor Supervisory Model CRNA bills (base units+time units)*conversion factor*.5 Anesthesiologist bills 4 units 8
9 Example of Scenarios or Cases Analyzed Case 1: Inpatient Setting with Optimal Demand 12 stations annual results Per procedure results Case 2: Inpatient Setting with Below Optimum Demand 12 station annual results Case 3: Outpatient Surgery with Optimum Demand 12 station annual results Case 4: Ambulatory Surgery Center with Optimum Demand 12 station annual results 9
10 Model Parameters Key yparameters may be changed, but are held constant in simulations across settings Medicare Medicaid Private Self-pay Payer Proportions Conversion Factors $21.00 $15.00 $ Costs Anesthesiologist i t $336,000/yr. Nurse Anesthetist ti t $170,000/yr. 000/ Settings are defined by base/time unit means Setting Base units Time units Inpatient Outpatient Surgery Ambulatory Surgery Center
11 Case 1: Inpatient Setting with Optimum Demand (12 Station Annual Results) Yearly Total Revenue (12 Stations)* Yearly Total Costs (12 Stations)* Yearly Total Revenue Minus Total Cost (12 Stations)* Medical direction 1:4 5,401,171 3,048,000 2,353,171 Medical direction 1:3 5,593,158 3,384,000 2,209,158 Medical direction 1:2 5,673, ,056, ,617, Medical direction 1:1 5,697,316 6,072, ,684 Anesthesiologist only 5,317,945 4,032,000 1,285,945 CRNA only 5,317,945, 2,040,000, 3,277,945, Supervisory 1:6 4,226,094 2,712,000 1,514,
12 Case 1: Inpatient Setting with Optimum Demand ( Per Procedure Results) Revenue Per Procedure Cost Per Procedure Revenue Minus Costs Per Procedure Medical direction 1: Medical direction 1: Medical direction 1:2 (4 Per Station ti Per Day) Medical direction 1: Anesthesiologist only CRNA only Supervisory 1:
13 Case 2: Inpatient Setting with Below Optimum Demand (12 Station Annual Results) Yearly Total Revenue (12 stations) Yearly Total Costs (12 Stations) Yearly Total Revenue Minus Total Cost (12 Stations) Medical direction 1:4 (2 Per Station Per Day) 2,939,415 3,048, ,585 Medical direction 1:3 (2 Per Station Per Day) 2,945,765 3,384, ,235 Medical direction 1:2 (2 Per Station Per Day) 2,948,422 4,056,000-1,107,578 Medical direction 1:1 (2 Per Station Per Day) 2,943,579 6,072,000-3,128,421 Anesthesiologist only (2 Per Station Per Day) 2,742,690 4,032,000-1,289,310 CRNA only (2 Per Station ti Per Day) 2,742,690 2,040, ,690 Supervisory 1:6 (2 Per Station Per Day) 2,165,133 2,712, ,
14 Case 3: Outpatient Surgery with Optimum Demand (12 Station Annual Results) Yearly Total Revenue (12 Stations) Yearly Total Costs (12 Stations) Yearly Total Revenue Minus Total Cost (12 Stations) Medical direction 1:4 4,458,762 3,048,000 1,410,762 Medical direction 1:3 4,465,417 3,384,000 1,081,417 Medical direction 1:2 4,455,544 4,056, ,544 Medical direction 1:1 4,460,628 6,072,000-1,611,372 Anesthesiologist only 4,159,381 4,032, ,381 CRNA only (4 Per Station ti Per Day) 4,159,381, 2,040,000, 2,119,381, Supervisory 1:6 3,658,851 2,712, ,
15 Case 4: Ambulatory Surgery Center with Optimum Demand (12 Station Annual) Yearly Total Revenue (12 Stations) Yearly Total Costs (12 Stations) Yearly Total Revenue Minus Total Cost (12 Stations) Medical direction 1:4 4,458,762 3,048,000 1,410,762 Medical direction 1:3 4,465,417 3,384,000 1,081,417 Medical direction 1:2 4,455,544 4,056, ,544 Medical direction 1:1 4,460,628 6,072,000-1,611,372 Anesthesiologist Only 4,159,381 4,032, ,381 CRNA Only (4 Per Station ti Per Day) 4,159,381 2,040,000 2,119,381 Supervisory 1:6 3,658,851 2,712, ,
16 Conclusions CRNAs acting independently is the most cost efficient model and most attractive financially Under most circumstances, it does not require a subsidy Where demand is high, supervisory model (1:4+) and direction model (1:4) become relatively more attractive financially Supervisory model is the second least costly model When demand is constrained, models which require larger demand become less cost effective There are no circumstances examined in which a 1:1 direction model is cost effective or financially viable When demand is highly uncertain, CRNAs acting independently becomes relatively more attractive financially 16
17 Education Costs Literature Simulation Analysis 17
18 Education Costs Education costs for CRNAs and Anesthesiologists CRNA education program costs PGY 2 through 4 for Anesthesiologists 18
19 Education Cost Literature (all estimates converted to 2008 dollars) CRNA Education $52,076 (Direct Cost) $287,382 (social cost) Gunn (1996) Fagerlund (1998) Anesthesiology PGY 2-4 $321,000 (Direct Cost) Dodoo and Phillips (2008) $301,178 Direct Cost Franzini and Berry (1997) $ (Direct plus productivity) $245,969 (with opportunity cost added) $229,267 (Direct, before GME offset) $-213,000 (with productivity offset and GME subsidy) Franzini and Berry (1997) Franzini and Berry (1997) modified by Hogan to include opportunity cost Pisetsky, Lubarsky, et al (1998) Pisetsky, Lubarsky, et al (1998) $146,940 Pisetsky, et al (1998) with productivity offset with opportunity cost (Hogan) 19
20 Education Costs Three types of cost included: Direct education costs Opportunity cost of student/resident s time Value of student/resident services while training 20
21 Education Costs CRNA BA/BS/BSN $53,696 (NCES) Anesthesiologist $53,696 (NCES) Direct Costs of Education and Training i before Medical School $436,080 (Gunn) entry into an anesthesia program One year as acute care nurse Required, but with no direct cost First-year residency $134,042 (PGY-1) (Gunn) Total Pre-anesthesia $53,696 $623,818 Direct costs $68,465 $494,420 Anesthesia Graduate Education (GE) Total Anesthesia GE (less transfer payments) Student/Resident Opportunity Cost $291,353 $897,793 Productivity of ($251,704) ($775,073) students/residents $108,113 $459,977 Total Estimated Costs $161,809 $1,083,
22 Conclusions: Cost-Effective delivery Models CRNAs acting independently provide anesthesia services at the lowest economic cost Net revenue is likely to be positive under most circumstances Supervisory model is next lowest cost, but billing rules impede revenue generation Direction model (1:4) can approach the net revenue benefits of the CRNA model in facilities where demand is high and relatively stable In areas of low demand, these models are inefficient, however The 1:1 directional model is almost always the least efficient model CRNAs acting independently is the only model likely to have positive net revenue in venues of low demand Analysis of claims data suggest that CRNAs acting independently are lowest cost to the private payer 22
23 Conclusions: Education Cost Both the direct costs and the economic cost of educating CRNAs is significantly lower than that of the cost of anesthesiologists Economic costs of graduate education for CRNA are about one-fourth of the cost of anesthesiologists Total education costs of CRNAs are about 15% of the cost of anesthesiologists Key cost drivers: Faculty cost and student-faculty ratio Program length Student opportunity cost Productivity of students in clinical portion of graduate education 23
24 The Lewin Group 3130 Fairview Park Drive Suite 800 Falls Church, VA Main: (703) The Lewin Group Health care and human services policy research and consulting Fairview Park Drive, Suite 800 Falls Church, VA From North America, call toll free: The Lewin Group is an Ingenix Company. Ingenix, a wholly-owned subsidiary of UnitedHealth Group, was founded in 1996 to develop, acquire and integrate the world's best-in-class health care information technology capabilities. For more information, visit The Lewin Group operates with editorial independence and provides its clients with the very best expert and impartial health care and human services policy research and consulting services. The Lewin Group and logo, Ingenix and the Ingenix logo are registered trademarks of Ingenix. All other brand or product names are trademarks or registered marks of their respective owners. Because we are continuously improving our products and services, Ingenix reserves the right to change specifications without prior notice. Ingenix is an equal opportunity employer. Original 2008 Ingenix. All Rights Reserved 24
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