ANE-712 · Finance & Business of Anesthesia

Origins of health insurance

• Earliest policies compensated for income lost when manual laborers fell ill; companies hired doctors to treat workers → earliest employer-based insurance.
• Archetype developed at Baylor University, Dallas TX (1929) — a deductible/"catastrophic" coverage deal; became Blue Cross (1939) to protect patient savings and keep hospitals afloat. Blue Cross plans were NON-PROFIT.
• Govt ruled money paid for employee health benefits would not be taxed (tax exclusion) — win-win; post-WWII wage freezes made benefits a recruiting tool.
• Insured Americans grew from 10% → 60% (1940–1955) → business opportunity → FOR-PROFIT companies moved in.

Medical Loss Ratio (MLR)

• MLR = share of premium dollars spent on medical care (vs. admin/profit).
• 1993: 0.95 of each premium dollar → care. 2010: down to 64.4%.
• ACA requires insurers spend 80–85% on care. Medicare spends ~98% on care, 2% admin.

Rise of for-profit models & consolidation

• Federal funding (1965) created a profit-driven environment; focus shifted to volume and profitable procedures.
• 1980s consultants pushed M&A for economies of scale/market dominance — largely backfired (reduced competition → pricing power, fewer quality/efficiency incentives).
• Market concentration: prices ~20% higher where hospitals have no competition. 40 largest systems own ~2,073 hospitals (⅓ of all ER/acute care). Top 10 own ⅙ of hospitals, ~$227B net revenue.

Scale of U.S. spending

Major issues facing healthcare

• High costs (insurance strategies, drug prices, salaries, profit-driven entities)
• Accessibility — ~35% of Americans can't access affordable care
• Workforce shortages — burnout, admin burden, retirement, low recruitment/training entry
• Technological integration (EMR, digital health) · Health equity · Cybersecurity
• Bankruptcies/closures — 5-yr high; 61 rural + 87 urban closures since 2020; 117 rural hospitals dropped L&D. "Converted closures" = became urgent care / outpatient / rural ER.

Sources: Sync 3 Lecture; Module 2 CH 26 (Healthcare Delivery Systems).

Healthcare delivery system basics (CH 26)

• Healthcare = nation's largest industry (>20 million employed; >17% of GDP).
• A delivery system = different levels/sites of care under a central administrative structure, providing a coordinated continuum to a defined population, accountable clinically & fiscally.
• Required elements: trained/motivated workers · well-managed infrastructure · reliable drug/tech supply · evidence-based policies · strong strategic plans.
• Four finance responsibilities: Planning · Organizing & directing · Controlling · Decision-making. Finance personnel: CFO, Controller, Treasurer.
• Shift from charge & cost → capitation & pay-for-performance; reimbursement increasingly tied to quality & outcomes; providers must manage at-risk payments.

Antitrust enforcers

• DOJ Antitrust Division — mergers, conduct matters (market allocation, no-poach agreements), insurers/providers.
• FTC — enforces antitrust in healthcare markets; competition → lower costs, better care, innovation. Also central to the non-compete debate.
• Loopholes & lobbying let consolidation proceed — M&A rarely challenged.

Fraud & abuse — Stark vs. Anti-Kickback

Certificate of Need (CON)

• 35 states + DC require a CON for a new hospital.
• Benefits: prevents wasteful duplication; protects rural margins (blocks cherry-picking of profitable insured patients); concentrates volume → better outcomes.
• Drawbacks: stifles competition (incumbents block entrants), raises costs, restricts access, causes bureaucratic/litigation delays.

ACA Provider Nondiscrimination

• Plans/issuers cannot discriminate against a licensed provider acting within scope — ensures network participation for CRNAs, NPs, chiropractors, etc.
• Limits: does not require contracting with every provider, and does not mandate equal reimbursement — only bans discrimination based solely on provider type.
• Weak federal enforcement since 2010 → ongoing AANA litigation (oral args 6/4/2026, 6th Circuit).

Non-competes & the Company Model

• Non-compete: employee agrees not to work for/start a competitor for a defined time/distance; heavily challenged by state legislatures & FTC. Violations → costly litigation.
• Company Model Safe Harbor (personal services): written & signed; covers all services for the term; specifies schedule if part-time; term ≥1 year; aggregate comp set in advance at FMV, not based on referral volume/value; no illegal activity; services not exceeding what's reasonably necessary.

Sources: Sync 3 Lecture; Payment Regulation & CRNA Practice (Santoro).

Building blocks

• Base units — per procedure via the Anesthesia Relative Value Guide; reflect anesthesia risk + surgical complexity/risk + pre/post-op care. ~5,000 surgical CPT codes are "crosswalked" to ~300 anesthesia codes.
• Time units — 15 min = 1 unit (divide total anesthesia minutes by 15, round to one decimal). Continuous time = from prep/induction until care transferred / no longer in personal attendance. Discontinuous time = billable blocks before/after an interruption (e.g., pre-op regional blocks).
• Conversion Factor (CF) — dollar multiplier per unit; varies by geography & payer.

CPT code facts

• Created/copyrighted by the AMA; 5 characters each. Three categories: I = procedure codes · II = tracking codes · III = emerging/experimental.
• Six Category I sections: E&M, Anesthesia, Surgery, Radiology, Pathology/Lab, Medicine.
• Physician RBRVS payment = [(RVU_work×GPCI) + (RVU_{practice expense}×GPCI) + (RVU_malpractice×GPCI)] × CF. Developed at Harvard (Hsiao, 1985; JAMA 1988).

Sources of payment & pre-anesthetic eval

• Governmental: Medicare, Medicaid, ChampVA, Tricare. Commercial: BCBS, Aetna, UHC, Anthem, Cigna. ~68% of insured Americans have private insurance, which pays roughly 3–5× governmental rates.
• Pre-anesthetic evaluation may be performed up to 30 days prior to surgery but must be updated within 48 hours. It is separate/distinct from a reportable comprehensive H&P or complex E&M service.

RBRVS & the RUC

• Medicare moved to the Resource-Based Relative Value Scale (RBRVS) in 1992.
• The AMA/Specialty Society RVS Update Committee (RUC) recommends resource values → CMS makes ALL final decisions on RVUs/payment.
• As of 1/1/2025, CRNAs may bill six new Fascial Plane Block Category I CPT codes (thoracic + lower-extremity) under Medicare Part B.

Coding systems

• ICD-11 adopted 2022 (WHO stats) — ~55,000 codes vs. ~14,400 in ICD-10; greater specificity incl. laterality. ICD-10 still used for U.S. billing.
• CPT codes (AMA) describe the service performed.

Declining anesthesia reimbursement

Pressures: No Surprises Act implementation, the stipend/subsidy crisis, state supervision/opt-out variation, workforce shortages, payer reductions (reduced QZ reimbursement, discontinued PS modifiers, medical-direction/concurrency errors), and the proposed anesthesia time cap.

Qualifying Circumstances & Physical Status (ASA modifying units)

*ABU = additional base units. Reminder: Medicare doesn't pay these modifying units, but commercial payers may.

TEE billing (CRNAs generally NOT reimbursed)

• 93312 Diagnostic TEE (probe placement + image acquisition + interpretation + report) · 93313 probe placement only · 93318 monitoring only — not payable.
• Standard of care for cardiac / major vascular. Intra-op TEE by anesthesiologist billed with a "59" modifier. Reimbursement not tied to TEE certification (facility privileging may be).

Other payment challenges

• Denials: average initial denial ~11.6–11.8%; ACA marketplace ~19.1% (≈1 in 5). A typical hospital loses ~$5M/yr to unresolved denials. Anesthesia is uniquely denial-prone (base/time/modifier calc).
• No Surprises Act — part of the Consolidated Appropriations Act of 2021, effective 1/1/2022. Protects patients from balance billing for OON care at in-network facilities. Surprise bill = OON provider at an in-network facility. >11% of anesthesia care is associated with OON bills.
• IDR (Independent Dispute Resolution): a 30-day open negotiation → if unresolved, an IDR entity is chosen → each party submits an offer → IDR picks one ("baseball-style"); the losing party pays the ~$400 fee. ASA proposed 9 fixes (Nov 2022) over flawed implementation (unresolved disputes, ~40% payment cuts).
• Medicare Advantage (Part C): 30M+ enrollees; CMS pays MA plans ~123% of traditional Medicare (≈$343B, ~46% of federal Medicare spend); UHC + Humana ≈ 46% of MA.
• Anthem penalty: effective 1/1/2026, participating facilities using non-par providers face a 10% administrative penalty (or network termination) in several states.
• Modifier PT — screening colonoscopy converted to diagnostic/therapeutic (deductibles/co-pays waived for screening). GI base-unit changes: screening colonoscopy (00812) cut from 5 → 3 units (−40%).

The "Company Model" & fraud/abuse

• Company Model — e.g., gastroenterologists own the GI practice, the endoscopy center, and the anesthesia subsidiary; the center pays the subsidiary a flat fee and collects for anesthesia. Raises Anti-Kickback Statute [42 USC §1320a-7b(b)] & Stark self-referral [42 USC §1395nn] concerns.
• Enforced aggressively — e.g., Tenet paid $66M+ (2019) to settle a company-model False Claims Act suit; Stark ASC settlements hit a record $12.6M (2023).
• Company Model Safe Harbor (personal services): written & signed; term ≥1 year; aggregate comp set in advance at FMV, not based on referral volume/value; services not exceeding what's reasonably necessary. (Also in §2.)

Source: Payment Regulation & CRNA Practice (P. Santoro).

Anesthesia billing modifiers

Medical Direction vs. Medical Supervision vs. Physician Supervision

TEFRA — who it's actually for

Interruptible events (medical direction NOT broken)

A directing MDA may step away for these without breaking medical direction: address an emergency of short duration · place a labor epidural · periodically monitor an OB patient · receive patients entering the suite for the next case · check on/discharge PACU patients · coordinate scheduling. (A prolonged airway rescue in another OR is not interruptible → QZ.)

The Seven Steps of Medical Direction (TEFRA)

For medical direction of 2–4 concurrent cases (QK), the anesthesiologist must satisfy ALL seven:

1. Perform the pre-anesthetic exam & evaluation
2. Prescribe the anesthesia plan
3. Personally participate in the most demanding portions, especially induction & emergence
4. Ensure any procedures not personally performed are done by a qualified anesthetist
5. Monitor the course of anesthesia at frequent intervals
6. Remain physically present & available for immediate diagnosis/treatment of emergencies
7. Provide indicated post-anesthesia care

Ratios & the split

• 1:1 → QY · 1:2 to 1:4 → QK (medical direction) · >4:1 → AD (medical supervision).
• In medical direction, payment splits 50% MD / 50% CRNA (QK + QX).
• Lowering the ratio (e.g., 1:2 → 1:3) markedly increases supervision lapses at first-case starts → mitigate with staggered starts or extra anesthesiologists (Anesthesiology 2012).
• QZ Manual reading: QZ is used when the service is not medically directed; it does not require the total absence of any anesthesiologist supervision.

Source: Payment Regulation & CRNA Practice; Quiz 1 Review.

Under MACRA, clinicians choose one of two pay-for-performance pathways:

Choice #1 — MIPS (Merit-based Incentive Payment System)

Combines four P4P inputs into a single Composite Performance Score (weighted average) → determines a payment adjustment (bonus/penalty).

The four MIPS performance categories

1. Quality
2. Advancing Care Information (EHR use / interoperability)
3. Clinical Practice Improvement Activities
4. Resource Use (Cost)

• Excluded from MIPS: low-volume threshold, first-year Medicare enrollees, Advanced APM participants, non-eligible clinician types, hardship exceptions.
• Performance period = designated time in the calendar year when clinicians collect/track data across categories → drives payment via a timeline, with feedback; sunsets prior programs.

Choice #2 — Advanced APMs (Alternative Payment Models)

• Clinicians reaching "significant participation" become Qualifying APM Participants (QPs) — earn APM incentive payments (2019–2024) and are exempt from MIPS.
• Partial QPs get a lighter path/option.

Measure Development Plan (MDP) & quality framework

CMS quality domains (map MIPS/APM measures to national priorities): Clinical · Safety · Care coordination · Person & caregiver-centered experience/outcomes · Population/community health · Efficiency & cost reduction.

Source: New Payment Models — MIPS and APMs.

Assets — what the org OWNS/CONTROLS

• Economic resources expected to produce future benefit. Balance matters: over-investment → underused resources + higher cost; under-investment → limits care, quality, revenue.
• Common: cash, accounts receivable, notes receivable, inventory, equipment, land/buildings.
• Current (short-term): convertible to cash within 12 months (A/R, inventory). Long-term: equipment, buildings, land (generate revenue for years).

Liabilities — outsider claims (debts owed outside)

• Common: accounts payable, payroll taxes due, notes payable, mortgage payable, bonds payable.
• Split short/long-term (payable within 12 mo?). Current liabilities generally don't require interest.

Net Worth — insider claims (equity)

• Terminology by org type: Owner's equity (sole proprietor/partnership) · Capital stock / retained earnings (for-profit corp) · Fund balance (non-profit/governmental).
• Owners hold a residual claim to assets remaining after debt is paid.

Revenue

• Actual/expected cash inflow from the org's business. Operating income = from main business; Non-operating income = tangential (parking, cafeteria, gift shop, investments, donations — usually negligible).
• Contractual allowance = deduction from billed charges where payer negotiated a lower rate; the difference is written off and cannot be billed to the patient. Different payers → different contractual rates.
• Bad debt = expected payment not received; booked as an expense (allowance/provision for bad debts).
• Charity care = no payment expected; tied to EMTALA mandate.

Payment for service methods

Payer mix & averages

• Simple average vs. weighted average — weighted reflects the real payer mix (what you'll actually collect after contractual allowances).
• Governmental sources = Medicare (Title XVIII) & Medicaid (Title XIX). Medicare Parts: A hospital · B supplemental/professional · C Medicare Advantage · D prescription drugs.
• Medicaid: state programs meet national minimums but may expand; federal support is inversely related to state wealth (poorer states get higher subsidies).

Expenses, costs & charges

• Expenses = expired costs used up in business (every used-up cost deducted from revenue).
• Cost = cash expended / liability incurred for goods/services received.
• Charges = revenues/inflows that increase net worth. Costs = expenses/outflows that decrease net worth. (To the patient, the org's billed charge is a cost.)

Cash vs. accrual accounting

Financial vs. Managerial accounting

Sources: Module 2 (Assets/Liabilities/Revenues/Expenses); Business of Anesthesia.

Goal of all four: determine the financial health of the organization.

Income statement components

Revenue → COGS → Gross profit (Revenue − COGS) → Operating expenses → Operating income (Gross profit − OpEx) → interest & taxes → Net income. Analyze via trend analysis, margin analysis (e.g., gross margin = gross profit/revenue), and a cash-flow check.

Balance sheet detail

• Two asset types: current (cash within 1 yr, listed first) & long-term/non-current (PP&E, investments).
• Two liability types: current (due within 1 yr) & long-term.
• Net worth = shareholders' equity = invested capital + retained earnings. Used to judge leverage, creditworthiness, liquidity.

Cash flow statement — 3 sections

1. Operating activities — cash from day-to-day operations; starts with net income, adds back non-cash (depreciation).
2. Investing activities — buying/selling long-term assets (property, equipment, investments).
3. Financing activities — cash between the company & owners/creditors (loans, stock issuance, dividends).

Source: Business of Anesthesia (Reporting performance).

Direct vs. Indirect costs

Responsibility & product/period costs

• Profit center — manager accountable for revenue/volume and expenses. Cost center — manager accountable for expenses only.
• Product cost — tied to an item in inventory, matched to revenue when sold (pharmacy/supplies). Period cost — not tied to production; matched to revenue by time period (supports the org's existence).

Cost behavior — fixed, variable, semivariable

• Fixed: total doesn't change with volume (admin salaries, rent, depreciation, interest).
• Variable: total changes in direct proportion to volume (supplies, food).
• Semivariable: changes with volume but not proportionally — often a step pattern.
• Total cost = total fixed + total variable.

Average & marginal cost

Efficient vs. profit-maximizing output

• Efficient output = where average total cost is minimized.
• Profit-maximizing output = where price ≥ marginal cost. Push volume past the point where price no longer covers MC and profit falls.

Four methods to estimate fixed vs. variable cost

1. Predominant characteristic — judge whether a cost is mostly fixed or variable, treat the whole cost that way.
2. Step method — examine the steps in a step-pattern cost, decide fixed-ish or variable-ish.
3. High-low method — (cost at highest output − cost at lowest) ÷ (Δ output) = variable cost per unit.
4. Scatter graph — plot all points (cost vs. volume), fit a regression trendline; intercept ≈ fixed cost, slope ≈ variable cost/unit.

Source: Module 4 (Ch 7 & 8).

The FTE

• Productive time = net hours actually on duty performing the job.
• Non-productive time = paid-for time not on duty (vacation, holidays, personal leave, sick).

Two costing approaches

Annualizing worked example (Exhibit 9.1)

Turnover

Source: Module 4 (Ch 9), incl. figures recovered by OCR.

Supplies ≈ 10% and equipment/facilities ≈ 4% of total hospital expenses.

Inventory & COGS

• Inventory = items held for sale in normal business; a current asset (expected to sell within 12 mo).
• When sold, it moves out of inventory (balance sheet) and becomes cost of goods sold (income statement).

Inventory valuation methods

Inventory loss ratio

Captures supplies purchased but neither sold nor recorded (spoilage, misplacement, theft) by comparing ending vs. actual inventory; compare to benchmarks to trigger action.

Depreciation & net book value

• Depreciation spreads a fixed asset's cost over its useful life. Salvage (residual/scrap) value is not depreciated (expected to be recovered).
• Reserve for Depreciation = accumulated depreciation on the balance sheet; each year's depreciation expense (income statement) is added to it — the two should balance.

Utilization of fixed assets

• The critical issue is utilization, not depreciation — how many patients benefit.
• Occupancy = total patient days ÷ available days.
• Turnover ratio = total revenue generated by asset(s) ÷ book value of asset(s) — revenue per dollar invested.

Source: Module 4 (Ch 10).

Budget types

• Operating budget — defines goals + expected total revenue, expenses, net income (short-term). Should provide no more/no fewer resources than needed for projected volume/quality.
• Master budget — finance assembles all departments' operating budgets to check overall resource sufficiency.
• Capital expenditure budget — evaluates high-cost, multi-year assets; handled separately (not routine, high organizational impact).

Incremental vs. Flexible

Construction stages & forecasting

1. Planning (review strategy/objectives)
2. Gathering information
3. Preparing input (assumptions + calculations)
4. Constructing/submitting preliminary budget
5. Revisions after management review → submit final

• Revenue forecast (prime input) assumptions: utilization, patient mix, contractual allowances, trend analysis.
• Labor/expense assumptions: hours by job code, wages, fringe benefits.
• Budgets often built bottom-up (department managers → finance/CFO compiles + adds overhead → executives approve).

Source: Business of Anesthesia (Budgets); speaker notes.

Cash & cash equivalents

• Cash = currency, checking/savings, coins, checks, money orders.
• Cash equivalents ("liquid assets") = CDs, government securities, money market funds — liquidatable on short notice; park operating cash short-term to earn interest.
• Good short-term investments are very liquid and very low risk.

FDIC

FDIC = independent U.S. agency insuring bank/thrift deposits; preserves public confidence, limits failure fallout.

Bonds vs. Stocks

• Preferred stock: no voting rights (raise capital without diluting control); fixed dividends with priority claim on earnings/assets (paid before common); usually callable; can defer in hardship without triggering bankruptcy.
• Common stock: partial ownership; shares in success/failure; main capital source for public companies.
• Privately/closely held (not on exchange) vs. public (NASDAQ/NYSE).

Capital structure & sources of capital

• Capital structure = proportion of debt to equity; the CFO guides debt-level decisions.
• Three sources of capital: Borrowing (lenders/investors) · Retaining (excess revenue over expense; non-profits limited) · Selling (additional ownership; non-profits must fundraise).
• Financing costs: principal (reduces loan) + interest (cost of using others' money); an amortization schedule details principal/interest split & remaining balance.

Buy vs. lease

Capitalize the lease if ANY criterion is met: (1) bargain purchase option at end; (2) ownership transfers before lease expires; (3) lease ≥ 75% of asset's useful life; (4) present value of payments ≥ 90% of asset value.

• Managed Service Agreement (MSA): alternative that keeps equipment as an expense, avoids a balance-sheet liability, and adds flexibility (maintenance/upgrades handled by vendor). Turns capital expenditures into predictable operating expenses.
• Buy/lease analysis differs from capital budgeting: here the expenditure will be made; capital budgeting decides whether to invest.

Source: Sync 3 Lecture (Capital Investments).

Components of a strategic plan

Planning is a never-ending cycle: plan → intervene → evaluate → revise. Broad goals → narrower objectives → action plans → performance measures. Internal & external stakeholders give input.

Stakeholder analysis (Quiz-1 high yield)

Strategic tools & projections

• SWOT analysis — Strengths, Weaknesses, Opportunities, Threats (also the basis of the RFP assignment).
• Financial projections — usually a 5-year plan (capital may extend 10–20 yr); document reasonable/justifiable assumptions; build alternative scenarios for informed decisions.

Business plan elements

• Executive summary (concise, ~1 page; often written last) · description of org/personnel/product/resources · marketing plan · financial projections.
• Four P's of marketing: Product · Price · Physical description (place/availability) · Promotion (plus competition analysis).
• Projected statements: income statement (net income impact), balance sheet (where org will be), cash flow (cash over the plan's life).

CMS Quality Strategy & IMPACT Act

• Keys: EHRs, standardized data, interoperability (transmit data across systems) → outcomes.
• IMPACT Act — 4 post-acute settings: SNFs, home health, inpatient rehab, long-term care. Standardized assessment domains: functional status, cognition/mental status, special services/treatments, medical conditions/comorbidities, impairments. Purpose: compare data/quality, improve outcomes, coordinate care, improve discharge planning, research.
• Six CMS quality goals: care coordination · clinical quality of care · efficiency/cost reduction (affordable) · person & family engagement · safety · population/community health.

Source: Module 3 (Healthcare Landscape & Strategic Planning).

Assessing performance

• Understand existing performance → compare to an appropriate standard → make estimates (used for timeliness, cost-benefit, lack of data, interim statements).
• SQTCM — five performance areas: Safety, Quality, Timeliness, Cost, Morale.

Benchmarking

• Continuous process of measuring products/services/activities vs. industry averages or best-in-class (may be outside your industry — e.g., housekeeping benchmarked to hotels).
• Three types: (1) prime competitors; (2) noncompetitors with world-class reputation; (3) internal processes worthy of emulation.

Measurement tools

• Pareto analysis (80/20 rule) — ~80% of problems come from ~20% of causes (e.g., 80% of med errors involve 20% of drugs). Steps: collect event data → sum & % by type → sort high→low → column chart.
• Quartiles — divide groups above/below the median (the median = point where 50% are above/below) into quarters; show how much better/worse vs. average.
• Deciles — break a range into 10% categories (identify top/bottom 10%).

Lean Six Sigma

The Eight Wastes

Defects · Time waste/idleness · Overproduction · Excess inventory · Excessive motion · Excessive transportation · Unnecessary processing · Underutilized talent.

Five Principles

1. Value — does the product have features/performance the customer wants?
2. Value stream — every step to design/produce/deliver; classify as value-adding, no-value, or value-reducing.
3. Flow — continuous progress toward the goal without wasted time/motion.
4. Pull — nothing produced until needed by the customer.
5. Perfection — do it right the first time / without repeated errors.

DMAIC

• Define — pick project, make the case, assemble team, set measures.
• Measure — document what customers want & how the system performs; estimate cost of poor quality.
• Analyze — identify factors blocking performance; test impact.
• Improve — identify improvements, weigh benefit vs. cost, build new value stream, implement.
• Control — sustain gains.

Kaizen, 5S & A3

• Kaizen = continuous improvement. Point kaizen = quick single-person fix (e.g., 30-30-30: 30 min observe → find 30 problems → 30 min to solve one). Kaizen event = team, DMAIC, value-stream mapping, defined goals.
• 5S: Sort · Set-in-place · Shine · Standardize · Sustain.
• A3 report — one-page structured improvement report. Six sections: Background · Current condition (value-stream map) · Root-cause analysis · Target condition · Implementation plan · Follow-up (plan vs. actual). Root-cause brainstorming uses the 5 Ms: Manpower, Materials, Machinery, Methods, Mother nature.
• Performance Improvement Cycle (6 steps): Voice of the Customer → Value stream mapping → Metrics & benchmarks → Cause-and-effect analysis → Revised VSM & hard targets → Tenacious leadership → (repeat).

Sources: CH 16 (Benchmarking/Estimates); Using Lean Six Sigma (A3 figures recovered by OCR).

Business structures

Employment status

• Independent contractor / 1099: no taxes withheld → pay quarterly estimated taxes; no company benefits; controls own schedule/contract; issued 1099-NEC (not W-2).
• Locums vs 1099: 1099 = tax/employment status; locum = temporary nature of the assignment. Often 1099 but not always.

Liability & malpractice

Malpractice policy types

• Claims-made — covers incidents that both occur AND are reported during the policy period.
• Occurrence — covers incidents that occur during the policy period regardless of when the claim is made.
• Tail coverage — add-on purchased to cover claims after a (claims-made) policy ends.

Other coverage

• Umbrella insurance — extra liability beyond primary limits; experts recommend ≥ $1 million (~$150–300+/yr). Does NOT cover your own property, business/professional liability, or medical malpractice.
• Commercial insurance — BOP, general liability, commercial property, workers' comp, professional liability, commercial vehicle.

Entrepreneurial process (5 stages)

Discovery & opportunity → Business planning → Resourcing → Execution & launch → Growth & management. Motivators: values/fulfillment, autonomy/control, goals/purpose, vision. Sell yourself via personal brand (credibility, competence, trustworthiness, character) and a practiced elevator pitch (identify self & goal → what you do → unique selling proposition → engage with a question → close with an "ask").

Source: Business of Anesthesia; speaker notes.

What & why

• An RFP solicits bids from vendors/groups for a service — issued by facilities/health systems to enter a Professional Services Agreement. Larger facilities use a stakeholder committee (surgeons, admin, CMO, consultants); may require NDAs.

Why anesthesia RFPs are issued

Signs an RFP is coming: contract term/renewal near · unscheduled CEO/COO/CMO meetings · poor financial performance · increasing subsidy requests · requests for detailed financials · increasing out-of-network billing · patient complaints/quality issues · difficult surgeon relationships.

RFP components

• Project overview/background — executive summary, company background (asks, mission/vision/values), demographics/trends, upcoming changes.
• Scope of work — services (sites, hours, call, block schedule, payer mix, case types, staffing model & why, growth), term, financial arrangement (who bills?), subsidies, volume/utilization guarantees. Everything is negotiable.
• Legal & financial — terms/conditions, estimated cost, billing.
• Timelines — project timeline (contract start, staffing/credentialing/onboarding, transition plan) & proposal timeline (submission deadline, evaluation, notification).
• Evaluation criteria — experience, proposed solutions, cost, overall fit; who evaluates (official & unofficial influencers).

Subsidies & financial arrangements

Opt-out: physician supervision is a Part A condition for hospital payment; states may opt out (full, partial, or none) — this is separate from Part B medical direction/supervision.

Types of financial arrangements

• Straight fee-for-service — no guarantees/subsidies ("eat what you kill"); hard to sustain now.
• Volume minimums — facility commits to a minimum # of cases/hours.
• Flat subsidy — fixed monetary support.
• Revenue guarantee — facility guarantees a collection level.
• Escalation clauses — increasing support over time (key in wage inflation); arbitrary or indexed.

Revenue vs. expense inputs (financial modeling)

Contracting & strategy

• Non-competes — consider existing staff & whether contracting limits other clients (FTC/state challenges).
• Push for face-to-face meetings (much isn't put in writing); study the people/power dynamics.
• On acceptance → Letter of Intent (LOI) outlines business terms → legal teams draft the contract.
• Six competency domains: Clinical, Business, Human Resources, Financial, Legal, Information Technology.
• The RFP is the facility's first look at your company — professional, error-free, well-formatted. Audience for the class assignment: facility board of directors; apply your SWOT analysis.

Source: Business of Anesthesia (RFP section).

Must-know formulas

Number bank

Contrast pairs (know the difference)

• Financial (external, GAAP) vs. Managerial (internal, customized) accounting
• Cash vs. Accrual accounting
• Direct (traceable) vs. Indirect (allocated) costs
• Fixed vs. Variable vs. Semivariable costs
• FIFO vs. LIFO (rising costs → FIFO higher ending inventory)
• Incremental vs. Flexible budget
• Claims-made vs. Occurrence malpractice
• Stark (strict liability, physicians) vs. AKS (intent, anyone)
• Bonds (creditor/debt) vs. Stock (owner/equity)
• Lease-purchase/capital (capitalize) vs. Operating lease (expense)
• Profit center (revenue + expense) vs. Cost center (expense only)
• QK (MD, 2–4) vs. QX (CRNA directed) vs. QZ (CRNA independent)

Click each question to reveal the answer & rationale. These mirror the scenario style of the Quiz-1 review.