HEALTH CARE AND HUMAN SERVICES POLICY, RESEARCH, AND CONSULTING - WITH REAL-WORLD PERSPECTIVE.
Cost-Effectiveness
Cost
Effectiveness Analysis of Anesthesia
Providers
June, 2010
Outline

Purpose

Cost-Effectiveness
ff
Analysis
l
off Anesthesia
h
Providers
d
and
d Delivery
l
Models



Education Cost



Literature
Cost Simulation of Providers/Delivery Models
Literature
Cost Model and Results
Summary
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Purpose
 Assess the cost effectiveness of CRNAs and Anesthesiologists
g
to
include:
 Cost-effective delivery model
 Quality
Q lit off care
 Economic cost of education
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Cost Effectiveness
Literature
 Simulation Analysis

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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 likelyy to require
q
subsidization byy the hospital
p
.
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Cost Effectiveness: Simulation Analysis
 Model simulates the billing (payer) revenue and economic cost of
providing
idi anesthesia
th i under
d seven diff
differentt d
delivery
li
models
d l
 Anesthesiologist only
 CRNA acting
g independently
p
y
 Direction model
 1:1 through 1:4

Supervisory model
 1:4+
 Qual
Quality
ty does not
ot va
varyy w
with
t del
delivery
ve y model
odel
 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
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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
anesthesiologist-total
total and average per procedure
 Economic cost per procedure
 Annualized results for 12 station case
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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
units) conversion factor
factor*.5
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
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Example of Scenarios or Cases Analyzed
 Case 1:
 Case 2:
Inpatient Setting with Optimal Demand

12 stations annual results

Per procedure results
Inpatient Setting with Below Optimum Demand

 Case 3:
Outpatient Surgery with Optimum Demand

 Case 4:
12 station annual results
12 station annual results
Ambulatory Surgery Center with Optimum Demand

12 station annual results
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Model Parameters
 Key
yp
parameters mayy be changed,
g
but are held constant in
simulations across settings
Medicare
Medicaid
Private
Self pay
Self-pay
Payer Proportions
.45
.1
.4
.05
Conversion Factors
$21.00
$15.00
$50.50
0
N
Nurse
A
Anesthetist
th ti t
$170 000/
$170,000/yr.
Costs
A th i l i t
Anesthesiologist
$336 000/
$336,000/yr.
 Settings are defined by base/time unit means
Setting
Base units
Time units
Inpatient
p
6.2
7.1
Outpatient Surgery
4.0
4.0
Ambulatory Surgery Center
5.0
2.1
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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
(4 Per Station Per Day)
5,401,171
3,048,000
2,353,171
Medical direction 1:3
(4 Per Station Per Day)
5,593,158
3,384,000
2,209,158
Medical direction 1:2
(4 Per Station Per Day)
5 673 606
5,673,606
4 056 000
4,056,000
1 617 606
1,617,606
Medical direction 1:1
(4 Per Station Per Day)
5,697,316
6,072,000
-374,684
Anesthesiologist only
(4 Per Station Per Day)
5,317,945
4,032,000
1,285,945
CRNA only
(4 Per Station Per Day)
Da )
5,317,945
,
,
2,040,000
,
,
3,277,945
,
,
Supervisory 1:6
(4 Per Station Per Day)
4,226,094
2,712,000
1,514,094
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Case 1: Inpatient Setting with Optimum Demand
( Per Procedure Results)
Revenue Per
Procedure
Cost Per Procedure
Revenue Minus Costs
Per Procedure
Medical direction 1:4
(4 Per Station Per Day)
474
267
206
Medical direction 1:3
(4 Per Station Per Day)
474
287
187
Medical direction 1:2
(4 Per
P Station
St ti Per
P Day)
D )
474
339
135
Medical direction 1:1
(4 Per Station Per Day)
474
506
-31
Anesthesiologist only
(4 Per Station Per Day)
443
336
107
CRNA only
(4 Per Station Per Day)
443
170
273
Supervisory 1:6
(4 Per Station Per Day)
352
226
126
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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)
y)
2,939,415
3,048,000
-108,585
Medical direction 1:3
(2 Per Station Per Day)
2,945,765
3,384,000
-438,235
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
P Station
St ti Per
P Day)
D )
2,742,690
2,040,000
702,690
Supervisory 1:6
(2 Per Station Per Day)
2,165,133
2,712,000
-546,867
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Case 3: Outpatient Surgery with Optimum
Demand (12 Station Annual Results)
Yearly Total Revenue
(12 Stations)
Yearly Total Costs
(12 Stations)
Yearly
y Total Revenue
Minus Total Cost
(12 Stations)
Medical direction 1:4
(4 Per Station Per Day)
4,458,762
3,048,000
1,410,762
Medical direction 1:3
(4 Per Station Per Day)
4,465,417
3,384,000
1,081,417
Medical direction 1:2
(4 Per Station Per Day)
4,455,544
4,056,000
399,544
Medical direction 1:1
(4 Per Station Per Day)
4,460,628
6,072,000
-1,611,372
Anesthesiologist only
(4 Per Station Per Day)
4,159,381
4,032,000
127,381
CRNA only
(4 Per
P Station
St ti Per
P Day)
D )
4,159,381
,
,
2,040,000
,
,
2,119,381
,
,
Supervisory 1:6
(4 Per Station Per Day)
3,658,851
2,712,000
946,851
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Case 4: Ambulatory Surgery Center with
Optimum
p
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 Per Station Per Day)
y)
4,458,762
3,048,000
1,410,762
Medical direction 1:3
(4 Per Station Per Day)
4,465,417
3,384,000
1,081,417
Medical direction 1:2
(4 Per Station Per Day)
4,455,544
4,056,000
399,544
Medical direction 1:1
(4 Per Station Per Day)
4,460,628
6,072,000
-1,611,372
Anesthesiologist Only
(4 Per Station Per Day)
4,159,381
4,032,000
127,381
CRNA Only
(4 Per
P Station
St ti Per
P Day)
D )
4,159,381
2,040,000
2,119,381
Supervisory 1:6
(4 Per Station Per Day)
3,658,851
2,712,000
946,851
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Conclusions
 CRNAs acting
g independently
p
y 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
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Education Costs
 Literature
 Simulation Analysis
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Education Costs
 Education costs for CRNAs and Anesthesiologists
g
 CRNA education program costs
 PGY 2 through
g 4 for Anesthesiologists
g
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Education Cost Literature
(all estimates converted to 2008 dollars)
CRNA Education
Anesthesiology
PGY 2-4
$52,076
((Direct Cost))
Gunn (1996)
$287,382
(social cost)
Fagerlund
(1998)
$321,000 (Direct Cost)
Dodoo and Phillips (2008)
$301,178 Direct Cost
Franzini and Berry (1997)
$-114.031 (Direct plus
productivity)
Franzini and Berry (1997)
$245,969 (with opportunity
cost added)
Franzini and Berry (1997)—modified
by Hogan to include opportunity cost
$229,267 (Direct, before GME
offset)
Pisetsky, Lubarsky, et al (1998)
$-213,000 (with productivity
offset and GME subsidy)
Pisetsky, Lubarsky, et al (1998)
$146,940
Pisetsky, et al (1998)—with
productivity offset with opportunity
cost (Hogan)
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Education Costs
 Three types
yp of cost included:
 Direct education costs
 Opportunity
pp
y cost of student/resident’s time
 Value of student/resident services while training
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Education Costs
CRNA
BA/BS/BSN
Direct Costs of Education
and
d Training
T i i gb
before
f
entry into an anesthesia
program
$53,696
(NCES)
Medical School
One year as acute
care nurse
$53,696
(NCES)
$436,080
(Gunn)
Required, but with
no direct cost
First year residency
First-year
(PGY-1)
Total Pre-anesthesia
Anesthesiologist
$134,042
(Gunn)
$53,696
$623,818
$68,465
$494,420
$291,353
$897,793
($251,704)
($775,073)
Total Anesthesia GE
(less transfer payments)
$108,113
$459,977
Total Estimated Costs
$161 809
$161,809
$1 083 795
$1,083,795
Direct costs
Anesthesia Graduate
Education (GE)
Student/Resident
Opportunity Cost
Productivity of
students/residents
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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
p
y model is next lowest cost,, but billing
g rules impede
p
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
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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
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