The grid above offers an outline of the options you have as a business owner. The S-corp is a very popular choice among independent CRNA providers - whether moonlighting or working full-time for yourself, it provides a well rounded mechanism for practice protection and individual success. 

For more information on the advantages and disadvantages of an S-corp click here

Benefits in a private practice should reflect the same benefits you would realize when working for a larger anesthesia group - in fact, factoring in tax deductabl expenses should improve your  financial dispostion even futher.

Below is a list of the benefits and expenses to consider prior to making the leap toward self-employment. Please note that this list is not exhaustive, it's merely a starting point that one should appreciate:

Benefits:

1. Retirement
2. Time off or Vacation
3. Healthcare costs
4. Dental
5. Vision
6. Health Savings Account

Expenses:

1. Employer taxes
2. Medical Malpractice Insurance
3. Capital Equipment
4. Medications (If not supplied by facility)

These variables are extremely important when negotiating a fee for your services. Failure to consider appropiate costs and benefits can will mostly likely severely jeopodize your chances to realize the compensation necessary in order to be successful.

Whether embarking on a career as a freelancer, independent contractor or small-business owner, you'll need to pay taxes - understanding the tax implications of being self-employed will aid in your preparation for success. Unlike being an employee of a company or corporation, where your employer pays half of your tax obligation, self employment requires you to pay both the employee and the employer portions of your tax burden - this portion is refered to as the "self employment tax."

The self-employment tax rate (employee and employer tax burden combined) is 15.3%. That rate is the sum of a 12.4% for Social Security and 2.9% for Medicare - where the tax burden is divided half.

• Employee - SS tax = 6.2% & Medicare tax = 1.45%
• Employer - SS tax = 6.2% & Medicare tax = 1.45%

What part of my income is subject to self-employment tax?

Self-employment tax applies to net earnings — what many call profit and is over and above any earnings paid out on a W2 schedule. 

Estimated tax payment - are tax payments made throughout the year on a monthly or quarterly basis and are designated to meet your tax obligation for the profit your company realizes. Profit or net income are monies earned over and above already salaried income that has been subject to payroll tax.

Profit is a combination of your salary you and any profit or shareholder distributions paid to you via your corporate revenue.

For example, say you are self employed and registered as an S-corp. Your income is a combination of your designated "reasonable salary" plus any "shareholder distributions" that have been paid out, from your corporation revenue, to yourself during the fiscal year - salary + shareholder distrubution = gross income.

Your salary (AKA Payroll Tax) will be taxed accordingly:

• FICA = Social Security and Medicare tax
• Self-emplyment tax (FICA) = 12.3% (the combined total of employee and employer tax obligation)
• State tax = Percentage varies by state

Your "shareholder distrubution" will be taxed:

• State Tax
• Employee side of payroll tax - 6.2% + 1.45%

As you can see in this example, monies paid out via "share distributions" are not required to pay the 12.3% tax rate that is required to be paid on your salary. 

Key considerations regarding a "reasonable salary":

• The tax code does not define what or how "reasonable" should be applied when deciding what to pay yourself.
• The minimum salary necessary to  pay 100% into your Social Security obligation is $142,800 for 2021.
• A salary of more than $142,800 will not incur additional Social Security taxes
• A salary of less than $142,800 will save 12.3% of taxes on any income over your declared "reasonable salary". 

Useful Links:

Understanding Self-Employment Tax

Social Security & Medicare Rates and Implications

Understanding FICA

SEP or Solo 401k?

The take home points...

• SEP IRAs and solo 401(k)s both allow small business owners to establish retirement accounts for their employees and you.
• SEP IRAs are funded by employer contributions alone.
• Solo 401(k)s allow BOTH employer and employee contributions.
• Depending on the amount of revenue your company generates or the employment arrangement you may have as a W2, in general, the Solo 401k is the better choice.

Click here for a great article explaining the differences between the two in more detail

Absolutely! What are my options? Are there differences? I'm only moonlighting, is there a policy that accomodates this practice arrangement?

The AANA offers malpractice insurance that is very good.  They offer full-time and moonlighting contracts as well as coverage for employees or CRNA provider substitute coverage shoud you need coverage for a specific situation. Click here to read more about malpractice insurance offered by the AANA.

Understanding Policy differences

Occurance verus Claims-made policy

An occurrence policy provides coverage for alleged incidents (injuries) that happened during the policy year regardless of when the claim is reported to the carrier. The occurrence policy provides a separate coverage limit for each year the policy is in force. It does not matter if the policy is active when the claim is reported. It only matters that the policy was active when the alleged incident occurred.

A claims-made policy covers the insured for an incident that occurred during the policy period and was reported as a claim while the policy remained in force. When you start a claims-made policy, the original inception date, known as the retroactive date, becomes a permanent part of the claims-made policy. The retroactive date remains the same each year the policy is renewed. The renewed claims made policy covers claims that come in during the policy year for incidents that occurred on or after the retroactive date. This is how past years are covered under the current policy. As long as you renew a claims-made policy, you will be continually protected for incidents that happen between the retroactive date and the policy expiration date. An incident that occurred prior to the retroactive date would not be covered. Therefore, it is important for the insured to renew the claims-made policy to maintain continuous coverage.

If the insured retires or is no longer practicing but wants to retain protection for the years insured under the claims-made policy, the insured can cancel the policy and buy the "extended reporting period" (commonly known as the tail). Generally you can purchase the tail for a specified number of years. An unlimited tail, allowing claims to be reported anytime in the future, normally costs 175% of your last year's premium. The cost of the tail is a onetime fee. The tail permits the insured to report claims for incidences that occurred during the time the policy was active (from the retroactive date to the policy expiration date). An incident that occurred when the policy was active but was reported after the policy was terminated, in the absence of the tail, would not be covered. Importantly, the tail will not cover incidents that occur after the policy is terminated.

For more information about malpractice insurance please click here

There are a variety of ways that you can be reimbursed or paid for the services you provide. Your choice will depends on the type of surgeon you work with, the types of cases you will be handling, the nature of the practice, and the amount of independence you able to realize in a particular practice setting. 

Important considerations:

1. Know your value in private pay settings. A good benchmark is to compare what you would likely be paid if you were to submit an insurance claim (BASE + Time). 
2. Keep in mind that most facilities will provide the anesthesia equipment and necessary medications and adjuncts - factor that in when negotiating. 
3. Understand your surrounding market - both what MDAs and CRNAs are charging for their services and negotiate accordingly. Nothing is stopping you from asking for the same amount as an MDA if you're doing the same job.
4. Using locum rates as a guide will not only undervalue your services it will also likely inhibit your ability to has a successful and sustainable practice - negotiate a rate that accounts for benefits, expenses, and a market competitive income.

Billing models to consider:

Billing insurance - This entails becoming privledged as a provider with each insurance entity as well as CMS if you are planning on providing anesthesia care for medicare and medicaid patients. You can accomplish this either on your own or by hiring a billing company. Regardless, it will be necessary to negotiate with each insurance company a UNIT RATE that will be used to calculate your reimbursement (Base + Time = Amount paid).  

Ideally, one should contract with a billing firm             to handle collections in this arena. Fees will vary, but you should negotiate for a collection fee of less than 7% - depending of the scale of your collections you can get this down to as little as .5%. Expect a failed collection rate of around 5-10% of services claimed.

Hourly position (Paid for every hour in the building) - This is a very common approach. However, it most often garners the lowest return for services rendered. This model is commonly utilized by locum tenen companies. Locum companies charge the facility a base hourly fee to supply the facility with a provider. They then negotiate an hourly rate with the provider - what ever is left the locum company realizes. There are several issues  with this model:

1. It creates a false sense of value for services provided because the locum company wants to make a profit as well - the only way to do that is by attempting to pay the provider less.
2. It creates a false monetary equivolancy for providers negotiating on their own - if the going rate for a locum is $150/hr, then facilities will attempt to use this benchmark as a starting point for rate negotiation, despite the fact they are paying the locums company a considerable amount more for the same service. This creates a false pretense for valueing one's services at the outside. One must thoroughly educate themselves on what the prevailing market will pay.
3. Its not even relatively close to what a provider would be paid if they were to directly submit insurance claims for services provided. While it it isn't feasible to expect realization of 100% of the collected fee, it is reasonable to negotiate for a fee somewhere in the middle. Its incumbant upon provider to understand how anesthesia billing works and what the types of cases you will be performing pay out when billing directly.
4. One of the disadvantages of this approach is the perception, when one is not performing cases, that the provider then is viewed as an expense. As anesthesia providers we must be careful not to be seen as an expense but as either a revenue generator or a provider who is only being paid by production. That why the next approach discussed will address this disadvantage.

Hourly position (Paid only for actual time of case) - This approach more closely emulates the rates you would be realizing if you were to bill on your own using (BASE + Time). It also has several advantages:

1. The ability to charge more for producative time is enhanced
2. Negotiating a higher hourly fee can be compared to how anesthesia providers are paid by insurance companies, making it easier to justify a more comparable hourly rate.
3. Understanding (BASE + Time) makes calculating a fair hourly rate easier by simply using comparable case BASE values to come up with a comparable fee.
4. Provider is always productive - downtime is not reimbursed. 

Fee for service or pay per case - this is a viable option if you are familiar with the facility and the skills of the surgeons you will be working with. For example, many plastic or cosmetic surgeons charge a flat rate for a particular procedure they are performing. Charging by the hour can result in an inconsitent cost for anesthesia services depending on the procedure and many times the anesthesia provider ends up sacrificing revenue in the end. Charging a flat rate per case offers increased revenue consistency and gaurantees a fair return for services provided.  Some key things to consider:

1. Using this model negates the perception that anesthesia is being paid outside of productive time.
2. Increases revenue consistancy
3. Allows surgeon/facilty to charge patient a standardized fee
4. Works well when working with efficient surgeons butr might be a disadvantage when working with and inconsistent or inefficient surgeon.

Understanding BASE + TIME Billing:

1. How time time off do you want? 

2. What is your ability to get coverage?

3. How will equipment and supplies be provided in the private practice versus a hospital setting?

4. Greater need for patient satisfaction

5. Greater need for surgeon satisfaction

6. Expanded role or inherited responsibility as a solo practitioner

6. Support staff or necessary training of support staff

7. How much does your practice rely on referal business?