Anesthesia Alert: Demystifying Anesthesia Subsidies

How to negotiate current difficulties in finding and paying providers.

Both the ambulatory surgical center (ASC) and anesthesia services landscapes have been evolving rapidly. These parallel evolutions have led to an increased need for anesthesia subsidies. This trend has further accelerated in the post-pandemic era due to amplified demand for anesthesia providers — both CRNAs (certified registered nurse anesthetists or nurse anesthesiologists) and physician anesthesiologists. New research shows that MDs and CRNAs now stand among the 20 most-recruited medical specialties. Plus, according to anesthesia provider job platform GasWork, demand for MD anesthesiologists and CRNAs has increased by 96% and 80%, respectively, over the past two years.

The scarcity of anesthesia service providers has been further exacerbated by various macroeconomic factors, including an aging anesthesia workforce, early retirements incited by the COVID crisis, growing demand for anesthesia services due to generally favorable (though often unstable) economic conditions, and an increase in the number of procedures (such as cardiology) requiring anesthesia services. All this builds on top of the ongoing shift of more complex cases to ASC settings.

In this climate, understanding the current economic fundamentals of anesthesia services is more crucial than ever for ASC administrators. The essential problem for a growing number of ASCs is that the cost of providing anesthesia services often exceeds the fees collected. This situation — a product of complex factors tracing back to the 1980s — increasingly necessitates financial support for anesthesia providers from facilities like ASCs, especially at facilities with poor OR utilization, long service times or low volume.

Multiple factors

Anesthesia expenses are multidimensional, spanning direct and anesthesia services, overall time required, case complexity and provider availability, along with classic factors such as payor mix and volume. Let’s examine those factors more closely:

• Anesthesia billable service time. This is the time considered billable by payors. Generally, this clock runs from when the patient enters the OR or procedure room until the anesthesia provider transfers oversight of the patient to the PACU nurse.

• Payor mix. This metric can have a significant financial impact. Generally, CMS and Medicaid reimburse the least for anesthesia services. Private insurance can reimburse at two, three or even five times the amount of what CMS will for the same case.

• OR utilization. This is a measure of time that correlates with anesthesia billable service times and case volume. A common OR utilization number is 60%. The higher this number is, the greater the opportunity an ASC has to reduce payments to its anesthesia group.

• Related anesthesia service time. This metric refers to the amount of time the anesthesia provider needs to provide overall anesthesia service to the center. In most cases, this time is not billable, such as when the anesthesia provider participates in patient review or quality committees. Generally, the higher these requirements, the greater the potential financial support the anesthesia provider requires.

• Availability. This is increasingly a factor which ASCs must consider. If an ASC is seeking greater flexibility and availability of anesthesia services, the anesthesia group may ask the ASC to bear some or all of the cost that occurs if there is no corresponding case volume to offset the cost of availability. When an ASC leader negotiates with an anesthesia group, a notice period to release anesthesia services should be included that allows the anesthesia group to adjust and capture productivity elsewhere.

• Case complexity. The cost of anesthesia services may vary depending on the types of surgeries the ASC needs covered, or the types of professionals it needs to cover them. If the complexity of the surgery is low — as in a podiatry case — the cost to procure anesthesia services may also be lower to some degree. If the skill required is comparatively higher — like total joints cases or those requiring regional anesthesia — the cost may rise. Availability complicates this dynamic. For example, if there is only a highly skilled cardiac anesthesia provider available, the cost will likely increase regardless of the complexity of the surgery.

Negotiate wisely and fairly

With all the variability we just outlined, your anesthesia provider or group may request a financial assistance agreement.

This arrangement can take roughly three basic forms: volume minimums, flat subsidies and collections guarantees. Customizing these agreements to suit specific requirements is the key to establishing a mutually beneficial relationship with your anesthesia provider. The advantages and disadvantages of these three types of anesthesia financial assistance agreements include:

Demand for MD anesthesiologists and CRNAs has increased by 96% and 80%, respectively, over the past two years.

• Volume minimums. The parties agree that a minimum number of cases will be present within a given time — usually daily, monthly or even quarterly. If the agreed-upon volume is present, no fee is assessed by the anesthesia provider. If not, a fee is assessed. The advantage of this setup is that both parties are generally aligned in terms of “more work equals more revenue.” However, there are disadvantages in terms of controlling for both the variability of revenue from different types of cases and payors, and especially for the increased time and cost associated with more volume. Agreeing on metrics around efficiency — for example, anesthesia units per hour — can be helpful to both parties.

• Flat subsidy. The parties agree to a flat fee each month or quarter, with few variations. This works well at ASCs where volume, payor mix and service time are all consistent. However, when those factors change, the flat subsidy may result in either an underpayment or overpayment, and it becomes a guaranteed — rather than potentially diminishing — line item for business owners.

• Collections guarantee. Both parties agree on an overall cost of doing business for a given time period. Collections are then measured and reported. If collections fall below a certain threshold, the ASC pays a fee to the anesthesia group to eliminate the shortfall. The advantage for the ASC here is that if its volume and efficiency rise, its costs will go down. However, if the ASC’s volume and efficiency go down, it can result in a large subsidy payment to the anesthesia group, which can negatively impact the ASC’s cashflow. OSM