Anesthesia Alert: Volatility in Anesthesia Services

Surgery centers are highly dependent on anesthesia services to run productive and dynamic surgical businesses, but maintaining working relationships with quality provider groups has never been more challenging. Backlogged cases, an aging patient population and, in some markets, a booming economy have significantly increased demand for anesthesia services in nearly every part of the country.

Accordingly, compensation rates are trending upward for anesthesiologists and CRNAs, while reimbursement continues to trend downward across all payers. This is on top of recent decreases in the anesthesia base unit measurements for common ASC procedures, resulting in significant reductions in collections for anesthesia groups.

These factors are causing extreme volatility in anesthesia service contracts, with some anesthesia groups ending their contracts due to low revenues, and other facilities ending their contracts with anesthesia groups due to lack of consistent coverage — at times due to outdated or restrictive anesthesia models.

Here are major trends to be aware of that can have a significant impact on your facility’s ability to provide cost-effective, efficient and high-quality care.

• Aligned incentives. Anesthesia groups are under pressure to optimize revenues so ASCs remain attractive for coverage. Many ASCs run short days with perhaps two or three anesthesia lineups ending early in the day. This model may have to change to ensure there is enough revenue to compensate providers and cover overhead costs associated with anesthesia services. Conversely, running ORs late into the evening represents a higher cost for ASCs and anesthesia groups. Maintaining an efficient, on-time operating room schedule helps ameliorate these cost pressures.

ASCs and anesthesia groups should look to align their incentives. A good negotiation means solving the problem of anesthesia coverage for the ASC and anesthesia revenue for the anesthesiology group. ASCs can reduce these pressures and increase their leverage by bundling cases efficiently and being aware of the payer mix, which can have a negative impact on anesthesia revenues (Medicare and Medicaid are the lowest reimbursing cases for anesthesia groups, by a large margin).

• Updated anesthesia models. CRNA-only and mixed CRNA-MD models have increased significantly in recent years, and COVID-19 has proven to be an accelerant. Some markets have seen rapid movement toward CRNA-only models as demand for anesthesia services has far outstripped supply, a factor that has been successful in breaking down organizational inertia. In short, we’re seeing more models where every anesthesia provider is directly involved in patient care, and not providing supervision for other professionals.

• Subsidy arrangements. These incentives, which guarantee anesthesia groups a certain level of revenue, are becoming more common. In the setting of increased demand and decreasing reimbursement, subsidies are showing up in ASCs that previously never would have needed or considered them. This is especially true in centers with low case volumes or mostly government payer mixes.

Consider the two general approaches to subsidy arrangements when deciding which is best for your facility’s situations: flat fee vs. variable. With flat-fee models, the anesthesia group is incentivized by keeping costs low and working cases. Variable fees can be structured in many ways, but generally involve a revenue threshold; the risk is on the ASC to schedule and perform enough cases to meet that threshold.

• Termination agreements. Due to the current level of volatility in anesthesia services, your ASC should have a 90- or 120-day notice-prior-to-termination clause in the contract with the anesthesia group. If your anesthesia group can leave without giving a 90- day notice, you’re at risk at being left without anesthesia providers with little to no time to react.

• Value-added services. Anesthesia care in ASCs requires specific expertise. Patient selection guidelines are critical, and managing case costs and finances requires particular attention. Working with an experienced anesthesia group who can draw from national standards and bring that experience to your center is ideal.

Finding appropriate vacation coverage can be a challenge, so working with a group with access to a per-diem pool of providers who are familiar with your facility and can step in when needed works well.

Running staff in-services, filling anesthesia director or medical director roles, and participating in quality improvement projects are things engaged groups do with their facility-clients without much prompting, especially for business relationships that are communicative, healthy and long-lasting.

All anesthesia groups are not the same. Putting out a request for proposal (RFP) lets various groups submit a formal bid to deliver services for your center. Their initial asks for information will likely include your facility’s case volume, payer mix and typical surgical schedule. 

Contact local professional associations to learn about anesthesia professionals who provide services in the market, and invite various groups to submit proposals. If several groups are interested in your RFP, choose among the best to have a formal discussion with your facility’s board of directors. This will allow administration and owners to interact with representatives of the group to see if the relationship is worth pursuing.

Once you’ve made your choice, normal onboarding ranges from 30 days to 120 days, with more time needed for larger centers. The first three to 12 months can be a challenging transition as new norms and practices are implemented. Frequent communication about what is working, and what isn’t, helps all parties reach their joint goals of great patient outcomes and great experiences for all involved. When issues arise, bring your perspective to the anesthesia group representatives, listen to their perspectives and find the solutions you need to run a safe and productive ASC. OSM