2021: An Anesthesia Retrospective
Summary: The year that was involved a transition from pandemic-induced reductions in case volumes to gradual recovery. However, other market and demographic forces affected practices in 2021 and will continue to have an impact on the year ahead.
By all accounts, 2021 was a challenging year for American medicine. The pandemic, which we all thought would abate as more Americans got vaccinated, just kept morphing from one variant to another like the cancer that keeps metastasizing from one part of the body to another. Every time we thought we were out of the woods, new case rates started to rise again. For the most part, anesthesia practices were immune to these spikes and appeared to be profiting from strong case volumes; and yet the impact of the virus was so extensive and pervasive that ultimately every practice was impacted in many ways.
Emerging from the Storm
For most practices, 2021 was a year of recovery. The average anesthesia practice saw an overall drop of about 10 percent in case volume from 2019 to 2020. Surgical volume had dropped significantly in March and April when most facilities canceled elective cases. For the most part, obstetric volume remained fairly constant. The second half of the year saw a gradual recovery for most lines of business; although, for many practices, endoscopic volume was a little slow to recover. Medicare patients, in particular, were somewhat reluctant to reschedule their elective colonoscopies. As we have explored in a previous alert, practices with significant orthopedic volume recovered especially quickly. Shoulder and knee cases also provided a meaningful opportunity to use nerve blocks, which provided a separate revenue opportunity.
One of the impacts of the pandemic in 2020 was that a disproportionate number of anesthesia providers chose to retire. Many practices reduced their staffing in response to declining surgical volume. For many providers, both physicians and CRNAs, the market had simply become untenable. The need to ramp back up and rehire providers at the end of 2020 and into 2021 created a significant demand for providers. The result was a manpower shortage in 2021. As is always the case in such periods of transition, those practices with consistent case volume and a favorable payer mix had little problem attracting qualified providers; but many practices with a marginal payer mix, and especially inner-city practices with a significant public payer mix, struggled to recruit and retain the necessary quotient of providers.
New Dynamics in Play
Underlying these developments, however, was the constant erosion of revenue potential based on demographic trends. As the American population continued to age, the percentage of patients continued to increase. As was noted in a previous alert, the fastest growing segment of the population is Americans over 80. With each case that migrated from a commercial fee rate to a Medicare rate, the average practice lost $400 to $500. It has also become clear to many practice administrators that commercial insurance plans are increasingly reluctant to participate in cost-shifting. In other words, many plans have been aggressively pushing back on requests for rate increases.
Unfortunately, the quality of anesthesia care has become a given. The specialty has become exceedingly adept at consistently managing patients safely and comfortably through the trauma of surgery. While the quality of care used to be the cornerstone of the anesthesia value proposition, the market now expects more than just the safe administration of anesthesia. Customer service has now become the key to the practice's relationship to its facilities. As hospitals compete to win surgeons and patients, the expectation is that anesthesia will be a critical business partner and innovator in enhancing the patient's surgical and obstetric experience.
Implications for 2022
What all of this has meant is that hospitals, most of which now subsidize their anesthesia practices, must tighten their belts and reduce costs to maintain profitability. The negotiation of hospital subsidies and financial support has become increasingly challenging, and many administrations have started resorting to alternative strategies. The security of every anesthesia service agreement has become increasingly fragile and more than a few of the nation's largest practices that have enjoyed long-term relationships with the facilities they serve are now losing their contracts. It has recently come to our attention that another major health system on the East coast has cancelled its contract with a large anesthesia practice to bring in another practice from the west coast.
There are five phases of an anesthetic: preparation, induction, maintenance, emergence and recovery. Many would argue that the most important of these is preparation. Careful thought must be given to the potential complications that could arise during the case. Many used to describe anesthesia as hours of boredom punctuated by moments of sheer terror. This is probably not so true any longer with regard to the administration of anesthesia care, but it has become increasingly true of the management of an anesthesia practice. Success and survival are now less about what happens in the operating room and much more a function of what happens outside. Understanding the dynamic impact of economic and market factors is becoming ever more important. After all, the only constant in today's medical economy is change.
If you want help understanding how these various factors and trends will affect your practice feel free to reach out to your account executive or email us at info@anesthesiallc.com. We have the experience and tools to position your practice for success.
With best wishes,
Tony Mira
President and CEO