Anesthesia Subsidies: From The Hospital Perspective
We know what we believe. On those topics about which we are particularly passionate, we are usually able to marshal the facts in support of our stance. Our experience and knowledge base—when coupled with that personal sense of rightness—allow us to be confident in successfully articulating our position. The problem with all this is that the person you're trying to persuade also has experience, knowledge and passion, all of which point him or her in a different direction. They see things through different eyes. Nevertheless, we should remember that engaging in a dialogue with one holding an opposing view can often provide greater insight for all sides. In other words, it's good to get the other person's point of view.
Over the last several months, we have brought you articles that occasionally include a discussion of hospital subsidies for the anesthesia group. These references are typically made from the point of view of the anesthesia provider, which is to be expected. However, we thought it may be helpful for our readers, at this time, to address this topic from the vantage point of the hospital. What do their CEOs and CFOs think or expect when it comes to providing subsidies to the anesthesia team? With that in mind, we came across a late-2021 article in Becker's Hospital Review that dealt with this very topic. The below insights are based, in part, on information gleaned from that article.
An Acknowledged Need
According to the above-referenced article, the percentage of hospitals that financially assist their anesthesia groups has been reported to be in excess of 80 percent for the last several years, and this number is expected to rise in the future. There has been an increased focus on this expense on the part of hospital decision-makers, especially as more and more of them are facing requests from their anesthesia groups for an increase in subsidies. These requests are due to several financial factors now impacting anesthesia practices, of which hospital administrations are becoming quite aware.
Anesthesia Revenue Per Unit Is Likely to Decline
The coming of age of the baby boomers, along with a corresponding change in payer mix, will have a disproportionately negative impact on anesthesia in contradistinction to most other specialties. The American Society of Anesthesiologists (ASA) refers to the gap in commercial reimbursement to Medicare reimbursement as "the 33 percent problem." That is, Medicare reimbursement for anesthesia is typically 33 percent of that for commercial payers. When determining the level of financial support for an anesthesia practice, one of the most important factors to consider is payer mix. The payment prospects for anesthesia services have been falling as both government health insurance programs and commercial payers have hit the specialty with recent reductions in per-unit reimbursement. We have certainly seen an indication of this negative trend in anesthesia reimbursement with the recent release of the 2023 Medicare Physician Fee Schedule (PFS) Proposed Rule, wherein the Centers for Medicare and Medicaid Services (CMS) called for a reduction in the anesthesia conversion factor (CF) from the current 21.5 to a conspicuously lower 20.7 for next year.
In addition, we have yet to determine the ultimate impact of the No Surprises Act (NSA), which went into effect on January 1, 2022. Early on, we witnessed a number of previously in-network anesthesia providers losing their participating status with certain health plans. There was an initial fear that certain commercial payers were taking advantage of the perceived pro-insurance language in subsequent NSA regulations by engaging in a scheme to force groups to agree to a lower contract rate or lose their contract. Recent court decisions have alleviated some of these fears, but the final regulations have yet to be published. We will have to wait and see if the final NSA rules will mitigate the lowering of contract rates.
Pressure on Wages as Demand on Providers Increases
In addition to this downward trend on wages, the Becker's article points out that an increasing volume of surgical cases will put pressure on hospitals to increase their support of their anesthesia providers. In that regard, the authors go on to state:
As hospitals take care of sicker patients, and seek to compete in more complex surgical interventions, there is a trend toward adding anesthesia providers to a hospital's on-call shifts. That additional call responsibility can require significantly more labor demand without a corresponding professional anesthesia service revenue opportunity.
In addition to this growing demand for anesthesia providers in the hospital setting, more anesthesia services will be needed in ambulatory surgery centers (ASCs), as well. The authors note that there is a major movement towards seeking lower cost options for site of service. As a result, case volume in the ASC setting is expected to rise, creating additional demand for anesthesia providers in that space.
A Positive Sign
Many hospitals responded to the variation in case volume (brought on, in part, by the advent of COVID-19) by increasing availability of operating room locations. The result has been a decrease in operating room utilization, which has had a "direct negative impact in exclusive anesthesia model economics." The authors assert that at least some hospitals are taking a fresh look at their operating room utilization, realizing that new strategies are essential if they wish to maintain cost efficiency. As anesthesia is often staffed by location, any increase in utilization will allow for more anesthesia billable time. The authors stress that "operating room governance can play a key role in increasing utilization."
Significantly, the article—which is directed to hospital decision-makers—concedes that "reimbursement pressure, new regulations, and increase in demand is a perfect storm for hospital leaders negotiating with anesthesia groups." This tells me that hospitals are becoming aware that there is a need for increased subsidies and that the anesthesia group may find itself in the driver's seat in these negotiations. Indeed, the article concludes by saying: "It is more important than ever to understand the economic levers of anesthesia, and work collaboratively with your anesthesia provider to create a sustainable economic model."
In conclusion, the Becker's article reveals that hospital executives are being made aware of the increased need to financially support anesthesia's presence in their facilities. In response, anesthesia practices should approach the hospital administration with at least some modicum of confidence during subsidy negotiations, knowing that they could be in a somewhat stronger position. If you would like more information, please contact your account executive. You can also reach us by going to info@anesthesiallc.com.