As a hospital leader, you’re often faced with tough decisions that directly impact your facility’s financial health and patient care. One of these key decisions is how to handle anesthesia services, a critical component of any hospital’s operations. You may be weighing whether to provide an anesthesia subsidy to a private group or move toward employing your own anesthesia providers directly.
The decision isn’t easy, especially with anesthesia costs escalating rapidly in the face of declining reimbursements, and a shrinking pool of anesthesia providers. Let’s explore some of the more important factors to consider when making this choice.
The Decline in Anesthesia Reimbursements
The financial challenges facing anesthesia providers are significant, and they will likely influence your decision on whether to provide an anesthesia subsidy or employ your own team. One of the biggest issues anesthesia practices face is the sharp decline in reimbursements. From 2019 to 2024, CMS anesthesia reimbursements dropped by 8.2%, falling from $22.27 per unit to $20.44. This decline has left many anesthesia groups struggling to cover their operating costs.
In fact, for every 10,000 billable Medicare units, an anesthesia provider can only expect a total revenue potential of around $218,000. This is far from enough to sustain many practices.
Private insurers have also cut back on reimbursements. Anthem Blue Cross Blue Shield, for example, will reduce the reimbursement rate for CRNA services to 85% of the physician fee schedule in several states. Similarly, Cigna lowered its rates for non-medically directed CRNA procedures by 15%. These cuts make it even more difficult for private anesthesia groups to remain viable without support from hospitals.
The No Surprises Act has introduced additional hurdles for anesthesia providers. This legislation was designed to protect patients from surprise medical bills, but its implementation has created challenges for anesthesia practices. The act’s independent dispute resolution (IDR) process has been used by payers to refuse in-network contracts with anesthesia providers, further reducing their reimbursements. Thus far, the impact of the NSA has been felt much more for large, national anesthesia groups who typically have enjoyed payer rates at the high end of the range.
This creates yet another financial strain on private anesthesia groups, which could lead to more requests for anesthesia stipends or even the collapse of some groups.
Given these declining reimbursements, most hospitals find themselves having to decide whether to dramatically increase their anesthesia subsidy or risk losing their anesthesia providers. Without financial support, a private group may be forced to withdraw from the hospital, leaving you with few options including paying as much or more to another group, or but to employ anesthesia providers directly.
The Shrinking Pool of Anesthesia Providers
Another pressing issue is the shrinking number of anesthesia providers. As you likely already know, the demand for anesthesia services is rising, but the provider pool is shrinking, putting hospitals in a tough spot. Nearly 30% of anesthesiologists are projected to retire by 2033, and over 17% of current providers are nearing retirement. And to make matters worse, the number of new anesthesia providers needs to catch up with demand. Residency graduates are increasing at levels too low to replace the departures. This creates a significant shortage that has a negative impact on both hospitals and private practices.
This shortage is particularly concerning as the demand for anesthesia services continues to grow, especially with the rise of outpatient surgery centers and office-based procedures. As Dr. Mark Thoma, Chair of Anesthesia at The Permanente Medical Group, pointed out, demand for anesthesia services is increasing not only in operating rooms but also in ASC settings, and multiple NORA settings such as catheterization/electrophysiology labs, and interventional radiology suites, which increases the strain on already limited anesthesia staff.
Faced with this shortage, compensation for providers is increasing rapidly, driving anesthesia stipendsand forcing more hospital leadership teams to consider moving todirect employment to secure the staff needed to cover all these services. The decision comes down to the best way to maintain adequate staffing for both your traditional and non-OR anesthesia needs.
The Impact of Burnout on Anesthesia Providers
Beyond financial pressures and workforce shortages, anesthesia providers are also experiencing rising levels of burnout. Over 50% of anesthesiologists reported feeling burnt out or both burnt out and depressed in a recent Medscape survey. Many cited long hours and a lack of control over their work as the primary drivers of burnout. This level of stress is leading more anesthesiologists to leave the field entirely, reducing the available provider pool even more.
Burnout also impacts the quality of care provided. When anesthesiologists are stretched too thin or work under conditions that cause high stress, it can lead to errors and a decline in patient outcomes. For hospitals, this raises an important question: Is it better to rely on a private group that may be struggling with high turnover and burnout or to employ anesthesiologists directly, where they can have more control over their schedules and working conditions?
Making the Decision: Anesthesia Subsidy or Employment?
Ultimately, the decision to offer an anesthesia subsidy or employ anesthesia providers comes down to your hospital’s specific needs and resources.Realize that the net anesthesia spend under an employed model will likely cost as much if not more than contracting with a group. Offering a subsidy to a private group allows you to maintain flexibility, but it will require ongoing financial support to keep the group viable. On the other hand, employing anesthesia providers directly gives you more control over staffing, scheduling, and the overall quality of care. But it also requires managing the complexities of staffing and compensation in a challenging labor market.
The vast majority of hospitals find themselves in a situation where a private anesthesia group simply can’t survive without a subsidy. In these cases, the choice may come down to whether you’re willing to provide ongoing financial support or transition to direct employment. Since there is not likely to be cost savings, ultimately it comes down to balancing the resources needed to manage an employed model versus the control which may be realized once such a model is stabilized.
Seeking Expert Guidance for Long-Term Profitability
If you’re grappling with this decision, working with a team of anesthesia consultants can help you navigate the complexities. They can provide insights into the true costs of both options and help you create a plan that fits your hospital’s needs. Whether you’re evaluating an anesthesia RFP or assessing the cost of an anesthesia stipend, expert consultants can guide you through the process.
At Enhance Healthcare Consulting, we specialize in helping hospitals like yours work through difficult decisions related to anesthesia services. From anesthesia RFPs to crafting the right subsidy agreement, we can help you find the best solution for your facility. Contact us at Enhance Healthcare Consulting today so we can review your anesthesia department and help you determine the best way forward.