Recent Trends in Anesthesia Services
The post-COVID services market for anesthesia services has created significant strains on the institutions requiring these services. There are several factors contributing to these strains which will be explored herein.
Early Retirements of Anesthesia Providers
The pandemic placed additional burdens on anesthesia providers as they were frequently enlisted to manage the most severe COVID cases. Many providers close or at retirement age determined that the associated strains of treating this patient population made the decision to retire or partially retire from the workforce. The anesthesiologist population trends older than other specialties placing additional pressure on the workforce through end of career retirements. The trend has been to supplement this shortage through CRNA programs, and they are generating more graduates, but their relative increase has its own secondary effects such as changing previous emphasis on medical direction and MD-only practices.
Provider Supply/increased Demand for Anesthesia Services Increase Salaries
We know from economics that reduced supply increases prices or in this case providers’ salaries. The 2023 MGMA salary survey demonstrated that CRNA and anesthesiologist salaries increased over 8% and 7%, respectively in the last year. This data is already aged with the rapid changes in Anesthesia post-pandemic and the current experience from our interactions suggest that the quoted median salaries of $198,000 and $499,000, respectively, do not reflect current compensation levels. It stands to note, this higher compensation places greater stress on institutions offering financial support such as stipends and income guarantees.
No Surprises Act Impact
Some Anesthesia groups in the past had relied upon out-of-network billing to supplement revenue gaps in their contracts. The No Surprises Act (effective January 1, 2022) has a major negative impact for anesthesia groups that relied on out-of-network billing practices to enhance collections from commercial payers. Per the NSA such claims are now to be paid at the in-network rate which puts significant downward pressure on collection amounts from these payers while creating additional pressures on institutions to offer financial support to make up for the loss.
Financial Support for Anesthesia Services is Becoming Normal Practice for ASCs and Hospitals
Most hospitals have traditionally offered financial support to independent anesthesia groups to cover shortfalls in anesthesia collections. These shortfalls were from a variety of reasons including payer mix, call burdens, poor utilization, and high-cost services such as OB, cardiac or pediatrics. Now that the impact of paying significantly higher provider salaries has entered this equation, some hospitals have reacted by bringing the outside groups in-house. In contrast, ASCs had fewer of these constraints (no call, no weekends, better payer mix and greater incentives for better OR utilization). The provider salary increases have upset this equilibrium and now it is not uncommon for ASCs to provide financial support to their anesthesia groups. All of this creates a further drain on revenues derived from the surgical caseload, for both hospitals and ASCs.
FTC’s Proposed Non-Compete Prohibition for the Healthcare Industry
The FTC published a voluminous discussion of its final rules on non-competes. Within the contents of this almost 600-page document, the healthcare industry is discussed in detail on pp. 373-385. The FTC discusses how its regulations apply to healthcare providers. For profit entities are considered within the purview of the FTC’s jurisdiction, but the FTC raised the prospects of applying the non-compete prohibition to tax-exempt institutions as well. In fact, on p. 380 of the analysis the FTC states that “…some portion of the 58% of hospitals that claim tax-exempt status as nonprofits and the 19% of hospitals that are identified as State or local government hospitals…likely fall under the Commission’s jurisdiction and the final rule’s purview.” Many states have already developed some version of these restrictions including Colorado, D.C., Florida, Indiana, Iowa, Kentucky, New Mexico, South Dakota and Texas. The new rule does apply to a non-compete agreement as part of an acquisition. This reflects the momentum among the states to curtail these agreements, despite the efforts by national business organizations to overturn this FTC rule.
Implications
Among the many constituencies in the anesthesia space, including private anesthesia groups, hospital-employed groups, and private equity backed groups, these trends constitute fundamental challenges and increase the competition for anesthesia providers. This will continue to exacerbate the financial pressures on the hospitals and ASCs which are already supplementing clinical service collections. With out-of-network billing prohibitions, anesthesia groups lost the ability to increase their revenue base independent of their institutions. A prohibition on non-compete agreements reinforces a shift in how groups and institutions perceive their relationship with their anesthesia providers. Hospitals, groups and ASCs will need to make serious efforts to differentiate their anesthesia service model with non-salary-based factors including:
- Building a provider-oriented culture with job-sharing, specialty focus and call accommodations.
- Using technology to improve provider quality of life, e.g., app-based scheduling system to enhance communication and flexibility in scheduling while minimizing payroll issues.
- Using technology to improve the clinical operation with Anesthesia Information Systems which interface to collect clinical data while the provider can focus on the patient. A side benefit better documentation to enhance revenue capture.
- Evaluating various care team models to align the skills required with case types.
