How to Fix Out-of-Control Anesthesia Subsidies

Anesthesia subsidies are financial payments that hospitals make to anesthesia groups to cover the gap between revenue generated by anesthesia services and the costs incurred to provide these services. 

Unfortunately, anesthesia subsidies have become more common due to declining Medicare reimbursement rates, increased workload for anesthesia providers, and anesthesia staffing issues. This rise in anesthesia subsidies can limit the revenue growth and ability of hospitals and other medical facilities to invest in other critical areas. 

Hospitals operate on narrow margins, and the need to subsidize anesthesia services can strain their budgets. This financial burden can limit the hospital’s ability to invest in other critical areas, such as new technology, facility upgrades, or additional staffing.

Factors that are contributing to rising anesthesia subsidies

  • Declining Medicare payment rates: Coronis Health reported the average anesthesia rate in 2023 as $21.88, which is a decrease of 5.5% from the 2019 rate of $23.14. This means if an anesthesia provider generates 10,000 billable units from Medicare, the revenue potential is only $218,000 (assuming all revenue is collected). Becker’s ASC notes that Medicare reimbursement for anesthesia dropped 2% from 2022 to 2023 even while the demand for anesthesiologists has increased.
  • Fair market value compensation: Compensation for anesthesia providers is influenced by geographic location, call requirements, case types, and subspecialty training. Fair market value is determined by comparing regional salary and benefits packages, considering factors like cost-of-living, case volume, and contract length
  • More anesthetizing locations: The number of locations where anesthesia services are provided impacts subsidy costs. More locations can lead to higher staffing costs and lower productivity if not fully utilized, increasing the subsidy required to cover these expenses.
  • Staffing model: The choice of staffing model (physician-only, anesthesia care team, or CRNA-only) significantly affects subsidy requirements. The model must balance surgeon preferences, case complexity, call obligations, and subspecialty coverage needs.
  • Improving revenue cycle performance: Effective revenue cycle management is crucial to ensuring all reimbursement dollars are collected. For example, hospitals can monitor charge capture, payer contracting strategies, and net collection percentages.

How hospitals can reduce out-of-control anesthesia subsidies

Managing the rising costs of anesthesia subsidies is critical for hospitals facing financial pressures. These subsidies cover the gap between the revenue from anesthesia services and the costs of providing them, a gap widened by declining Medicare reimbursement rates, fair market value compensation, and staffing complexities. Here are some tips for hospitals:

  • Optimize revenue cycle management: Ensuring that all possible reimbursement dollars are collected and employing specialized billing teams can significantly reduce the need for increased anesthesia subsidy amounts.
  • Improve staffing efficiency: Reviewing and optimizing the ratio of anesthesiologists to CRNAs and ensuring efficient OR utilization can help reduce costs.
  • Enhance patient preparation: Effective patient preparation can reduce surgery cancellations and delays, improving overall efficiency and reducing costs.
  • Assess OR productivity: Improving operating room turnover and productivity through close cooperation between surgeons and anesthesia providers can enhance revenue and reduce subsidy requirements.

Contact us to increase efficiency and value from anesthesia

Anesthesia subsidies present a significant financial challenge for hospitals, driven by declining reimbursement rates and complex staffing needs. While essential for maintaining quality coverage, these subsidies can strain the budgets of hospitals and ambulatory surgery centers. Contact Valley Regional Anesthesia Associates (VRAA) for expert anesthesia management services that optimize billing efficiency and accuracy, ensuring long-term success for your healthcare facility. You can learn more about our anesthesia billing services, consulting services, and more here. When you’re ready for efficient, optimized anesthesia, contact us.