Anesthesia — More important than ever for the survival of hospitals

In the rapidly evolving landscape of healthcare, anesthesia — once a behind-the-scenes specialty — is now taking center stage in hospital systems. Since the 1980s, anesthesia services were functionally “free” to hospitals in that hospitals authorized clinicians to deliver care in their facility and the anesthesia providers billed the patient’s health plan for that care. In all but a few circumstances, there was no “bill” sent to the hospital for anesthesia procedures and health plan reimbursements to the anesthesia provider covered the cost of delivering care.

That situation changed dramatically over the past 5-7 years. Now, the revenue generated from anesthesia billings to health plans does not cover the costs of delivering anesthesia care at most hospitals. This critical imbalance in care is caused by multiple dynamics.

Growing demand for anesthesia and a drop in clinicians

Demand for anesthesia has grown, not only in line with the growth and aging of the population, but also due to the increasing prevalence of ambulatory surgery centers (ASCs) and other non-operating room anesthesia locations, such as dental and gastroenterology centers. In fact, a paper published by Journal of Medicine, Surgery, and Public Health estimated that increasing demand for surgical services will continue to rise by 2% to 3% annually over the next decade. At the same time the demand for care is growing, many baby-boomer-aged anesthesia clinicians have just, or soon will, retire. This is causing a serious reduction in the pool of available providers.

To further complicate matters, fewer people are pursuing careers in medicine. Anesthesia is no exception, with an expected shortfall in 2024 of several thousand anesthesiologists. And the Association of American Medical Colleges has predicted a shortage of 12,500 anesthesiologists by 2033. The COVID-19 pandemic is one cause, but so is the high cost of obtaining a medical education, paired with what is a less financially stable income stream.

And those that do pursue a career in medicine are, like younger workers in all professions, eager for greater work-life balance. Anesthesia is a hands-on business, so the options available to reduce burnout are shorter working days, more weeks of vacation, and less “on-call” hours. The net effect is that a new clinician entering the workforce tends to work fewer hours than the retiree being replaced.

The American Society of Anesthesiologists reports that the percentage of facilities reporting an anesthesia staffing shortage increased from 35% in early 2020 before the pandemic to 78% in late 2022.

“The shrinking pool of clinicians in anesthesia means hospitals and anesthesia groups face a real challenge in maintaining access to care for patients,” said Dr. Matt Maloney of US Anesthesia Partners. “Attracting and retaining anesthesia providers can literally make the difference between a hospital having to close one of their operating rooms or being able to open two additional operating rooms. The impacts to care access and hospital sustainability are huge.”

The reimbursement imbalance

In a dynamic where there are fewer clinicians to meet a larger demand for services, you would expect normal supply/demand dynamics to ensure that reimbursements for care would at least cover the cost of delivering that care. But in today’s anesthesia environment, several key factors have hindered economic balance.

Health plans, which correctly look to drive down costs, rarely look at the total cost of care (e.g., lower re-admissions, higher positive outcomes, and shorter recovery times) when evaluating reimbursement levels for individual anesthesia groups. Their approach is often a “one-size-fits all” solution that fails to reward the highest quality, more skilled clinician groups.

Another factor reducing anesthesia viability is Medicare. Medicare reimbursement for anesthesia has always been much lower in relation to other medical specialties. But over the last 20 years, that reimbursement has fallen another 20% after adjusting for inflation, adding to the financial challenge anesthesia providers face.

The gap between cost of care and care reimbursement means that absent additional funding, the anesthesia providers at a facility cannot afford to fully staff and cover all procedures the hospital is scheduling. This becomes particularly problematic in an environment with fewer clinicians available to meet an ever-increasing demand for care.

The impact on patients

When patient access to care is reduced, a hospital’s mission to serve its community is compromised. This dilemma has convinced many hospitals to offer direct financial support to their anesthesia group to provide the surgical services the community requires. This is a very complicated topic of course, but at its core it is a supply-demand mismatch leading to a labor shortage, and in turn, driving up wages as practices compete for talent.

But there are reasons for optimism. No longer invisible, hospital administrators are recognizing the strategic importance of anesthesia departments in achieving overall healthcare goals. Investing in anesthesia services can lead to better patient outcomes, higher satisfaction rates and improved financial performance for hospitals. Hospitals can work with more sophisticated anesthesia groups to reduce costs through better OR efficiency, adoption of care team models, investing in the talent pipeline and better revenue cycle management. There’s also been a rapid evolution in how contracts are administered and budgeted.

Anesthesia’s shift from an invisible specialty to a central component of hospital systems reflects its indispensable role in modern healthcare. As hospitals continue to evolve, the importance of skilled anesthesia services will only grow, emphasizing the need for continued investment and innovation to ensure patients have access to a wide range of critical, high-quality care in their communities.