What’s the Best Post-COVID-19 Anesthesia Business Model—Hospital-Based or ASCs? 

Anesthesia groups face major challenges in the aftermath of the pandemic: Financially strapped hospitals are increasingly unwilling or unable to pay anesthesia subsidies, and a shortage of qualified anesthesiologists and CRNAs is making recruitment extraordinarily competitive.

The good news is that anesthesia opportunities are plentiful in the ambulatory surgery center (ASC) market. As more inpatient procedures migrate to ASCs, anesthesia practices can help meet demand by working with hospitals and ASCs. A dual-contracting approach can help increase revenue, reduce operational risk, enhance recruiting leverage, and present opportunities for equity investments in ASC ventures. 

Expanding ASC Case Mix

Multiple factors are driving increased ASC volume. Consumers have long been attracted to the convenience and fast turnaround times ASCs offer, and as the pandemic began to take hold and patients worried about becoming infected in hospitals, their popularity increased. 

But even before the pandemic hit, the use of ASCs was growing, with the number of centers increasing 7.1% annually since 2016.¹ No doubt this was in part driven by Medicare restricting fewer surgeries to the inpatient only (IPO) setting. This year alone, Medicare is adding 11 orthopedic procedures to the ASC-approved list, including total knee arthroscopy (TKA) and total hip arthroscopy (THA).² Commercial payers are also fueling ASC volume by promoting this venue as a lower-cost option to members. Lastly, with more than 90% of ASCs at least partially owned by physicians, providers themselves are driving more procedures to this setting.

Hospitals Become ASC Buyers 

For years, hospitals viewed ASCs as direct competition and discouraged or even prohibited inpatient anesthesia practices from contracting with them. But that dynamic is changing as more hospitals become buyers or majority investors.

According to a recent survey, the percentage of hospitals and health systems planning to increase their investments in ASCs rose from 44% in 2019 to 67% in 2020, with 75% of 200-plus-bed hospitals already owning more than one ASC.³ Hospitals view these investments as a way to enhance physician relationships and increase surgical capacity.

The Benefits of Practice Diversification 

For anesthesia practices that elect to contract with both hospitals and ASCs, a key benefit is improved profitability, since average ASC case reimbursements are higher than average hospital cases due to better payer mix and more efficient room turnover. Groups that work with multiple organizations also reduce their institutional or operational risk by limiting their exposure to potential financial problems associated with a single contracted entity.

Practices likewise gain an edge when it comes to recruiting in today’s highly competitive anesthesiologist and CRNA market. One of the chief benefits of ASC involvement is being in a position to offer a better work-life balance by spreading call responsibilities across a larger physician call pool. The math is simple: If a hospital group has seven physicians, each must provide call coverage once a week. But if the group also contracts with five ASCs and brings on five additional doctors to staff the facilities, individual call responsibilities are reduced to once every 12 days.

The importance of mitigating call duties to improve the work-life balance for both experienced clinicians and new hires can’t be overstated, particularly as hospitals work to streamline OR throughput by increasing the number of surgical procedures. Groups can also explore a range of creative compensation approaches, including essentially selling call opportunities to newly hired or recent graduate anesthesiologists as additional avenues to attract qualified clinicians while easing the burden on senior anesthesiologists.

Equity Opportunities 

Among the most intriguing aspects of ASC involvement is the potential for becoming an equity stakeholder in the business. Surgeons traditionally have been the primary drivers in creating ASCs, but new opportunities exist for anesthesiology groups, particularly if their hospital is buying an existing ASC or developing a new ASC venture and looking to diversify the ownership group.

The idea of anesthesia ownership isn’t as crazy as it might sound. Like surgeons, anesthesiologists are integral to the success of an ASC, and like surgeons, they get there early and stay late. It’s no secret that joint ownership can greatly improve relations between the practice and the hospital, since both are now working toward the same objectives.

Groups can also make more money. I met with a surgical group not long ago with a 49% ownership stake in a hospital. That equity generated an additional $80,000 per year for each physician partner. How much you can make, of course, depends on your specialty, your level of ownership, and the volume of business. But you’ll never know until you try. 

Outside Expertise

The pandemic has unleashed numerous changes throughout healthcare, and where the dust will eventually settle isn’t entirely clear. But what is certain is that for organizations to remain viable, they’ll need to be flexible and look hard at nontraditional business opportunities. Contracting with both hospitals and ASCs represents one such approach for anesthesia groups.

If you’re interested in exploring this and other business possibilities but don’t know where to start, Change Healthcare can help. Our team of expert anesthesia practice-management consultants have an average of 18 years’ experience in the specialty. We can be engaged on a per-project basis or we can provide our consultant services as part of our turnkey anesthesia-billing solution.

Our anesthesia revenue cycle management services can be deployed either on our own proprietary anesthesia-billing platform or on your hospital billing system. Either way, we’ll provide seamless, end-to-end service. To learn more, please call Change Healthcare Anesthesia at 1-844-798-3017 or visit https://www.changehealthcare.com/revenue-cycle-management/reimbursement-management/physician-revenue-cycle-services/anesthesia-practices.  

^{_{1 You ASCed for it. Your most frequently asked questions about ASCs, answered, Advisory Board, April 5, 2021}}

^{_{2 CMS finalizes ASC rules for 2021, Becker’s ASC Review, Dec. 9, 2020}}

^{_{3 Avanza Intelligence: 2020 ASC Joint Venture Survey, Avanza Healthcare Strategies}}