ASCs are likely to face continuing anesthesia problems into 2025, but there are potential models and solutions for physicians and centers.
Scott Mayer, the CEO of Ambulatory Anesthesia Care, recently connected with Becker's to discuss the ongoing issues in the anesthesia space and potential solutions in 2025.
Note: Responses were lightly edited for clarity and length.
Question: What are your predictions for the ASC industry in 2025?
Scott Mayer: ASCs will not be out of the woods in 2025 with the challenges they have experienced this past year or two. Labor and supply costs will continue to rise, and payer reimbursement will not keep up, causing further margin compression. It will take innovation and adaptability from leadership to optimize OR utilization, build efficiencies and improve performance to overcome this. The best path would be to rebuild the entire ASC operational model from the ground up to align with the current market versus the past, but we know that isn't realistic in the short-term. Unfortunately, those legacy expectations and assumptions from how things "used to be" will hamper the ability for the ASC community to adapt to a streamlined utilization, efficiency and team approach that will be required for centers to sustain and thrive in the long-term. One example of this that is at the forefront of ASC administrative and surgeon frustration and concerns is anesthesia.
The ASCs–anesthesia relationship and its potential impact to performance will need to be priority No. 1. Not only is the anesthesia provider shortage causing surgeries to be delayed or rescheduled when not enough bodies are available, badly hurting the operational and financial sides of the center, but the demand for anesthesiologists has caused rising costs. We are seeing more Medicare patients in ASCs than ever before because of higher acuity surgeries getting the financial support to migrate out of the hospital. These are higher revenue surgeries for the ASC which in turn are pushing the smaller and more minimally invasive procedures to the growing physician office or clinic surgical settings.
While that is positive for the center, it is devastating to the anesthesia financial model given how wide the anesthesia reimbursement gap is between Medicare and private pay insurers. Medicare reimbursement for anesthesia continues to decrease annually when it already didn't cover the costs of the provider. In most cases today, given the increase in provider costs, Medicare anesthesia reimbursement only covers a quarter to one-third of the direct cost for that anesthesiologist or CRNA. Given this, ASCs must embrace that for every Medicare patient they bring into their center, they need to add financial support for anesthesia into their profitability equation.
I think this is where the biggest confusion and frustration lies with the anesthesia and center/surgeon relationship today. In years past where nearly all of an ASC's patients had private insurance, there was enough anesthesia reimbursement to cover or exceed costs and be profitable, especially when out-of-network status was available for anesthesia groups to use as leverage against the private insurers. With so many more centers being built, decreasing the amount of surgeries per OR across the country, the wave of Medicare patients entering the space and the No Surprises Act significantly limiting the out-of-network leverage anesthesia has had to negotiate fair in-network rates with the private payers, the financial model and situation has changed drastically. ASC anesthesia is now similar to what hospitals have gone through over the past 20 to 30 years. Anesthesia subsidies are a standard in the hospital setting and now they are making their way to ASCs because of a similar evolution of the environment.
ASCs need to understand this is not a short-term problem. Changing out anesthesia groups because of false promises and misleading request for proposal processes will not solve the situation and only cause more operational dysfunction and frustrations. Besides some unit rate arbitrage between anesthesia groups, everyone has the same labor shortage and increased cost issues and the same declining financial model. The sooner the centers understand it is their responsibility, the sooner they can come together with their anesthesia partners and figure out solutions to create and optimize a model that can sustain and thrive in this environment. Surgeons and the centers must have more accountability for the anesthesia side and find a model that connects the direct OR utilization and payer mix of the surgeon or center with the anesthesia financial component. If the center doesn't have the overall volume or private pay mix that can cover the anesthesia costs, there needs to be a mechanism in place for the subsidy to come directly out of the distributions of that surgeon or center. Also, having daily team huddles and weekly strategic meetings with clinical, administrative and anesthesia leaders to bundle cases in ORs, streamline efficiencies and have open communication about the ongoing results and performance for all of this is paramount in creating a model that will work now and well into the future. Even though it is painful to have an additional expense for the center to support anesthesia that wasn't part of their budget before, it is necessary at this point.
What people don't fully comprehend is a revolving door of anesthesia groups (due to a false assumption someone else can make the impossible possible financially) causes strain on the surgeons, ASC staff and patients, closes ORs and cancels surgeries due to not having anesthesia coverage, and limits their ability to grow and scale their center and platform. That is doing far more damage to their bottom line than the anesthesia subsidy and/or OR utilization change management costs. Whoever does see the forest through the trees and truly brings anesthesia in as a partner to understand their needs, current financial model and importance to the center's success will offer patient care, surgeon satisfaction and growth opportunities that far exceed their competition and the market. There is an opportunity out there if ASC leadership understands this and strategically sets their centers up with all of this in mind. It's not going away and kicking the can on it only makes the situation worse. It is time for a mindset shift and reset on the anesthesia relationship and expectations. If that can be done, these problems can turn into opportunities.