In light of the recent controversy surrounding Anthem's reversal of proposed policy changes on anesthesia reimbursement, the conversation around compensation and coverage has taken on renewed urgency.
Anthem’s now-scrapped proposal, which would have denied claims for cases exceeding arbitrary time limits for certain procedures, has sparked concerns among providers about fair compensation and access to care.
Mark Thoma, MD, anesthesiologist and chair of anesthesia at San Francisco-based The Permanente Medical Group, joined Becker's to discuss the biggest misconception in anesthesia reimbursement and compensation.
Editor's note: This interview was edited lightly for clarity and length.
Question: What's the biggest misconception about anesthesia reimbursement?
Dr. Mark Thoma: I wish I could say that reimbursement was easy and straightforward, but it is anything but. Some of the major misconceptions are [that] many folks believe that time is a sole driver of reimbursement. While time is a major component, the base unit value and the payer's conversion factor play significant roles. Additionally, Medicare and some private insurers may reduce the reimbursement rate for longer cases or cap billable time (i.e. GI cases). The Anthem policy proposal attacked this area where they would have denied claims for cases that went longer than an arbitrarily defined time for a particular surgical procedure.
While we are talking about time, many payers, including Medicare, use rounding rules or incremental billing (e.g. 15-minute units). Without precise documentation of start and stop times, reimbursement can be reduced or even denied. Electronic medical records provide an accurate means of documenting time and this ensures fraud does not occur.
Medicare rates are not competitive. Medicare typically reimburses anesthesia services at significantly lower rates — usually one-third to one-fifth — compared to private payers. Overall, the Medicare payment for physicians has remained stagnant over the past 22 years, and it has not kept up with inflation resulting in a decline of over 25%. In comparison, Medicare reimbursement to hospitals, pharmaceutical and device companies have risen exponentially.
Due to declining reimbursements, particularly for Medicare and Medicaid patients, hospitals often provide stipends to anesthesia groups to cover shortfalls. These stipends are becoming increasingly common to ensure anesthesia coverage for essential services like obstetrics and emergency care which requires in-hospital coverage, therefore, putting greater pressure on hospitals to decide to keep these services and impacts hospital revenue
Many anesthesia practices rely on private payer rates to offset Medicare and Medicaid losses. However, as the proportion of Medicare patients grows due to an aging population, anesthesia practices face increased financial strain, often necessitating hospital stipends to remain viable. Ultimately, hospitals bear the burden of ensuring that anesthesia practices are fiscally viable.
Q: What are some common misconceptions about anesthesia compensation?
MT: When it comes to procedural costs, anesthesia only accounts for 3% to5% of the total cost. Most payments go to the surgeon, facility fees, and other operational costs, leaving anesthesia practices with a smaller share of overall reimbursement.
Compensation primarily depends on the payer mix — private versus Medicare/Medicaid — the types of cases performed and the regional healthcare market more than it does for pure hours worked. For instance, a provider in a region with a high proportion of Medicare patients may earn less despite working longer hours. Many private practices rely solely on collections-based income giving potential for higher earnings at higher risk. Hospital employed anesthesiologists have more stable income with fixed salaries coupled with productivity incentives. However, they all face financial risks should there be a change in payer mix, reduction in stipends or decrease in surgical volume.
Medicare reimburses anesthesia services at a fraction of private payer rates — often less than 33% of commercial insurance payments. Many anesthesia practices require hospital stipends or subsidies to offset these losses, particularly in facilities with a high percentage of Medicare or Medicaid patients. Additionally, the reimbursement rates for anesthesia services — especially from Medicare — are significantly lower compared to other specialties. The anesthesia conversion factor has not kept pace with inflation, effectively reducing real earnings over time.