By Tim Hanners, Managing Principal, Lumina Health Partners
LinkedIn: Tim Hanners
LinkedIn: Lumina Health Partners
Anesthesiology is a medical specialty in crisis. Simply put, the current number of Anesthesiologists, CRNAs and AAs and the numbers coming out of training will not be enough to accommodate both current and future demands. Providers who are available and working now are often under contract by third-party firms, owned by private equity or venture capital firms, who view them as a means to provide a return on investment. These firms have little to no incentive to solve the current problem as they are able to use the supply / demand imbalance to increase the fees they are charging. Facilities now, more than ever, are looking for alternative solutions to overcome the challenges of having enough anesthesia providers to run their operating rooms. One such solution is the direct employment anesthesiologists, CRNAs and AAs.
According to the JMSPH, since 2012 private equity / venture capital firms have acquired anesthesia practices and put a stranglehold on the market for anesthesia providers. As a result, costs have increased as much as 16%, raising questions regarding quality, safety and essentially the sustainability of these for-profit owned anesthesia practices. Using draconian restrictive covenants (aka non-compete clauses), these third-party entities restrict the access to anesthesia providers leading to inflated costs of anesthesia services for facilities. As such, the idea of directly employing anesthesia providers, a taboo topic 10 years ago, is now very much in vogue.
However, questions remain: should I directly employ my anesthesia providers? Does it make economic sense for me? What is the best model to use? and Do I have the necessary expertise and resources available to make a change to an employed model for anesthesia services?
The Challenges of Hiring Anesthesiologists Directly
Facility leaders have always been weary of this option: both with the cost of anesthesia providers themselves as well as the cost overseeing them. Traditionally, outsourcing of most specialized clinical service lines has been the best option for hospitals. However, recently there has been a shift of thinking based on financial, operational and other factors. So, what has changed?
In the past the cost of outsourcing was offset by both the primary and secondary revenues generated from surgical and procedural volume. Furthermore, “outsourcing” was typically done with private practice groups who traditionally had little overhead and as “owners” had incentives to “run” lean and fully engage with facilities to make service contracts work, as the providers often lived either within or close to the communities they served.
National venture capital / private equity firms often are not as “invested” in the facilities or communities in which they provide services, as such base relationships on financial interests. If relationships with facilities “don’t work out” they (the venture capital / private equity backed firms) simply cancel the service agreement and move on, often leaving a hospital without anesthesia services and providers scrambling for employment (see non-solicitation / non-compete clauses)
Fortunately, the model of directly employing anesthesia providers, is one solution that can increase provider job satisfaction, increase the number of providers available, while maintaining high safety and quality of care.
Weighing the Costs for Anesthesiology
There’s not a simple answer to the question of whether healthcare facilities should directly employ anesthesia providers or continue to partner with third party firms. There is no one correct answer, however there is a correct answer for each facility.
- Organizational Stability: 21% of all healthcare company bankruptcies in 2023 were private-equity-backed healthcare firms. One should strongly consider the financial health of any third-party firms they wish to engage. You should ask: if the firm fails how will that affect my ability to provide care? My financial and operational future? How can all of this destabilize my facility? And for how long?
- Flexibility and Infrastructure: Increasingly, facilities are requiring anesthesia providers to have flexible clinical schedules to accommodate increasing demand for both operating room and non-operating room (OR and NORA) schedules. Negotiating with third party firms on the issue of flexibility can be and often is extremely difficult. As these firms have to negotiate not only with the hospital but also with their employed workforce. This creates inherent tension between the facility, firms and anesthesia providers. Often these third-party firms do not have the knowledge or contractual adjustability to create solutions without significantly increasing costs to the facility.
- Reduction in Costs: Facilities must analyze the short medium and long-term costs of continuing to contract with third-party firms and compare the costs to directly employing anesthesia providers. What will happen should your stipend increases significantly? Can you continue to afford services should stipends increase? What would happen if your contract was terminated?
- Decreasing Subsidies: With recent changes, hospitals are eliminating up to 20% of their subsidization by directly employing anesthesia providers, without sacrificing quality or OR access for surgeons. Is this 20% savings enough to offset the costs of employment?
- Revenue Capture: Reimbursement and payment collections are always top-of-mind for financial leaders. Third party firms while wanting to capture all revenue generated from anesthesia services many not be full motivated to do so, if the facility is making up any shortfalls, (i.e. revenue or income guarantee agreements). Is your third-party firm collecting all possible fees? Are they transparent with their billing and collections process?
Addressing the Changing Face of Anesthesia Care
As with all fields of medicine, the challenges facing anesthesia are rapidly changing. The Federal Trade Commission’s recent ban on noncompete clauses will substantially change workers’ rights to seek better employment and increase the availability of anesthesia providers for facilities. When changes such as this occur, business innovation is not far behind. New and novel, financial and operational models will be created and implemented. Are you prepared for the future? Are you ready to make a change? Are you equipped to make a change?
Your healthcare organization will need the right information and come to the negotiation table ready to take charge or pivot toward cost-effective direct hiring of anesthesiologists and CRNAs.
This article was originally published on the Lumina Health Partners website and is republished here with permission.