Anesthesiology services cost employers 3.5 times as much as Medicare
Market forces, such as high demand and a limited number of providers, have given providers a better negotiating position.
Anesthesiologists, an in-demand medical specialty, see relatively high payments from private insurers, a new GAO study finds.
The study said that private insurance payments for anesthesia services on average were more than 3.5 times those of Medicare payments. The study was an update on and earlier study, and the GAO found that payments had increased slightly since 2004, when payments for anesthesia services were about 3 times those of Medicare.
Market forces at work
The study notes that Medicare payments are set by the Centers for Medicare & Medicaid Services (CMS), while in the private market (including employer-sponsored plans), insurers negotiate with providers over rates. Market forces, such as high demand for services and a limited number of providers, seem to have given providers a better negotiating position, the study said. The result is higher reimbursements to specialists such as anesthesiologists.
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“Several studies and stakeholders cited market concentration as a key factor that increased private payments for anesthesia services. In a market with high provider concentration—or relatively few providers in a given market—there is little competition between providers, enabling the providers within that market to negotiate for higher payments from private insurers,” the report said. “Studies also indicated that specialists, including anesthesia providers, could negotiate higher in-network payment rates because they were able to leave an insurer’s network with little risk of losing patients or revenue.”
“In addition, when anesthesia providers are not a part of a private insurer’s network, they are typically able to bill for a higher amount than the insurer would pay for an in-network provider, known as out-of-network billing,” the study added. “This dynamic decreases providers’ incentives to participate in insurer networks because it creates an attractive alternative to network participation.
A small point of good news from the GAO researchers was that the data did not seem to indicate that there is a serious shortage of access to anesthesia providers, and that relatively few providers had opted to drop out of the Medicare system.
Research from three sources
The GAO study was based on three recent studies of private and government payment for anesthesiology services. In one, researchers from Yale University calculated that private insurance payments were 3.67 times Medicare payments, on average, for services provided by anesthesiologists for a large private insurance company that operated in all 50 states and the District of Columbia.
In addition, a 2017 study by The Health Care Cost Institute calculated that private insurance payments ranged from 2 to 7 times Medicare payments, on average, across six common services provided by anesthesiologists in 33 states. That analysis also found wide state-to-state variation within specific services.
The third study, by The American Society of Anesthesiologists (ASA), found that private insurance payments in this area of medicine were 3.46 times Medicare payments, on average, based on a survey of its members in 2019.
The ASA disagrees
However, the ASA took issue with the new GAO report, saying that it was inaccurate and misleading. The specialty association said that the GAO had ignored the core problem, which it identified as a flawed Medicare reimbursement system.
“Instead of looking at the real problem, the anesthesia payment system known as the conversion factor, the GAO conducted a study assuming the Medicare rate to be reasonable, something physician anesthesiologists have challenged for decades,” said ASA President Beverly K. Philip, M.D., FACA, FASA. “Medicare payments for anesthesia have been undervalued compared to other medical specialties since 1992.”
The ASA turns the supply-and-demand argument around, noting that instead of focusing on the limited supply of providers, an analysis of the issue should take into account the fact that many markets have only one insurer. “These insurers use that dominance to unfairly negotiate with anesthesiology practices, often offering the anesthesia group a ‘take it or leave it’ contract. Recent ASA surveys have captured insurers canceling contracts, even recently negotiated contracts, and forcing physician anesthesiologists out of network,” the group said in a statement.
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