Success in Anesthesia Agreements: Key Strategies for Effective Anesthesia Contracting

Contracting for anesthesia services with hospitals and ambulatory surgery centers (ASCs) involves a complex interplay of legal, financial, operational, and strategic considerations. As healthcare delivery rapidly evolves due to shifting reimbursement structures, staffing shortages, and increasing regulatory scrutiny anesthesia groups and facilities must carefully structure their agreements to ensure compliance, protect their interests, and achieve mutual goals with the facilities they serve.

Planning and Structuring Anesthesia Coverage

Understanding the foundational complexities and evolving landscape of anesthesia contracting, it is critical then to thoughtfully address how anesthesia coverage should be planned and structured. Effective coverage planning is the cornerstone of operational success. In addition, effective coverage planning directly impacts financial performance and legal compliance. By systematically evaluating the unique needs of each facility and the realities of the local market, anesthesia groups and their hospital or ASC partners can lay the groundwork for a sustainable and mutually successful relationship.

A robust anesthesia coverage plan for a hospital or ASC must be tailored to the facility’s needs, the local market, and the legal environment. The process should begin with a detailed assessment of service requirements, staffing models, and operational realities:

• Define Service Requirements: Clearly outline the number of operating rooms, out-of-OR locations (e.g., endoscopy, cath lab), call requirements, and any specialty needs (e.g., cardiac, pediatric, OB anesthesia). Specify hours of coverage, after-hours and weekend needs, and minimum case guarantees.
• Develop a Coverage Grid: Use a coverage grid to map out required anesthesia staffing by time of day, day of week, and location. This grid should be included as an exhibit in the contract to prevent scope creep and ensure mutual understanding of expectations.
• Flexibility and Scalability: Build flexibility into the plan to allow for changes in case volume, seasonal fluctuations, or expansion of services. The contract should specify procedures for adjusting coverage and compensation accordingly and should not be unilaterally controlled by one party.

Careful planning and clear documentation of coverage expectations not only helps prevent operational misunderstandings but also serve as the basis for determining the financial structure of the agreement. Once the coverage model is established, the next step is to select an appropriate billing and reimbursement arrangement that aligns with the facility’s needs, the parties’ financial goals, and the realities of the payer environment.

Common Billing and Reimbursement Models

1. Straight Fee-for-Service (FFS) Mode

Under a straight fee-for-service model, the anesthesia group bills payers (commercial insurance, Medicare, Medicaid, patients) directly for professional anesthesia services rendered. The group’s revenue is entirely dependent on collections from these payers.

Historically, the benefit of this structure may have been aligned incentives for the group and its facility partners. Clear, direct relationship between services provided and payment received. The group is motivated to maximize efficiency and case volume under the fee-for-service model; however, the reality is that most groups do not control coverage schedules. Instead, facilities dictate coverage levels. Given the downward pressure on professional reimbursement, competition for providers, and increased coverage demands, fee-for-service can fall short for the group. Because the hospital or ASC does not directly subsidize anesthesia costs, the hospital or ASC enjoys a reduced financial risk. Collections can also fluctuate due to payer mix, reimbursement rates, and case volume. High proportions of government or uninsured patients can make this model unsustainable. If collections fall short of costs, the group bears the loss.

This model has been a good fit in situations with high-volume centers with favorable payer mix (commercial insurance dominant or reliable self-pay clients), facilities with predictable, stable case volume and minimal uncompensated care. Given the limited opportunities to work with facilities under previously described fact pattern and coupled with declining reimbursement from payers, it is not realistic for most contracts to be a straight fee-for-service model without a subsidy. As such, this model is not widely used today.

2. Fixed Stipend Model

The fixed stipend model is a financial arrangement in which a hospital or facility pays the anesthesia group a predetermined, fixed amount, usually on a monthly or annual basis, to subsidize anesthesia services. This payment is designed to cover the short fall between the anesthesia group’s total costs and the revenue generated from professional anesthesia billing, regardless of fluctuations in case volume or collections. The stipend is typically calculated based on a thorough analysis of the group’s costs, expected collections, and required staffing to meet the facility’s coverage needs. The group may or may not bill for services separately. This model provides both parties with the exact financial commitment of the group’s facility partner in the form of predictable, stable payments, which aids both parties in budgeting and financial planning. It offers administrative simplicity, as there is no need for monthly reconciliation. It also tends to be attractive to providers seeking income stability, which is worth noting in the competitive recruitment retention environment of anesthesia. If structured properly, the fixed stipend model stabilizes financial concerns, and the group can focus on quality improvement and operational efficiency rather than chasing collections.

While attractive for its simplicity, a risk with this model is that one party may benefit disproportionately if a core assumption of the calculation methodology changes. For example, if volume or payer mix changes, or the cost of recruiting and retaining providers changes, only one party is bearing the financial risk of those changes if there is no built-in process to update the methodology assumptions during the term of the agreement. A number of hospitals and ASCs complain that the group may be less motivated to maximize collections or efficiency. On the other hand, if the staffing levels can be unilaterally increased by the facility without modifying the stipend, even when a group is maximizing its collections, the professional fees may not support the group’s increased coverage obligations.  Lastly, determining the “right” fixed amount requires robust data which itself can be costly to gather and analyze.

3. Collections Guarantee (Net of Collections)

Pursuant to a collections guarantee, a hospital or facility guarantees that the anesthesia group will receive a minimum level of income by making up the difference between the group’s actual collections and a pre-established “break even” amount. The anesthesia group bills and collects for its professional services as usual; if collections fall short of the agreed-upon threshold, the hospital pays a subsidy to cover the shortfall. If collections exceed the threshold, the group may not receive any subsidy, or may even be required to repay previous subsidies, depending on contract terms. This model is suitable for new centers or those with fluctuating volume, as it shares risk and aligns the interests of the parties.

This model protects the group from low collections due to payer mix or volume fluctuations.  There is an alignment of incentives as the facility shares financial risk.  Both parties are incentivized to optimize operations, by incentivizing the facility to plan for reasonable coverage levels and incentivizing the group to maximize its professional collections. The facility only pays for actual shortfalls, reducing the risk of overpaying when collections are strong, which makes the practice more attractive in challenging markets. The model encourages open sharing of billing and collection data, fostering trust and accountability.

This model is more administratively complex as it requires regular reconciliation of collections and stipends. There is also the potential for more regular disagreements over calculation methods or performance. Subsidy payments may also lag behind actual expenses, creating cash flow challenges for the anesthesia group. This model can be a good fit for new or growing centers with uncertain volumes, facilities with high Medicare/Medicaid/uninsured populations, as well as in markets experiencing provider shortages with volatile staffing costs. As a result, this model is more commonly seen in markets with anesthesia provider shortages and high competition, as parties are willing to take on risks and align incentives instead of relying on flat stipends.

4. Cost-Plus Model

The hospital reimburses the group for actual costs (salaries, benefits, overhead) plus a management fee or margin. This model is less common due to the risk of unchecked cost escalation but may be appropriate in high-complexity or high-uncertainty environments.

This model is beneficial for anesthesia groups as it is protected from financial loss and it incentivizes the facility partners to establish reasonable coverage expectations, because inefficient coverage requirements result in additional costs to the facility. Hospitals and facilities like the degree of transparency as all costs are visible and auditable. This model also makes recruitment and retention of groups easier because the facility is assuming the financial risk for the group’s operation and in turn groups can guarantee compensation to providers in competitive markets because of the guaranteed amounts.

This model is difficult to sell to hospitals and ASCs, as the facility bears all financial risks, including inefficiencies of the anesthesia group. Hospitals and ASCs usually view this model to provide limited incentive to the group to maintain cost controls; however, on the other hand for a facility that has unreasonable or inefficient coverage expectations, this model aligns the interests of both parties. It also carries a substantial degree of administrative burden as it requires detailed cost tracking and auditing. This model is usually deployed in high-complexity environments (e.g., academic centers, trauma, cardiac) and markets with severe provider shortages or high turnover.

5. Hybrid Models

A hybrid model in anesthesia contracting typically combines elements of both the fixed stipend and net collections models and may also incorporate performance-based or value-based components. This approach is increasingly popular as it allows both the hospital and the anesthesia group to share financial risk, align incentives, and address the complexities of modern healthcare delivery. This model also frequently ties bonuses to quality or efficiency metrics (e.g., on-time starts, turnover times, patient satisfaction).

Benefits of this model include encouragement for both financial stability and high performance, customizable tailoring to facility priorities (e.g., on-time starts, patient satisfaction), and dual-party upside and downside risk sharing.

The challenge of this model is it requires more research, a clear understanding of the various drivers of anesthesiology reimbursement, and upfront drafting for clear definition and measurement of performance metrics. There is also greater potential for disputes over performance assessment or bonus calculation.

A hybrid model is a good fit when there is significant variability in case volume, payer mix, or reimbursement rates as the model provides a safety net for the anesthesia group (via a fixed component) while ensuring the hospital only pays for additional support when necessary (via a variable or collections-based component). This is especially useful in markets, experiencing rapid changes in provider compensation, payer contracts, or regulatory requirements.

If both parties value predictable budgeting but also want to incentivize efficiency and high performance, a hybrid model can provide a stable baseline payment with the flexibility to adjust for real-world results. This is particularly relevant for facilities with fluctuating surgical schedules, new service lines, or expansion into new types of cases (e.g., Non-Operating Room Anesthesia (NORA), Obstetrics (OB), or specialty procedures). Additionally, as healthcare shifts toward value-based care, hybrid models can incorporate quality or efficiency metrics alongside financial guarantees. This structure supports the dual goals of financial stability and improved patient outcomes for both the group and facility.

Stipends: Prevalence, Rationale, and Request Process

When seeking a stipend from a hospital or facility, anesthesia groups must approach the process with thorough preparation, transparency, and a clear alignment with facility objectives. The foundation of any stipend request is a detailed proforma that projects all anticipated revenue, broken down by payer and case type, and comprehensively accounts for expenses such as provider salaries, benefits, malpractice insurance, administrative overhead, call coverage, and vacation. This financial model should be built using actual facility data and current market compensation benchmarks to ensure accuracy and credibility.

Equally important is the clear definition of coverage requirements: the group should specify the number of anesthetizing locations, required hours of coverage, call responsibilities, and any subspecialty needs, presenting this information in a coverage grid that can be included as a contract exhibit. This element is critical to the determination of the stipend amount, as increases to the coverage requirements while under a fixed stipend could expose the anesthesia group to unanticipated financial risk.

To justify the requested stipend, the group must demonstrate that compensation is at fair market value. This involves referencing reputable sources such as Medical Group Management Association (MGMA) surveys, GasWork.com postings, and local job offers, while making necessary adjustments for factors like call frequency, subspecialty expertise, and annual work hours. Transparency is critical throughout the process; anesthesia groups should expect to commit to regular financial and performance reporting, allow for audits, and participate in scheduled business reviews to foster trust and accountability.

Highlighting current market realities is also essential. The group should document local provider shortages, trends in rising compensation, and evidence of competing offers, as well as the potential costs associated with locum tenens coverage or service disruptions if adequate staffing cannot be secured. Finally, aligning the stipend request with the facility’s goals strengthens the proposal. This can include offering to tie a portion of the stipend to performance metrics such as first-case on-time starts, patient satisfaction scores, or other quality and efficiency indicators. By following these best practices, anesthesia groups can present a compelling, data-driven case for financial support that addresses both their operational needs and the strategic priorities of the facility.

Legal Considerations Across All Models

Regulatory Considerations

Every anesthesia contracting model, whether fee-for-service, stipend-based, or a expense management model such as a net collections guarantee or cost-plus arrangement, must be structured with careful attention to a complex web of legal and regulatory requirements. Foremost, all arrangements must comply with the federal Anti-Kickback Statute (AKS) and the Stark Law when federal payers such as Medicare or Medicaid are involved. This means that at a minimum any payments to anesthesia providers must reflect fair market value for services actually rendered and cannot be tied, directly or indirectly, to the volume or value of referrals. In addition, state-specific laws, including corporate practice of medicine (CPOM) prohibitions that prohibit non-physicians from delivering professional services through entities and state analogs to the federal AKS and Stark Law, must be addressed, particularly in multi-state operations where requirements may differ significantly. Additionally, all parties must comply with HIPAA and data security obligations to safeguard patient information.

Billing and Collection Practices

Billing and collections practices also carry legal implications. It is recommended that anesthesia groups bill directly for professional services performed by the group to avoid inducement risks and ensure compliance with payer requirements. In addition, given the federal No Surprises Act and state equivalents, contracts should prohibit balance billing to patients when the facility is in-network.

General Contractual Considerations

Contractual protections are equally critical. Provisions regarding exclusivity, non-compete, and non-solicitation must be narrowly tailored to avoid antitrust scrutiny and to ensure enforceability under state law. Overly broad or restrictive covenants can be challenged or invalidated, and recent enforcement actions highlight the risks of using such clauses to foreclose competition. Contracts should also clearly define termination rights, transition assistance, and buyout options to facilitate smooth transitions and minimize service disruptions. Mutual indemnification clauses and requirements for adequate professional liability insurance, including tail coverage for claims-made policies, are essential to protect both parties from unforeseen liabilities. Dispute resolution mechanisms, such as arbitration or mediation, should be specified to provide a clear path for resolving conflicts without resorting to costly litigation. Finally, transparency is vital. Agreement terms should mandate regular business reviews and require that any amendments be made in writing, ensuring ongoing compliance and alignment with evolving legal standards.

By proactively addressing these legal considerations, both anesthesia groups and facilities can mitigate risk and foster stable, compliant partnerships. For more insight on regulatory healthcare requirements and legal guidance, please reach out to a member of our Healthcare Practice Group.