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Darwin’s Law of Natural Selection: Eliminating Medical Direction Anesthesia Delivery Models

February 28, 2021/in Blog/by Excel Anesthesia

By Jean Covillo, DNAP, MA, CRNA

Any healthcare facility that employs Anesthesia Assistants is trapped into using ONLY the costly medical direction model!

Currently, there are approximately 54 million Medicare enrollees, but by 2030, this will rise to nearly 80 million.1 Medicare reimbursement rates for anesthesia services are 25-35% the amount received from commercial payers. Those on Medicare will need more care and increased access to quality, safe, cost-effective services. With rising numbers of Medicare beneficiaries at a significantly lower reimbursement rate, business models must adapt to a higher level of efficiency or be doomed to Darwin’s law of natural selection. Certified Registered Nurse Anesthetists (CRNAs) and Anesthesiologists (ANs) play a critical role in meeting this challenge by providing safe, efficient, quality anesthesia care at a cost that ensures access to anesthesia for millions of Americans. Each provider is independently capable of providing the same services, leaving the choice of delivery model based on preference rather than necessity. Conversely, Anesthesia Assistants (AAs) can only provide services ancillary to an AN and are unable to operate independently. This squeezes the choice of delivery models down to one option: medical direction, leaving no room for flexibility in workflow or cost-effective alternatives. Hospital administrators often don’t realize the economic significance, or financial consequence they’ll face when hiring AAs -only to discover it after it is too late.

Anesthesia Delivery Models Four anesthesia delivery models are commonly used by U.S. healthcare facilities: 1) AN only; 2) CRNA only; 3) AN medical direction of CRNAs, or AAs; and 4) AN supervision of CRNAs. Each delivery model is associated with a specific modifier code that identifies which type of provider is involved in the anesthetic. The first two models: AN only, and CRNA only are equally recognized by Medicare at 100% of the allowable charge. The remaining two models have conditions or adjustments tied to payments, rendering them extremely inefficient and expensive with no offsetting redeemable benefit for the money spent.2,3

Anesthesia Modifiers and Delivery Models

Despite the variety of anesthesia delivery models, CRNAs have no federal or state requirement to be supervised by, directed by, or even work with a physician anesthesiologist. CRNAs can provide non-medically directed care in all states regardless of state supervision requirements. Although some states may require CRNAs to be supervised, the operating practitioner commonly fulfills this requirement. Conversely, AAs can only provide service under the medical direction model.2,3 Healthcare facilities cannot employ an AA without also employing an AN—who, at a median compensation of $533,000, earns nearly three times more than an AA or CRNA. As previously stated, any hospital healthcare facility that employs AAs is trapped into using ONLY the costly medical direction model. Oftentimes hospital administrators don’t realize this consequence until it is too late. Alternatively, a facility can employ a CRNA as a standalone provider or rely on a mixed provider approach by hiring both CRNAs and ANs without restrictive ratio requirements. This approach results in higher numbers of CRNAs and less ANs, ensuring quality of care, increased workflow flexibility, and a more favorable bottom line.

When performing services under the medical direction model, both CRNAs and AAs are recognized by Medicare for 50% of the payment with the remainder allocated to the physician AN. However, there is a professional and economic distinction between these two providers. CRNAs are recognized in all states by Medicare for the provision of non-medically directed services and are reimbursed at 100% of the allowable amount when billing without medical direction. Conversely, AAs are not recognized by Medicare for non-medically directed services and cannot legally provide care if there is a lapse in supervision (medical direction). These “lapses” can lead to costly surgical case delays, regulatory violations, or accreditation jeopardy for facilities if lapses occur.4 Conversely, when CRNAs are involved in failed medical direction, the model can be reclassified to the CRNA only QZ model without reductions in payment.

Anesthesia Models -Value Scale Rating Numerous studies have performed cost analyses of anesthesia delivery models. In 2016, a study was performed by The Lewin Group, entitled Update of Cost Effectiveness of Anesthesia Providers which showed the highest gross profit was found in the CRNA only model, followed by medical direction with an AN/CRNA ratio of 1:4.5 Most hospitals utilizing AAs provide medical direction services at a 1:3 and sometimes 1:2 ratio, which drastically reduces gross profit by more than $1 million dollars as shown in the table below. Increasing physicians staffing to support these types of ratios often results in higher stipends that hospitals pay to subsidize these groups to offset losses in productivity.

Table from The Lewin Group, prepared for American Association of Nurse Anesthetists. Update of Cost Effectiveness of Anesthesia Providers: Final Report Falls Church, VA: Lewin Group Inc May 2016. Accessed December 6, 2020.

The Problem with Medical Direction In addition to being one of the most inefficient and costly delivery models, medical direction exposes facilities to fraud and other regulatory infractions that can threaten accreditation and result in loss of licensure.4 When providing services under medical direction, completion and compliance of the TEFRA6 regulations requires strict discipline in a fluid healthcare environment. Failure to comply with these regulations can result in a fraud abuse claim. A study in 20127 performed by two ANs looking at medical direction compliance, determined there were supervision lapses 37% of the time—even with supervision ratios of 1:2. These lapses are not in compliance with billing requirements and can result in violations under the False Claims Act (FCA). ANs are not solely liable for these claims. If a CRNA or AA is aware of non-compliance or lapses in TEFRA regulations and fails to report such infractions, they can be held legally responsible and face criminal and/or civil penalties for these violations. Federal penalties can total three times the amount of the claim, plus fines of $5,500-11,000 per claim. State laws also include fines as well as imprisonment in some cases.4

Given these lapses are a fairly common occurrence and independent practice is illegal for AAs, one might contend that the liabilities associated with hiring AAs far outweigh the benefits. Regardless of the practice makeup, providers and administrators need to be aware of these billing requirements and take steps to ensure compliance.

Discussion The success in managing a cost-efficient anesthesia department that translates into millions in savings hinges on two critical components: 1) the licensure of the anesthesia staff, and 2) the elimination of medical direction delivery models. Profit margins increase when hiring practices are modified to ensure only professionals licensed and capable of flexibly working and billing autonomously. CRNAs and physician ANs are the only professionals capable of independently providing anesthesia services that are both recognized by Medicare for 100% of the Medicare allowable rate. Since AAs cannot work independently, hospitals must hire additional physicians to satisfy supervision requirements and models cannot be flexibly interchanged once the AAs are hired. Hiring Professional CRNAs or physician ANs instead of ancillary anesthesia assistant staff ensures all members can maximally contribute to the team. Concurrencies that prevent ANs from meeting medical direction criteria cannot be offset by billing the QZ model (as can be done with CRNAs), and may instead result in regulatory violations and accreditation jeopardy for facilities.8

Through adaptation and elimination of the medical direction model, hospitals running 12-24 rooms can expect to see savings between $550,000-$2,000,000, respectively. These savings are a direct result of staffing modification that removes unnecessary AN fixed-ratio requirements which will become critical as Medicare beneficiaries rise.

Medical direction models are expensive because every procedure adds the cost of two anesthesia providers when one is sufficient, when reimbursement only pays for one. In a collaborative team approach, each provider contributes services according to their licensure, training and expertise as a team. This ensures costs remain low through the use of one provider instead of two, for each procedure. In addition to lowering operating expense, this approach promotes flexibility in workflow which fosters increased productivity through its adaptability when cases are added or moved from room to room. Taken together, these benefits create opportunities for significant increases in net profitability as long as staffing is maintained by independently practicing licensed providers.

Conclusion For business-minded professionals, it is easy to see why medical direction models should be eliminated. The increased cost, inefficiency of workflow, and risk of noncompliance penalties are sufficient reasons to re-evaluate the way a hospital provides and pays for anesthesia services. What healthcare facilities fail to recognize is that by hiring AAs, they are trapping themselves into using costly and inefficient medical direction models which limits all available options. The inability of AAs to practice independently forces hospitals to hire more physician ANs and removes any flexibility in adaptation toward a more fiscally sound anesthesia delivery model. Although this guarantees job security for ANs by ensuring hospitals hire sufficient quantities of their numbers, it exposes hospitals and other healthcare facilities to extreme vulnerability—both financially and regulatory—and removes all viable options by trapping them into one of the most inefficient delivery models available.

“It is not the strongest of the species that survive, or the most intelligent, but the one most responsive to change.” Charles Darwin


1. Report to the Congress: Medicare and the Health Care Delivery System | June 2015.

2. Centers for Medicare & Medicaid Services. Payment for Moderate Sedation Services. Department of Health & Human Services; 2017. Transmittal 3747. Accessed February 10, 2021.

3. Centers for Medicare & Medicaid Services. Medicare Claims Processing Manual Chapter 12 – Physicians/Nonphysician Practitioners; see Section 50 for Anesthesiologist Services and 140 for CRNA Services. Accessed February 10, 2021.

4. Silberman MJ, False Claims Act Liability for CRNAs Related to Medical Direction. AANA Journal. 2014; 82:10-12

5. The Lewin Group prepared for American Association of Nurse Anesthetists. Update of Cost Effectiveness of Anesthesia Providers: Final Report Falls Church, VA: Lewin Group Inc May 2016. Accessed December 6, 2020.

6. Tax Equity and Fiscal Responsibility Act, HR4961, 97th Congress (1981-1982). Pub L No. 97-248. Accessed January 10, 2021.

7. Epstein RH, Dexter F: Influence of supervision ratios by anesthesiologists on first-case starts and critical portions of anesthetics. ANESTHESIOLOGY 2012; 116:683–91

8. According to the Medicare Part A Conditions of Participation (which hospitals must meet in order to accept Medicare patients), an anesthesiologist assistant can only administer anesthesia when under the supervision of an anesthesiologist (42 CFR §482.52 (a) (5). For Medicare Part B payment/billing purposes, in 1992, federal law mandates that “the anesthesiologist assistant must work under the direction of an anesthesiologist …” and comply with the 7 requirements for billing medically directed anesthesia (i.e., TEFRA) (see: 57 Fed. Reg.33878, 33891, July 31, 1992 and 2 CFR §410.69 (b)(1)). In 2013 the Center for Medicare and Medicaid Services (CMS) clarified and confirmed that anesthesiologist assistants (AAs) are prohibited from billing Medicare for non-medically directed services (billing code QZ). This is in contrast to CRNAS, who are authorized to bill Medicare directly for non-medically directed services. See CMS Policy Transmittal #2716 dated May 30, 2013, available at CMS.go


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