The Financial Incentives of Anesthesia Group Acquisitions

Medical group acquisitions have continued to trend upwards in recent years. A study conducted by the Physicians Advocacy Institute (PAI) found that in a 5.5-year period from July 2012-January 2018, the percentage of hospital-employed physicians increased by over 70%. In the same period, the number of physician practices employed by hospitals grew by 44,000 practices [1]. According to the American Society of Anesthesiologists, the United States employs 52,000 practicing anesthesiologists in an industry that generates $19 billion in revenue [2]. It is becoming increasingly important for anesthesia providers to have a good understanding of the merger and acquisitions landscape in order to make informed decisions about their own practices now and in the future–be it staying with a group that is joining a larger network or avoiding groups that are undergoing an acquisition.

There are many benefits to operating as a single-specialty physician group compared to an integrated hospital or larger provider network. As others have pointed out, the small size of physician groups allows for increased flexibility in deciding operating hours and service offerings and the lack of inter-department competition can allow for more cooperation and collaboration between physicians within an independent group. These groups are also able to respond to shifting market pressures and new care guidelines more easily and quickly [3].

The changing demographic make-up of patient populations, along with new models of value-based care pose a challenge to these groups despite the many advantages of their unique position within the healthcare environment. Increased documentation and reporting requirements that require upgraded data analytics and electronic health record infrastructure may incentivize smaller groups to partner with larger practices or hospitals that already have these systems in place. Additionally, the move to lower cost surgical settings such as ambulatory surgery centers (ASCs) mean that private anesthesiology practices that are accustomed to providing hospital-based coverage now have to adapt to a surgical landscape with less income stability as surgical volumes become spread out across many sites with shorter contracts. Partnering with private equity firms is one avenue for smaller groups to mitigate contract risk and gain access to a broader pool of providers [4]. Additional incentives for entering into acquisition deals include opportunities for senior group members to monetize on growth, outsourcing management expertise and infrastructure that allows physicians to focus on clinical work, access to risk and quality management and compliance programs, the potential for increased income with the integration of non-physician staff such as certified registered nurse anesthetists (CRNAs) and anesthesiologist assistants (AAs) as well as income and employment security [5].

Larger organizations such as hospitals, private equity firms, and practice management companies stand to benefit from the acquisition of smaller physician groups. Hospitals gain more control over specialty referrals within their hospital network through such acquisitions. Additional financial considerations include the increased costs to the Medicare program and larger financial burdens placed on patients when a higher proportion of services are performed in the hospital setting. According to the PAI report, Medicare spends more on an episode of care when services are provided in an HOPD setting for a variety of specialties. For instance, cardiac imaging costs $5148 for an episode of care in an outpatient department, compared to $2862 in a physician office [1, 6]. Acquirers are also motivated by potential revenues to be generated from a successful anesthesia practice with demonstrated relationships with hospitals and health systems, sound leadership, and quality clinical service [5].

There are also risks for small groups considering becoming an acquiree. Because the ultimate goal of anesthesia group acquisitions by larger bodies is to profit, anesthesiologist salaries may decline overtime as the outcome of an acquisition is always to share profits with another entity. Additionally, purchasers may have little to no experience with anesthesiology or medicine to support the continued success of the practice [5]. Thus, it is important for potential acquirees to conduct thorough research into acquiring bodies when considering the future success of the practice and to come to a mutually satisfactory payment agreement.

As we can see, the incentives for anesthesia group acquisitions are diverse in nature. Financial considerations play a significant role in group acquisition decisions as smaller anesthesia groups make protective moves in search of income and employment stability and decreased contract risk in a changing healthcare environment. Larger bodies are also able to financially support information technology and analytics infrastructure development needed to meet new reporting requirements and provide managerial expertise to these smaller practices. Hospitals, private equity firms, and practice management companies are able to capitalize on successful practices with established hospital and patient relationships and a good track record for providing quality services.


1. Updated Physician Practice Acquisition Study: National and Regional Changes in Physician Employment 2012-2016, P.A. Institute, Editor. 2019, Avalere Health

2. Anesthesiologists Industry Profile. First Research, 2019.

3. Moriarty, A., Why are hospitals buying physician groups? 2018: Definitive Healthcare.

4. Consolidation in Anesthesia, in Provident Perspectives 2018, Provident Healthcare Partners.

5. Mira, T., Practice Management Companies’ Acquisitions of Anesthesia Practices. 2012, The Anesthesia Insider

6. Rosenberg, J., Hospital Acquisition of Independent Physician Practices Continues to Increase. 2018, AJMC Managed Markets Network.

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