How AB5 Regulations Have Challenged Your Anesthesia Department

monitoring a patient in surgery to illustrate AB5 regulations
February 15, 2023 0 Comments

If you’re involved in hospital administration, you know the challenging effects of California Assembly Bill 5 (AB5) regulations on your facility. You’ve probably gathered a list as high as Mount Whitney – and as chilling!

After all, surgery is your biggest income generator and anesthesiologists a major part of your operating room.

So – three years after AB5 came into force – let’s review how things look for your anesthesia department.

We’ll also talk about possible ways forward, based on experience. But first…

Unintended Collateral of AB5 Regulations

AB5 aimed to protect gig workers in many sectors of business, such as Uber and Lyft.

But, when legislation is not carefully thought through, there’s collateral!

Some of the most significant casualties among this collateral are hospitals.

In hindsight, there are two main reasons why hospital anesthesiology ought to have come up for consideration at an early stage in the Bill’s drafting:

1 Every medical center needs anesthesia staff, and the new AB5 regulations make it more difficult to classify those workers as independent contractors – which they often are. Yet, without CRNAs, no surgery can happen.

2 We’re talking about the healthcare of Californian residents. All motivation, growth, and prosperity in California depends on addressing the population’s health and wellness. See Maslow’s Hierarchy of Needs, where survival forms the first rung of the ladder. And think how a patient’s sole focus is on getting better!

So – the effects of AB5 rules are (frustratingly) felt much further afield and for longer term than the rule makers intended.

But we’ll turn now to specific challenges for hospitals and anesthesia departments,

The Classification Challenge of AB5

You’ll likely have found it difficult to classify your anesthesiology workers as independent.

The criteria are strict. It’s a balancing act trying to prove (according to the ABC test) that

  • one of your employees is truly free from your direction and control,
  • they really do undertake work outside your hospital – they may work all the hours they need with you, and
  • they usually trade independently.

If you can’t prove their rightful classification as an independent contractor, they may leave to work in a different state. But if they stay on as “employees,” you’ve gained a financial burden. It feels like a situation you can’t win!

The Financial Impact of AB5 on Hospitals in California

Anesthesiology departments often rely heavily on independent contractors, such as nurse anesthetists, to provide specialized services.

If you’ve been forced into considering them as employees rather than independent contractors, you’re now subject to ongoing costs such as

  • higher payroll taxes,
  • workers’ compensation insurance premiums, and
  • other benefits such as healthcare and retirement plans.

It’s a headache. Will you hire additional staff (to keep shift hours within bounds)? Or reduce services in order to manage these expenses?

You may also have had to pay back-wages and penalties if the authorities found you misclassified workers in the past.

Overall, however, the financial impact of AB5 regulations on your hospital will depend on factors such as

  • the size of your hospital,
  • the types of workers affected, and
  • whether they were previously classified correctly under existing laws.

But in every case, financial implications affect staffing and your business’s survival.

Staffing and Running an Anesthesiology Department under AB5

Since the introduction of AB5 regulations, some independent contractors (including CRNAs) choose not to work for hospitals that classify them as employees under AB5.

It’s understandable: They value their flexibility and autonomy.

But California suffers a chronic shortage of anesthesia providers. With a population of 40 million, you clearly need more than the approximately 6,300 anesthesiologists and 2,500 CRNAs available.

AB5 regulations have therefore led to staffing shortages in anesthesiology departments and longer wait times for patients needing anesthesia services.

And then there’s the safety factor. Patients and surgeons prefer continuity of care. If your CRNA has to go off shift after eight hours (due to now being a W2 employee), the replacement will not know that patient.

Clearly, collateral that involves patient safety will have distressed you, to put it mildly! And this adds to all kinds of fears for your hospital’s surgery schedules and how well you can run your operating room.

Fears For the Future Under AB5 Regulations

If you’re responsible for staffing your hospital anesthesiology department, you may recognize some of these fears:

  • Not being able to attract and retain top talent due to the increased costs associated with complying with AB5 regulations.
  • Finding you have a shortage of CRNAs, leading to cancelled surgeries.
  • Seeing an adverse impact on your hospital’s patient care.
  • Finding your hospital’s reputation harmed.
  • Facing possible legal consequences and financial penalties, which would further strain your already precarious financial situation.

Some hospitals have closed as a result of the regulations.

For example, in rural and underserved areas, CRNAs act – in effect – as physicians, competently administering anesthesia.

But with the overall shortage of CRNAs in California – and some out-of-state CRNAs refusing to work under the new rules – there’s sometimes no option but to close.

That’s the last thing you want if your facility is in these vulnerable areas where need is high. Like us, you probably believe accessible healthcare is a necessity not a luxury.

What can be done? In some areas, you may be able to introduce one of the following options to mitigate some of the challenges of AB5.

Three Options to Counteract the Challenges

1 Increase fees

You might choose to increase fees for surgeries and other procedures in the OR. This could offset some AB5 costs and allow you to attract and retain talent. However, this threatens accessibility to healthcare in some populations.

2 Invest in technology

You might be able to introduce technology such as tele-anesthesia. In the near future, automated anesthesia could also help you survive by using fewer anesthesia providers.

3 Partner with other hospitals

Sharing costs with other hospitals or providers in the area can lead to pooling resources and economies of scale that would help you maintain patient care.

Meridian Medical Solutions Can Help You

We understand the challenges AB5 brought about. If you’re looking for a solution that serves both your patients and your financial health, Meridian Medical Services offers a network of highly skilled providers in any medical area that needs anesthesia services.

As experienced administrators and managers, we can also take over your anesthesiology department, negotiate contracts, reduce your overheads, improve outcomes and turnover times, and help you run lean.

We’re deeply committed to transparency, so if you need top anesthesiology talent in your ORs, schedule your consultation with us today. Let’s talk!

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How AB5 Regulations Have Challenged Your Anesthesia Department
The effects of California's AB5 regulations are challenging for anesthesia departments and ORs. Review and learn some possible ways forward!