How Anesthesia Billing Is Calculated: Base Units, Time Units and Conversion Factors
By Andrew Woodmancey, Managing Director · Published
The short answer: anesthesia is not paid a fixed fee per procedure. Each case is converted into units and the units are priced. The units are the procedure’s base units, which reflect how complex the anesthesia is, plus time units, one for every 15 minutes of anesthesia time under Medicare’s rules. Many commercial payers add units for the patient’s physical status and for special circumstances, though some large payers have stopped; Medicare does not. The total is multiplied by the payer’s conversion factor, a dollar amount per unit: $20.4976 for Medicare nationally in 2026, adjusted for where the care is given, and whatever the contract says for commercial plans, where the average is about four times Medicare’s. The billing modifier then decides how the payment is split when an anesthesiologist directs a CRNA.
The formula
Payment = (base units + time units + any modifying units) × conversion factor × the share the modifier allows
Base units: what the procedure is worth
Every anesthesia code (CPT 00100–01999) carries a fixed number of base units that reflects the complexity of the anesthesia, not the surgery’s fee. Medicare’s values come from the American Society of Anesthesiologists’ Relative Value Guide, with one exception set in regulation: cataract and iridectomy procedures are fixed at 4 units. CMS has kept the same base unit file since 2022 and says the values are unchanged for 2026. Commercial contracts may reference a more recent edition of the ASA guide, which can differ for some codes.
| Code | Procedure | Medicare base units |
|---|---|---|
| 00812 | Screening colonoscopy | 3 |
| 00400 | Skin of the extremities, anterior trunk or perineum | 3 |
| 00142 | Lens (cataract) surgery | 4 |
| 00811 | Lower intestinal endoscopy | 4 |
| 00731 | Upper GI endoscopy | 5 |
| 00813 | Combined upper and lower GI endoscopy | 5 |
| 01967 | Neuraxial labor analgesia (labor epidural) | 5 |
| 00840 | Lower abdomen, intraperitoneal | 6 |
| 00790 | Upper abdomen, intraperitoneal | 7 |
| 01402 | Knee arthroplasty | 7 |
| 01961 | Cesarean delivery | 7 |
| 01214 | Hip arthroplasty | 8 |
| 00797 | Bariatric surgery | 11 |
When several procedures are done under one anesthetic, the case is billed under the code with the highest base units, with the total anesthesia time. Add-on codes, such as 01968 for a cesarean delivery after a labor epidural, are reported separately.
Time units: how long the anesthetic lasts
Medicare counts anesthesia time from when the anesthesia practitioner begins preparing the patient for anesthesia in the operating room or an equivalent area until the patient can safely be placed under postoperative care. The claim reports actual minutes; the Medicare contractor divides by 15 and rounds to one decimal place, so 49 minutes is 3.3 time units. The time must be continuous, though separate blocks of time around an interruption can be added together.
Commercial payers mostly follow the 15-minute unit: 96% of the contracts in ASA’s 2025 survey did, and the rest used 12-, 10- or 1-minute units. Rounding is where they differ. The same 49 minutes is 3.3 units at Medicare, 3 units under rules that only count a partial unit after a minimum number of minutes (some Medicaid programs), and 4 units under contracts that round every partial unit up. Some payers also cap time for particular services, such as labor epidurals.
Time is the part of the bill that depends most on documentation. A record without clear start and stop times, or with gaps, loses units on every case.
Modifying units: physical status and special circumstances
Many payers add units when the patient is sicker or the case is harder. Medicare does not: its regulation allows no modifier units.
| Item | Units (ASA Relative Value Guide) |
|---|---|
| P1, P2 or P6 (healthy, mild disease, organ donor) | 0 |
| P3 (severe systemic disease) | 1 |
| P4 (severe disease, constant threat to life) | 2 |
| P5 (not expected to survive without the operation) | 3 |
| 99100 (patient under 1 or over 70) | 1 |
| 99116 (total body hypothermia) | 5 |
| 99135 (controlled hypotension) | 5 |
| 99140 (emergency) | 2 |
In ASA’s 2025 survey, which covers contracts in effect in 2024, 75% of commercial contracts paid physical status units and 72% paid the qualifying circumstance codes. Some large payers have since stopped: UnitedHealthcare’s commercial policy now pays neither. Medicaid programs vary, and some set their own values. A group that never reports these units to the payers that still pay them is leaving money on the table.
Conversion factors: what one unit is worth
Medicare. The 2026 national anesthesia conversion factor is $20.4976, or $20.5998 for clinicians who qualify through an Advanced Alternative Payment Model. CMS has proposed $20.2143 and $20.4165 for 2027 (the 2027 conversion factor). The rate actually paid is adjusted for each of Medicare’s 109 payment localities:
| Locality | 2026 anesthesia conversion factor |
|---|---|
| Arkansas, Nebraska (lowest) | $19.42 |
| Rest of Texas | $20.21 |
| Los Angeles | $21.26 |
| Chicago | $22.38 |
| Manhattan | $22.81 |
| Alaska (highest) | $28.15 |
Commercial. Each contract sets its own rate. ASA’s 2025 survey of 805 contracts in effect during 2024 found a mean of $82.43 and a median of $76.00 per unit, with the middle half of contracts between $66 and $92. Among the 15 states with enough responses to report, averages ran from about $65 in Illinois to about $122 in New York. Medicare’s rate is roughly a quarter of the commercial average, consistent with the Government Accountability Office’s finding that private payers pay more than three and a half times Medicare for anesthesia.
Medicare Advantage plans typically pay close to the Medicare rate: the same survey found a median of $20.88. Medicaid rates are set by each state, some at or near Medicare and some well below it.
Who gets paid: the modifier
The modifier on the claim decides how the allowed amount is shared:
- AA (anesthesiologist alone) and QZ (CRNA without medical direction): 100%. Several commercial payers now pay QZ at 85%.
- QK or QY (medical direction) with QX for the CRNA: 50% each.
- AD (medical supervision): the anesthesiologist gets 3 base units, plus 1 time unit if present at induction.
On the knee replacement above, medical direction pays $153.73 to each of the anesthesiologist and the CRNA. Each modifier is explained in our guide to anesthesia modifiers.
Why it matters to the hospital paying the subsidy
A hospital’s anesthesia subsidy is the gap between what coverage costs and what the group collects, and collections are units times rate. Small differences in either compound across a year of cases. With the subsidy calculator’s default program — six anesthetizing locations, four cases a day each, 250 days a year — the group bills 6,000 cases a year, and it collects about $42 a unit on average across its payers. Losing one time unit a case to poor documentation costs about $250,000 a year. Commercial rates $10 a unit below market cost about $310,000. Both arrive at the hospital as a request for more support.
Before agreeing to a larger subsidy, it is worth asking the group four questions: how anesthesia time is documented and audited; whether physical status and qualifying circumstance units are billed to the payers that pay them; what its commercial conversion factors are against the market; and what share of cases is billed as medical direction rather than supervision.
Sources
- 42 CFR 414.46 (anesthesia payment: time units, base units, modifier units, medical direction and supervision).
- CMS, Medicare Claims Processing Manual, chapter 12, section 50.
- CMS, Anesthesiologists Center: anesthesia base units by CPT code and 2026 anesthesia conversion factors by locality.
- American Society of Anesthesiologists, 2025 commercial conversion factor survey results, ASA Monitor, November 2025; and Anesthesia Payment Basics on physical status and qualifying circumstances.
- U.S. Government Accountability Office, GAO-21-41 (2020), private and Medicare payment for anesthesia services.