Independence vs. Assimilation of

Anesthesiology GroupsKOAMA Santa Fe 2008

Joe Laden

Why this presentation?

ASA Involvement

An Endangered Species: Small to Medium-Sized Independent Anesthesiology Groups

ASA Newsletter, May 2008

Preparing the Case for Hospital Financial Support ASA Practice Management Conference 2008

Independence

Assimilation

“Resistance is Futile”

“I am part of the Collective”

Not all assimilation is bad

AssimilationAll or most members of an existing

anesthesiology professional services corporation become employees or shareholders of

another organization.

Assimilation into:

Hospital Practice Management CompanyLocal MegagroupRegional Megagroup

Assimilation MethodLucrative Sellout

PediatrixSheridanAnesthetix

Rescue from implosion Hospital employmentHospital procures PMC or Megagroup

Improvement of Situation (group initiated)Join megagroup, PMC or hospital voluntarily

How are practices purchased?

• Group – 20 MD’.s, 60 CRNA’s• Great payer mix, expanding market• W-2 = $550k• Reduce W-2 to $350K = $4m “profit/earnings”• Times earnings = 8 = $32m• 16 shareholders• $2,000,000 per shareholder paid as cap gain

Assimilation Drivers

• Capitalize Lucrative PracticesMD’s over $500k

Few Owners

• Hospitals refuse higher anesthesia stipends Greater than $100k stipend per OR

• Anesthesia practices seeking greater efficiency and negotiating power

How does this affect

ME?

Stakeholders affected by I vs AMD’s

HospitalPractice ManagerBilling Company

Management company Accountant / Lawyer

Practice Non-clinical employeesVendors (insurance)

Patients ??CRNA’s ??

Will I be the

Assimilator or

Assimilated?

Sometimes the best defense is a good offense.

Initiate merger with equal groupsor

Assimilate smaller groups

Work

Anesthesiologist Paradigm

Control

Pay

Work

Work

Time• Hours Per Day• Weeks Per

Year• Late Hours• In-House Call• Beeper Call• Weekends

Intensity • Sick Patients• Rapid

Turnover• Understaffed• Residents• SRNA’s• Trauma

Training/Skill • Cardio/TEE• Pediatric• Post-op Blocks• Pain Mgmt.• Critical Care

Pay

• Salary , Bonus & Benefits• Income Division Formula• Source– Patient Fees– Hospital Stipend– Hospital Salary

Pay

• Length of Employment Contract• Variability of Pay• Stability of Source• Availability of Extra Pay

Control

• Ownership• Shareholder / Partner• Voting Rights• Election of Directors / Managers• Determine Staffing• Set Work Schedules• Control Contracts With Facilities

C$

W

C$

W

Independent

Assimilated

Analyze How These Factors Change In Both Scenarios

Benefits of Assimilation to MD• Income fixed for guarantee period• Increase in income • Income guaranteed by large entity• On “same page” with hospital• Few worries about personnel shortage• Elimination of dysfunctional doctors• Expectations are contractually

delineated• Less dependence on others in group• Don’t have to deal with CRNA problems

Benefits of Assimilation to MD

• Quality management program implemented and funded by employer or megagroup

• Less or no time spend on managerial and business matters

• No need to negotiate with managed care companies

Benefits of Independence to MD

• Choose and hire own doctors • CRNA’s – Use or not• CRNA:MD Ratio• Negotiate Coverage With Hospital• Negotiate Clinical Standards With Hospital

Disadvantages of Independence to MD’s

• Must devote time and talent to run business • Difficult to discipline partners / terminate

partners• Variable income• Recruiting Issues• CRNA business issues• Small groups may be at competitive

disadvantage with managed care, vendors

Disadvantages of Assimilation to MD’s

• Income may be less• Little or no input in choosing clinicians• Cannot control MD:CRNA ratio to one’s benefit• Employer may have a take or leave it attitude • Employer controls staffing, scheduling and call• May be difficult accept employer-appointed leader • Future will depend on future of employer/group• What will happen at end of contract period?

The Future• Increased government involvement in healthcare• CRNA’s outnumber anesthesiologists• Increased hospital employment of all specialties• Package pricing via hospitals• Extinction of small anesthesiology groups• Vertical Integration of hospital-based MD’s• CRNA controlled anesthesia departments

Anesthesiologist’s Strategic Planning

• Can my current practice organization prevail?• How can I best react to unknown future

changes?• Which changes will affect me most?• Which path should I choose for the future?

Thank you!

• Questions • Observations• Comments