Independence vs. Assimilation of Anesthesiology Groups KOAMA 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 An Endangered Species: Small to Medium-Sized Independent Anesthesiology Groups

Independence

Assimilation

“Resistance is Futile”

“I am part of the Collective ”

Not all assimilation is bad

Assimilation All or most members of an existing anesthesiology professional services corporation become employees or shareholders of another organization.

Assimilation into: Hospital Practice Management Company Local Megagroup Regional Megagroup

Assimilation Method Lucrative Sellout Pediatrix Sheridan Anesthetix Rescue from implosion Hospital employment Hospital 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 Practices MD’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 A MD’s Hospital Practice Manager Billing Company Management company Accountant / Lawyer Practice Non-clinical employees Vendors (insurance) Patients ?? CRNA’s ??

Will I be the Assimilator or Assimilated?

Sometimes the best defense is a good offense. Initiate merger with equal groups or Assimilate smaller groups

Work Anesthesiologist Paradigm Control Pay 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 C $ $ W W C C $ $ W 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