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December 22, 2018

Group Organization, Hospital Contracting, Practice Management Issues and “When It All Goes South"

Paige Covell

Paige Covell
CEO /Paige K. Covell, CMPE

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Times When Accessing a Knowledgeable Consultant is Money Well Spent


Published in Gateway to Anesthesia, Healthcare Profile Supplement to Anesthesiology

Most physicians don’t go into medicine to “run a business.” They go into it because they enjoy the practice of medicine. In more than 40 years of working with anesthesiologists, and physicians in general, I’ve yet to run across a single one who wouldn’t just love to practice his or her specialty and go off for a good round of tennis or spend some time with the kids. Not that any of us wouldn’t envy the simplicity of such a life, but most physicians really just want to put in a full day’s work and then enjoy the fruits of their labor. Sadly, the business end of medicine is fraught with greed and politics. This forces even the most noble of your brethren to learn how to twist with the hospital administrator, foxtrot with other department members and samba with their family members who once again must put up with Mom or Dad’s late night meeting at the hospital because of the latest snafu in their professional life.

I recently attended the ASA’s Practice Management Conference in Phoenix. Being in the business myself, I sought the break-out sessions on hospital contracting. I wasn’t slated to speak at this conference but I was really interested in hearing what others were saying on the issue. Every session featured standing room only at the back of the room where I staked out a spot near the coffee and cold beverages. Was there anybody at the other break-outs?

Clearly, hospital contracting for anesthesia services was the hot topic of the weekend. And rest assured, the information the speakers parsed out was valuable indeed. Armed with the whole nine yards of studies, practice statistics and group composition permutations, an anesthesiologist could feasibly negotiate the landmine field found inside her hospital administrator’s conference room. But how realistic is it? It’s no secret that physicians, as a general rule, make pretty lousy businessmen. I apologize in advance to those unaware, but history is a hard one to beat on this issue. Personally, I believe that only about three percent (3%) of physicians have the true business acumen to do battle with the savvy hospital or IPA administrator and come out with the upper hand.

Yet the “upper hand” isn’t what is usually best. Each party has goals they wish to achieve and, as long as they don’t step on each other’s toes, many of those goals are achievable. The problem, however, is that too often, sometimes without realizing it, what one party is asking for would throw the balance of an agreement off if they actually got what they wanted. And if a contract isn’t balanced fairly, it generally won’t last past its initial term. What was so surprising in Phoenix wasn’t the information that was disseminated; it was the information that wasn’t. Did all of these eloquent speakers (many of whom were excellent with their material, I should mention) really expect all of those attending to be able to take what they were given to then sally forth and conquer? I disappointingly surmised, “Yes!” But as they say in the South, “That dog just won’t hunt.”

I was dumbstruck that not a single speaker (at least not in my presence) even remotely suggested that their admittance-paying listeners consider hiring a consultant to handle the many tasks at hand. As I say on my own website, why spend your hard-earned time struggling with something you don’t enjoy, don’t fully comprehend and don’t do on a regular basis? It would be like me giving myself an anesthetic… The outcome is bleak!

And while hospital contracting comprises about sixty to seventy percent of my work, as the title to this article alludes, it’s not the only activity for which I strongly recommend you seek outside assistance and direction. The real beginning chronologically is when a group is forming or restructuring. There are so many ways to better construct how a group really functions than the manners in which I’ve run across over the years.

Let’s take for example the entity form itself. The most common structure found is the standard corporation, with each anesthesiologist becoming an owner in the corporation. But have you considered a “corporation of corporations” or perhaps an “LLC of LLCs?” You need to check with your state laws, but, using the former, each physician forms his or her own corporation (or retains their existing one if already incorporated before an amalgamation). Then each corporation becomes an owner in the umbrella corporation that is XYZ Anesthesia Medical Group, Inc. Why go through this extra layer? Because in doing so you’re able to continue to maintain your own pension plan and health insurance, et al. It also allows the colleague who wants to write off that summer ski trip to Chile as a medical conference to do so without jeopardizing his buddy who is ultra-conservative with IRS issues. This concept is the same with the LLC vehicle. If there’s one thing I’ve learned over the years, it’s that anesthesiologists are unequaled in their fervent desire to retain their individual autonomy. That’s why these structures are so attractive to gas-passers in particular. There are also income distribution methodologies that effectively socialize the payor mix by pooling your revenues while still retaining the capitalistic incentive to do cases.

As I said above, the key to a successful hospital agreement is one that is balanced and fair, not one that is too heavily weighted to one side or the other. And it’s not just you who needs edification in this area — Administrators are just as naïve about what’s fair in the anesthesia market and they’re even less knowledgeable about how many physicians it really takes to staff a department that runs ten rooms per day (the answer is usually 14 FTE). A great deal of my time when working on hospital agreements is spent educating all of the parties as to what’s truly fair and reasonable to expect.

Is your billing office or service doing a good job? How do you calculate a meaningful collection percentage, and how does it compare? How do you verify that your write-offs are legitimate and in accordance with your guidelines? How do you safeguard against loopholes through which your money gets into someone else’s wallet? Whether you have your own office or employ an outside billing service, you should be concerned. A good consultant will be able to advise you on this and more without the ulterior motive of trying to get your billing business.

Finally, what do you do when your situation has turned into a disaster (or lawsuit)? A common example is someone not taken on as a partner due to supposed discrimination. Whether you’re the victim of alleged discrimination or your group is the alleged offender, you need someone to take a look and give you an expert opinion, which can be different than an attorney’s legal opinion. [Note: While attorneys are good with the law, I know of very few who actually know intimately how the anesthesia world operates (outside of ASA counsel)]. This kind of fight can occur anytime a fractious separation occurs, whether it’s between colleagues or domestic partners, and a good consultant can be of tremendous assistance.

In closing, thank you for reading. I hope that I have helped influence you a bit as to how valuable a good consultant can be with the many issues affecting your professional life. Combined with ethics, diplomacy and a bit of intestinal fortitude, much can be accomplished, with you spending less time in the hot seat and more time on pursuits of your own design.

Comments? You can contact me directly via my AdvisoryCloud profile.

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