- Email: [email protected]
We do exactly what every other anesthesia group does, so why are we doing so poorly?
Seminars in Anesthesia, Perioperative Medicine and Pain (2005) 24, 226-228
We do exactly what every other anesthesia group does, so why are we doing so poorly? Mark F. Weiss, JD From the Advisory Law Group, Santa Monica, California. Chances are, if you’ve ever negotiated an exclusive contract or served as a leader of an anesthesia group, you’ve encountered a hospital administrator who treats, or even describes, the anesthesia department as a commodity-type support service, not that much different from the role of the hospital’s laundry or cafeteria. Of all the professional insults, this has got to rank high on the “it really ticks me off scale” for anesthesiologists. Yet, it pays to consider to what extent anesthesia group leaders have fostered this perception through their own acts and omissions. After all, putting aside the degree to which it is professionally demeaning, the receipt of this sort of treatment is a gauge of the effectiveness of the group’s projection of itself as an entity providing a valuable professional service, and as an entity which is viable separate and apart from the hospital. Yet this is the very problem facing many anesthesia groups. As opposed to multi-physician practices that come together proactively to leverage their owners’ ability to deliver services and produce income, it’s far too common for anesthesia groups to come together reactively as a result of an overture from hospital administration. And then, once they come together, they do little or nothing to establish themselves, and, importantly, the perception of themselves, as a premier service provider to their patients, their referring surgeons, and the hospital. How can you effectively negotiate any deal if the other side sees that the mere existence of a deal is what defines you as a business? You can’t. As I’ve written before for this journal (see The Future of Anesthesia Practice: Hedge Your Practice’s Chances of
Address reprint requests and correspondence: Mark F. Weiss, 1601 Cloverfield Boulevard, 2nd Floor, South Tower, Santa Monica, CA 90404. E-mail: [email protected]
0277-0326/$ -see front matter © 2005 Elsevier Inc. All rights reserved. doi:10.1053/j.sane.2005.10.003
Being On, Not Under, the Leading Edge of the Wave, which appears in the June 2005 issue), anesthesia groups must adopt business practices that will permit them to succeed in a changing and uncertain future. After all, if you don’t write the script for your own future, someone else will. No matter how formed, as a result of its members’ own initiative or as a seed planted by the hospital’s CEO, no group can gain the necessary leverage to obtain maximum income, significant hospital stipend support, and business longevity if it does not develop beyond its initial hospital base. Simply being wed to the hospital isn’t a business strategy; rather it’s simply a formula for distress, not success— business failure on the installment plan. If you think that this is pie in the sky, that providing anesthesia services at a hospital is indeed a commodity, that showing up relatively on time and doing cases at a level that meets the standard of care should be enough, I ask only that you consider that smart distributors of lettuce, an ultimate commodity, have transformed their market by washing, cutting, bagging, and selling at premium prices “ready-cut” salad mixes, going from near zero to $3.5 billion a year in a bit more than a decade. If it’s possible to transform head lettuce selling for $2 a pound into 5-ounce “salads” selling for $3 to $4 (that’s $9 to $12 per pound), it’s certain that you can transform an anesthesia group from a perceived commodity to a high value-added business. Thrill your patients, thrill your colleagues, thrill your referral sources, thrill your hospitals— and charge for your services commensurate to the value you deliver. Think person to person pre-op contact as the rule; managing the OR case flow; establishing an interactive Web site for patients and referring physicians; becoming very active on medical staff committees; developing your own protocols, without hospital prodding, to reduce anesthesia
Weiss
Evaluating the Anesthesia Group
costs and to increase surgical turn around time—these are but a few examples. If you still don’t believe an anesthesia group can be so transformed that’s okay, the person who takes over your position probably will. As General Eric K. Shinseki, former Army Chief of Staff, put it, “If you don’t like change, you’re going to like irrelevance even less.”
Is a group really a viable business if it practices at only one hospital? Look at it this way. Assume you have $100,000 to passively invest in a hospital laundry service. Would you invest in one with many customer accounts or one that works only for one hospital? The one with many customer accounts, of course, as the service has spread risk. If the need to diversify is seen as so important for your investment in a laundry service, why is it seen as so unimportant for the core business of so many anesthesia groups? Look at it less metaphorically: Your group of 10 anesthesiologists holds the exclusive contract at your hospital. No one in the group practices anywhere else. In the course of your discussions about contract renewal, you tell the hospital’s CEO that you need a trauma stipend and an OB stipend because there is little income from providing these services at the facility. What leverage do you have in persuading the CEO to pay up? Sure, as long as there is a relative shortage of anesthesiologists, the CEO might be hard pressed to replace the group. But what if you’re in a desirable metropolitan location with a number of anesthesiologists who might split off from other facilities to take your contract? Even if you’re in a rural area with zero-degree winters and mosquitoes the size of hummingbirds in the summer, the CEO just might think she can replace you. How hard are you going to bargain if losing the deal means that everyone in the group has to look for new jobs? How hard are you going to bargain if those new jobs are 50 or 100 or even 500 miles away? If you think that the CEO doesn’t know this, you’re probably fooling yourself. And even if the CEO starts off truly in the dark, there’s always the possibility, unfortunately far too high in my experience, that a rogue member of the group who’s afraid of having to uproot her husband and two elementary school age kids or who’s afraid that he’s too old to find another position, will approach the CEO and let her know you’re all boxed in. The reality is that there’s little “win–win” and a lot of “win–lose” in the world of negotiating anesthesia contracts. Having Archimedes’ lever— or Teddy Roosevelt’s big stick—is of dire importance. And you’ve got little to no leverage if your only option is to take it or leave town.
227
If you can brand lettuce, you can brand anesthesia services Ready-Pac® is a brand of lettuce. Chiquita®, of course, is a brand of bananas. So why haven’t you branded your anesthesia services? What is a “brand?” It’s been described variously as a name or symbol that distinguishes your services from those of other providers, or as an identification that your service delivers a promised quality. Better yet, a brand is a perception created in the minds of the target audience. In other words, branding is telling a story. Those of you who have read my other work know that I am a fan of Rolf Jensen, the noted futurist and author of The Dream Society. As Jensen might put it, successful branding is telling the better story, as the public is no longer convinced on the basis of facts alone, feelings having replaced facts as the major motivator. Anesthesia groups certainly have the “raw material” with which to brand. Instead of being viewed (or perhaps better said, not seen at all) as the ghost-like providers who send patients bills for doing some such thing during surgery, branding the group’s services brings an awareness of the fact that your physicians not only remove the pain, but keep Mr. or Ms. Smith alive during surgery. Additionally, branding brings an awareness of the benefits provided by your group—the story it tells to convince its audience of the advantages of dealing with you. Many anesthesia groups are in a good position to brand their services in order to build awareness among the general public of the quality of their service and, perhaps more importantly, in order to leverage off that perception as a tool to convince surgeons, hospitals, and surgery centers that using their group will increase revenues due to higher patient confidence. This is certainly the case in metropolitan areas with multiple hospitals and other surgical facilities, markets in which there are likely multiple anesthesia groups. But it’s also true in more rural areas, where anesthesia groups successful in providing a high quality of service at one hospital branch out to provide similar services in neighboring communities.
Dynamic leadership needed To succeed in the near future, groups need leaders who are not satisfied with maintaining the status quo or even with slow forward movement. Groups need leaders who are not afraid to fail and then to pick up the pieces and try again. At the same time, in order to assure their long-term success, group members must allow their leaders the freedom to fail forward quickly.
228
Seminars in Anesthesia, Perioperative Medicine and Pain, Vol 24, No 4, December 2005
I’m not saying that it’s easy, only that it’s required One group leader who spoke with me about his experience on the condition of confidentiality (no, there’s not yet a total freedom to fail in his situation) described the difficulty of transforming his group with a practice base at a very large metropolitan area hospital, at which it holds the exclusive anesthesia contract. Although he did not perceive what he had accomplished as “branding,” Dr. X has branded the group in terms of its relationship with the hospital and payors by pushing the breadth and sophistication of his group; this effort was undertaken to justify the dramatic increase in reimbursement to the group that he has accomplished over the past several years. In addition to not being afraid to take an aggressive posture with managed care payors (he’s refused to contract with IPAs and HMOs that won’t pay what he believes are fair rates for the level of service his group provides), he’s pushed the hospital hard in terms of payments to the group. In addition to their hospital base, the group provides service at another significant-sized hospital as well as at several surgery centers. Even so, Dr. X has had to pull along, kicking and screaming, some of the group’s members. One problem: Some group members now consider the group so elite that they refuse to consider providing services at smaller, community hospitals—those facilities just aren’t “important” enough—and the thought of having to incorporate some of those facilities’ anesthesiologists into their group, anesthesiologists who perhaps didn’t train at the most prestigious programs, is abhorrent. John Keating, MD, and Douglas Etsell, MD, the present and immediate-past presidents of their group, Anesthesia Medical Group of Santa Barbara (“AMGSB”), shared some of their experiences in leading their group in a different market setting. As opposed to the large metropolitan setting of Dr. X’s group, with more than a dozen acute care hospitals within a convenient drive, AMGSB is based at Santa Barbara Cottage Hospital, the sole acute care facility within the city of Santa Barbara, a city of approximately 80,000, and one of only two such facilities, both operated by the Cottage Health System, within the coastal region of Santa Barbara County. The geography of Santa Barbara is such that it has a relatively isolated healthcare market. On the one hand, the geographic niche has protected AMGSB from significant competition— even though the group does not hold an ex-
clusive contract, it provides all of the anesthesia care at the hospital and the majority of the anesthesia care in the city. On the other hand, the dearth of competing healthcare facilities reduces the opportunity for expansion. Although they are the largest anesthesia player in their market, AMGSB has not engaged in the type of branding that I advocate above, in part because of sensitivity to differentiating the quality of their anesthesiologists from that of their major competitors, who practice at the smaller acute care hospital operated some 6 miles distant by the same healthcare system. In addition to all of the work at Santa Barbara Cottage Hospital, they have developed outside sites in part through cooperating in the marketing efforts of plastic surgeons who tout all-M.D. anesthesia to their prospective patients. AMGSB’s leaders have informally implemented a system to encourage their physicians to develop additional work site opportunities for the group. Although they do not offer a financial reward to the “finder,” they have tried other incentives. In one instance, which they do not intend to repeat, the finder was given the right to accept the medical director position at the found facility. It’s important to note that, in pursuing outside work, AMGSB views all intraoperative anesthesia work as group opportunities. In other words, a potential outside site is either taken as a group site or is passed over—individual members are not allowed to pursue the work independently. AMGSB assesses opportunities for their ability to bring in more work with a significant bump up in practice value, such as cash payments for plastic surgery cases and the fact that the site comes without concomitant call obligations. Simply receiving more work without a major financial reward to the group is not seen as a viable opportunity.
Conclusion Distinguish your group as a cutting edge leader, forget about being in the pack and forget about benchmarking. “If it works, it’s obsolete” –Marshall McLuhan. It’s inconsequential to your future that your group has been run in its present manner successfully for the past 10 or even 20 years. “No Matter How Far You Have Gone on the Wrong Road, Turn Back” — Turkish Proverb. Can’t add a thing. . . “The world is full of people whose notion of a satisfactory future is, in fact, a return to the idealized past.” –Robertson Davies.
We do exactly what every other anesthesia group does, so why are we doing so poorly? Mark F. Weiss, JD From the Advisory Law Group, Santa Monica, California. Chances are, if you’ve ever negotiated an exclusive contract or served as a leader of an anesthesia group, you’ve encountered a hospital administrator who treats, or even describes, the anesthesia department as a commodity-type support service, not that much different from the role of the hospital’s laundry or cafeteria. Of all the professional insults, this has got to rank high on the “it really ticks me off scale” for anesthesiologists. Yet, it pays to consider to what extent anesthesia group leaders have fostered this perception through their own acts and omissions. After all, putting aside the degree to which it is professionally demeaning, the receipt of this sort of treatment is a gauge of the effectiveness of the group’s projection of itself as an entity providing a valuable professional service, and as an entity which is viable separate and apart from the hospital. Yet this is the very problem facing many anesthesia groups. As opposed to multi-physician practices that come together proactively to leverage their owners’ ability to deliver services and produce income, it’s far too common for anesthesia groups to come together reactively as a result of an overture from hospital administration. And then, once they come together, they do little or nothing to establish themselves, and, importantly, the perception of themselves, as a premier service provider to their patients, their referring surgeons, and the hospital. How can you effectively negotiate any deal if the other side sees that the mere existence of a deal is what defines you as a business? You can’t. As I’ve written before for this journal (see The Future of Anesthesia Practice: Hedge Your Practice’s Chances of
Address reprint requests and correspondence: Mark F. Weiss, 1601 Cloverfield Boulevard, 2nd Floor, South Tower, Santa Monica, CA 90404. E-mail: [email protected]
0277-0326/$ -see front matter © 2005 Elsevier Inc. All rights reserved. doi:10.1053/j.sane.2005.10.003
Being On, Not Under, the Leading Edge of the Wave, which appears in the June 2005 issue), anesthesia groups must adopt business practices that will permit them to succeed in a changing and uncertain future. After all, if you don’t write the script for your own future, someone else will. No matter how formed, as a result of its members’ own initiative or as a seed planted by the hospital’s CEO, no group can gain the necessary leverage to obtain maximum income, significant hospital stipend support, and business longevity if it does not develop beyond its initial hospital base. Simply being wed to the hospital isn’t a business strategy; rather it’s simply a formula for distress, not success— business failure on the installment plan. If you think that this is pie in the sky, that providing anesthesia services at a hospital is indeed a commodity, that showing up relatively on time and doing cases at a level that meets the standard of care should be enough, I ask only that you consider that smart distributors of lettuce, an ultimate commodity, have transformed their market by washing, cutting, bagging, and selling at premium prices “ready-cut” salad mixes, going from near zero to $3.5 billion a year in a bit more than a decade. If it’s possible to transform head lettuce selling for $2 a pound into 5-ounce “salads” selling for $3 to $4 (that’s $9 to $12 per pound), it’s certain that you can transform an anesthesia group from a perceived commodity to a high value-added business. Thrill your patients, thrill your colleagues, thrill your referral sources, thrill your hospitals— and charge for your services commensurate to the value you deliver. Think person to person pre-op contact as the rule; managing the OR case flow; establishing an interactive Web site for patients and referring physicians; becoming very active on medical staff committees; developing your own protocols, without hospital prodding, to reduce anesthesia
Weiss
Evaluating the Anesthesia Group
costs and to increase surgical turn around time—these are but a few examples. If you still don’t believe an anesthesia group can be so transformed that’s okay, the person who takes over your position probably will. As General Eric K. Shinseki, former Army Chief of Staff, put it, “If you don’t like change, you’re going to like irrelevance even less.”
Is a group really a viable business if it practices at only one hospital? Look at it this way. Assume you have $100,000 to passively invest in a hospital laundry service. Would you invest in one with many customer accounts or one that works only for one hospital? The one with many customer accounts, of course, as the service has spread risk. If the need to diversify is seen as so important for your investment in a laundry service, why is it seen as so unimportant for the core business of so many anesthesia groups? Look at it less metaphorically: Your group of 10 anesthesiologists holds the exclusive contract at your hospital. No one in the group practices anywhere else. In the course of your discussions about contract renewal, you tell the hospital’s CEO that you need a trauma stipend and an OB stipend because there is little income from providing these services at the facility. What leverage do you have in persuading the CEO to pay up? Sure, as long as there is a relative shortage of anesthesiologists, the CEO might be hard pressed to replace the group. But what if you’re in a desirable metropolitan location with a number of anesthesiologists who might split off from other facilities to take your contract? Even if you’re in a rural area with zero-degree winters and mosquitoes the size of hummingbirds in the summer, the CEO just might think she can replace you. How hard are you going to bargain if losing the deal means that everyone in the group has to look for new jobs? How hard are you going to bargain if those new jobs are 50 or 100 or even 500 miles away? If you think that the CEO doesn’t know this, you’re probably fooling yourself. And even if the CEO starts off truly in the dark, there’s always the possibility, unfortunately far too high in my experience, that a rogue member of the group who’s afraid of having to uproot her husband and two elementary school age kids or who’s afraid that he’s too old to find another position, will approach the CEO and let her know you’re all boxed in. The reality is that there’s little “win–win” and a lot of “win–lose” in the world of negotiating anesthesia contracts. Having Archimedes’ lever— or Teddy Roosevelt’s big stick—is of dire importance. And you’ve got little to no leverage if your only option is to take it or leave town.
227
If you can brand lettuce, you can brand anesthesia services Ready-Pac® is a brand of lettuce. Chiquita®, of course, is a brand of bananas. So why haven’t you branded your anesthesia services? What is a “brand?” It’s been described variously as a name or symbol that distinguishes your services from those of other providers, or as an identification that your service delivers a promised quality. Better yet, a brand is a perception created in the minds of the target audience. In other words, branding is telling a story. Those of you who have read my other work know that I am a fan of Rolf Jensen, the noted futurist and author of The Dream Society. As Jensen might put it, successful branding is telling the better story, as the public is no longer convinced on the basis of facts alone, feelings having replaced facts as the major motivator. Anesthesia groups certainly have the “raw material” with which to brand. Instead of being viewed (or perhaps better said, not seen at all) as the ghost-like providers who send patients bills for doing some such thing during surgery, branding the group’s services brings an awareness of the fact that your physicians not only remove the pain, but keep Mr. or Ms. Smith alive during surgery. Additionally, branding brings an awareness of the benefits provided by your group—the story it tells to convince its audience of the advantages of dealing with you. Many anesthesia groups are in a good position to brand their services in order to build awareness among the general public of the quality of their service and, perhaps more importantly, in order to leverage off that perception as a tool to convince surgeons, hospitals, and surgery centers that using their group will increase revenues due to higher patient confidence. This is certainly the case in metropolitan areas with multiple hospitals and other surgical facilities, markets in which there are likely multiple anesthesia groups. But it’s also true in more rural areas, where anesthesia groups successful in providing a high quality of service at one hospital branch out to provide similar services in neighboring communities.
Dynamic leadership needed To succeed in the near future, groups need leaders who are not satisfied with maintaining the status quo or even with slow forward movement. Groups need leaders who are not afraid to fail and then to pick up the pieces and try again. At the same time, in order to assure their long-term success, group members must allow their leaders the freedom to fail forward quickly.
228
Seminars in Anesthesia, Perioperative Medicine and Pain, Vol 24, No 4, December 2005
I’m not saying that it’s easy, only that it’s required One group leader who spoke with me about his experience on the condition of confidentiality (no, there’s not yet a total freedom to fail in his situation) described the difficulty of transforming his group with a practice base at a very large metropolitan area hospital, at which it holds the exclusive anesthesia contract. Although he did not perceive what he had accomplished as “branding,” Dr. X has branded the group in terms of its relationship with the hospital and payors by pushing the breadth and sophistication of his group; this effort was undertaken to justify the dramatic increase in reimbursement to the group that he has accomplished over the past several years. In addition to not being afraid to take an aggressive posture with managed care payors (he’s refused to contract with IPAs and HMOs that won’t pay what he believes are fair rates for the level of service his group provides), he’s pushed the hospital hard in terms of payments to the group. In addition to their hospital base, the group provides service at another significant-sized hospital as well as at several surgery centers. Even so, Dr. X has had to pull along, kicking and screaming, some of the group’s members. One problem: Some group members now consider the group so elite that they refuse to consider providing services at smaller, community hospitals—those facilities just aren’t “important” enough—and the thought of having to incorporate some of those facilities’ anesthesiologists into their group, anesthesiologists who perhaps didn’t train at the most prestigious programs, is abhorrent. John Keating, MD, and Douglas Etsell, MD, the present and immediate-past presidents of their group, Anesthesia Medical Group of Santa Barbara (“AMGSB”), shared some of their experiences in leading their group in a different market setting. As opposed to the large metropolitan setting of Dr. X’s group, with more than a dozen acute care hospitals within a convenient drive, AMGSB is based at Santa Barbara Cottage Hospital, the sole acute care facility within the city of Santa Barbara, a city of approximately 80,000, and one of only two such facilities, both operated by the Cottage Health System, within the coastal region of Santa Barbara County. The geography of Santa Barbara is such that it has a relatively isolated healthcare market. On the one hand, the geographic niche has protected AMGSB from significant competition— even though the group does not hold an ex-
clusive contract, it provides all of the anesthesia care at the hospital and the majority of the anesthesia care in the city. On the other hand, the dearth of competing healthcare facilities reduces the opportunity for expansion. Although they are the largest anesthesia player in their market, AMGSB has not engaged in the type of branding that I advocate above, in part because of sensitivity to differentiating the quality of their anesthesiologists from that of their major competitors, who practice at the smaller acute care hospital operated some 6 miles distant by the same healthcare system. In addition to all of the work at Santa Barbara Cottage Hospital, they have developed outside sites in part through cooperating in the marketing efforts of plastic surgeons who tout all-M.D. anesthesia to their prospective patients. AMGSB’s leaders have informally implemented a system to encourage their physicians to develop additional work site opportunities for the group. Although they do not offer a financial reward to the “finder,” they have tried other incentives. In one instance, which they do not intend to repeat, the finder was given the right to accept the medical director position at the found facility. It’s important to note that, in pursuing outside work, AMGSB views all intraoperative anesthesia work as group opportunities. In other words, a potential outside site is either taken as a group site or is passed over—individual members are not allowed to pursue the work independently. AMGSB assesses opportunities for their ability to bring in more work with a significant bump up in practice value, such as cash payments for plastic surgery cases and the fact that the site comes without concomitant call obligations. Simply receiving more work without a major financial reward to the group is not seen as a viable opportunity.
Conclusion Distinguish your group as a cutting edge leader, forget about being in the pack and forget about benchmarking. “If it works, it’s obsolete” –Marshall McLuhan. It’s inconsequential to your future that your group has been run in its present manner successfully for the past 10 or even 20 years. “No Matter How Far You Have Gone on the Wrong Road, Turn Back” — Turkish Proverb. Can’t add a thing. . . “The world is full of people whose notion of a satisfactory future is, in fact, a return to the idealized past.” –Robertson Davies.