Originally published by our sister publication Anesthesiology News
A Large Asteroid Has Been Identified
I am not directly comparing the survival of private practice anesthesia with the survival of the Earth facing a collision with a giant asteroid. I am suggesting that, without intervention, we are on a collision course that will result in the loss of our identity as physicians and anesthesiologists.
Since “War Games: Private Anesthesia Group Versus Hospital System Versus Private Equity Firm” was published in Anesthesiology News, I have received commentary from many readers throughout the United States. The piece stirred conversation both in the form of reaction and, more importantly, strong association with a similar experience. It appears that the process of replacing an established, successful private anesthesia group with a regional or national provider of anesthesia services happens too frequently. Subsequently, the exodus of established anesthesiologists and CRNAs that follows leads to a scramble to cover surgeries, forcing cancellations that require patients to seek care elsewhere. Ultimately, the task of reproducing adequate anesthesia coverage and lost OR time results in financial losses to the institution.
In the “War Games” article, I used the term “irrational” when referring to the hospital’s decision to part ways with our group. It seems neither logical nor reasonable to disrupt a functional relationship between an established anesthesia group and a hospital when it becomes expensive and chaotic in the short run.
A Frightening Path
So, why might an administration proceed when the outcome is the dismantling of surgical services? Additionally, where is the logic of a regional or national anesthesia provider stepping in if the shortage of staff—see my mention of an exodus above—makes it unlikely the agreed-upon contract will be honored successfully?
For the private equity group, this dynamic is a necessity. Their profits have decreased as competition has lowered negotiating power over insurers, and the ability to balance bill if negotiations fail has been greatly limited. Expenses have increased with higher provider pay due to the shortage of providers. Furthermore, outcomes are being scrutinized within the medical literature potentially limiting interest. So, frankly, they need the work.
Therefore, taking over practices sight unseen to increase inventory and obtain hospital stipends has become a common practice for these businesses. Even if the relationship fails, there is guaranteed money to keep the company solvent.
The Projected Outcome of the Collision
But how does this even remotely benefit the institutions? In the short term, at least, profitability is lost. Cases cannot be covered, and departments are filled with high-priced and minimally vetted travelers. Surgeons, OR staff and ultimately patients are dissatisfied.
It is hard to fathom hospital systems making decisions in a vacuum, oblivious to what is occurring within other institutions. It is not reasonable. The administrations are full of business degrees, and surely, they read the news.
Take this quote from an article titled “Oregon Hospitals’ Surgeries Plummet Amid Anesthesiologist Shortages”: “Surgeries at two Providence hospitals were down by almost 50% in December and January amid an anesthesiologist shortage. The delay comes after the hospitals’ anesthesia staffing was taken over by a private equity-backed physician staffing firm” (Becker’s ASC Review, Feb. 12, 2024).
Different state, different institution, different private equity group, but the same outcome. So again, why?
Remember, the institutions have been watching the private equity groups. Why would they not strive to create a similar model under their control?
After reading my article and listening to my theories, an astute young economist/strategist said the institution’s “why” likely follows the “rational actor model” of decision making. This model is based on rational choice theory, which states that people are rational and will choose a path that helps them achieve their goals. The rational actor makes calculated decisions, never losing sight of the goal.
And what is the goal? Control. Private provider groups are asked, not told, what to do. What if the providers are employed? The institution now controls much of their decision making including referral patterns, admissions, procedures performed and diagnostic testing. Furthermore, the patients and the care they receive stay within the institution.
More frightening is the hospital system now has the power to remove employed providers, physicians included, seemingly at will. “With cause” is not difficult to accomplish if needed. It is hard to match a legal team on retainer.
Private equity groups are temporary intermediaries doing the heavy lifting during the process of dismantling the private group. Restrictive covenants/noncompetes are not placed within the contracts at the insistence of the hospital administration for easy transition to institutional ownership.
It does not stop there—that would be too narrowly focused. Eventually, the institutions’ reach goes beyond providers to pharmaceuticals and devices. If a hospital system purchases 100 units of a product, the manufacturer quotes the price for each unit. However, if the units purchased are 1 million, the institution will control the unit price. If hospitals band together within a buying group, that much more pricing power exists. Many believe that this practice is the driving force leading to drug shortages and the outrageous cost of medications passed on to patients.
Here lies the difference between a cool shooting star on a summer evening and a massive asteroid on a collision course that will result in devastation. The devastation will be of the autonomy of the physician. Institutions will grow, consolidate and, eventually, only a few will control all of healthcare.
But wait, a few paragraphs back I said the hospitals are losing money. These are short-term losses. Remember the rational actor: a calculated risk for a long-term goal. These institutions are like casinos with war chests of house money. Spend millions to make billions.
A Difficult Plan to Intercept
Unity! We need unity within our specialty, solidarity at the group level, and at the regional and national levels. Remember, we are the scarce commodity. The American Society of Anesthesiologists listened to my concerns after the publication of “War Games.” It is a complicated task for a society to protect anesthesia groups, but the groundwork has started.
Equally as difficult is for a group of physicians and CRNAs to speak in one voice. Our instinct is to protect ourselves—to jockey for position. But power does not exist within a bunch of individuals. We still all lose. I have no doubt that the rational actor has calculated for a lack of unity.
Nevertheless, if you want to stop the collision and devastation that will ensue, for now, be the opposite of being divided. The loss of one OR is unfortunate but survivable. The loss of 50 closes the place down.
And never forget the power of the spoken and written word, otherwise we would not even know the asteroid is coming.
I hope together we avoid an even bigger crater than I traverse daily.
Answine is the American Society of Anesthesiologists alternate director for Pennsylvania, and vice president of scientific affairs, Pennsylvania Society of Anesthesiologists.
Editor’s note: The views expressed in this commentary belong to the author and do not necessarily reflect those of the publication.