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Spring 2009


Re-Assessing Anesthesia Group Administration

John T. Mulligan, Esq.
McDonald, Hopkins, LLC, Cleveland, OH

From time to time anesthesia groups find that they need to reassess their administration or decision-making processes. This can involve everything from tinkering with how routine day-to-day administrative activities are carried out, to totally revamping the group’s governance structure.

Reassessments can come about for a variety of reasons. There may have been a significant growth in the number of physicians or CRNAs, or an increase in the number of practice locations. The group may have encountered internal strife without adequate governance systems in place. The group may find itself incapable of making decisions or reaching consensus in a timely or efficient manner. A group may have relied too heavily upon busy physicians to carry out non-clinical duties, or one physician may (by choice or otherwise) be overburdened with administrative responsibilities.

Issues in a Small Group. One of the assumed advantages of a smaller group is that it can function in a “more efficient” manner. However this can be negated by an excessive number of decision-making layers. Anesthesia groups often function through a legal entity such as a corporation or a limited liability company including shareholders/members, directors/managers, and officers.

An issue that comes up regularly in the context of a small group involves the physicians having to remember which decision-making “hat” (“is this a ‘shareholder’ or a ‘Board’ decision?”) they are wearing. An alternative that is available under the laws of many states is to eliminate the Board of Directors and have the shareholders function as the Board. If your group does so, make certain that you understand the full implications of the change under your state’s laws. As an example, there may be implications with regard to the giving of, or the content of or notice of meetings.

Smaller groups often concentrate decision-making in one or two persons. While a case could be made that the ‘wise benevolent dictator” is the most efficient governance structure, not all dictators are either wise or benevolent. At the other extreme, a rotating presidency which periodically results in persons occupying leadership positions who possess neither the desire nor the ability to lead will also cause problems. At the risk of oversimplifying the matter, the best system is the one that works for your particular group at a particular time.

Whether a system for both making and implementing decisions is “working” depends not only on the whether the “right’’ decisions are being made in a timely manner, but also on whether the group’s physicians feel comfortable with the manner in which they are made (“why wasn’t I consulted on that?”’). The only way to know this is to have periodic reassessments of how your group’s governance or decision-making structure is working. Far too often the sum total of a group’s review of its governance or decision-making structure is limited to an annual “I move that we re-elect the current officers.”

Another issue that faces small groups involves the determination of when to seek the services of a full or part-time practice manager. There are typical objections to hiring such a person (“we don’t need one;” “we can’t afford one;” “our accountant can do all that for us.”). While small groups may not need one, and while having the wrong manager can be worse than having none at all, this is a topic that even a small group should examine from time to time.

The starting point is a candid internal discussion of the shortcomings of your current practice management, perhaps with the assistance of outside advisors. Is the wrong person in a leadership position? Shou1d administrative responsibilities be shared within the group? Are the others willing and able? Is the group taking advantage of the services that its current outside consultants can provide? How could a practice manager solve these problems?

Issues for Larger Groups

For larger groups, particularly groups which have experienced rapid growth, there can be different issues. The group may have a situation where historically every physician-owner (a shareholder or member) has a seat at the table for all decisions. This may no longer be practical. Scheduling meetings, or assuring attendance at meetings, may be a problem, particularly where the group practices at multiple hospitals. A further problem that large groups often encounter involves trying to reach consensus or make a decision, particularly where it has been historically felt that “consensus” means unanimous approval. At some point the need for unanimity becomes the tyranny of the minority.

The solution for many groups is a Board of Directors or managers that consists of fewer than all practice owners. While this may be a difficult decision to make in a situation in which the physician-owners have been accustomed to participating in all decision-making, at some point it may become necessary. In moving to a smaller governing body, consider the following issues and questions:

    1. How large should the Board be? To some extent the answer to this question depends on how large the group is, or how many “constituencies” (e.g. different hospitals or practice subspecialties such as pain management) need to be represented.
    2. How should the Board be selected? Should certain persons (e.g., the chair of the department) be automatically on the Board? Is there any need to allocate Board positions among the various “constituencies?”
    3. What should be the term of office of a Board member, and how can the Board member be removed from office? Often groups will choose multi-year staggered terms for the sake of continuity, with the ability to remove a Board member with or without cause. To the extent that Board members have been considered to be “representatives” of certain constituencies, who must approve a removal?
    4. What decision-making authority should be retained by the owners of the practice? What about the hiring or termination of a physician, the sale of an ownership interest to a physician, entering into a hospital service agreement, or incurring a significant financial obligation? A group needs to decide what power should be reserved to the owners, or what veto power they should have over decisions by the Board. However, it needs to be recognized that at some point the owners could have retained so much authority that it will eliminate much of the benefit of a Board.
    5. How can the feeling of disenfranchisement by non-Board member physicians be addressed? To some extent a feeling of disenfranchisement is inevitable on the part of those persons who will see their role in the decision-making processes reduced. One way to address this feeling is to make sure that there is adequate regular communication from the Board and the solicitation of input before important decisions are made.
    6. The group should also continue to maintain regular meetings of all the physicians or all owner-physicians. That being said, Board meetings should not be conducted as part of an overall meeting of the physicians in the department or of the owners of the business. Doing so will undercut the notion of the Board as having a separate and distinct function.
    7. Before a group makes this change, it should do it in a manner that is not only consistent with state law, but also consistent with the terms of any existing contracts. For example, employment contracts with physicians may contain provisions that provide that certain decisions (e.g., involuntary termination) can be made only by the owners.
    8. There are many ways to structure the administration and governance of a group medical practice. Administration and governance should be the subject of periodic group discussion.

John T. Mulligan is a Member of the law firm McDonald Hopkins, LLC, in is Cleveland, Ohio office. McDonald Hopkins has other offices in Chicago, Detroit, Columbus, West Palm Beach, and Dennis Mass. John’s practice focuses on the representation of physicians and physician groups, with a particular focus on the representation of hospital-based groups. He is listed in the “Best Lawyers in America” for health care law. He can be reached at (216) 348-5435 or jmulligan@mcdonaldhopkins.com.