Anesthesia Business Consultants

Discover Practical & Tangible Professional Articles &
Advice Dedicated to the Anesthesia Community

800.242.1131
Ipad menu

Winter 2012


What Is Your Value Proposition? Is Your Practice The Steak Or The Sizzle?

Jody Locke, CPC
Vice President of Anesthesia and Pain Management Services, ABC

Anesthesia is the quintessential service specialty. Establishing and maintaining a consistently strong relationship with a hospital, a clinic or an ASC is no easier for an anesthesia group practice than for any other type of service provider, be it car mechanic, internet provider or hair stylist; today’s medical consumers know they have options that give them leverage in demanding services and loyalty. For too many anesthesia practices this is a relatively new and somewhat disconcerting state of affairs. Anesthesia vulnerability to replacement has grown in direct proportion to the amount of financial support provided by the facility; practices that receive no subsidy support clearly have the strongest support, at least to the extent that they provide quality care. Competition for anesthesia contracts has ushered in a new era of service expectations and changed the perception of the role of the specialty in the facility. Quite simply consistently good outcomes are simply no longer enough to sway the thinking of an administration considering the need to provide significant levels of financial support. As the scope of customer expectations changes every practice must redefine its role and commitment to the medical staff, or have it redefined by the market. There is a growing number of practice managers who have learned this lesson the hard way. Their experience should teach us a basic truth about today’s market: hope is not an option. Today’s successful practices are survivors because they made themselves indispensable by clearly demonstrating that their best option is the administration’s best option.

Securing Your Future

Effective strategic positioning must begin with a clear identification of each of the group’s categories of customer. Stakeholder analysis has become a critical discipline and an invaluable tool to help define the communication plans necessary to make anesthesia an essential and critical player in the management of operating room and obstetric operations. It is not enough to just focus on the idiosyncrasies of surgeons or to assume that nothing can be done to change the status quo. Sometimes the surgeons are, themselves, pawns in a larger strategic game. All too often it is those with the most direct line of communication to administration that can have the most impact on the perception of the anesthesia team. The identification of anesthesia’s true customers must focus on the entire scope and focus of surgical and obstetric operations from scheduling to profitability. A clear understanding and appreciation of the goals and objectives of each of the various classes of stakeholders can provide invaluable insight into potential opportunities for value creation. The more interaction, the better. There is no substitute for clear and open lines of communication.

The typical stakeholder map includes five categories: surgeons, operating room staff including nurses, administration, patients and the members of the anesthesia practice itself. Understanding the strategic role of each involves an assessment of each stakeholder’s specific goals and objectives in the relationship as well as a determination of the ways in which anesthesia can best support those objectives. The ultimate challenge often lies in the fact that the goals and objectives of one stakeholder may be at odds with those of another; this is where the art of diplomacy and finesse become most important. More often than not the satisfaction of all stakeholder objectives require the resetting of some of the stakeholder’s objectives. An analogy is often made to Southwest Airlines’ entry into the competitive market for professional travelers: by defining its own objectives as frequency of flight options, reliability of service and low fares, the airline forced its customers to re-evaluate their own priorities with regard to air travel. In the end Southwest not only secured its place in the market but changed the industry.

Anesthesia’s Relationships Within the Hospital: Customer Service Everywhere

Conventional wisdom holds that all surgeons care about is availability of anesthesia staff so that they can operate instantly when there are patients requiring surgery. It is also typically assumed that hospital administrations have bought into this notion and that they are committed to providing availability of operating room time to lure profitable specialists away from competing medical centers. There is always some truth in such assumptions but the question that must be asked is whether these are assumptions based on history and custom or an optimum state of affairs. In a growing number of institutions anesthesia is being called upon to help moderate the idiosyncratic requirements of surgery in an effort to improve operating room efficiency and profitability.

Too often the role of the operating room staff is either misunderstood or taken for granted. Anesthesia practices have a tendency to forget just what a direct line of communication nurses and operating room support staff have to administration. More often than not it is input and feedback from these front-line staff that forms the basis of an administration’s perception of an anesthesia practice. Inconsistencies in communication and outlier providers often do more to damage the reputation of the department as a whole than any objective statistical measure of quality or outcomes. As one recovery nurse once expressed it, “every time those doors swing open our hearts skip a beat wondering who will be bringing in the next patient because depending which member of the department is we may have our work cut out for us to stabilize the patient.”

Volumes could be written about the socio-pathology of relations between so many anesthesia groups and their hospital administration. There is no better example of the lack of a tradition of customer service, per se, in medicine than the way so many practice interact with the people who actually hold their purse strings. Not only is there typically a lack of regular interaction but the intercourse that does take place is often more confrontational than collaborative. There are so many lessons that anesthesia providers could afford to learn from business about customer loyalty cultivation. A case in point is a basic understanding of medical economics. Steven Covey’s admonition to seek first to understand is a good starting point. Contract reviews and subsidy calculations have created a growth business for highly paid consultants who do little more than act as intermediaries between the anesthesia practice and administration. There is little in their analysis and Power Point presentations that most intelligent people could not have figured out on their own. When a hospital administrator resort to formal Requests for Proposal (RFP) for anesthesia services it is tantamount to a vote of no confidence in the ability of a practice to define its value proposition and deliver it consistently. More important than the specific areas of misunderstanding, however, is the fundamental difference in approach to problem-solving. An anesthesia provider who prides himself on his or her ability to resolve complex clinical problems in a matter of seconds can have no appreciation for the art of administrative decision-making, which can require hours of patient negotiation and education.

The role of patient satisfaction is not always clear or logical. One might argue that an individual patient’s level of satisfaction with surgical or obstetric services is not as important as might be supposed given the scope of services provided by even a small facility. One might also argue that quality of care and professionalism are a given. Here is where the metrics differ. A successful anesthetic outcome for the department of anesthesia can still be a customer service disaster for the hospital. Understanding and appreciating this distinction is the key to understanding the role of patient satisfaction in a hospital. Only when anesthesia groups start to appreciate their role in ensuring a consistently positive surgical or obstetric experience and the importance of that patient’s potential to refer other patients will the interests of anesthesia and administration have been truly aligned.

Ideally, a medical group should provide a service that far surpasses the individual contributions of its members. Professionals have a tendency to assume the competency and professionalism of other professions. There is no greater challenge than the need to monitor or discipline another professional. Drug diversion is just one of many problems that can haunt even the best of departments but the most common and difficult problems are attitudinal. Professionals are expected to maintain a consistent attitude and demeanor. When they decompensate under stress, the repercussions are significant and can completely undermine the credibility of the management of the practice. By the same token, unhappy providers or those whose expectations cannot be met can also have an adverse impact on the overall perception of the department. No department can afford to have team members who are not 100 percent committed to the success of the team.

Anesthesia groups with the best reputations and most secure futures are those that have dedicated themselves to anticipating the specific customer service expectations of all their customers. Such groups make it a point to monitor the level of satisfaction at every level of the institution. Sometimes the process takes the form of surveys and statistical analysis but more often it is the result of regular communication and inquiry. They appreciate the value of any and all feedback and know that there is no substitute for a consistently aggressive approach to customer satisfaction. They place great value in committee participation. All feedback is taken seriously and discussed at the highest levels of the organization. It goes without saying that the strength of a group’s reputation is only as good as its least strong provider or the latest unresolved customer service issue.

But this is only the beginning; environmental scanning and the triaging of customer input defines the baseline. True value creation requires a knowledge and understanding of customer desires and expectations that exceeds that of the customers themselves. This is what defines the sizzle to the solution. Today’s customers are looking for the wow factor that takes them to the next level. Americans in general are impatient for the latest technology or the best strategy. Hospital administrators are no exception. To appreciate the importance of this concept is to understand the success of a Google or an Apple. In both cases the companies distinguished themselves by providing services or technology that allowed their customers to do new and more things, do them faster and be more productive. This is the essential and underlying expectation of all hospitals in today’s competitive healthcare environment.

New Roles for Anesthesia

Any anesthesia provider or group practice that does not believe it can significantly contribute to the growth and success of the facilities it serves has already lost the battle and probably the war. The opportunities are virtually limitless for those committed to defining and executing them, but five are worth specific consideration as starting points for a serious value added strategy. They are:

  1. operating room management,
  2. drug management,
  3. technology management,
  4. risk management, and
  5. surgical patient satisfaction.

When asked what opportunities there are for an expansion of services to a given facility, most anesthesiologists will suggest some aspect of operating room management. Few anesthesia practices actually play a major role in O.R. management but this is probably more a function of lack of experience and the perception that assuming responsibility for the running of the operating rooms would involve considerable political risk for very little financial reward. The exceptions, however, are quite notable. Years ago when Dr. Mark Rogers assumed the chair at Johns Hopkins he negotiated for Dr. Robert Donham to take over the management of the operating rooms using a scheduling program that had been designed by and paid for with department funds. Drs. Julian Gold and Ronald Wender also made a proposal to the management of Cedars-Sinai hospital in Beverly Hills that also gave the department considerable management oversight for all operating room staff and operations. There are numerous other examples, starting with the work done by Dr. Franklin Dexter and colleagues at the University of Iowa. Dr. Michael Roizen also has written about the potential role of anesthesia in this area.


The point is that a department of anesthesia should have more and better data about what actually happens in the operating rooms than even the hospital.


The fact is that most private groups simply use this information to enhance collections and not to improve operating room efficiency or effectiveness. While this is starting to change the role of anesthesia in the management of operating rooms is still in its infancy. The irony is that by ceding responsibility for the management of the ORs to others anesthesia is foregoing an invaluable opportunity to directly manage the factors that determine provider income and lifestyle. A commitment to playing a more active role can clearly prove to be a win-win situation for groups with the tools and commitment at avail themselves of the opportunity.

But there are other possibilities as well. Why should the hospital pharmacy play such a significant role in drug management, for example? Is this not also an area where anesthesia brings significant expertise and experience to the table? It is probably true that few anesthesia providers have a good handle on the true economics of drug costs and usage, but this is information that should be readily available given a nominal investment in time and the formulation of some simple budget templates. It is not uncommon for hospitals to be open to cost-sharing arrangement for savings in drug costs. An active role in this area would be consistent with the current interest in co-management options.

Anesthesia also brings considerable expertise to the hospital in the area of technology management. The current focus on ultrasound is just one of many examples of a new technology that has been carefully evaluated and ultimately implemented by the anesthesia department but there are so many others. Why should anesthesia not play an active and aggressive role in helping a facility define state of the art operating room technology? It is true that some will ask what is the financial benefit to the department or group, but often the potential value should be measured not strictly in terms of short-term return on investment, but long-term interdependence and partnership. In other words, most businesses make certain investments intended to secure or maintain good customer relations, and to emphasize their value to the institution.

Risk management is another area of increasing interest to anesthesia practices as the specialty asserts its role in defining pay for performance measure (P4P). It is safe to say that with all the new programs being developed and implemented to capture clinical data throughout the entire continuum of anesthesia care that anesthesia has a significant armamentarium to offer. Why should those who have been so well trained to assess individual patient risk factors not step up to the plate to share their experience and insights?

Ultimately, anesthesia plays the definitive role in creating a positive surgical experience. The sad truth is that all the hard work and discipline that goes into managing patients safely through the trauma and abuse of surgery with such consistent outcomes goes unnoticed. Rare is the hospital with a strong reputation for advanced surgery that does not rely on sub-specialty trained anesthesiologists and in many cases nurse anesthetists to achieve the results they do. Again the role of anesthesia is just starting to be defined, but the potential would appear to be nearly unlimited. Perhaps it is time for anesthesia to step out form behind the curtain and take some of the credit for material improvements in surgical morbidity and mortality.

This short list of opportunities will no doubt inspire consideration of others. The core issue is not what services anesthesia groups are qualified to offer but rather the commitment to redefine the role of anesthesia in the hospital. As in so many businesses outside medicine the market for medical care is impatient for new solutions to long-standing historical problems. The tide is clearly starting to turn with the aggressive role of so many large anesthesia groups across the country.

It has been said that there are three ways to play any game. One can choose not to play; one can play not to lose or one can play to win. In today’s competitive market there is no room for anesthesia practices playing not to lose; they are destined to be replaced by more professional and active practices with better and more creative insights into the challenges of practice management. There is a reason anesthesia is seeing a resurgence of practice aggregation: the market is insisting that anesthesia step up to the plate in partnership with the facilities it serves. Leverage is the name of the game. Small practices will find themselves challenged to provide the kind of value added services that their larger competitors are offering. Some might be skeptical of the ability of a larger entity to provide a better and more customized service, and they might be right but being right is no longer good enough. Today’s decision-makers are an impatient lot. They are less concerned with being right than being better. The impact on anesthesia is already clear. Everyone wants to partner with a team that is being willing to take risks, create value and distinguish itself in the market.


Jody Locke, CPC, serves as Vice President of Pain and Anesthesia Management for ABC. Mr. Locke is responsible for the scope and focus of services provided to ABC’s largest clients. He is also responsible for oversight and management of the company’s pain management billingteam. He will be a key executive contact for the group should it enter into a contract for services with ABC. He can be reached at Jody.Locke@AnesthesiaLLC.com.