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Spring 2013


Are You Making This Mistake Concerning Competition?

Mark F. Weiss, Esq.
The Advisory Law Group, a Professional Corporation, Los Angeles, CA
From the Spring 2013 issue of The Communiqué

“The Competition”

These days I hear that term from more and more anesthesia group leaders, and I’m sure that you’re thinking about it more than you’d like.

From the Latin root competitionem, its meaning originated in the sense of rivalry, of a contest for something. Since at least the 1790s, it’s been used to describe rivalry in the marketplace.

Ask yourself what “the competition” means to you. What comes to mind?

In working with anesthesia group leaders across the country, my regular experience is that they envision the competition as another anesthesia group, whether from across the county or across the country. These days, the image that often first comes to mind is that of the predatory staffing-service model.

I certainly can’t fault these group leaders because, especially these days, there is tremendous competitive pressure from outside entities coveting your facility contracts.

So, for most group leaders protecting their practice from competitors involves looking outward to block outside groups from breaching the walls of your facility relationships.

Accordingly, the best of those group leaders would be doing all they could to create an Experience MonopolyTM, the unique experience that the group provides to its “customers:” hospitals, referring physicians and patients, one that, even if the competitors could observe what was going on, they couldn’t replicate. And, those group leaders would be taking other action to create barriers to block entry into their market by those outside competitors.

Of course, that focus on outside competitors and the action taken to keep them at bay and to render them ineffectual, are both necessary and required.

Unfortunately, if that’s all that’s done, your group is still at risk.

That’s because being so intently focused on outside competitors can blind group leaders from seeing another, often equally lethal, predator seeking to capture your group’s business; a predator so dangerous it might destroy your group’s ability to survive.

Let me use an example from outside of healthcare to illustrate this second category of threat.

A country can take great efforts to protect state military or even physical access to a sensitive installation by, among other things, erecting barriers, both physical and virtual, to outside intrusion. Similarly, industry spends countless millions of dollars each year protecting essential trade secrets from competitors.

But that’s only part of the story, because as much as a country’s military and as industry have to be concerned about protecting their secrets from someone who’s on the outside, they have to be equally concerned about guarding against espionage from someone who’s already on the inside—by someone who is thought to be “on the team.” That same point applies to your anesthesia group.

Yet, unfortunately, protecting against competition from within is a weak point for most anesthesia groups. The reality is that many groups don’t fail simply because of competition from an outside competitor; they fail from within due to the actions of, and sometimes competition by, members of their own group who break off to directly compete with their former group or who facilitate an outside group’s ability to displace it.

Protecting against competition from within requires much more effort and detail than most groups incorporate within their “owner” documents (their shareholders agreement or partnership agreement) and within their employment agreements and subcontractor agreements.

Although in some states, the direct approach to preventing competition, covenants not to compete, is unenforceable, the correct approach is to build a series of protective measures against competition around the relationship between the group and each of its physicians, whether owners or employees/subcontractors. You can conceive of these protective measures as a series of interlocking spines or spears, each designed to provide protection. One particular measure standing alone might be compromised, but together, as a systematic structure, they provide far more potent protection.

By adopting a wide range of protective measures, groups reduce, and if possible, prevent, competition from within, whether it’s actual direct competition by group members or their facilitation of direct competition by a third party to whom those group members hand the key to the group’s economic engine.

Focusing on threats from without is hardwired into most anesthesiology group leaders. Group leaders must be just as diligent in focusing on threats from within.


Mark F. Weiss, Esq. is an attorney who specializes in the business and  legal issues affecting anesthesia and other physician groups. He holds an appointment as clinical assistant professor of anesthesiology at USC’s Keck School of Medicine and practices nationally with the Advisory Law Group, a firm with offices in Los Angeles and Santa Barbara, CA. Mr. Weiss provides complimentary educational materials to our readers at www.advisorylawgroup.com. He can be reached by email at markweiss@advisorylawgroup.com.