The Value of a Quality Practice Administrator

Ronald Booker, JD, CPA
Houston, TX

Compensation packages for senior practice administrators in large, private anesthesia groups can be well into six figures. That’s a lot of money, but are they really worth it? During this time of turmoil in the healthcare market where there is tremendous pressure on all healthcare providers, including doctors, to do more for less, does it make sense to pay one individual so much money? Each anesthesia practice must decide who they want to help run their business and how much they should be paid. However, the following issues should be a part of the equation.

The business side of anesthesia is very complicated. Anesthesiologist, CRNA and AA recruiting and retention. Scheduling. Retirement plans and health insurance benefits. Employee policies and enforcement. Managed care and hospital contracting. Revenue cycle management (billing and collections). Coding. Compliance. Accounting. Payroll. Risk management (lawsuits) and insurance. Continuous quality improvement. Computer and communication systems. Strategic planning and implementation. Hospital administration relationships. Surgeon and patient satisfaction.

Can any one person be an expert in all of these areas? Not likely. So why not hire lower cost experts to handle all of these issues and save the expense of a high priced administrator? There are at least four essential skills that a quality administrator brings to an anesthesia practice that more than justify his or her compensation: decision-making, problem-solving, communication and relationships.

Decision-Making

Just as a conductor of an orchestra contributes not a single note to a beautiful piece of music but is indispensable to the performance, a practice administrator brings together the right team and helps them blend their skills to create a high-functioning organization that makes good decisions. Here are a couple of examples.

A well-meaning partner of a large anesthesia group and the new HR director decided to hire an independent broker to evaluate the practice’s health, dental, vision, disability and life insurance plans. As expected, following his evaluation, the broker presented complicated and colorful charts and graphs showing that the practice was being too generous in offering “above market” insurance to its employees and recommended a significant reduction in benefits and increase in employee contributions that would save the partners a significant amount of money. The well-meaning partner, anxious to look good to his partners, was ready to make an elegant presentation to the board that he was confident would result in the unanimous approval of the new plan.

The experienced administrator helped him avoid what might have been a disaster by asking the following questions: how much residual financial liability would the group incur by changing from a self-funded plan to a full indemnity plan, and where would the money come from? How long would the savings be guaranteed? Was the current insurance provider given a chance to modify coverage and reduce costs? How would this new plan affect recruiting and retention of new providers? Would the change breach any employment contract provisions? How would a change in network affect partner and employee access to their current family doctors and hospitals? Changing employee insurance benefits may be the right thing to do, but the decision involves much more than just reducing insurance costs, and a quality administrator will help identify and answer these issues to allow the partners to make a good decision.

In the second example, the group’s finance committee and CFO read an article stating that patient deductibles and financial responsibilities are increasing significantly as employees pass more costs to their employees. In response, the committee decided to 1) hold filing all claims to non-government payers for 45 days so that the hospital and surgeons will get hit with the patient deductibles, and 2) start collecting deposits from patients prior to surgery. It sounded like a no-brainer until the administrator spoke up, asking, “How many deductibles is the practice being hit with currently? What effect will holding claims have on the practice’s cash flow? How will the billing department handle holding only non-governmental claims? How will the group collect from patients pre-surgery and how much will it cost? How will the new policy affect the group’s relationship with hospitals and surgeons?” By focusing on the forest instead of just one tree, a quality administrator can help identify the impact of decisions on the entire practice to avoid unintended consequences.

Problem-Solving

There is an old adage: “you don’t know what you don’t know.” This is a difficult concept for very intelligent and successful people to accept, but it is as true in an anesthesia practice as it is in any other endeavor. A quality administrator has access to personal experience, colleagues, conferences, professional journals and other resources to help them identify new ways to deal with traditional problems. In addition, they often know that they don’t know the answer and that it is time to bring in someone who does.

Take the example of a six- anesthesiologist practice where a partner is nearing retirement. The group’s historical and successful strategy has been to interview young anesthesiologists near completion of their residency and to offer the best candidate a full-time job with a one year partnership track. This structure was primarily driven by the shortage of anesthesiologists and the need to keep the call burden reasonable for all of the partners.

However, in many markets, things have changed. There is a ready supply of qualified anesthesiologists looking for stable jobs in a flexible environment. Maybe the group can hire a young anesthesiologist on a three-year partnership track or as a full-time permanent employee. Maybe the group can hire a less expensive CRNA to replace the anesthesiologist during the day and hire a stay-at-home parent or a semi-retired baby boomer anesthesiologist to cover some calls. A quality administrator recognizes and honors what has worked in the past but is always looking for creative solutions that take advantage of current circumstances and isn’t afraid to ask for help from colleagues and consultants.

Communication

By far, the number one problem in every anesthesia practice is poor communication. In small groups, the partners are so busy providing clinical services that they don’t take the time to stay informed about non-clinical issues. In larger groups, it is not uncommon for long-term partners to barely know each other, much less to know about what is going on in numerous committees. The key to good decision-making and problem-solving is knowing and understanding the truth. A quality administrator’s ability to understand the important issues and clearly communicate them to each partner is essential to the success of the practice.

The relatively young twelve-member board of a very large anesthesia practice decided to consider partnering with or selling to a national practice. They decided to retain a consultant for $20,000 to help them evaluate their options. Before the meeting had even ended, the buzz was spreading among the other partners that the board had decided to sell the practice, that each board member had been promised a $20,000 bonus from a potential buyer, and that they intended to fire all of the older partners so that they would not benefit from the sale. This may sound like an exaggeration, but it isn’t. Lack of truth breeds rumors and gossip that can destroy the best laid plans. A quality administrator is in a unique position to listen to partners’ concerns, communicate the facts and dispel misinformation. Even in situations such as lawsuits where confidentiality is required, a quality administrator can be invaluable in helping partners feel inside the loop.

Trust

At the end of the day, the most valuable asset that a quality administrator brings to an anesthesia practice is trust. It takes time to develop and does not usually happen without planning and hard work. However, having an administrator who the partners know, because of experience and their relationship, will be honest, reliable, and effective is a valuable asset to the practice. It is important to know that the administrator is truly committed to the success and best interest of the partners. While good decision-making, problem-solving, and communication are essential to the success of any practice, there are many times when a partner just needs to hear from someone they trust that things are OK.

An experienced administrator was recently asked by his 25-member anesthesiology group to try and quantify his value to the practice. After considerable thought, the administrator produced a spreadsheet showing how just a few successes regarding managed care contracting, staffing; and adding new facility contracts had resulted in an additional eight million dollars for the partners over a three-year period. I don’t know how much the administrator was being paid, but I’m guessing that this was a pretty good return on investment for the anesthesiologists. The administrator then asked each anesthesiologist to anonymously describe the administrator’s value to them. While many commented about their increase in compensation, most commented about bad decisions that were avoided, problems that were solved without most partners even knowing about it, or keeping peace in the family.

A quality administrator is worth his or her weight in gold. Hire carefully, evaluate constantly and reward appropriately. Your group will be better for it.

Ronald J. Booker, JD, CPA served as the in-house legal counsel for Greater Houston Anesthesiology, and as the CEO of iMed Group, a multispecialty MSO, for 24 years. More recently he earned a Master’s Degree in Conflict Resolution and Reconciliation. He can be reached at (281) 460-7442 or at ron@bookerweb.com.