Management Service Organizations and Anesthesia Practices Today and in the Future

William Hass, MD, MBA
Co-Founder, PhySynergy, LLC, Huntsville, AL

Management Service Organizations (MSOs) will have an increasingly important role in anesthesia practices. What today are cooperatives of independent anesthesia groups may morph into something quite different in the future.

The original goal of an MSO was to be a cooperative of local independent anesthesia services that reduced costs and gained management expertise for its members. The desired functions and advantages were similar to those offered by cooperatives in other industries. Traditional and attainable goals to be sure, but then reality got involved.

Here’s one version of reality. Some anesthesia groups and anesthesia professionals are concerned (read terrified) that the “sharks” of the anesthesia business world, anesthesia management companies (AMCs) and private equity investors (PEIs), will devour local practices. The facts behind this assumed reality are quite different than imagined; more people die each year from being crushed by vending machines than from shark bites. Here’s another reality. Many more anesthesia practices will perish due to their poor governance, leadership, management and human resource management (HRM) than will be gobbled up by AMCs and PEIs.

If the risks from AMCs and PEIs are small, why should a local independent anesthesia group worry? Why do anything? It’s another, but different, reality this time. The probability of an anesthesia service having insight into its strengths and weaknesses is about as common as a shark attack. Many anesthesia services not only don’t know where they are headed, they don’t have a clue where they are. Are they:

• A success to be sustained,
• In need of organizational “tweaking” for realignment,
• Doomed without an extensive turn-around,
• A candidate to be restarted, or
• A sucking black hole of resources and careers?

They don’t know. Worse, the conventional wisdom inside anesthesia groups is that they are above average. Just ask them.

There are anesthesia groups that are well led and well managed. They can make decisions and prosper. They see the future and see the possibilities. There is also a vast wasteland of dead, dying, lost and confused anesthesia services. Sort of sounds like the definition of zombies, doesn’t it? In you’re waiting for them to make a decision, particularly a difficult business decision, you are wasting your time. The chances of that happening are less than that of a shark attack in a vending machine.

Why? Failed governance is the costly, and possibly lethal, flaw in many anesthesia services. Decisions are just about impossible to make given voting requirements in their operating agreements or the realities of their day-to-day functioning. Veto power maybe given to a minority of members more interested in preserving their prerogatives than in making difficult and/or uncomfortable decisions. Senior members may seek short-term solutions that are not in the best long-term interests of their junior associates, allied anesthesia professionals or the facilities they serve. Not only do these groups not know who they are or what their problems are, they can’t do anything to fix their situation. This is a case of suicide by failed governance.

This presents a significant problem for governing boards and facility administrators. If they:

• Can’t depend on the local group to make a decision,
• Don’t want the complications of an employed anesthesia service,
• Want to avoid the entanglements of an AMC compounded by the complexities of PEI involvement.

What should the facility leadership do? The best possible answer is to engage an MSO to transition their existing zombie anesthesia service into one that can provide long-term clinical excellence and community service, as well as the operational and financial performance needed for the future.

How does this work? Simply, the facility will enter into a “caretaker” contract for anesthesia services with an MSO to:

• Evaluate services needed and provided,
• Reorganize clinical, operational and financial operations, and
• Return the anesthesia service to local independent owners.

The newly-reorganized and revitalized local independent group and its staff will become new independent members of the MSO in order to continue low costs, proactive management and the valuable association with other successful groups.

At this point anesthesiologists and other anesthesia professionals might cry foul. Aren’t MSOs dealing with the enemy when they work with governing boards and administrators? With rare exception, anesthesiologists will be business partners with governing boards and facility administrators for their entire career. Reality again. Neither party can succeed without the other over the long term. When a governing board works with a MSO, the goal is to develop a local independent anesthesia service so that neither party is subject to the whims of distant AMC corporations or PEIs. The goal of the local facility-MSO relationship is to direct the resources of the practice to the local community, not the operating costs and profit of distant corporations or investors.

It is possible that governing boards and management would cry foul too. The concept of working constructively with anesthesiologists might seem so foreign that the whole idea is more like science fiction than a reasonable alternative. So what are the alternatives? Doing nothing doesn’t seem like a viable plan in today’s environment. The problems with employment are becoming increasingly apparent. Becoming an ATM for an AMC and their PEI investor doesn’t seem like a good idea, either. MSOs provide the greatest potential for the best possible operational and financial performance at the lowest possible—and sustainable—cost.

There is a significant potential that MSOs will go be beyond being cooperatives of member anesthesia groups to actually developing new MSO member groups. Using caretaker contracts, these MSOs will steward troubled anesthesia groups though the process of becoming successful local independent anesthesia services. While voluntary membership in an MSO is preferred, given flaws in many groups’ decision-making, this transition may eventually be led by governing boards, administrators and managers who understand the operationaloperational and financial benefits of local and independent practices. Building on strong relationships with facilities, MSOs may provide a full range of medical services including hospitalists and other hospital-based services. This is happening already.

Why will MSOs succeed? Because there is strength in cooperative and collaborative efforts based on mutually advantageous local relationships. In fairness it should be noted that there are well-led and well-managed AMCs, but their business model gets in the way. If you rob Peter to pay Paul long enough, Peter is going to figure that there is something wrong with the relationship and that there must be a better way.

For a proactive physician group, facility or multi-site corporation, an MSO is the best choice now and in the future. If your organization is better served by being subject to the whims and entanglements of management companies and their investors, that’s your decision to make. If you feel that your organization’s financial resources can be better used supporting the operating expenses and investor expectations of other companies, that too is your decision to make. Just know that MSOs will be around to pick up the pieces long after your bad choices are gone.

William Hass, MD, MBA has been actively involved in anesthesia practice management for more than thirty years. He currently is the medical service organization (MSO) evangelist for PhySynergy, an MSO based in Huntsville, Alabama. PhySynegry executives had more than 100 years cumulative service in anesthesia service management. Dr. Hass is also the medical director for the Madison Surgery Center in Madison, Alabama. He can be reached at whhass@physynergy.com.