Is Hospital Employment Inevitable for Anesthesia Providers?

Summary 

The relationship between an anesthesia practice and the hospital administration can become challenging, especially when the negotiation of a hospital contract involves the determination of financial support. While it is true that sometimes the parties cannot come to terms and the administration must employ the providers, this is the exception rather than the rule and not a desired state of affairs for either party. Managing the relationship has many challenges but none that cannot be overcome with effective management.

At ABC we have spent more than 40 years helping our client practices maintain their independence. This has involved aggressively managing their accounts receivables and collections so that they generate enough money to recruit and retain sufficient numbers of qualified providers. It has involved assisting them in the negotiation of their hospital contracts and, where necessary, helping them calculate a reasonable level of financial support where needed. We have also provided a variety of practice management services so that they are seen as a professional and valuable partner to the facility. These are challenging times, though, and many of our clients continue to believe that all of this is just buying time, that ultimately the hospital administration would prefer to have the providers as employees rather than as an independent contractor. We would like to reassure our clients that while this may happen in a few select institutions it is not likely to happen across the board.

Clearly, we understand the concern. These are challenging and stressful times for anesthesia practices. In just the past few years many private anesthesia practices have been displaced through an RFP (request for proposal) process. For those of you not familiar with what has become three of the scariest letters in the anesthesia vocabulary, an RFP is a statement of concern that maybe the practice is not meeting the hospital's expectations. Most RFPs do not result in a change of practice but they represent a time-consuming and anxiety-producing process that can be very disruptive to a practice. It is also one that inevitably requires additional resources and expense. There are consulting firms that now specialize in responding to RFPs.

By far the most stressful aspect of an RFP response is the calculation of the level of financial support required. An RFP is a hospital wish list. It lays out hours of coverage, the scope of care required and sometimes even the number of providers required. Projected growth in surgical and obstetric volume and payer mix are usually exaggerated. The practice must use its data to reset administration expectations with regard to revenue potential. Typically, the hospital thinks the anesthesia group is asking for too much while the group believes the hospital does not understand the economics of anesthesia. And if the practice is a physician-only group, the administration is sure to ask them to hire CRNAs.

Is an RFP intended to lay the groundwork for hospital employment? We think not. In fact, just the opposite is more likely the case. It is tempting to think that the hospital administration sees the anesthesia department as a potential source of additional revenue. Anesthesia providers are well paid and the perception is that they do very well financially, which is true. But they are well paid for a reason. They provide an invaluable service, without which the hospital could not run the operating rooms efficiently and ensure a comfortable and safe surgical experience.

Most hospital administrators are not cognizant of the inner workings of an anesthesia department. The last thing they want to do is micromanage a collection of anesthesiologists and CRNAs. This is why there are so few employed anesthesia departments outside of the academic arena. About five years ago HCA (Healthcare Corporation of America), one of the nation's largest hospital companies embarked on an initiative to employ anesthesia providers. The initiative involved the addition of qualified staff whose mission it was to expand the program. After a few years the entire initiative was disbanded. The result was that HCA is trying to get out of the business of employing anesthesia providers.

The real question is this: If an anesthesia practice is not financially viable is the hospital in any better position to fix the problems than the group? The administration might be if the group is intransigent or dysfunctional, which the case is sometimes. We are familiar with practices where the hospital has insisted that the group shift from a physician-only model to a careteam model and they refused. In these cases the hospital felt it had no choice but to employ the providers. Time will tell how long this arrangement lasts.

Here is how we look at it. The hospital administration has responsibility for dozens of specialties that all have to interact collaboratively. Does it really want to micromanage all of them? Historically, hospital administrations have found that the contract model works much better. There are examples of hospitals that have hired a chairperson to manage the anesthesia department. There was the famous case of a major hospital where the designated chairperson hired less qualified providers to save money and the result was two incidents that made the front page of the New York Times.

Asking if hospital employment is inevitable is actually the wrong question. Hospital employment is an option of last resort. The better question is what set of circumstances might lead a hospital to think they have no other option. If the practice understands and addresses any service issues the hospital might have they are probably in good shape. If they can demonstrate and explain the economics of their practice in a way that the facility understands and accepts they will likely receive the necessary support. The administration must believe there is a partnership relationship because if it is not employment is not the option they will pick; they will find a new group of anesthesia providers.