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Spring 2018

Independent Anesthesia Group Practice: A Short Manifesto

Will Latham, MBA
President, Latham Consulting Group, Inc., Chattanooga, TN

“Most people will choose unhappiness over uncertainty. -Tim Ferris

Anesthesia groups are facing great challenges in today’s environment. I am sure you are aware of these various challenges so I won’t belabor them.

The question is: What do we do now?

Some groups are throwing in the towel and selling out. It seems as though every few weeks another independent anesthesia group has sold out to one of the national companies. I wonder if they are “choosing unhappiness over uncertainty.”

But other groups continue to pursue independence. Why do they want to follow this path?

Benefits of Independence

Liberty – from the Latin libertas, meaning freedom of the people to participate rather than be ruled.

Over the past year I have worked with many anesthesia groups as they develop their strategic plans or negotiate mergers. One question that is often expressed by some group members is “why should we work so hard to stay independent? It feels like I am an employee already, so why don’t we go ahead and sell out?”

While this sentiment is typically expressed by those nearing the end of their careers (who are often attracted by the financial pay-off they will receive if the group is sold—money that they might not otherwise have received), sometimes younger physicians express the same thought.

Here are some of the key reasons that these groups are choosing to pursue independence: 

    1. Elect your leaders: In an independent group, you get to decide how your governance system is structured and are able to vote on who will lead the group. As an employee you have no say in selecting group leaders (no matter what they tell you). 
    2. Decide with whom you will practice: As an independent group, you get to decide who to add to your practice. As an employee, you don’t get to decide and may not even be asked for input.
    3. Retain control: As an independent group, you maintain control over the operation of the group, including such items as staffing levels, use of midlevels, scheduling, vacation, compensation p lans and retirement plans.

      As an employee, you have a “boss,” and that individual has hiring and firing authority over you. If you are terminated, for whatever reason (even standing up to the employer for mistreating members of the group), don’t expect your associates to stand up for you. If they do so, they risk their position and have to go home and tell their spouse that they are moving.
    4. Undiluted contact with the hospital: Hospital relationships are always challenging. As an independent group, you contract directly with your hospital (sometimes using external resources to help). You choose how much risk to take in these negotiations.

      But if you are employed, someone else does much of the negotiating. Naturally, they don’t want to lose the contract or relationship, but if they do, what happens to you? You have to move, because that is what your noncompete agreement requires. 
    5. Protection from being arbitrarily fired: Most group shareholders are protected from being arbitrarily fired from their group. (Being fired typically requires a super-majority vote, which is sometimes a good thing and sometimes a bad thing.) If external organizations want a group member fired, the group ultimately makes the decision. As an employee, the “boss” makes that decision.

Many will take exception to these benefits of independent practice. But when you speak to such individuals, ask them how they make their money, and you will likely find that they make it by getting you to sell out. Almost everyone out there who offers advice on whether or not to sell your practice is incentivized for you to do the deal.

Who is in Charge?

Some of the group members advocating selling out make the argument that “control is just an illusion—we are getting so big that I already feel like an employee of a big corporation—so why don’t we go ahead and sell out now?”

It is true that many groups are growing (and need to grow larger, as I discuss below). Growth typically results in the need for a more “corporate-like” atmosphere (more formal, more organized, more policies and procedures, etc.). However, I believe the real question is not “will we get more corporate-like?” but instead “who do you want to have at the top of the corporation?”

Who do you want on top:

  • A hospital executive (whose goal is to appease the surgeons)?
  • A “stock” executive (whose goal is to cash out)?
  • Other physicians who you get to elect and who will more likely have your interests in mind at all times?

Independence Requires Work

Liberty means responsibility. That’s why most men dread it. – George Bernard Shaw

Making the decision whether or not to continue to be independent is an important first step. However, if your goal is to stay independent, there is work to be done. As the old saying goes, “even if you are on the right track you will get run over if you stand still.”

So, what are anesthesia groups doing to create more robust organizations? Here are some of the steps that we have seen anesthesia groups take to improve their prospects for the future:

  1. Improve governance: The most successful groups create a culture where all group members agree to support group decisions (or, if they don’t, are driven out of the organization) and then develop a governance system that:
    • Creates a right-sized decision-making body
    • Specifies the authority (hiring/firing, spending money, entering into contracts, deciding on key strategic issues) of each part of the governance structure
    • Enhances group communication using multiple communication tools
  2. Develop strategic plans: Many anesthesia groups are now using a well-known business process called strategic planning to help them set their practice’s future direction. “Strategic planning” is a buzzword for a relatively straightforward process of defining the purpose of the group (why it exists), setting objectives (where it wants to go), and mapping a plan to meet those objectives (how it plans to get there). The most effective groups develop such plans and review and update them on an annual basis.
  3. Get bigger: In today’s healthcare market, bigger is often better in terms of providing cost-effective care and retaining autonomy. Single specialty mergers offer one of the few ways that anesthesia groups can “fight back” against a threatening environment. I believe that you can never be too rich, too thin or too big. Yes, growth will entail compromise and change, and you will have to give up some control in a larger group, but what’s the choice—employment? Circle the wagons and shoot out.
  4. Play politics: Plato is reported to have said “Those who are too smart to engage in politics are punished by being governed by those who are dumber.” Good works alone won’t protect you from threatening forces. This is why the most effective groups support their leaders with the time to be as fully involved with the hospital as possible.
  5. Pursue lucrative business: Some anesthesia groups get comfortable providing service at one location or in one system, even though having all the eggs in one basket puts them at great risk. Other groups receive substantial stipends that can put their hospital relationship at risk.

    Anesthesia groups that are working to strengthen themselves for the future are actively looking for new business all the time, even if it is “inconvenient.” Such business is often in the form of ambulatory surgery centers which, if obtained, can improve the group’s payer mix, add staff to decrease call frequency and potentially reduce dependence on the hospital stipend.
  6. “Simulate” the predators: Progressive anesthesia groups are paying attention to what predatory groups are doing (or say they are doing) so they can preemptively simulate their offerings. This does not mean the anesthesia group has to do everything the predatory groups are doing, but the group does have to show progress to hospital leadership to avoid the dreaded “request for proposal.”
  7. Deal with disruptive physicians: While this may seem to be a minor point as compared to the other initiatives outlined above, disruptive physicians create three enormous challenges for groups:
    • Disruptive physicians threaten the entire group’s relationship with the hospital. Frankly, predatory groups do not allow this to happen and terminate or transfer disruptive physicians quickly.
    • Disruptive physicians sap leadership time that could be spent on more valuable activities.
    • Other members of the group become demoralized when they see that nothing is done to deal with disruptive physicians.

Therefore, the most effective groups have systems and processes to quickly and effectively deal with disruptive physician behavior. This could include creating a code of conduct by which the group can measure behavior, establishing an internal review process, and creating a formal process to deal with disruptive situations (see “Disrupting the Disruptive Physician” in the Winter 2018 issue of Communiqué).

Time for Action

“Many a false step was made by standing still.” – Fortune Cookie

Is there a risk in staying independent? Of course there is.

However, look at the historical track record of companies that acquire medical practices. If you are too young to remember the acquisition activities of the 1990s, take a few minutes and Google such companies as PhyCor, MedPartners and OrthoLink.

To achieve the benefits of independence outlined above, it is time to move from worrying to working. Review these steps to determine what your group needs to work on to secure its future. 

Will Latham, MBA, is president of Latham Consulting Group, Inc., which helps medical group physicians make decisions, resolve conflict and move forward. For more than 25 years Mr. Latham has assisted medical groups in the areas of strategy and planning, governance and organizational effectiveness, and mergers, alliances and networks. During this time he has facilitated over 900 meetings or retreats for medical groups; helped hundreds of medical groups develop strategic plans to guide their growth and development; helped over 130 medical groups improve their governance systems and change their compensation plans; and advised and facilitated the mergers of over 120 medical practices representing over 1,200 physicians. Mr. Latham has an MBA from the University of North Carolina in Charlotte. He is a frequent speaker at local, state, national and specialty-specific healthcare conferences. Mr. Latham can be reached at (704) 365-8889 or