Hospital Divorces Anesthesia Group After 24 Years of Marriage: How to Avoid the Same Fate 

Mark F. Weiss, JD
The Mark F. Weiss Law Firm, Dallas, TX, Los Angeles and Santa Barbara, CA

We still love you but, hey, we’re in love with someone else who spends less on clothes stipends.

When I was a kid growing up in Los Angeles, there was a television show that I loved to watch: the original Divorce Court. You see, at the time, California required grounds for divorce, and the show proffered up titillating tales of deceit. But just across the border in Nevada, one could quickly obtain “residency” and snip marital ties on a whim.

Just like a 1960’s Reno divorce, last year, Olean (NY) General Hospital announced that it was terminating its 24-year marriage to Southern Tier Anesthesiologists. Apparently, it was the “for richer or for poorer” part of the marital vows that pushed the hospital over the edge.

Yes, after 24 years of marriage, it was time for a change. Will the successor anesthesia group be a “trophy wife” or bring staffing strife? Only time will tell.

But either way, there’s actionable insight to be gleaned, insight that can help you prevent the same fate—termination of your group’s facility contracts.

Money talks. According to a letter obtained by the Olean Times Herald, Olean General Hospital stated that Southern Tier’s bid for the renewal contract would have cost it too much: “. . . It is simply not feasible for [Olean General Hospital] to pay millions of dollars more than necessary over the life of the . . . contract.”

Of course, none of us are privy to the inside terms. Southern Tier claims to have done its best to meet any offer. But the hospital says there was a great gap. And, it’s reported that the hospital lost $3 million the previous year. How and why they lost it is anyone’s guess, but it’s unlikely that it was significantly due to Southern Tier’s contract.

We love you, but what have you done for us lately? Again, we don’t have any specific facts, but query whether it was only an issue of money that led the hospital to take “bids” for Southern Tier’s anesthesia contract after a 24-year relationship.

Maybe the relationship had become stale. You know, a “commodity” (at least in the mind of the hospital CEO and perhaps in the collective mind of Southern Tier). Although it’s impossible for personal services of any kind to actually be a commodity, it’s a mind virus with legs. And commodities are, by definition, fungible. Bye-bye Southern Tier!

The actionable insights for you. If your group holds any facility contract that pays you anything—a coverage stipend, a directorship fee, an income guaranty—anything, you must constantly assess how to increase the value proposition to the facility.

There are only two ways to do this: 1) reduce the amount you’re paid by the facility, which might or might not be possible, and 2) increase the amount of perceived value that you’re providing to the facility.

Note the word “perceived.” There’s no such instantiated thing as “value.” In fact, value is as malleable as clay. You, as an anesthesia group leader, can’t set value for a facility because it’s set by the perception of the facility’s leaders.

And the cold, hard truth is that if they think that they are receiving value from the deal—something worth more to them than the worth of what they are giving up—they will most likely keep your group around. On the other hand, if they think they’re giving up more than they are getting, then you’ll soon be crying southern tears over your lost contract.

And, again, magically perhaps, because “worth” and therefore “value” are subjective concepts, they can be influenced. Although you can’t set the value for the facility, you can heavily influence how it perceives value.

What programs and initiatives have you created at the facility that increases that perception? What add-on services do you provide at little to no cost to you that produce a disproportionate increase in perceived value? I’ve long referred to this as creating an Experience Monopoly™: an experience for facilities, patients and referral sources that they cannot get from anyone else. How often do you meet with the facility’s leadership, both administrators and medical staff leaders, to stoke top-of-mind thinking of the value that you create?

Despite all of the rainbows and unicorns talk about “alignment” and “valued partners,” facilities view physicians, especially (Anti-Kickback Statute alert!) those who do not refer patients to them, as vendors: Cafeteria—check! Laundry service—check! Hospital-based medical group—check! Or, in the case of Southern Tier—uncheck!

Don’t take for granted that you can’t be unchecked as well.

So, as much as you may love the idea that you’re “supporting the hospital,” take a bit of advice from polygamists: spread the love around. Have contracts at as many facilities as you can, but not simply within the same health system, because that’s just the same mistake on a larger scale!

After all, you never know when you’re going to be dumped, even if you’ve done everything possible to keep the love alive.

Mark F. Weiss, JD, is an attorney who specializes in the business and legal issues affecting physicians and physician groups on a national basis. He served as a clinical assistant professor of anesthesiology at USC Keck School of Medicine and practices with the Mark F. Weiss Law Firm, a firm with offices in Dallas, Texas and Los Angeles and Santa Barbara, California, representing clients across the country. He can be reached at markweiss@advisorylawgroup.com.