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Why Anesthesia Practices Fail

October 9, 2023


There are a number of factors that contribute to the success of an anesthesia practice. The same can be said for a practice’s failure. Today’s article looks at these factors and suggests what works best to keep the group afloat.

It has been the plan and aspiration of every founder of an anesthesia practice that there would be a strong and productive relationship between its providers and the facility administrations it serves. The expectation has always been that the practice would be a source of income and job security for its members. It used to be that when a physician or CRNA joined a practice they could put down roots and become a part of the community. There would always be a need for anesthesia, and so there would always be plenty of work. There was a time when most providers stayed with the same practice until they retired, but this is no longer the case. In the turbulent world of American medicine, anesthesia is no exception: the only constant is change. Like so many other businesses, very few anesthesia groups remain the same, and many simply cease to exist.

Whether a practice decides to become part of a larger entity or no entity at all, the underlying dynamics are the same. Managing a medical practice successfully in the current environment is a complicated and often challenging proposition. Most practices complain that their greatest challenge is generating enough revenue to recruit and retain an appropriate team of qualified providers. In other words, the practice must juggle the service requirements of the clients, the revenue potential of the clinical activity and the capricious demands of anesthesia providers in a competitive market. The successful practices are notable for their favorable location, their effective management and their exemplary customer service, but they are the exception rather than the rule. Curiously, it is not the size of a practice that makes it successful but rather its strategic plan and its commitment to certain key values.

Success and Failure

Without question, the number one reason for failure is financial. There was a time when most providers generated a sufficient amount of revenue from their clinical activities to cover the cost of their income and necessary business expenses. As coverage requirements began to expand and as payer mix has eroded, most practices have had to ask for financial support from the facilities they serve. Hospitals used to respond to such requests with fairly generous subsidies, but now even ambulatory centers are being asked for financial support. Contract negotiations are now often contentious as practices are forced to justify the cost of the requested services.

For all the successes, there are as many failures. Sometimes, administrators grow weary of the ongoing struggle and simply decide to pursue other options. There was a large practice in California that had been serving its primary hospital for 30 years. After repeatedly trying to obtain ever larger subsidies, the administration decided to cancel their contract and hire a national staffing company.

Management and Administration

Sometimes, the financial issues are overshadowed by administrative issues and management challenges. A critical aspect of a contractual relationship between a facility administration and its anesthesia practice is the level of confidence the administrators have in the leadership of the practice. Practice managers are responsible for the consistency and quality of the care provided. The administration should never have concerns about the quality of care or the competency of the providers. A service contract is essentially a wish list. If the terms cannot be met, then the administration has options. If an administration loses confidence in the group’s leadership, the relationship is doomed—no matter how good most of the providers are. Infighting and internal conflicts within the group must remain internal, for the practice must be perceived as a harmonious and collaborative whole.

Ultimately, in the current environment, the strength of a relationship is built on customer service. Anesthesia is a critical service, and anesthesia practices must be quintessential customer service organizations. It used to be that what mattered most was what happened within the four walls of the operating room but now it is what happens outside the O.R. that determines a practice’s success or failure. Anesthesia must not only ensure that every surgical and obstetric patient has a safe and comfortable experience but that it is the quality of the team that make surgeons want to bring their cases to the facility.

It is often some combination of these factors that leads an administration to decide that an arm’s length contractual relationship with a private group practice is no longer a viable solution. This usually explains why the administration will simply decide to employ all the anesthesia providers itself. Such thinking may not result in a perfect solution, but it is usually considered the best option of last resort.

A well-known Harvard business professor, Rosa Beth Moss-Kantor, summarized the three most important qualities of any business partnership in her book, Confidence. They are accountability, collaboration and innovation. When these three qualities define the relationship between the anesthesia practice and its client administration, the relationship will most likely be strong and enduring; but, if one or more of these is missing, then the client’s confidence will be inevitably compromised.  

If you have any questions on this topic, please contact your account executive.

With best wishes, 

Rita Astani

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