Episode 23: Key Elements of a Profitable And Efficient Anesthesia Practice, Through The Eyes of a Practice Consultant w. Michael Zervas

Jul 26, 2019


This Episode

Interview with Michael Zervas

You Will Learn

 – The similarities between practice consulting and martial arts.
 – The importance of good data systems when making business decisions.
 – Common issues and problems with technology in practice management.
 – Benchmarking methodologies to assess practice efficiency and profitability.
 – What to look for to make sure that the practice you want to join is a well-run business

Resources & Links

This week I’m talking to Michael Zervas about the business of anesthesia.  We look at things through the eyes of a practice consulting company and identify important metrics to evaluate the health, profitability, and efficiency of anesthesia in different practice models.  We also talk about some common pain points for medical directors overseeing practices, and how getting good data is critical to making organizational improvements.  Also you won’t want to miss Michael’s thoughts at the end about things to look for if you’re thinking about joining a practice, to make sure that it’s a healthy business.

Show Transcript

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Michael: [00:00] Spend as much time as you possibly can with ownership and understand their personality, their drive, and their time horizon because that’s going to have a big dictate to how the business is running. You got to understand whether or not it’s not right or wrong. It is what it is. How does you overlay against that? Hey, this is Justin Harvey, your host of the anesthesia success podcast. My wife is an anesthesia resident and I’m a financial planner and I work with anesthesia and pain doctors as my clients. This podcast is designed to help the anesthesia community be informed about their careers, the finances, and more by taking important questions straight to the experts. Thanks for tuning in. This week I’m talking to Michael Service about the business of anesthesia. You look at things through the eyes of a practice consultant company of which Michael is the CEO and we identify important metrics to evaluate the health, profitability and efficiency of anesthesia in different practice models. We also talk about some common pain points for medical directors overseeing anesthesia practices and how getting good data is critical to making organizational improvements. Also you won’t want to Miss Michael’s thoughts at the end about things to look for if you’re thinking about joining a practice in order to make sure beforehand that it is in fact a healthy business. Thanks for tuning in.

Justin: [01:16] Hello, it’s Justin. Welcome to this week’s episode of the anesthesia success podcast. This week we’re going to be digging into the business of anesthesia and I’m really excited about it. My guest is Michael Service, the CEO of encompass healthcare data solutions encompasses a provider of practice management solutions serving medium sized healthcare organizations, rural hospitals, medical centers, and physicians practices nationwide encompasses not a lot of work with anesthesia groups specifically and helping doctors understand how the business of their practice works and assisting them in systematically addressing all the different considerations they need in order to make sure they run profitably and serve patients with excellence. They’ve also been recently selected as the preferred company for HR services by the American Society of anesthesiologists. Michael specifically has consulted with hundreds of small businesses to help them achieve their operational goals. I’m really pleased to have Mike with us today. Welcome, Michael. Thanks Justin. Appreciate you inviting us on the show and look forward to arousing and engaging conversations. Warning. Yes. As do I. And to get us started off, you were just saying before we hit record, a little bit of your background involving some kickboxing excursions over in Thailand. You want to start with a story from abroad?

Michael: [02:22] Yeah, sure. I was a, I grew up playing sports and started wrestling and then, when I got out of college I was, looking for some physical activity and got drawn into mixed martial arts. And I’m, I’m 58 now, so I’m talking about 30 to 35 years ago before it was popular, like it was today. Okay. And, through a series of, adventures and misadventures aligned myself with a Sensei who’s a part of his training was to take me to some of the places, the origins of where some of the fighting styles originated. So I was lucky enough to go to and, and study Jujitsu and go to Thailand and be thoroughly thrashed and beaten up by on small, but very quick and powerful men. And as I tried to learn how to kick box, so eventually said this is, this is hard and morphed into a health care and, and helping people, how to put your body back together after all. Yeah, it was a, it was quite an eye opener.

Justin: [03:23] It’s funny. I’m curious, have you found any a translatable skills when it comes to the martial arts and looking at businesses and operations and solving problems?

Michael: [03:31] Yeah, it’s interesting you say that because I talk about that quite a bit with my team. The reality is is that every time we walk into a situation, whether it’s an anesthesiology practice, a hospital system that’s employing anesthesiologist or some variation thereof, each one is unique. And in martial arts, the whole process is for you to develop your own effective style by learning from all different styles that you are exposed to and people that you train with. And so in that way, we walk in kind of as a new, as a white belt and looking and learning and trying to understand the strengths and weaknesses of the organization in the same way you would with a new student. And then build a style that’s most suited and most adapted to the needs that they have given their regulatory constraints, market constraints, talent level skill sets within their organization. So yeah, there’s quite a bit of crossover and I can say to tell you the other crossover is that in martial arts, the harder you try, the less successful you are. So it’s not about muscle but it’s about flow. And the same is true in healthcare and in business. It’s the ability to let things flow and not try to feel like you have to muscle everything.

Justin: [04:42] Yeah, that makes a lot of sense. And I can also see like in you studying different styles, being able to, you know, if you’re facing an opponent, you’re sort of going through your inventory mentally to see like where are the weaknesses, what is the, the one thing that I know, the one facet of one style that’s going to be able to exploit my opponent’s weakness to be able to have its desired effect that’s identical in like practice consulting and that way I would imagine

Michael: [05:05] that’s exactly, that’s insightful point magician maintenance. Exactly right. You’re constantly probing and thinking and paying attention. And many people have said that, martial arts, and that contest is kinetic chess. Yeah. And, and, and really business is chess, right? It’s how you’re playing it and it’s how you’re thinking two, three steps ahead for your team, your client, your division, your hospital, your group. That’s really the predictor to some degree of success.

Justin: [05:34] Yeah, absolutely. And I think a lot of physicians, especially in the practice management context, are finding themselves having to in this way, learn a new language to be able to manage their practices, not just have clinical expertise, but develop that sort of way of thinking to be able to effectively operate a business in addition to serving patients. Well. So I’m looking forward to unpack and then here in a minute. Yeah, that’s an interesting insight. so to start us off, why don’t you just talk a little bit about your role with encompass and all the things that your company does for me?

Michael: [06:06] I’m the CEO of the company. I’m also, one of the shareholders. so I’m wearing kinda two hats. and I’ve been in healthcare in a variety of capacities for a significantly long time now and that I have owned facilities, many hospitals in rural settings built them from the ground up. I’ve worked on a consulting side, I’ve worked in systems, I worked for groups. And so that’s given me a unique perspective of being able to sit all the way around the table and understand everyone’s needs and everyone’s challenges and what’s pulling at them at a certain time. I’ve shadowed docs and operating rooms that then in to to really understand day in, day out what these guys are doing. And that translates into what we do as an organization and where we try to find that value that we can prevent, provide to that client. It’s really understanding and coming up with a unique solution. It’s not a cookie cutter. We got to find a solution that makes sense for this group because they’re different even though they do the same stuff then the group down the road that they’re competing with.

Justin: [07:08] Yeah, it makes sense. So why don’t you give us just sort of a 30,000 foot overview of the practice of anesthesia and its different various models and then talk about the ones with which you work most closely.

Michael: [07:17] Well, there’s, there’s a lot of different models. you know, there’s a completely independent model right where they’re going in and they have the, the group has different, contractual relationships with facilities to provide a certain level of service. There’s employed models where they’re wholly captive to a specific system. There’s hybrids between those two where the hospital maybe wants the majority of their time and it’s giving them guarantees about amount of their, a floor that they’re gonna make so that if they’re not keeping the operating rooms busy, that the anesthesiologists aren’t going to bear the brunt of inefficiency within the system. And then there’s another layer beneath that that’s at the highest level of how do they interact with the marketplace themselves. And then each practice can configure itself within those environments differently depending on what they’re trying to accomplish. And so it can be, they have hired, there’s a few core owners, all, everybody becomes an owner over time. Some people have to work in, there’s buy-ins, there’s, how are we paying each other based on production. But wait a second, I’m doing extra work because I’m also the clinical manager or I’m managing this. So there’s like variations on a theme consistently. And that’s why really one size doesn’t fit all. You got to go in and look and say we work backwards from the goal and then build the model to fit into the system and give the partners what they need.

Justin: [08:40] Yeah. Makes Sense. And with regards to practice size, which, which practice sizes are you working with most frequently? Or is there a most frequently? Maybe there’s not

Michael: [08:51] that there isn’t. and, and thanks for giving me the, the grace to not have to answer that question because there isn’t really, we have small groups with, five to eight members and we have large groups that have 150 or 200 members and kind of everything in between. And we don’t provide the same types of services or levels of service equally across those groups. So the hundred and 50 group might have tremendous infrastructure already built that’s running great and they just need us to do specialty work around an it issue or a comp issue. Conversely, maybe the small group with eight guys is trying to negotiate a contract with their service system and they’ve never gone through that process and they need someone to be on their side of the table that has a lot of data and experience everything in between. And so there are commonalities in what they struggle with but not necessarily in size. Sure.

Justin: [09:50] Okay. So let’s take a couple sort of concrete examples that sort of help our listeners build out specifically what it looks like to work with encompass. So if we take the small practice example, five to eight mds, maybe some crns in there, what kinds of things might a practice of that size? What are they, what are their operations look like? What are their pain points and what does it look like for you to sort of start that conversation with them about we can help, here’s how.

Michael: [10:13] Yeah, so encompass, we have a broad range of services and so we do everything from handling credentialing and enrollment for all of their locations, their billers, their payers, all of their payers, and taking that off their to make sure that’s running. We also have a division that does nothing but manage and monitor and help them with it issues. We have a division that does nothing but revenue cycle. We have a data scientist in who runs our division for business intelligence and interoperability issues. So quality, we build quality programs so they can submit to Macra and MIPS and not get penalized. So we’re kind of tailored and they pick and choose between that. So it depends. But in general, to answer your question more specifically, what they wrestle with is you’ve alluded to it. So in the smaller practices, it’s kind of all hands on deck and a lot of the dots are carrying extra workloads and trying to learn to speak a language to use your metaphor, which I think was apt is that they’ve never been trained at, so they didn’t have one week of business school training or graduate school business training.

Michael: [11:18] They didn’t ever go to an MBA class. And at the minim good schools will tell you, take you two to three years just to get an MBA, right? Assuming that you’ve got a good selfie underpinning of business and economics and financial knowledge in an undergraduate degree where you spend another two or three years. Right? So what we’re doing is we’re asking these docs to walk in and say, fix this and you’ve had no experience. So they struggle a lot with, they try, they’re really hard workers, all of them. And they struggle sometimes of knowing how to differentiate what they should work on, what’s important and where the solution sets are. So they bogged down and things take incredibly long time and they don’t always come to the optimal solution. The other thing sometimes is that as the marketplace changes for these smaller practices, they have embedded longtime employees who may or may not have as an office manager who may or may not have the screening, the the background, the education or the experience to be tracking along with all of these changes that are happening rapidly to them and so they’ve got personnel that they might have in the wrong spot who don’t have the knowledge, don’t know where to get the information, don’t have the resources to ask the right questions to get these solutions.

Michael: [12:33] So that manifests itself and we’re not making as much money as we were a year ago, two years ago, three years ago. I can’t ever seem to get the information that I want out of the system to make decisions about how to do our disbursements. I can’t understand if the money that we’re making today is still good money in relation to everyone around me. How do I benchmark and what are the variables that I need to do? I’ve got a sneaking suspicion that my revenue cycle company isn’t collecting all of the money that they should be collecting, but how do I, how do I go about and get that information so that I can have objective information? So it’s around finances and then you’ll see that because I’m working harder, quote unquote, I’m working harder than I’ve ever worked.

Justin: [13:20] Yeah.

Michael: [13:22] I got less time with my family.

Justin: [13:24] Yeah.

Michael: [13:24] And I feel like I’m making less money.

Justin: [13:26] Yeah, makes sense. And it sounds similar to, you know, in some ways, like if someone wants to engage a financial planner, sometimes there’s a, an acute pain of like, oh my gosh, I’m really, I’m literally losing sleep over student loans, for example. Right. Therefore, I’m reaching out to you and I figure maybe there’s other things. And in practice management opportunities, is there that same acute pain point or is it just sort of a vague sense of, I feel like I should be doing better. I talked to my buddies at the country club and they’re talking about how great their lives are and I feel like mine’s not that great. But what do you tend to find there

Michael: [13:56] as they’re talking about it at the country club? The, that their lives aren’t dead. but to be fair, taking my tongue out of my cheek, it’d be fair. The, we usually get clients because there’s a Seminole event or there’s an acute pain point that’s coming up, right? It’s the end of the year. Our distributions were down 30%. How come? But when you start talking with them, they will tell you that I had a general feeling that things aren’t quite right, but they haven’t been able to pinpoint it partly because of everything we’ve already discussed, but also because they’re incredibly busy. Yeah. They’re hustling. Right. And so they don’t have the luxury of sitting down for three hours and pouring through data to looking for patterns and anomalies and trying to find that signal through the noise. Right. So almost always when we go in on one thing, it morphs into what about this? And what about that and were able to say, well let’s, let’s give you some framework and some information and some parameters that you can these, put that one to bed or tackle it when you see fit. Yeah. So it’s very specific. Usually it’s benchmarking. It’s, we’re not collecting as much money. I don’t know. We can’t recruit doctors. We don’t know what we should be paying them to the hospital. We can’t get a contract that the hospital will not protect us when they want us to be available, but their surgery went from 10 a day in this room to five because they’re not turning rooms fast enough enough and I’m losing money now. And, and how do I fix that? How do you have that conversation? What does the contract look like?

Justin: [15:32] That sounds incredibly complicated. I’m glad there are smart people out there that can figure that stuff out.

Michael: [15:38] And, and, and quite frankly, we’re a data driven organization. We’re built on a pretty robust infrastructure that has a lot of data. And so it becomes easier when you can start to give them, localized data that’s validated and can be cross referred and all of a sudden you’re like, okay, now at least we know where to focus and what the conversation should be about. Right.

Justin: [16:00] So let’s take a hypothetical example. If I come to you and I’m a, you know, a medical director at an anesthesia practice and I say, Hey di the example you gave, my distributions are down 30% versus last year. We’re making a lot less money there. They’re starting to be some unrest in the ranks and we need to figure out where we’re taking on water. Take me through that process of what does that intro conversation look like? And then you know, a little bits of, sort of your methodology for looking at those different areas that you mentioned.

Michael: [16:24] Sure. So we’ll, we do a, we really try to have a conversation and we start there and we start probing and as we ask questions and kind of develop a needs analysis because of our experience, we’ve been doing this for over 30 years now. You just hear things and you, it makes you ask the next question. And so you’ll ask a series of questions and that begins to define what data that we need from them. And so then we’ll say we need data, we need to look at your production, your asa units. We need to look at that by provider. We need to look at that over the last two years. We need to look at your payroll, your expenses. We’re going to marry that against benchmarking for national averages by region. And we’re going to start to look at that. And then they come back and say, well, we can’t get that data right.

Michael: [17:06] It’s like, well, what do you mean you can’t get it? Well, we can’t pull that data out and like, well let’s run a report and let’s look at it and say like, so where is this data? Well, we don’t have a system that actually captures that data from here to here. Right? Now all of a sudden we’re starting to get to the underpinnings of that. Wow, you have a distribution firm, you’ve got a technology communication problem, right? And the data is there and you’re not getting the data in through that data. When we get it for him, we go, well, here’s the problem. Last year you build actually less than this year, but you collected 22% less. Hmm, we got a collection problem. So now let’s drill down and take a look into each chart and find the signal in that noise and see what’s different. Why aren’t you collecting like you were the previous year? Right. That’s where the problem is.

Justin: [17:50] Okay. Makes Sense. So it’s funny, this is business is kind of the same across industries. I’m realizing as I’m hearing you talk, because I have the same challenges with my own practice and thinking about benchmarking and gathering data. And it’s not at all hard for me to imagine you walking in and them saying, we don’t have a system to get the data you’re asking for. And then the installation of that system being sort of the first step of the process. So what does that process look like and what kind of systems are you putting in place? What kinds of metrics are you usually finding that, oh, this is something that people often aren’t tracking correctly and this is sort of the system that we often implement in order to help them get that data.

Michael: [18:24] Yeah. So we’re going to, this is where you might have a lot of people turn in the podcast off cause we’re going to get into some really boring leads right now. So I will leave it to you to be able to tell me. Okay. That’s enough. Very Fair enough. I’m pretty wonky and pretty nerdy. So what happens is, it may, so it may be that they’re capturing the data in one system, in their EHR, in the hospital, EHR. Yep. They can’t easily get that information out of that system into their internal system to be able to move the data. So we might just help them and build them an interface. Very. And so we facilitated that. Now conversely, it might be that they say we don’t have any way, we don’t have any infrastructure to do anything with that data. And we’ll say, you know, we’ll put it in art in a warehouse for you.

Michael: [19:09] We’ll let our data scientists cubit validate it, cross refer it, and we’re going to spit you back a dashboard of all the information then you need so that you can see in a very simplistic real time way what’s happening in the practice. The next level is to say, let’s talk about what we should be looking at, what you, what you’re exactly right. Intuitively correct question was, and that’s where the rubber gets interesting because what they look at and what we tell them to look at are usually two very different things. So they’ll look at how many asa units did we build and we’ll turn around and say, that’s important. Let’s keep following those asa units through the whole thing. How long did it take you guys to get them coded? How long did it take to bill? How many initial denials did you have?

Michael: [19:53] Why did those denials happen? How does that relate to what your contracts say you should be getting paid versus what you’re collecting? Who’s doing that audit periodically and you’ll find we don’t, we don’t, we don’t, we don’t have it. We didn’t do that one with a lot of we and we go, no worries. We can set that system up. And so we’re, we’re taking them into the deep weeds of saying you need to look at your initial claims denial rate, you need to look at your, you’re up subsequent total collection rate. You need to look at and have an ability to run reports by provider, by location of your denials. And we use drill down on this data and that’s a feedback loop that we create back into the system. Yeah, the direct behavior of either the provider, the staff, the coders, the billers. And so that honing is where they start collecting that extra money.

Michael: [20:40] And it might only be five points, but on a, on an anesthesiology group that’s billing that size, you know, a 12 million group. Yeah. At 600 K we’re talking about, yeah, it’s real money. Yeah. We’re pretty close to real money territory. Yeah. I mean not for were a big shot like you, but I mean for us, the rest of us. Yeah. I’m just kidding. Yeah, I am too. The but you know, you say you got a eight member group and there’s six or 700 k that’s a hundred gs and that’s what they’re feeling. Right? It’s like it’s there but it’s so buried. It’s hard for them to intuitively see it no matter how bright they are. Right.

Justin: [21:18] Yeah, that makes sense. So you know, we’ve talked a little bit on the show in the past about the P and, l the profit and loss statement and sort of breaking it down in very broad terms of get your revenue on the top and then you’ve got your, all the stuff that comes out, all the costs that you’re paying for infrastructure and for your staff and systems and all that. And then the, you get your net income at the bottom. So it sounds like a lot of what you just described is going to be in the sort of, in the middle there. Not necessarily. A lot of it has to do with, I guess like I’m thinking you’re talking about counting asa units and then looking at the overhead required to deal with claims denial. And the less you have sort of your back office kind of churning on things that are very inefficient, the more you can deploy them in more productive ways and ultimately maybe even have to hire one or two less people in order to run your operations because things are running more smoothly and then you’re, if the top line doesn’t grow at all, if the middle of your P and l is more efficient, more lean than more dollars follow fall to the bottom line.

Justin: [22:18] Right.

Michael: [22:19] That’s exactly right. And we look at, as another metric, we look at profit over expense for each employee. So we measure that over time for them. And as a, that’s a crude but relatively effective model of productivity for their practice. Right. So yeah, we’re looking at all of those things and exactly right. You, you mentioned a couple of things there that are, that are spot on. So, for example, we’re deploying a lot of machine learning and artificial intelligence. I’m this one area of the, of our business for revenue cycle management. And what happens is there’s no millions of potential permutations, right? As you take all of the CPT codes, all the different cases and all the different ways that they could interact. And what we do is we teach our AI to start recognizing patterns. And then what we do is we start saying, and we proved this mathematically as well as in the laboratory of the real world with payers will start being able to say to our clients, there is 99.6 plus percent that this subset of coding, the way we’ve already artificially coated it with no human interaction is right, send it out.

Michael: [23:33] And that’s somewhere between 40 and 60% once we get the machine learning up to now all of a sudden there’s 40 and 60% less need for those groups of people to be working on that. And we have a higher rate of accuracy than even if they were doing it right. And then there’s a subset of that group that we say there’s another 30% that is yellow. It’s not full goal. Someone’s got to look at it because there’s anomaly within this data. We’ve got a new doc, he’s all of a sudden doing a new procedure. She didn’t, she changed her location of her clinic this week and no one let us know. But that doesn’t ring true with what we’ve been seeing for the last seven months. Those a coder can look at and move through very quickly. And then there’s full red stops, which is always about 10 to 15% there’s something significantly inappropriate about this that has to be on this.

Michael: [24:23] This said it was left knee. This is saying right me. And so what happens is that’s where that first claim denial rate goes way down, and what happens is the speed of their cashflow starts to increase, right? They’re seeing more money faster, right? And so it’s a onetime payback of there’s a half a million bucks out there that’s languishing right in Ar. Let’s compress that and take that all now and then let’s never let that build up again. In addition to the additional collection yet, can you describe what you do, what you just said? Can you kind of break that down for us? If there’s a half a million in accounts receivable trying to accelerate it, shaping an ar to it being in my checking account as a practice. So, that’s exactly right. It’s in our checking account. I love that. So the idea would be that we did, we sent out today on Thursday, a half a million bucks in billing.

Michael: [25:16] So the clock started ticking on how fast we’re going to get paid. Yeah. But 30% of that came back before it even could get process because it was rejected maybe by a clearing house, less likely, but the payers are rejecting it for various reasons. Now the coders and billers have to stop what they’re doing and go back and correct a typo that they made, something that they missed. Maybe it’s a red that they should have had the left leg and the right leg. So now that delays us. There’s a week delay, right? We resubmit it, it goes through the process. It comes back, still didn’t pay 100% of what we thought. And by the way, most of us aren’t checking those rates and have an automated the ability to check what we’re getting paid versus what our contractual rates are. So we don’t know that if they’re underpaying us by $22 because we don’t have a way to know exactly what that one item is.

Michael: [26:12] So now there’s this additional delay. So now this half a million dollars has been out 30 days and we still haven’t collected on it. Right? Right. And it’s moving through that continuum of x of accounts receivable every day. And every day that it moves farther and farther away, you lose a percentage of it to be able to collect. Okay? So the rule of thumb is every, 30 to 60 days that it moves from one bucket to the next, you lose 10% of the total amount that’s in there. Got It. So that money’s moving. It’s continuum. The class taking, if we eliminated all of that delay and you got paid within the first 14 days, that’s a onetime payment to your company because every single anesthesiology group we’ve ever done has this Bolus. It’s ongoing Bolus of money sitting out there and it’s, and it’s like, Hey, let’s get that money back. Right? And so then you say, well, how come I does? Because they collect some of it and then some more ages and it adds and some more ages. It’s like, no, let’s keep 90% of our stuff within the zero to 60 days and not let the 60 to one 20 and we’re trying to grab all of that money and bring it back into the bank account. Hopefully that makes more sense.

Justin: [27:23] It makes perfect sense and thanks for breaking that down. With regards to the benchmarking, I’m fascinated by this idea of you have in your database with the work that you’ve done a pretty good cross section of all the different important metrics for different practice sizes and different geographic locales all over the place. So if I come to you, you can tell me where I fall in the strata of different similar practices elsewhere. Talk a little bit about what benchmarking is and means and some of the important benchmarking metrics that you’re going to bring to the attention of some of the clients with whom you work and why that matters.

Michael: [27:53] Sure. So there’s another element to what you described, which you did very well, which is we have a lot of internal, we have experential data, we’ve have anecdotal data. Hey, we’ve negotiated this contract, right? There’s this company, this compendium of, of our institutional knowledge that we have. We also have the ability to go out and know where to go to get information from clearing houses like a MGMA and Sullivan cotter, and be able to take all of that information and start to build a picture of what’s appropriate. And so the things that we work on, obvious first one, total comp, right? Right. What do you make in, what does an anesthesiology make in Macon, Georgia? It’s different than what they make in Boulder, Colorado. Yep. And how much production do they do on average to make that average dollar amount or what’s the 75th percentile or the 90th percentile?

Michael: [28:49] What kind of benefits do they get to go along with that? Who’s paying for the benefits? Are they paid for call or are they not pay for call? Do they have floors? Do they not have floors? So there’s a minimum amount of money they’re gonna make every year. If they’re not busy enough, is there an ability to look at their contract and say, you guys have, should be able to share in your quality metrics and bonuses that the hospital might get as a result of the work that you’re doing and process improvement within that venue. And so all of this data, we’re able to come back to them and say, kind of here’s your world. It’s by no means what I say. It’s exactly like there’s a bunch of, is it a privately owned practice? Is it cold, is it hospital based, is it working in surgery centers?

Michael: [29:34] What’s the average length of, of the anesthesiologist? And we are able to sort through all that data and say, here’s you and here’s how you compare to your cohort. Right. And you know what? You guys are killing it. Yeah. Keep your head down, man. Don’t, don’t negotiate anything. I know this one thing, budget, but you open up that they’re going to open up. Or conversely you guys are getting killed, you’re producing at the 75th percentile and you’re being paid as a 43rd you’re not being paid for call and that’s costing you another hundred thousand dollars a year individually. Yeah. And you should be getting this amount of medical benefits. So there’s a lot of different ways that we sort of mass that to give them a grounding and help them understand where to focus their energy in terms of what’s broken and what’s what isn’t.

Justin: [30:19] Yeah, it makes sense. The example you gave, so anesthesiologist in Georgia for example. Sure. If we just sort of take that as an example. If we’re talking about you’re, you’re gonna, you’re giving some relevant data points for compensation for anesthesiologists in Georgiou certain practices. How are you measuring comp and how are you sort of helping your, the client with whom you’re working to understand sort of what that means?

Michael: [30:44] Yeah, that’s a good question. So we, we, we look at comp, but we also then can also look and say, what is it costing you to run your practice? And we can benchmark that also and then drill down into that. How much are you paying for an office manager? You’re paying $167,000 for an office managing the average in Macon, Georgia, 67. Let’s talk about that, right? So there’s different ways and you paying spend this much on supplies or you have this many people or you’re paying your crns 80% above market and your model is really different because you’re not connecting Sierra and crns to anesthesiologists and leveraging that. But your question about what is it that we’re looking at, we primarily start with an asa unit, which is a way to measure how much time or effort is spent on any given case. And that’s a universal and that becomes a, a, a leveling that we can measure asa units across the board and compare and contrast now and then attach dollars to each asa unit.

Justin: [31:44] Got It. Tell me about a time when you were doing sort of some preliminary benchmark reviewing and you went to a client and they either were in like the hundredth percentile or like the fifth percentile and what kind of actions did that spawn for you and for your client?

Michael: [31:57] It’s a, both of those conversations are difficult for different reasons. Yeah. So sometimes there’s a spread in groups between younger members and founding fathers who are looking to sunset out. Right. And they get a lot of cases, they’ve got relationships built up there at people. Surgeons might be saying, I want to work with Justin. I don’t, you know, I don’t even know him. Z, I’m sure he’s a fine person, but I got a good rapport. So there’s some times it’s skewing of WHO’s making the most money in relation to if they’re getting paid straight by ASA. And so what happens is you’ll look and you start digging into that. And you’ll find out that Justin’s producing at the 70th percentile, but he’s only making 50 percentile money. The guy who started the practice, or the Gal who started the practice is producing at the 75th but getting paid at 110 now we got an uncomfortable conversation we do in the practice, right?

Michael: [32:50] And we help them navigate that by saying, wait a second, there’s more to the picture than just that. Who’s doing extra work? Who’s doing what? There is some equity to have for somebody who’s built it and sometimes actually having somebody in the middle who can speak to the data can do it. I’ll tell you an interesting story. We, we were working with a client and trying to help them understand the benchmarking, which is a small piece of it. And eventually had started talking to him because we could, we were showing them how much more money they could be collecting. They were doing it very inefficiently and as we were, we were literally asking them on the phone and walking, wanting to pull up and go through some of the reports and they got ransomwared. Oh my gosh. And everything got locked down. And so we actually went in and busted the encryption and got all their data back.

Michael: [33:44] our data scientists went in, we worked, it took us eight days behind the scenes working with doing some forensic stuff within their backups and busing the encryption. And we got enough where they were able to go away and not have to pay that and get, we got about 96% of their data back wow. Until we didn’t get it all. And they had to go rebuild some, some charts and there was just some stuff we couldn’t do. But then that conversation quickly more from benchmarking to building the appropriate security infrastructure and having us white hat tested periodically to see if they, you know, people make changes and, and do things unknowingly. And so that was switched on us. And so it was just interesting. It’s like I switch gears. We’ve got a couple

Justin: [34:32] That’s insane. So I’m just thinking about the other like anesthesia practice consulting groups that one might think about talking to out there. And, I mean, I’m not an expert in this, but I have to imagine there’s not a lot of them who are going to essentially hack the hackers, break through this ransomware a retrieve this data. And then, you know, you said white hat testing that’s essentially trying to exploit, vulnerabilities in a system which you create to, to sort of test it in a vacuum so that other people essentially can’t get in later. So they keep, don’t get ransomwared again. So that’s, that’s a part of the what you would offer to your clients. That’s, yeah, that’s it. That’s incredible.

Michael: [35:09] Well, like I said, most most companies, management companies that are working in healthcare don’t have a division that has data scientists, programmers, they’re not built on this it infrastructure. We knew from long time ago that we’re healthcare was going in, that everything that has to happen in healthcare is going to be underpinned by technology. How you, well, your EHR can talk to your billing, how well you can talk to the hospital, how well you can extract date out to make good. And so our data scientist is a great guy, very bright. and we’re, our company is filled with a lot of nerds and wonky people who just liked data and likes icon, but he was particularly giddy. kid birthday clown pony, giddy. when he, when we broke the encryption, we’re able to get off. Yeah. And that, you know, you mentioned about the penetration testing. It’s really interesting because it’s a, it’s a really interesting mindset that I’m encountering out there is that if you talk to, if every person, every doctor you’ve in PR practice provider owner that you talk to would tell you that yeah, I know there’s a risk of being hacked.

Michael: [36:21] And I see it in the biggest organizations in the world are being hacked. And if you said to them, what have you done and what are you actively planning to do? The vast majority of them wouldn’t have an answer, which is remarkable to me because it’s relatively simple to find companies that can do penetration testing, try to spoof and try to spearfish and try to do all the different tricks your team and then being able to build a really secure infrastructure. And it’s your whole business. And if you get your data captured, forget ransomware. If they just pull it and sell it, it’s HIPAA data. Yeah, you’re liable. And it’s, I don’t, I haven’t figured out why there’s this disconnect between, maybe it’s overwhelming that they really don’t know where to go get that help. And so it just kind of freezes them where they’re busy. But 60% of all businesses who are hacked, 60% within one year are out of business. Wow. 60% small businesses are, are, it’s remarkable. They can’t recover. So yeah, that was an interesting day.

Justin: [37:30] Wow. So you mentioned this thing a few minutes ago that I want to come back to, sort of the idea of different generations of physicians in a certain institution and that introduces the idea of potentially like a buyout or sort of an equity exchange between older and younger partners. Do you find yourself playing a role in those discussions at all and what, what does that often look like?

Michael: [37:50] Yeah, we do, but it’s less of a, it’s more of a side conversation with the partnership group as we’re working on other projects for them. I see. And so it comes up because as you’re looking at comp or as you’re looking at, we’ve got to switch our revenue cycle company. We got to get AI in here and let them do the work. Why are we paying for all this for last? It kind of morphs into, and it becomes, and that’s actually better because the conversation is collegial and it’s, it’s not reached a contentious point. And so they’re asking the question almost exactly how you asked it. What do you see? Hey, we think this, what would you recommend and how do you guys see people doing this and becomes a conversation? And then the path kind of reveals itself as people candidly and honestly talk about without having to feel like they’re in contest with each other. Right? What are you looking to achieve? What is it that you want? What’s your work horizon? What do you hate about what you’re doing today? And all of a sudden you go, hey guys, we got data and there’s a path here. Let’s show, let us show you. Yeah. So yeah, it’s possible. But, that, that contingency planning in that succession planning, sometimes it’s hard to talk about for them.

Justin: [38:57] Yeah. That makes perfect sense.

Michael: [39:00] True. In every business that I’ve ever been involved with. As you’re looking to hand things off, it’s very difficult. It’s very emotional topic for everybody.

Justin: [39:08] Yeah. Imagine spending, I mean you don’t have to imagine spending 2025 years building this baby that is your business and your practice and you onboarded the first, you know, other physicians working with you and you bet the office staff and to, to plan for walking away from that as it’s like trying to get people to do estate planning and plan for the deaf. Like nobody wants to do their wills or their health care powers of attorney for that reason.

Michael: [39:29] It’s exactly right. But it’s like, and then by the time they get around to doing it, they’re in it. Yeah. And that’s the worst time to start and figure it out. Yep.

Justin: [39:37] And you end up leaving a lot of money on the table, I would imagine having a lot less flexibility.

Michael: [39:41] Yeah, that’s exactly right.

Justin: [39:43] Cool. So I a, I got one more question here that I want to sort of close with. Sure. so you’ve, you’ve seen a lot of practices, you’ve kicked a lot of tires and seen what’s under the hood. imagine you are an early ish in practice physician and I’m sitting down with you and we’re drinking a beer and I said, Mike, what should I be looking for? what kinds of things have you seen? What would a good question or to be, to ask to be able to determine is this like a critically dysfunctional organization or is this a, a practice that sort of has done the due diligence required to be able to have a solid foundation for moving into the future?

Michael: [40:18] So the idea would be that if I was talking to someone who’s looking to join a group or build a group, join. Yeah,

Justin: [40:23] well, yeah, I mean we can maybe do both. Yeah.

Michael: [40:25] So if it’s someone who’s looking to join a group, the first kind of thing that I would talk with them about, which they do intuitively in this isn’t great advice, but is spend as much time as you possibly can with ownership and understand their personality, their drive and their time horizon. Cause that’s gonna have a big dictate to how the business is run. And you got to understand whether or not that it’s not right or wrong, it is what it is. How does you overlay against that? The second thing, if you want to say, but how well of a company is it run? I’m asking to look at it and go, Hey, can we look at some of your contracts that you have with your facilities? Can we look at, what some of your collection rates are and how those may or may not change?

Michael: [41:14] And can I look at some of the production that you guys do in relation to collections? Because that’s the, that speaks to you about the internal efficiency of the operation, right? That’s going to affect day in and day out, your ability to generate the income that you want. Right? Right. And so if you understand the psychological and emotional mindsets, the people that are making decisions and you’re like mine and you understand that the company itself is, is efficient or at least in market, those are the two big things. And then in third thing is, and I done this, I’ll just say to them directly and go, who’s recruiting you? And the first question you ask them is, what’s the one broken thing that we got to fix in this place? And there’ll be surprised at how remarkably candid there’ll be. And then you can start to understand where the pain point is.

Michael: [42:04] And is that fixable? Do they have the skillset? Is that something you know about? And you can bring value add. And if they can’t answer it, if they say to you, I don’t know, or we think it’s great, yeah, that’s a red flag to me because they’re, none of them are ever run. No business runs perfect all the time. And all businesses have areas that we can improve on. Yeah. So the inability to either identify it or have the will to work on it is a big problem that you’re going to have eight months or 12 months from now when you’re struggling with something.

Justin: [42:39] Yeah, it makes sense. And how about with regards to starting a practice maybe, I mean there’s obviously so many different permutations of that. it’s almost too big. Maybe you can sort of just paint us a picture of one situation where you’ve seen a practice form and some of the considerations from that specific story.

Michael: [42:56] Yeah, I’ve been around more than a few in, if there’s one predictor of success, it’d be that the, the team that’s forming the practice has the ability in public with no reservation to say, I don’t know if they’re willing to say, I don’t know. By definition, they’re willing to go out and find that person that needs to be on the team or their coworker or a surgeon in the hospital system that they’re friends with who’s been through this and seek answers. I think that we’ve done a disservice to our physicians and how we train them in that part of the training is to expect them to know every answer all the time on all topics. And that’s what they mean short of beating them with a stick. That’s what they’re doing to them as they take them through med school and residency. And that’s almost in business.

Michael: [43:48] That’s almost a guaranteed way to fail, right? It’s, it’s the best people, the most successful people are that people have the ability to look around and go, man, Justin’s really good at this. I need to get Justin over here on either side. Sure. I could probably learn to do what Justin does, but that’s that doctor training. You don’t have to do that. Right. Get Justin working over there at optimal. And so the ability to do that if you see people thinking and talking and building teams in that way. Yeah, very high probability of success and the converse is true also. Makes a lot of sense.

Justin: [44:25] Cool. Well, I think, we’ll close with that. And like any, any parting words of wisdom or anything else you want to share to wrap up?

Michael: [44:30] I’m not sure I’ve given you any wisdom so, but I, I tell you thanks and I’m, I appreciate you giving us the time to, to talk today and hopefully some, some people who are out there working and we’ll find some, information useful and, and will make healthcare a little bit better. Yup. Everybody out there trying to access the machines. So thanks again for your time. Absolutely. Thank you very much. Michael Zervas, Encompass Health Kara Davis Solutions. It’s been a pleasure speaking with you, sir.

Justin: [44:59] Hey Justin here. This may shock you to learn, but I am actually not a full time podcaster. I also run a financial planning company called quantify planning, where I work closely with anesthesia and pain docs to build and implement customized financial plans. If you’re interested in working with a financial planner who knows many of the ins and outs of your profession, shoot me an email or head on over to quantify planning.com for more information. If you’re a resident or fellow, I can also offer you a free student loan analysis if you’re interested, but there might be a waiting list. So check out the link over there to see if you’re interested in learning more about the topics we discussed today. Could over to anesthesia, success.com to join our community, residents and attendings and others to ask a question or get more free resources. If and only if you liked this episode, please leave us a review and subscribe. Thank you very much for listening to the anesthesia success podcast.