Episode 77: Private Equity In Pain Management Practices w. Stuart Neiberg & Daniel Kvarnberg

Dec 21, 2020

This Episode

Interview w/ Stuart Neiberg & Daniel Kvarnberg

You Will Learn

– The different rules that physicians need to understand when not many arbitrary risks involved.

– How physicians can easily fall victim to the “Greater Fool Theory” and how to avoid it

– How the idea of the “hub and spoke” model of business may be the answer to most physician’s business

Resources & Links

Learn more about Physician Advisory Solutions: https://www.physicianadvgrp.com/

Check out our YouTube channel: https://www.youtube.com/watch?v=Po3ISEGnYGw&feature=youtu.be&ab_channel=JustinHarvey

This week, I am again speaking with Stuart Neiberg and Daniel Kvarnberg about private equity consolidation in the context of pain management practices. As private equity has a more and more pronounced presence in healthcare, we want physicians to be empowered and equipped to understand these dynamics and what it means for practice.

Justin (00:03):
This week, I’m talking to StuartNeiberg and Daniel Kvarnberg of physician advisory solutions. These guys are experts in practice transactions and practice economics and the forces that drive value in a physician’s practice. Today. We’re talking about anesthesia and anesthesia practices specifically where we cover current trends, private equity, consolidation factors, impacting practice value and more. I’ll also be speaking to them again soon when we’re going to cover these same questions, but for me pain management practice point of view, before we dive into today’s content, two quick things for your consideration. First, if you really liked the show and you wanted to give me a nice Christmas present would love it.

Justin (01:02):
If you’d share this with an anesthesia or pain management physician that you care about. Number two year-end is coming up, giving Tuesday was last week, and you might be thinking about that year end tax deduction for calendar year 2020. This is a great opportunity to think about how you can give a little bit monetarily. If you have the capacity, there’s actually a unique rule this year under the cares act, the coronavirus relief act that allows for a $300 above the line tax deduction. Meaning even if you take the standard deduction on your taxes, you don’t have a lot of charitable stuff. Normally you don’t have a lot of mortgage interest or student loans or whatever. You can still reduce your taxable income by $300. If you make a contribution to charity. So you might ask Justin, do you know of any anesthesia related, non-profits doing great work out there that we should consider reporting or consider supporting.

Justin (01:52):
And I would say why? Yes. Why don’t you first go back to episode 45 anesthesia success.com/ 45, where we talked to Dr. Meg Owen and her organization, Kybella K Y B E L E works to train physicians and under-resourced settings to make the childbirth process as safe and happy as possible for both mother and child. So if you’re looking for a place to send that 300 bucks, so you can reduce your taxable income and support an awesome worthy cause consider supporting the great work that Dr. Owens and her organization are doing over at Kybella. Hope you enjoyed this week’s episode with the gentlemen from physician advisory solutions.

Justin (02:36):
Hello, and welcome to episode 75 of APM success. We have a couple of special guests today. I’m really pleased to be joined by Daniel Kvarnberg and StuartNeiberg of physician advisory solutions. They have a lot of experience in looking at the guts of sort of the economics of medicine, doing mergers and acquisitions advice and helping physicians optimize their own practices and lots of exciting business stuff that frankly, every physician should understand and very few ever get the training to be able to, to process properly. So we’re really excited to have Stuart and Daniel here today. Thanks for joining us, gentlemen,

Daniel Kvarnberg (03:10):
Thank you very much, sir. Just to give you a quick breakdown of, of what physician advisory solutions is, is we are a full service advisory and valuation firm focused on working with healthcare organizations across all industries of that size. And basically what we do is we help provide the business acumen and understanding to physicians and help them become more efficient, more profitable with most of our practices that we work with, we work with everything from single physician practices, all the way up to large healthcare systems. And we can help with transaction services helping them look at their financials, operations, business, strategic initiatives, helping them become more efficient and more profitable, and eventually looking towards an exit for the, the value that they should deserve and even assisting with those transactions.

Justin (04:08):
Awesome. Can you maybe just to give the listeners an idea of some of the work that you do, maybe just tell us some of the things you’ve been working on in the last few weeks.

Stuart Neiberg(04:15):
Yeah. I’ll jump in and take this. So, so yeah, so I mean, Justin, much of our work is very transaction heavy. It, you know, it’s either because, you know, there is some sort of deal that’s going to be done within a practice or some sort of, you know, ancillary facility, like a surgery center, diagnostic imaging center internally, or with some sort of external party, like a health system focus, our effort on, you know, being an advocate for our client. First of all, you know, making sure that, you know, we help them identify, you know, any nuances or twerks or, you know, odd things in a potential transaction, which, you know, as you can imagine there’s more and more of those, these days in the COVID world, which, you know, we can talk about, you know, as we get into the depth of this conversation. But you know, it’s really about you know, physicians are really, really good at practicing medicine and delivering care to patients. So, you know, it’s about leaving some of the more business and financial and accounting nuances to us at the end of the day to help them facilitate a transaction. So they continue to deliver the care at the utmost quality you know, to the patients that need it.

Justin (05:29):
Awesome. Let’s, let’s talk a little bit about the, sort of the economics of anesthesia care. And obviously this is like really broad and there’s a million different iterations, but maybe let’s look at a couple of concrete examples. Maybe we can look at like a physician only physician owned practice, as well as maybe anesthesia as, as part of like a bigger either a multi-specialty group or in a bigger group, kind of what does the, what is the economics of the anesthesia specifically look like? And if you’re talking to, let me actually narrow the scope here. So if a physician owned anesthesia group comes to you and says, Hey, we want to understand if we’re profitable, we’re thinking about selling. We want to know who’s out there, how much we can get and what we need to do to make ourselves look prettier to like a PE group or a big health system. What kinds of things, what kind of questions are you going to be asking them?

Stuart Neiberg(06:21):
Well, I mean, I first, you know, and this all kind of dovetails into our approach of looking every, at everything three-dimensionally you know, in terms of, you know, yes, you, they want to be profitable. They want to be an attractive target to a potential acquire. You know, so, so the first thing is, you know, so first, what are your financials look like? You know, so we’re gonna want to look at, you know, traditional income statements and balance sheet, but then we’re gonna want to reconcile back that revenue number on the income statement as to who is performing the services, you know, where are the services being performed? How are they being paid for? Because there’s all sorts of nuances in the anesthesia world. And I’m gonna just to, just to clarify, I’m gonna start with just pure anesthesia, not assuming any pain management pain for the moment.

Stuart Neiberg(07:08):
So, yeah, so I don’t want to confuse the listeners or anything right now when we start talking about pain. But you know, realistically in the anesthesia world, it’s, it’s who are you delivering care to at the end of the day? Are you delivering care at a hospital? Okay, what type of hospital are you delivering care to? Is it a primarily Medicaid funded hospital where you need some sort of collections guarantee just to be able to pay, you know, bare minimum salaries, or are you, you know, delivering anesthesia at a you know, really ritzy, glitzy, private pay surgery center, you know, where everyone’s making, you know, millions of dollars over what, you know, Medicare would normally say you should be making right now. So it’s all about diving deeper into, you know, where the care’s being provided, you know, isolating you know, what the strengths and weaknesses are of the particular practice.

Stuart Neiberg(08:03):
And then frankly, it’s, you know, who the Target’s going to be, you know, are you looking at being acquired by a health system out of necessity? Are you looking at being acquired by a private equity fund as a, like a hub and spoke type model? You know, they have a large anesthesia group and this is an ad-on, are you going to be the hub? And they’re going to add onto your practice going forward, you know, or, you know, is this, you know, without speaking about the elephant in the room, you know, we’ve got the, you know, the, the Mednax is, and the Sheridan health cares that, you know, have always been active and looking at, you know, anesthesia practices and you know, would they be, are they interested in acquiring you because if they are, you know, they have a very formulaic approach to determining you know, what the deal will look like on their behalf. So, you know, it, I hate to give you the answer that it depends, but it depends if it gets, I understand dive in and understand it.

Justin (09:00):
So if we maybe put some more concrete parameters around this and say, we had like a, an intermediate sized physician only group, maybe there’s 22 doctors who have maybe a hospital contract and three surgery centers, and you’re looking across the landscape at sort of the different sites of service, the different, you know, the payer mix. It sounds like it’s an important part of this. Can you maybe talk a little bit about like specific questions that would be site of service specific and talk a little bit about maybe the practice model and how physician only versus a care team model may impact this conversation?

Stuart Neiberg(09:33):
Yeah, I mean, look, I mean, you know, with a care team, you know, if you’re able to get creative and, you know, apply leverage, you know, to be able to you know, further hone in on, you know, profitability growth you know, single physician practices tend not to be as profitable, you know, as other groups that, you know, have you know, a little bit more flexibility in the way that they staff and, you know, really I’ve noticed it to that point, Justin, it really, you know, anesthesia, it’s all about being masterful at staffing at the end of the day. You know, if you’ve got that staffing down and you can anticipate, you know, needs and you can make it as efficient as possible, that’s where the value really resides. You know, so, you know, then do we, do we have like automated workflow solutions within the practice? You know, it’s because at the end of the day, you’re, you know under that type of circumstance that you described revenue is going to be largely fixed, but it’s all about how you move the pieces within the practice to maximize the profit and the bottom line,

Justin (10:41):
Something that I’m curious about, and this is I think pretty specific, and I might not even be phrasing this question, right? So maybe you can help me, Stuart is, is there a difference between States for whether or not a state is doing the opt-out for CRN a autonomous practice and the way that billing works, meaning like, are there some States where a CRNs can build like an anesthesiologist and then the group employing that CRN and gets anesthesiologist equivalent revenue versus in another state where maybe they don’t have that ability.

Stuart Neiberg(11:09):
I’m going to qualify this with, I’m not a, a medical billing specialist by any means I’m a deal guy. So, you know, I definitely consult like a billing specialist before, you know, someone tries to do this, but my understanding is yes, that there are different, you know, professions and positions that bill at different rates, and that would be a state, a state function. You know, I think that it even is a state function, you know, even within Medicare, which is federally funded but you know, it comes down to, you know, specific state demographics and modifiers to particular codes that would be charged on the anesthesia billing site schedule. So, so I think, yes, it would be state or even geographically separated out. But obviously, you know, 100% consult not even a medical billing specialist, but a medical billing specialist that has expertise in anesthesia because, you know, there are certain medical billing specialists that, you know, can probably do primary care and gastroenterology and all that stuff. But, you know, the units that you build in anesthesia, it’s definitely a completely different animal than other primary care specialties.

Justin (12:20):
Yeah, absolutely. There’s, there’s plenty of disclaimers. We can always throw around on the show. This is for entertainment purposes only really appreciate everybody listening. And we want to give you categories to be able to understand important questions and then take those questions to the real experts who can answer them with greater specificity as you’re consulting with these groups. So there, you know, again, if we’re talking about the balance sheet, you said the revenue kind of is what it is, and then everything, or, sorry, I should say the income statement, the revenue is what it is. And then we can like massage the P and L a where money’s coming from and where we’re spending money to be able to increase profitability potentially, or change the multiple at which that profitability is going to get purchased. So are there a couple, is there low hanging fruit for this type of scenario saying like, Oh, here’s the top three, three things I always tell physicians to look at to try to fix,

Stuart Neiberg(13:08):
I guess, like low hanging fruit is anything but staffing, you know, cause staffing is a necessity. So you’re in an anesthesia practice, your payroll costs, they’re pretty important and they’re pretty sticky. And, you know, replacing an anesthesia provider is, you know, pretty impossible at the end of the day. You know, when, you know, surgeons start getting very comfortable with certain providers, so you don’t want to mess with those costs. So whenever I look at an anesthesia practice, I look at everything else, you know, I start, I start with everything else, like where are there additional costs that you probably don’t need as much as staffing and then really start honing in on those particular expenses? You know, so it could be anything from, you know, unnecessary spending on supplies or rent for an office, or, you know, other type of costs that don’t relate to you know, the particular staffing or payroll needs of that, of that practice.

Justin (14:05):
Let’s talk for a minute about subsidy. So we, I spoke with Dr. Loft Shaw a couple episodes ago. He has some experience in running a small anesthesia company and doing a lot of the staffing that you mentioned. Like it is a staffing question. That was very much the impression that I took from him. Talk about like, what is a subsidy? Why does it happen and how does it vary between different sites of service?

Stuart Neiberg(14:27):
Yeah, no it’s a great question. And I mean, it’s super important for anesthesiologists to understand mechanics behind the subsidy, you know, anesthesia needs to provide coverage at most health systems. You know, if someone comes into the you know, the ER and they need a surgical procedure, you need anesthesia onsite, you know, all the time to be able to do that. That’s expensive because you have to pay the anesthesiologist, not only for the burden of being on call, but you have to have someone there, you know, 24 hours a day to, to handle that. So in some situations, you know, the amount of revenue, depending on the payer mix, you know, in that particular facility that the anesthesiologist will collect may in fact, be less than what the expenses are associated with keeping a staff member there 24 hours a day. And in some cases you need two or three or four people there a day, depending on how busy and you know, how many emergent events that particular facility may have.

Stuart Neiberg(15:30):
So a subsidy is a, a, you know, a legally justified way of paying, you know, anesthesiologists, additional monies so that they can staff those facilities with, you know, normal market value salaries and, you know, answers geologists should not be burdened by the fact that just because the, the facility isn’t taking enough revenue, they should be taking less salary associated with it. So it will be a loss leader for the hospital or the facility, you know, to, you know, pay a little bit more. But the benefit of having that coverage, you know, keeps them in business. It keeps them compliant with all the regulation.

Justin (16:09):
Can you talk a little bit about how reimbursement rates interact with the subsidy? Because I know next year CMS has significantly cutting the anesthesia reimbursement 10% year over year as the number that I heard most recently. And presumably that means Medicare, as I understand it is going to, based on an apples to apples, anesthesia service is going to be paying 10% less in 2021 than 2020. There’s obviously implications for hospitals, for anesthesia groups, et cetera. So as I understand it, and I’m curious to hear your thoughts, you know, this is that subsidy, the amount that the hospital needs to pay the anesthesia group above and beyond what they can bill for them is, is going to probably be impacted by the fact that revenue, again, for that same anesthesia service may continue to go down. Can you speak to that a little bit and how do you expect that to unfold? Because obviously there’s a few different stakeholders here, and I guess what I’m wondering is like, who is going to absorb the fact that there’s 10% less dollars now flowing for anesthesia services.

Stuart Neiberg(17:06):
So two things I know you’re going to hate hearing me respond to the questions this way, Justin, but it’s another, it depends answer, you know you know, it’s a, a, a situation where we, I mean, first of all, I think that proposed reduction is still a proposed number. I think CMS still has a couple more weeks to determine what the final rulings will be, but usually if there’s a 10% reduction, you’re likely going to have some kind of a proposed, you’re going to have some sort of like final reduction and, you know, with all the money the government spent with the cares act this year, there probably isn’t as much money to, you know a warrant increases in reimbursement for certain things next year. You know, I know only things that I’ve heard that there will be some increases for will be home care type procedures, just, you know, in in response to COVID, you know, more and more people want to try to keep stuff out of a hospital and, you know, into a home care type scenario where there’s less people around.

Stuart Neiberg(18:06):
So I believe that that will be a you know, a contentious point, but that all being said, you know, there will be, you know, some sort of squeezing of the revenues and expenses, especially with anesthesia groups you know, and the hospitals are gonna have to find ways within their budgets to, you know, maintain certain, you know, compensation structures for the anesthesiologist that are providing those services, you know, either through a more efficient staffing model different days of doing surgery you know, or increases to the subsidy. But, you know, it’s, it’s, it’s all going to have a trickle down impact to the particular providers that are offering those services. Right.

Justin (18:46):
Can you talk for a minute about sort of at a high level, as you think about all the anesthesiologists in America the different, there’s a couple of different employment models and rather than leading to what I think the answer is, I’d love to just hear, like, how would you, if somebody says I’m an anesthesiologist, I want to know kind of what’s out there and some key characteristics of each different, either employer or, you know, ownership opportunity, what kinds of things do you see

Stuart Neiberg(19:10):
Traditionally, a lot of anesthesiologists know, especially early on in their careers and, you know, with the consolidation in the industry over the last several, you know, I would say almost decade now, maybe even longer, you know, the it’s less of a production based you know opportunity from an employment standpoint, you know, that it’s not a an orthopedic type profession where, you know, we’re gonna pay you, you know, if you work, you know, 17,000 work art views next year, we want you, you know, you know, cutting people up all day, day in and day out, you know, do ACL tears, all that stuff. Hey, you know, it’s definitely a different model where, you know, it’s a lot of base plus bonus type type opportunities. You know, and then just with ownership, you know, if that, if that’s the route that an anesthesiologist wants to go you know, it’s all about really, you know, the basics of business with networking and, you know, arriving at a, you know, a good mix of contracts and facilities that you can provide work for. And then, you know, that generates your top line. And then, you know, we’re going to come back to it over and over again, but it’s staffing, it’s, you know, the more money you make is the more efficiently you’ll be able to staff these the facilities that have a need for you.

Justin (20:23):
You referenced consolidation. And this has been obviously a trend we’ve seen for a long time. There was an article a few years. I think it was actually kind of recent that was looking at like 2013 to 2015 JAMA was doing a here’s what’s happening in private equity consolidation in healthcare and of these numbers. Anesthesiologists. I remember seeing were the most consolidated, the most acquired specialty by private, which has a lot of implications. But the question I want to ask is have we seen a reversal of this trend in 2020 because of the crazy dislocation that COVID has brought about?

Stuart Neiberg(20:57):
I don’t think that anyone is seeing like a reversal. Like, I think that, you know, there, there are a lot of people are riding out this storm, you know, especially private equity. And I mean, at the end of the day, Justin people will need surgery. You know, there’s just, no, there’s no way around it. You know, there’s always going to be certain procedures done in America. And with surgical procedures being done, there’s always going to be a need for anesthesiologists. Like, you know, it’s one of those very sticky professions. You know, that where there will always be a need. It just, it depends on what is available to pay for that need at a given point in time. And I don’t see any situation with private equities on winding. You know, I think that you’re seeing some situations where, you know, maybe some anesthesiologists are unhappy with you know, the way the practice is run under the private equity model, and they’re going to leave and go search for employment elsewhere.

Stuart Neiberg(21:54):
You know, or if you get a group of them together, you know, those form, their own practice and, you know, try to do it all over again you know, try to make it work. You know, you find, you know, a couple of disgruntled people having a beer or something together, they say, well, why don’t we just start our own, if that makes sense to, you know, so I think that in large part, the you know, it’s, I wouldn’t say it’s a reversal, but you’re probably gonna have, you know, groups that, you know, form out of, you know, just disgruntled private equity employees and whatnot, but that comes as absolutely no surprise that anesthesia was, you know, early and often the most gobbled up practice specialty.

Justin (22:31):
Yeah. And I, I think, and I’m interested in your feedback on this too, you know, with private equity. And actually before I get down to the weeds, maybe just take a minute and describe what is private equity, because we kind of hear this the PE world and like private equity that there’s, there’s a lot of connotations that we have. And even that physicians have what is private equity?

Stuart Neiberg(22:50):
So, I mean, I mean, PRI private equity is essentially you know, a model that, you know, emerged probably like 40, 45 years ago. You know, were investors wanted to find alternative ways of generating above market returns outside of the stock market. So, you know, essentially that was, you know, investing in a fund that fund goes out and either buys public companies and takes them private, or, you know, buys private companies. And, you know, it looks to find some sort of a advantage with those purchases to in turn, you know, exit and sell those companies for, you know, a material gain over the course of some time horizon that’s predetermined you know, private equity in the healthcare world really emerged not too long ago with you know, basically just too much capital out there. There, there was entirely too much cash sitting on the sidelines and these private equity fund managers, they only get paid if they deploy their capital into viable opportunities.

Stuart Neiberg(23:49):
And the provider space became very hot. And you know, in the provider space, you know, like I said, you look for that hub and spoke model. You look to buy a practice and then find ways to make that practice grow that doesn’t cost you a lot of money to make it grow. So they identified that one of the best ways to do that was to buy a medium-sized practice. And then instead of making acquisitions, which is, you know, more traditional in the private equity model, they could just go out and hire more doctors for that practice, you know, to keep reinventing investing capital into it every year to, to make it grow. You, you, you grow a physician practice by syndicating to new physician owners or new physician employees that, you know, can help increase the top line revenue. You know, so, you know, that’s very, you know, easy to do with just hiring new anesthesiologists and several private equity funds really mastered that model. You know, several other companies, you know, like the bed maxes of the world, not too far from where Daniel lives, you know, they, they, they mastered that model as well. You know, they were able to, you know, buy a practice, employ more physicians, get really good hospital contracts you know, staff, ORs staff, you know, all different types of departments. And you know, they were able to turn into a very profitable enterprise.

Justin (25:11):
So just for our listeners Stuart used this phrase, taking a company private, I think it’s important to understand what that means. Cause this has happened a couple of times recently in the last couple of years in the anesthesia space where basically if a company is publicly traded, it’s on the stock market, its stock is listed on New York stock exchange. It trades at a certain price. If I want to buy a share of Amazon, it’s a thousand bucks or whatever. Now, if I had enough money and I could take all of the numbers of number of shares of Amazon out there, and times the stock price, I could hypothetically buy Amazon for myself. Now there’s there’s regulatory restrictions there, obviously, but this happened recently in 2018 with KKR and with envision healthcare, right? So envision was a publicly traded company. And KKR said at this stock price, we can buy a controlling interest or maybe all I’m not a PE expert.

Justin (25:59):
But substantively all of the outstanding shares. And with this special business plan that we have for this company, we think we can buy it at a certain price. You know, if every share is 40 bucks, we take $40 times all the billion shares or hundreds of millions, we buy a company. And then we say, here’s the strategy. Maybe it’s the hub and spoke model that you mentioned. And through this you know, business plan, we’re essentially going to increase the value. And that’s how a company like KKR who’s the major PE partner with envision would then monetize the deal for their investors. Is that an accurate summary Stewart?

Stuart Neiberg(26:34):
Yeah. I mean, we can get more complicated one day and talk about control premiums and how that comes into play by taking a company private and all that stuff and what you would pay above and beyond the, the list price. But we, we, we don’t have to go there yet, Justin, but you know, it, it really, you, I think answered a lot of your own question when you brought up the regulation topic and that’s usually the reason why you do this private equity buyout is, you know, just there’s so many costs associated with the regulation of having a publicly traded business that, you know, if a very sharp and savvy private investor can identify a way to minimize those costs by taking a company private and the costs of being private outweigh the costs of, you know, what you, whatever premium you have to pay to take the company private, there’s usually a very good case to do so.

Stuart Neiberg(27:25):
You know, I think KKR identified that particularly with envision, you know, there’s just something so tough with you know, publicly traded healthcare businesses. Very few people have been able to master that, you know, HCA has really mastered it in their model. I got to give them all kinds of credit. Other publicly traded health systems haven’t done so well. But you know, so usually the play is to minimize those costs because of all the regulation that already exists in healthcare to have the additional regulation of a publicly traded business. That’s usually the driving force to to bring the company private.

Justin (28:02):
Yeah. Talk, talk for just a minute about what are the additional regulations. So if you’re a publicly traded company, there’s like there’s additional due diligence that you’ve got to go through every year to be able to be traded on a stock exchange.

Stuart Neiberg(28:14):
Yeah. I mean, it just, you know, attorneys fees, accountants fees, and consultants fees alone, couldn’t run a public company, you know, tens of millions of dollars a year. And, you know, that could be material savings at the end of the day. Like we talked about early on at a very basic example, when you asked me to look at, you know, a, an anesthesia practice, you know, what are the costs that we can cut out to make an anesthesia practice more valuable versus what are costs that we really can’t cut out? You know, we can’t cut out staffing costs, we can’t cut out payroll, but if there is an opportunity to cut out certain costs, like, you know, paying accountants or consultants like me and Daniel, you know, to get more money to the providers, you know, that’s definitely an opportunity.

Justin (28:56):
So one of the things you said before was, there’s an opportunity if there’s like a lot of regulatory requirement or constraint, or frankly, just complexity. That’s a place where somebody with specialized knowledge can come in, make an acquisition of a company or a business and then create extra value. Is there a reason that anesthesiology is the most acquired specialty over the last handful of years that that relates to that, that idea?

Stuart Neiberg(29:22):
I think it has to do with the fact that some of the big players, you know, like the Sheratons like the Mednet dating staffing models and, you know, identifying efficiencies and then, you know, with their businesses. And I’m going to use them as an example, because I think they were the two of the largest acquirers of anesthesia practices, you know, nationwide over the past several years with the ability for them to staff as strongly as they were, they grew to such size and scale that that, because they were major players in most markets, they were able to have substantial negotiating power with insurance companies on reimbursement rates. And with that negotiating power plus the efficient staffing model, they were able to just generate such enormous returns in anesthesia. That the only way they were to grow was let’s buy up more practices, you know, cause then you have more doctors, more scale, more ability to, you know, have leverage with insurance and more ability to have leverage with staffing. So, I mean, I think that that, whereas most other practices it’s been a two, a one pronged approach. It’s either, you know, I get more leverage with insurance or I get more leverage with staffing with anesthesia. It was both with some of these major players. So that’s really what led to the major consolidation that you referenced.

Justin (30:47):
So with regards to reimbursement negotiating, I’m curious how, I mean, I kind of understand how negotiating works in principle. Like I have something that you want and I have leverage, and I use that leverage to get better terms. Is it it’s I just look at insurance and like the big payers I think there it’s like trying to turn the Titanic to get them to budge one penny on anything ever. And I don’t know if that’s just me or that’s kind of my perception as I look at them, but I’m curious, you know, with with an envision like situation or one of the other peer groups, do they, what you’re saying and correct me if I’m wrong, like they have enough critical mass enough thousands of anesthesiologists where they can go to a commercial payer and say, Hey, you know, you’re paying us X per unit, but we want X times 1.5 or some smaller magnitude to be able to continue to provide services at certain institutions. And then the insurers, they have to play ball with that. Or there’s, there’s a dialogue rather than a no go back to work.

Stuart Neiberg(31:46):
There actually is a dialogue. I mean, it’s, it’s a really good point, but I mean, you know, you know, Dr. Johnson has a one-off primary care practice, you know, in some market they don’t have a lot of negotiating power with the insurance carriers. And one of my favorite examples was I did a deal many years ago with a surgery center on key West in Florida. And guess what, there was no other place that anyone could go for surgery. Then this one surgery center on key West. So you wouldn’t have believed the power that they had had with negotiating reimbursement with insurance providers at this surgery center a long time ago. Cause I mean, it, you know, really the option was, you know, get your surgery done on key West or drive, you know, two and a half hours, three hours to Miami and get a surgery done. So, I mean, just there are these like microcosms in America where, you know, people do have, you know, substantial negotiating power, whether it’s because of, you know, geographic restrictions or you know, critical mass. But you know, if Dr. Johnson tries to negotiate with United healthcare, that’s one thing. But then if HCA or tenant, you know, they try to negotiate with, you know, hundreds of hospitals. It’s a totally different story.

Justin (33:05):
I’m just, I’m just thinking like, what does this say for the future of independent practice? Cause I’ve heard different things. I’ve talked to physicians pretty recently who said like, COVID, in some ways it’s going to help like revitalize independent practice, but, but it seems like this it’s just hard to not look at insurance as just like the big 800 pound gorilla that you can’t ever make terms to them. You just take what they give you. And that seems to be the death knell of independent practice, unless you’re with a group big enough to hit back.

Stuart Neiberg(33:33):
Right. And, and I mean, I think that insurance is trying to change that a little bit, you know, and they’ve been trying to change it much with like the managed care world by putting a lot of it back on the provider anyway. You know, and it’s not just like, how much can I get for doing every surgery that I do, but you know, all right guys, like, they’re like, look, we’re going to give you a fixed amount of money. It’s going to be a reasonable amount of money, go make it work. You know? And, and, and I think that that is what will help, you know, independent practice, you know, that, and COVID is that, you know, people will have the ability to sort of control their own destiny with that sort of model.

Justin (34:08):
Do you have an idea of like, what percentage of contracts or payments from payers are like on a, like some sort of like value or, or some other managed model?

Stuart Neiberg(34:16):
Okay. That’s all private information. I would have no idea how to even speculate on that at this point. Okay. Okay.

Justin (34:22):
So I want to sort of bring things to a closer, and I really appreciate your time. I think we might have to do this again to just continue the conversation, but as we’re, as we’re wrapping up, are there any other specific observations, specific cases, specific deals you’ve done that you think show something important behind the curtain about the specialty of anesthesia or perhaps its future that you think the listeners will be interested in?

Stuart Neiberg(34:43):
You know, I think we touched on a lot of it, you know, that the consolidation in the the industry has been tremendous over the past several years, which, you know, I think if played right, it actually does create a lot of opportunity, you know, for anesthesiologist. I think that it could be looked at as a good thing. You know, I think that it could be looked at as a good thing in so far as that, you know, it w with larger organizations that provide this they’re naturally going to have, you know, more substantial overhead costs. So there’s all kinds of angles that, you know, if independent practitioners do want to try to get into the space and form a group, you know, it’s, there’s ways to approach it, you know, with the right advice, if you want to be entrepreneurial, definitely a possibility, you know, but then at the same time, there’s a lot of opportunity in that.

Stuart Neiberg(35:31):
It’s probably not going to be hard to find employment, you know, and then because of the need of those groups to negotiate what that implement looks like for the physician, you know, and it all depends on whether they want to, you know, know how much they’re going to make every year and, you know, get a base salary, whether they want to put more at risk and, you know, try to achieve more production bonus is or quality metrics or whatnot. You know, I think it’s just all about getting educated on the business side of things that will make it easier for them to generate the returns that’s meaningful for them. And, you know, create a model of, you know, you know, work as hard as you want to make as much money as possible, or, you know, to work as little as you want to maintain the lifestyle. That makes sense. So, you know, I think it all depends on, you know, what the providers introspective wants and needs are at that point in time, and then channeling that into logical business decisions.

Justin (36:24):
Totally agree. Couldn’t have said it better myself. Well, Stuart, Daniel, thank you very much for joining us today on ABM success. If you liked what you heard this week, head on over to APM success.com, where you can find more content and free resources to help you build a successful career in anesthesia and pain management. If you want it to leave a review in iTunes, that also really appreciate it. Thanks for using some of your valuable time to join me today on APM success.