An anesthesia practice is sold, and a warning to young doctors

An anesthesia practice is sold, and a warning to young doctors

We were startled to learn recently that Sheridan Healthcare Inc., a physician services company based in Florida, has bought one of the largest private anesthesiology group practices in California, the Medical Anesthesia Consultants Medical Group Inc. (MAC) of San Ramon.

The deal, which closed November 14, is Sheridan’s first in California, and “provides a platform that will accelerate our expansion in the California marketplace,” said John Carlyle, Sheridan’s CEO, in a recent statement.

By all accounts, MAC is a well-respected and highly successful anesthesia practice, with more than 100 physicians — shareholders, non-shareholders, and independent contractors — who provide anesthesiology services to five hospitals and 23 ambulatory surgery settings in northern California.  So why did this group decide to sell?

Was this a hostile takeover, or did hospital administrators force the group’s hand?  Not at all, says a senior partner in the MAC group (who prefers not to be named).  The senior shareholders actively sought a purchaser, hired an investment bank to broker the deal, and voted unanimously to approve it.  Apparently, there are no plans yet to hire nurse anesthetists or change the MD-only composition of the group.  Hospital administrators didn’t instigate the sale but all supported it, the anesthesiologist said. “For us right now, it looked like the right thing to do.”

It’s doubtful that the non-shareholders in MAC are quite as enthusiastic.

While the financial terms of the deal have not been made public, anesthesia practice buyouts typically feature a substantial payout in cash (and sometimes corporate stock) to senior partners.  Non-partners — typically younger and newer to the group — receive much smaller (if any) buyout packages.

What happens to future pay prospects when a group practice is sold? A new employment contract is signed, bringing with it either salary cuts or a lower unit value for the years to come.  Since anesthesia practices have little tangible value, what the corporation is buying is a share in future revenue.  As a general rule, in return for the initial buyout investment, the corporation pays physicians less and institutes cost-cutting measures to make sure financial targets are achieved.  These cost-cutting measures may or may not be palatable, but the senior partners who benefited most from the buyout probably won’t be around to mind.

Nationally, anesthesia practices are selling to corporate buyers or merging with other groups at an unprecedented pace, as physicians fear that the Affordable Care Act (ACA) will bring sharply reduced compensation.    The Wall Street Journal reported on November 21 that Blue Shield of California has sent contract amendments to many physicians, asking them to accept fees up to 30% lower for insurance exchange patients than the usual commercial rates.  In New York, the WSJ said, UnitedHealth Group Inc. has set rates for plans in the new health-law marketplaces close to what the state Medicaid program pays for the same services, and less than half of what physicians receive for treating people covered by employer-sponsored insurance.

Signing on with a corporate buyer has the potential to bring several years of relative security for the anesthesia practice, depending on the terms of the purchase agreement.  The sellers hope that corporations will be able to negotiate better contracts than private anesthesia groups can when they act alone.  Groups may become part of single-specialty corporations such as Somnia Anesthesia Services or North American Partners in Anesthesia (NAPA), or they may be acquired by multi-specialty corporations such as Sheridan, TeamHealth Holdings Inc., or Mednax Inc.

Not all corporate deals are friendly, of course.  EmCare and Somnia have taken over the anesthesia contracts at a number of California hospitals — with or without the blessing of the anesthesia practices.  At Kaweah Delta Medical Center in Visalia, hospital administrators put out the anesthesia contract for competitive bidding in 2011, and the all-MD anesthesia group that had held the contract for years lost out to Somnia.  A new anesthesiology chief came on board, and a care team model with nurse anesthetists took over.

Merger is another possibility for anesthesia practices. In May 2013, a new anesthesiology corporation, Resolute Anesthesia and Pain Solutions LLC, was formed by the merger of Broad Anesthesia Associates and Mid-Florida Anesthesia Associates in a recapitalization led by the Goldman Sachs Private Capital Investing Group.  Resolute currently serves over 25 locations in Florida, Missouri, and Illinois, according to a company press release, and “expects to grow by partnering with leading quality anesthesia groups nationally.”

So what does the future look like for anesthesia practices that haven’t yet begun courtship with a corporate buyer or merger partner?  The answer is more work for less money, as the demand for anesthesia services increases and payments continue to dwindle.  In California at least, the MD-only group may soon be an endangered species.  It’s hard to see how that practice model will continue to be financially viable.  It would make sense for all-MD groups to consider adopting the anesthesia care team model, including lower-cost practitioners, sooner rather than later, or risk having one forced upon them by hospitals that are tired of paying stipends for coverage of trauma, obstetrics, and other services which are money-losers for the anesthesia group.

The problem, of course, for many all-physician anesthesia practices is that they don’t want to hire nurse anesthetists.  The militant anti-physician stance of the American Association of Nurse Anesthetists (AANA) is understandably distasteful to many of us.  The AANA doesn’t believe physician supervision or collaboration is necessary or even helpful.  Anesthesiologist assistants, the only other mid-level alternative, can’t get a license to practice in California or many other states yet, though efforts are underway to make that happen.  Until then, there’s no choice other than nurse anesthetists if a group wants to add lower-cost practitioners.

For young physicians going into anesthesia practice, who aren’t partners yet, the only sensible advice is to beware of changes to come.  If your group is MD-only, and hasn’t adopted a financially sustainable anesthesia care team model, it is ripe for losing its contract to a tough competitor such as Somnia or EmCare.   Even if the group has been stable for decades, don’t think that your elders, the senior partners, won’t sell the practice out from under you to a corporate buyer or a lucrative merger if the price is right.

Only time will tell whether or not the physicians of MAC are happy with their decision to sell the practice, and how many of the non-shareholders may decide to leave and seek work with a different group where partnership is still an option.  For now, though, it’s a safe bet that MAC won’t be the only California anesthesia practice to look for a good deal while one may still be available.  Which group will be next?

Thanks to Stan Stead, MD, MBA for his clear explanations of how anesthesia practices are valued for sale, and how deals are typically structured.

Karen S. Sibert is an associate professor of anesthesiology, Cedars-Sinai Medical Center.  She blogs at A Penned Point.

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  • Dr. Drake Ramoray

    Anesthesia, welcome back to the real world.

    Radiology is next. How long until we just transmit radiology images overseas and when an attending physician has a question or wishes to review the images hey have to talk with “Bruce” in Pakistan or India.

  • Suzi Q 38

    I am sorry this is happening to you too.

    This is the “real world.”

    It happens in pharmaceuticals, medicine, law, computers engineering, city planning and architecture, accounting, retail, marketing, engineering, transportation, and hotel services….etc.

    Cost is a main concern, and wages are a huge part of the costs.
    Any company is going to attempt to reduce costs/wages.
    Police and fire departments get new management and are asked to accept reduced salaries and benefits. Ditto for city employees across the board.

    The private sector is really no different.

    If this is a shock to some of you, I think that you have to get calmly over it. You have choices. You can work somewhere else, but eventually, they will do the same.

    This has been happening to us for the last 20 years…..
    Yes, radiology is next.
    My radiologists are still in the U.S., thank goodness. I wonder for how long. Forever, I hope.

    • Dr. Drake Ramoray

      Excellent post Suzi.

      The solo practicing family doctor is the same as the old Shoe repair stores of old. That is now creeping into all specialties.

      Few and far between, while most people get Walmart level of service (unfortunately at Nordstrom prices) with facility fees.

      • southerndoc1

        In a sane world, the AMA would point out that when physicians work for outside investors, they are no longer professionals and the doctor-patient relationship is destroyed – their sole responsibility is to improve the bottom line of the corporation and increase return to the shareholders.
        But the AMA is way too compromised financially and ethically to take a stand like that . . .

        • ErnieG

          This aspect- the deterioration of the patient-physician relationship- is what worries me the most.

          Indeed, when physicians become employers of hospitals or employees of large systems (whether profit or non-profit) AND these systems are
          not owned by the physicians themselves, the physician is no longer a professional. Physicians are in an
          increasingly bad situation- still legally and ethically treated as
          professionals responsible for medical care, yet restricted by the other players
          who behave like large business entities.

          While many commentaries point to a rise in cash only practices as a beneficial unintended consequence, I am pretty sure this will
          fail. All it takes is a line a law in
          some federal traffic bill that will outlaw “private practice” by some clever
          restriction—perhaps by taking away prescription rights or forcing state medical boards to couple licensing to Medicare.

          I don’t claim to have a perfect system, but what is clear to me, that increased direct control of medical care by large business and large government will not solve improve our system. They both have large interests separate
          from the interests of our citizens as physicians and patients. In my view it
          begins with the fact that large business and government control the money.
          The money needs to be controlled by patients. The ACA is, in my book, giving the insurances a chance to handle more of this money with government restrictions. But
          this will fail. Government will come to the “rescue”, which will be an even
          bigger disaster. In, and of itself, a single payer system is not bad. But the
          devil is in the details, and I have no faith in the federal government, simply
          because it is not designed to manage personal medical care. A single payer system, in this country, managed by the federal government will bankrupt the federal government.

          In the end, medical care is a deeply private matter. As a physician, I am trained to recognize and manage disease, and advise people who
          suffer from it. Individuals may decide not to listen to me, or decide to take
          my recommendations, and act upon it, whether it is medications, referral,
          lifestyle change, surgery, hope, or nothing. Some will make stupid choices. Money will be a concern, of course, but in my mind, as long as patients make those decisions for themselves, that is the best we can do. I do not want to see government or business making those stupid decisions, all the while stealing
          money from citizens, deeply satisfied because they are measuring our
          performance and telling us how bad were doing.

    • azmd

      Personally, I see no reason for any of us, whether we are city managers or physicians to “calmly get over” a societal trend for lower real compensation for the work we do, such that over time our buying power becomes less and less. The fact is that for all of us, that lower compensation is directly related to someone else making more money somehow.

      For a city manager, his or her pay is lower because tax revenues are lower because the top 0.1% are no longer paying their share of taxes. For a primary care physician,his or her compensation is lower because the top hospital administrators are making multiples of what a physician makes, or the CEO of the health insurance company is making tens of multiples of what a physician makes.

      Whatever makes you think that we shouldn’t be saying anything about the fact that a small segment of our society is making more and more money for doing less and less while for the rest of us, it’s the complete opposite? If we don’t say something, where is it all going to stop? And what kind of lives will our children have when they are working adults?

      It’s all very well and good to say that we can all lead simple lives and get along with less. That’s perfectly true. But by allowing a very small group of people to have most of the financial resources in our society, we also allow them to have most of the power, and to make decisions about how we live and work. That’s what most doctors are reacting to, and so should everyone else.

      • Suzi Q 38

        “…Whatever makes you think that we shouldn’t be saying anything about the fact that a small segment of our society is making more and more money for doing less and less while for the rest of us, it’s the complete opposite? If we don’t say something, where is it all going to stop? And what kind of lives will our children have when they are working adults?…”

        You can say whatever you wish directly or indirectly to your administrators or corporation CFO’s. In fact, that would be a great idea. Get all riled up. Threaten to strike, or actually strike. This is America.

        My point is that most businesses and government entities are not doing well and have not done well for about the last 20 years. The same has come to health care, physicians included.

        Yes, we all were shocked, surprised, and hated getting the news that everyone had to take a pay CUT. This was over ago. Since then, my husband has had to endure several pay cuts in order to assist his city in balancing their budget. He was not alone.
        Other employees, including the fire and police department had to do the same.

        The teachers have had a rough 5 years.
        Many working 14 years and less have lost their jobs completely. Schools have had to close. All those jobs lost.

        The pharmaceutical industry has had a very rough 20 years. Many companies and divisions have either bought each other out, or closed. all of those employees are gone and without jobs at all.

        I can go on and on if you so desire.
        I trust you are aware of this.

        manufacturing….construction…..etc…There are so many more stories.

        My point is that what the OP is talking about does not surprise me. It is not a big shock. Is it sad???

        The future for insurance companies and medical corporations are somewhat if not very uncertain with Obamacare. The administrators are looking to cut costs. Unfortunately, the big targets are the salaries.
        Hopefully physicians like you will be strong enough to push back and say “You are NOT cutting my salary.” I hope you can do that and are successful at getting them to see that the administrators need to “lead by example” and cut their own salaries first.
        Most people, when faced with having to accept a lower salary or looking and getting another job, will accept the reduced salary.

        Maybe you are different.

  • Dr. Drake Ramoray

    Sarcasm, but only a little. A way to demonstrate the corporatization of medicine. I appreciate your clearing it up for those who didn’t catch it (too subtle in hindsight).

    That being said when I was in training DO’s were looked down upon by many as “not real doctors”, then came the CNA, now we have near monthly fights on these boards about NP’s and PA’s practicing without supervision from a licensed physician. Anything is possible. Ask a family practice doc 20 years ago if they thought a PA or NP would be doing their job. There was a post on here earlier that included “Medical technicians” with 1-2 years training that could be dispatched into the community.

    California is considering letting optometrists practice medicine.

    Optometrists in Kentucky and other states want to perform surgeries

    While I doubt it’s coming soon, if you don’t need a medical license for surgery, primary care, or ophthalmic surgery, why do you need a radiology license to read a CT scan? I do think the consolidation of radiology practices is coming, although probably like anesthesia and into US mega radiology corporations. In hindsight the India/Pakistan part was over the top. Wouldn’t take much to set up something off shore in the Caribbean, perhaps associated with one of the American Medical schools. Pay radiologists to sit on the beach and read X-ray films from a tablet or Google glass.

    • Margalit Gur-Arie

      You are scaring me, Dr. Joey…. :-)

    • macbook

      So scary…….

  • Tony Indovina

    If physicians are all going to employed by corporations is there any chance that they will able to unionize, like airline pilots, nurses and other professionals?

    • Suzi Q 38

      Sure they can.


    Have to jump in here. When statements like your are made, they have to be corrected. There is no data showing mortality and morbidity increase with CRNA only anesthesia. Absolutely not defending them. Respectfully, your statement is incorrect and fear mongering. I personally agree with the rest of your post. :)

    • PoliticallyIncorrectMD

      Respectfully, the absence of evidence [of difference] is NOT the evidence of absence. This is not a fear mongering, just common sense.

      • NPPCP

        We both know there is evidence though. There are CRNAs practicing in many states without physician supervision. There is no lawsuit uptick or great increase in mortality or morbidity. Please please let’s don’t argue. We both know the facts since we are both in the business. I am grateful for MDs and CRNAs. The data has been borne out and is being borne out as we discuss. But I do understand your feeling. In your opinion, what psychomd is saying is common sense. In my opinion with information I have seen, it’s fear mongering. Thanks for responding.

        • PoliticallyIncorrectMD

          Why avoid discussing it ? After all this is the perfect venue for it! I am willing to accept any argument (even opposite to my own beliefs) as long as it is internally consistent. If you argue that CRNAs provide the same level of care for the fraction of money and time invested in training, why continue training physicians at all?

        • PoliticallyIncorrectMD

          I guess you chose ignoring me instead of providing some logical arguments!

    • Karen Sibert MD

      Of course, situations where nurse anesthetists work without physician supervision tend not to do cases as complex, so M & M statistics aren’t comparing apples to apples. We are starting to hear about malpractice cases where the nurse anesthetist’s defense is that the hospital and the surgeon shouldn’t have let a nurse anesthetist do a case that complicated.

      In hospitals that use the anesthesia care team model, cases can be appropriately stratified to the appropriate anesthesiologist or nurse anesthetist. If a hospital or surgery center uses exclusively nurse anesthetists, there is no such option.

      • Dr. Drake Ramoray

        While this is true for anesthesia in terms of risk stratifying the cases, this is not something that primary care MD’s are looking forward to. I can’t speak to anesthesia but in outpatient medicine no doctor wants a schedule full of super complicated cases. Without a sore throat, a simple hypertension, or in my case a simple case of hypothyroidism, I don’t think I would last a week. The thought of the charting alone in our EMR for one day of nothing but patients with six point problem lists makes me sick to my stomach.

      • NPPCP

        Karen, I don’t know the breakdown of complex vs “simple” cases. I do know crnas provide anesthesia for complex cases. I also do not know who “we are starting to hear” is. I have not heard of any uptick and neither have any of my colleagues. So we are “hearing” different things… Much like an opinion.

        • PoliticallyIncorrectMD

          Selective hearing?


    In your opinion. You do not speak from fact but from personal preference. Completely agree with you right to voice your opinion. I feel differently. That’s okay too.

  • PoliticallyIncorrectMD

    Thank you! But I guess it is important how NPPCP FEELS. This is the way to settle the argument!


    Hey psychomd, I agree with you more than you know. And I would trust Dr. Sibert with my life. The issue that concerns me is the willful disregard of what is actually happening all across this country. NPs, CRNAs are safely delivering care every day, day in and day out. and our MD counterparts continue to say people will die and this endangers patients to the nth degree. It’s already happening and has been happening for years – but our friends simply stand there and say it is not. I see almost 30 people on my schedule at my privately owned clinic and have done so for many many years. I am extremely careful about representation of who I am. No one has an issue and if they do, I tell them there are several MDs or DOs within a 10 mile radius. I understand the feelings of incursion and loss of profession; I don’t understand the blatant disregard of the fact that what I(we) do is working safely and effectively. To say this seems like I am anti-physician. I am not. I am just filling a spot, doing what no one else wants to do, and loving every minute of it.

    • NPPCP

      Another quick example – you would be amazed at the antagonistic posts from MDs I receive that are filtered out. I still get them on Disqus but they don’t show up here. Why? I am simply discussing, agreeing, disagreeing like everyone else. Let’s face facts about the part we all play. I’m not going away and neither are any of you. I am happy with the part I play. I am thankful for the part physicians play. Not sure why that makes so many angry. Sometimes I wonder if given the choice if some physicians would rather my clinic be gone and people receive no healthcare rather than not receiving healthcare from them.

      • Suzi Q 38

        Anger comes from fear.
        Some fear loss of patients and income.
        Also, there may be some competition.

    • Suzi Q 38

      Be proud of who you are, what you do, and the health care that you provide for your patients.
      Your patients would not come to you if you were not good at what you do.

      Everyone has a right to earn a living doing what they like and want to do.

  • Suzi Q 38

    Yes, things can go wrong. Several things have gone wrong with me in the last year and a half, and I was under the care of a gyn/oncologist and a neurologist.
    My PCP made a couple of errors, too.
    I understand.
    Yes things can go wrong, because it can.
    I have to point out that things go wrong with patients of board certified physicians as well.

    There is a need for the NP. The physicians say that there will be a shortage. This is a way to assist with the perceived future “shortage.”

  • Karen Ronk

    I think this is just another example of extrinsic forces cluttering up the care of patients. Our medical care givers have access to the best technology and education and yet I believe that many of us get substandard care. If only there was a way for the best minds in the field to get together to come up with a viable solution to the healthcare conundrum. Personally, I do not believe that building mega practices that are beholden to corporations is the answer.

  • Suzi Q 38

    Yes, plus the good and the bad of belonging to a union. I think that the nurses at Kaiser are union.
    When the union members who are the majority say “strike,” you have to do so.

    Some have fared well, others have not.
    Ask the grocery store employees 10 years ago in California. Many outright lost their jobs.

    The government stepped in for the air traffic controller’s strike of the 80′s. I believe (not sure)
    President Reagan ordered every striking employee to be laid off or fired. The management had to hire and train new controllers, and life went on.

    The teachers have a union and know how to strike.

    A union is a right, but the outcome is uncertain as to whether or not it is better for the employees. I think for them, it has worked well.

    Also, there are union fees, as now you have to pay for a new set of union administrators.

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