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Cutting Anesthesia Costs Starts with a Battle

Philip Betbeze, for HealthLeaders Media, March 21, 2013

Hardball tactics followed.

"We mutually talked and said, 'Okay, what we want to do is an RFP,' " Simmons says. "We did that and the day after we sent that out, they gave us a 90-day termination notice because they were trying to force us to sign a contract."

Essentially, within 90 days, Providence Regional had three bad choices: Incorporate an entirely new anesthesia group into practice, sign a new contract with the legacy group at unfavorable terms, or be left without anesthesiologists. None of the options was attractive, but the leaders chose to switch. They're glad they did.

"At a higher level, we left a relationship that was antagonistic, without aligned incentives, and based on a historical clinical and operational model," says Dave Brooks, the CEO of Providence Regional until he moved to St. John Hospital & Medical Center in Detroit in February.

"We did our darnedest to try to evolve that with the existing group, but it got to a breaking point, unfortunately, so we moved to a new partner," he says. "Now we're very aligned, paying less, providing more coverage and at better quality, we think—we had troubles measuring it in the past—and we believe we have a model built around the future, not the past."

In Providence Regional's case, says Simmons, he's confident his current arrangement with a national anesthesia group, Somnia Anesthesia of New Rochelle, N.Y., is better not only for surgeons and the hospital, but also for patients.

By the time the legacy group issued its contract termination notice, the surgeons, who at first were not universally supportive of the idea, were on board with the change, but prior to that ultimatum, they had to be convinced over a long period of time, during which the hospital formed a panel—with broad physician participation—aimed at improving the relationship with the legacy group.

The surgeons' eventual alignment with administration "probably required a two- to three-year period of clarity around the hospital escalating its communication that this relationship wasn't adding value to us," Simmons says. As the physicians on the panel sought solutions over two to three years, he says, they realized the depth of the divide.

"Some surgical leadership who were very much against this, as they became more involved, it became clearer to them that we had irreconcilable differences," he says. "Doing something like this is very high risk, so you can't do this without consensus and a strong partnership with key physician leaders."

With cost control such an administrative imperative, groups that provide an anesthesia care team that includes CRNAs under physician supervision can represent a big improvement in cost and access. Mary Ouimet, senior vice president and chief nursing officer with Wheaton Franciscan Healthcare–All Saints, was part of the team making the decision on a legacy all-physician anesthesia group two years ago. Like Providence Regional, the old model became cumbersome and outdated largely because of growth of the Racine, Wis.–based 368-bed facility.

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