Bob Johnson: The Timeline of Anesthesia Economics

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Jeff McLaren (00:06):
Welcome Bob Johnson, one of the industry's most trusted anesthesia experts and Medaxion Senior Vice President for Anesthesia Operations. Bob, you have seen a lot of change through the years. What makes today's anesthesia economics challenge different? Why are we in unique times? I feel like we are.

Bob Johnson (00:34):
Well, we are. I would certainly agree with that. I would however say that it's not been a change in the fundamentals of the economic issues that have existed in anesthesia for some time. What's changed is the degree of intensity around the problem with anesthesia. And that's been historically the one feature of anesthesia that you can look back in its entire history and see because of the anesthesia so vital to surgical or any invasive procedure, obviously you need patients rendered insensitive to pain and hopefully unconscious, is that ability to do that, the demand for anesthesia, the demand for providers to perform anesthesia has almost always outstripped the ability of schools and other even hospitals to produce providers that perform anesthesia. Often the economics follow that fundamental demand supply problem. And so I think what we're seeing today is probably the most acute imbalance of demand versus supply that I've seen in my 40 years of being involved in this specialty.

(02:03):
And I've seen three cycles of where demand has become more acute in terms of the imbalance, but I've never seen anything to the degree that we are seeing today. And I think there's lots of reasons we can discuss about that. And that is also leading to other issues as any service industry that is failing to provide the services that the society demands is going to be in a difficult period of how to achieve that balance again, if in fact they can.

Jeff McLaren (02:48):
Yeah. We've got a number of, and you and I talk about this all the time, that there's a number of factors that have led to the current situation, but a number of the problems have actually been really longstanding. They were just affordable. And because they were so complex and they were relatively affordable, they were just managed. But then as you said, when the demand greatly outstrips the supply, you just get a great explosion of cost, which is extreme pressure on what were formally accepted patterns of staffing and coverage in the operating room just became under threat, became non-affordable.

Bob Johnson (03:32):
Yeah. Even I think any discussion about the economics anesthesia, really, I think we need to step back a little bit and look at, why is anesthesia in this position? Why of all the medical specialties out there? Why is anesthesia seemingly have this unique position as being almost single-handedly keeping the development of surgical procedures and the economics of healthcare economics all around? The anesthesia seems to have this singular ability to control the growth of hospital and out of hospital operations.

Jeff McLaren (04:23):
It's titrating the whole industry in a way.

Bob Johnson (04:25):
Exactly. I mean, I often hear from hospital leaders, I feel they feel that they're being held hostage, if you will, by anesthesia providers, by anesthesia private groups, by corporate groups. And in that being held hostages, they're requiring great deal more financing than professional fee billing allows for anesthesia providers. And here's the rub about that. Anesthesia professional billing has long been a problem for anesthesia providers who, as their specialty has allowed them to command greater and greater amounts of compensation. Unfortunately, neither government nor private payers are able to keep up with that level of compensation. Hence, you have more and greater need for support outside of the typical professional fee billing structure. And hence you have hospitals, what we call providing subsidies. That's compensation over and above what they collect on a professional fee basis.

Jeff McLaren (05:46):
Max out payer for the whole system, essentially. And not just hospital surgery centers.

(05:52):
Yeah. Surgery centers is a good, something to talk about because up until probably two or three years ago, it was unheard of for a surgical center to require for the anesthesia providers to require additional compensation other than what they were receiving from their professional fee billing. Surgical centers are efficient. They tend to have better payers, if you will. And long been that one place where anesthesia actually, in terms of a profit loss, was either breakeven or better. Well, that's even changed now. And again, for the same reason, the demand for the service is just outstripped ability to generate providers. And I would even point out that today, the supply of anesthesiologists through residency programs, the supply of nurse anesthetists through hospital and university programs is historical levels. They're producing more and better, if you will, anesthesia professionals than ever in history. And that has still not been able to keep up with the demand for anesthesia services, both within the hospital setting and outside the hospital setting to include surgical centers and even office provided anesthesia services.

(07:23):
Yeah. It's pretty interesting what's happened. And you're right. I hear of more and more CRNA programs opening up, but the program did go from a two-year to a three-year program, which in the period of the last five years, that took essentially a graduating class of CRNAs out of the mix, didn't it?

Bob Johnson (07:44):
Yes it did.

Jeff McLaren (07:45):
Programs transitioned. I mean, effectively it's caught up now, but that's a whole year of graduating class that was not fed into the market of provider supply.

Bob Johnson (07:56):
Yeah. And I would even argue that phenomena of going from two to three years even helped precipitate the crisis mentality that's surrounding this issue today. It's, "Oh my gosh, how am I going to get more anesthesia? I can't afford it. " Hospitals are looking at subsidy amounts that a few years ago could be say two million for your typical hospital or approaching $10, $12 million in subsidy payments on an annual basis today. And

Jeff McLaren (08:30):
That's just coming straight off the hospital bottom line.

Bob Johnson (08:33):
For which they've neither budgeted nor been prepared for. I mean, it's not only the amounts, but it's been the sudden appearance. A lot of hospitals, what they would term as physician spend when it came to anesthesia, nobody was happy with, but seemed to be at least manageable and identifiable. For something to turn around, that's two, three, four times the amount that they were used to paying almost overnight. Of course, hospitals, where does this additional funding come from? And where's it going to come from? This is a zero sum game. Hospitals only have X amount of money that they can use to provide all of its services to pay more to anesthesia means somebody's going to get less. Maybe it's the nursing, maybe it's radiology, maybe it's housekeeping services. It's got to come from somewhere.

Jeff McLaren (09:34):
Is that money that was formally contributed by the OR to all those other functions, that those funds are no longer available because they're being shunted over to anesthesia. And if anesthesia isn't funded, surgery doesn't happen and then none of it flows through the system.

Bob Johnson (09:51):
So we have to ask, why has anesthesia from all the medical specialties seemingly have come to this issue when others have been much more gradual? Everything's gotten more expensive, but why anesthesia alone seems to have this dramatic, if you will, development that is creating such a crisis within hospitals and other places to allow or to afford anesthesia. And I think you need to go back in time and look at this.

Jeff McLaren (10:25):
I agree. And to me, I remember being at trade shows, it was around that 2018, 2019 time period when the types of conversations that were being had at the ASA annual or at the practice management, which is now the ASA Advanced Show, all of a sudden it was subsidy, subsidy, subsidy, where that just became a point of constant conversation. Would you say it was around that window just before COVID when it seemed to really bite? Of course, it was a steady problem that then hit a cliff in a way. Is that around the timeframe? I know COVID just accelerated the whole thing.

Bob Johnson (11:09):
Exactly. And COVID certainly didn't help. I mean, providers at that point were leaving the workplace, retiring early, knowing that anesthesias, we knew it all of a sudden was under a lot of stress to provide these hospital services in the middle of the major global pandemic. I mean, no one was prepared for that, certainly not anesthesia services. But when you think about anesthesia, what's always struck me is, why is it so different? Why does it seem this specialty of anesthesia? Always lead even whatever conversation you're having with hospital or health system leaders, why anesthesia? I think beg some understanding of what was the history of this that evolved in this fashion. And I think what you understand, what I understand is that this really, when you look at the economics of anesthesia, economics have long been a concern. It's not like the economics of anesthesia is a new phenomenon that people are studying, but up until recently has almost completely been limited to the billing and collection of anesthesia services.

(12:31):
That's been the discussion about anesthesia economics up until recently, right? Because it was general bill.

Jeff McLaren (12:37):
It was not desired, but it was generally, I mean, in terms of paying subsidies, but it was generally affordable.

Bob Johnson (12:43):
It was generally affordable. And the percentage of all, anesthesia will always tell you that it's been the government payers that that's really created because the government payment is so out of proportion to private payment. I mean, anesthesia on a unit, single unit basis, and the government is $20 a unit, Medicaid, that's Medicare. Medicaid could even be like $14 a year. Compare that to a Cigna, United, which is anywhere from $80 to $150 a unit. And as Medicare and Medicaid increase as a percentage of that payer pie, if you will, right? What's that mean? That means obviously anesthesia for Medicare and Medicaid almost becomes the more you do, the more you lose. And it's such a drag on-

Jeff McLaren (13:43):
It's a loss leader in a way. You have to do it to get the other business.

Bob Johnson (13:47):
And so why and how did this happen? And because it's not true to this extent of other medical specialties. Well, what's happened in the sort of history of medical economics is really, it was the creation of Medicare that first defined medical specialties as, if you will, a business that we're going to be separately paid for. Of all the medical specialties, anesthesia was the only one that created and was allowed to use its own methodology to determine the charges and the payment. And that unique anesthesia methodology for billing today still is one of the principle reasons why dealing with anesthesia requires different expertise, different knowledge, and even individuals who are really steeped in that understand why the differences of anesthesia billing versus say everybody else, because they are different.

Jeff McLaren (14:52):
I was struck when I first came into the industry, just how complicated the data collection and management exercise is to appropriately bill for anesthesia because of all of the, I wouldn't say competing factors, but overlaying factors that you have to get right to maximize what you're owed for that particular service. It's procedures. It's in some cases, patient acuity, it's the difficulty of the surgical case, it's time and intervals of time.

Bob Johnson (15:26):
You just hit the nail on the head. It's time. Anesthesia's the only medical specialty that uses time as one of its principle ways to charge patients. It's how long does a procedure take? The longer procedure takes, that's going to be the more anesthesia is going to be paid or is going to charge you as a patient. They also charge you for the complexity of the case, but that methodology, time and complexity, that's unique to anesthesia. No other medical specialty is allowed to do that. Everybody else went under what's called RBRVS in, I believe in the early '70s where there was a single methodology that defined how all medical specialties would bill. So you could equilibrate a surgeon's fees with a pediatrician's fees, and that effort would be a part of that component. Anesthesiology argued that they had already developed a relative value system. It worked, but it was based on time and they won that argument with Medicare.

(16:31):
Unfortunately, the deal that they struck with Medicare was, "Hey, if you give us this unique billing methodology, you're also going to get a lower fee as a result because you can bill for time and you can bill for volume." So it was sort of a-

Jeff McLaren (16:50):
It's a strange penalty in a way, because I've always assumed that the reason anesthesia kept time-based billing, or at least instituted that, was that they don't control the factors of time. They're serving the surgeon who some surgeons are faster or slower to given procedure. So unlike getting your car repaired, any certain repair is listed as supposed to take one hour, 10 minutes, whatever it is, and you bill based on that book time regardless of how long it takes you. And I think, I guess anesthesia argued that we're beholden to folks that are slower or faster, we shouldn't be penalized that way. Do you think that's how that evolved?

Bob Johnson (17:37):
That's exactly the argument that was used, but it's had mixed results. Certainly it has resulted in less payment, if you will, because the deal that was struck was, "We'll give you this, but what we'll take back is the amount of money or the amount that you will be paid for these units, anesthesia units." So with the creation of anesthesia units was a whole industry was born, right? And that was a billing industry that even today exists where you have very large and small billing specialists, companies for anesthesia, much more so than other medical specialties. And why? It's because it's a lot of understanding that is required in actually creating and collecting on an anesthesia bill today. We can't go into it all today, but a lot of that ... Now, the mixed result of that was, while it did result in sort of less payment, but it also gave anesthesia and anesthesia alone the ability to really understand its own operations because they were billing for time.

(18:54):
So now anesthesia, and more importantly, anesthesia private groups were actually able to understand what their own economics were in delivering anesthesia, whether it's a hospital or ASC or an office because now with their billing mechanism, they were able to say, "Here's how much time we as a group are spending, and here's what we're receiving as payment for that. " So anesthesia had something that other specialties didn't, and that was using the billing data, if you will, to be able to manage their operations. Now, albeit driven by the ability to collect money, but still it gave anesthesia this very unique way to say, how can we best understand the services we're providing in a given location, a given hospital over even a procedure?

Jeff McLaren (19:57):
I think that's really insightful. That's interesting. I didn't think about that as a benefit as the specialty of anesthesia continued to evolve in the '70s, '80s, and '90s. And I assume that's why the rise of regionally dominant practices in that time period in the '80s and '90s, before private equity came into the fold so much, that they actually had this data that allowed them to dial in efficiency where other specialties, because it wasn't part of billing, had to separately track physician patterns during the day. And that entailed whole different types of record keeping over and above the record keeping necessary just to bill for that particular service.

Bob Johnson (20:45):
So you understand it, now anesthesia has a whole different path that it's going forward with than other specials. Even with anesthesia, people like myself, we were anesthesia administrators. We were very steep in how the billing of anesthesia, that's really what, as an administrator, you were focused on was the billing. How can we maximize the return versus the expense? And up until probably the early 2000s, for the most part, anesthesia either broke even or even made money. But the advent of the 2000s, that's when things changed. That's when the demand had hit that point where more and more anesthesia is required. And then what happens in any industry when the demand exceeds supply? Those who are providing the services are going to ask for and will receive higher levels of compensation and in anesthesia, that's been the story for the last 25 years has been that.

(21:56):
And as we pointed out earlier, that very steep rise in the last couple of years, beginning with COVID.

Jeff McLaren (22:04):
And that steep rise in the last, let's say, five, six years has been just to keep up for physicians. I mean, compensation for physicians has not risen nearly at the rate that the compensation for CRNAs has risen in the last five, six years.

Bob Johnson (22:24):
Absolutely. So what do we have today, which is so relevant to the services that we provide both with MidAction core electronic record and with anesthesia manager because what's happened here as this subsidy amounts have tripled or quadrupled, the need to be even more efficient, to be efficient to another decimal point in the past has arisen. And what's happened is the billing data alone was no longer sufficient to provide you the information you needed to make your deployment, that so important deployment of providers and how you deploy them every day, so much more important to your, both whether you're a private group or you're an employed practice in a hospital. Now we're talking about an FTE or two in an anesthesia group where that could be a half million dollars. And if we're talking about anesthesiologists, two anesthesiologists is $1.2 million. I mean, think about that.

(23:40):
So that importance of being able to more precisely deploy anesthesia providers to whatever situation has become, that's what's driving those of us in the industry today that are trying to create a more efficient anesthesia structure. We all know that we're dealing in an operating room world where often the operating room itself is poorly utilized, right? So that puts anesthesia back behind the eight ball, if you will, right away.

Jeff McLaren (24:14):
They don't even control that throughput.

Bob Johnson (24:16):
Exactly. So here you are in an environment which is almost, for almost most hospitals today are operating at utilization of at the most 60% that you see around. So that means 40% of your time as an anesthesia provider is not being reimbursed for. Now, back maybe when an anesthetist cost $75,000 a year, that was okay. Nurse anesthetists today are hitting $300,000 per FDE. It's not okay anymore. So remember, that ability to titrate how many bodies or FDEs you're providing to a hospital or system now becomes an incredibly precise and from a business point of view, absolutely important exercise. And it's now, so now where does that data come from? If the billing no longer is able to provide it, and here's the other thing, hospitals, unlike for every other hospital-based service, emergency medicine, radiology, hospitals evolved with their own metrics of having to measure these things.

(25:29):
They looked at how many reads and radiologists would do, how many admits emergency medicine would do, and they were able to measure those and help manage whether it was private or employed. Anesthesia, however, did not evolve that way. Anesthesia was left to these private groups to run their own business. So hospitals were really quite blind to what was taking place. For whatever number of anesthesia providers they had within their four walls, they often didn't know how many, much less who was there on any given day.

(26:08):
And so when hospitals realized that, wow, this is costing so much more money, they also realized they did not have the data to be able to really try to manage this as either a partner with the anesthesia group or as a employer of anesthesia services. Hence,

Jeff McLaren (26:26):
And then you add in that, so the groups had expertise on management and at least a certain baseline capability to gather data because they had to bill. So they were shepherds of this data, and then you get into a situation because of the subsidy rise that hospitals are insourcing, they think they can apply systems they already have and make anesthesia work, but they can't because they don't have the management expertise and they don't have access to the data.

Bob Johnson (26:59):
So Jeff, when you, as providing up till recently, electronic medical record technology for anesthesia, when did it become apparent that the information that you were collecting as a result of those records as important, if not more important all of a sudden than the actual service of a record itself? In other words, the anesthesia data, when did you realize that that data by itself was both important economically and operationally?

Jeff McLaren (27:36):
Yeah. I think that, and it's funny, the economics of it, who was buying systems? So when we started out over 15 years ago, for this company, 17, 18 years ago, when we started out, interestingly enough, it was the most forward thinking groups that were jumping into doubling down on technology investments. So it was the most forward thinking groups. Not all of them were market dominant mega groups, but we had great success with the market dominant mega groups because they were already dialed into efficiency.

Bob Johnson (28:16):
Right.

Jeff McLaren (28:16):
They already understood that the way they could reduce subsidy is to treat all of the facilities they're in across a market. Instead of looking at each hospital individually, they're looking at five, six, seven, eight, 10 hospitals and a dozen or two surgery centers on top of that and treating the provider resource as a fluid component that can shift between those facilities to maximize efficiency. They had to use data to do that, but even they were constrained by just using revenue cycle data, they needed more. They knew that patient acuity came into play and that they needed more real-time data where revenue cycle data inherently was lagging 30 days. They needed the ability to make decision that day because they knew that data was valuable. They just didn't have it in the timeframes they needed and they didn't have the clinical overlay. So they needed more timely data and they needed access to the overlay of clinical with the revenue cycle components.

Bob Johnson (29:23):
And how about that leads to the question about benchmarking, right? I mean, as a consultant and an anesthesia business person, if you will, it was always problematic for ... I would get the question, how do we compare to others? And hospitals would ask you that, why are we more expensive? And what you find out really quickly, there was almost no way to do that in any competent, statistically valid way. Survey data was biased by ... It was either the providers themselves kind of data or It was biased in other ways. And so there was really no true way to benchmark one hospital anesthesia performance versus another, even within its own system.

Jeff McLaren (30:13):
Yeah.

Bob Johnson (30:13):
You couldn't compare a hospital aid hospital. So when and how did you realize that that and almost that alone distinguished what you could provide versus what was out there in the industry?

Jeff McLaren (30:24):
Yeah. I think that's a complicated answer to me because I think many of our larger clients, the larger market dominant groups actually had enough data that they felt like they, within the pools of data they had, had a pretty good sense because they were already pretty highly scaled, that they had a pretty good sense of what was right and wrong. Because not only were they operating well, they were using revenue cycle data, I found that all of those groups had high degree of clinical leadership cohesion. They were just run differently. Those market dominant groups were just run differently. And so they didn't always have national benchmarks to pull from, but because they were so tight, there was so much cohesion and because they were tracking data, I felt like they did well without having national benchmarks. I think that was at that point in time.

(31:36):
They were more concerned with the real-time nature of data because they didn't have real-time data. They had 30-day lag data and they needed the clinical components mixed in with real-time data. So that real-time component allowed them to even increase the fluid nature of staffing. So the game at that point wasn't so much metrics as it was in terms of broad scale metrics across from a national footprint perspective. It was more daily metrics. They needed data today to know how to move people. Now, those larger groups also had the benefit of being part of consortiums where they shared data. So they actually pulled the ABG. They would pool data amongst them to some degree with the agreement that they weren't really competitive. These were all geographically distinct. And that was one of the elements of joining the ABG, which couldn't really compete with each other.

Bob Johnson (32:39):
ABG being anesthesia business groups.

Jeff McLaren (32:42):
Sorry. Yes, that's right. And so I think they had certain element of benchmarking that was done through the ABG. They were really missing the daily benchmarking, the weekly benchmarking in the tide of clinical. That was the rug for them, I think. Now with the breakdown of the market dominant groups, I mean, there's certain national players clearly that have amalgamated some of the market dominant groups, but many of the hospitals that are insourcing anesthesia are treating, and this is what I'm seeing, they're treating the anesthesia staff as a hospital isolate. So they don't have the ability to benchmark anymore because they're treating everything as a silo instead of as more of a market look or a statewide look. They're looking just at a hospital, maybe a surgery center. So I think the need for benchmarking is acute right now. They're flying live in so many ways.

Bob Johnson (33:46):
Wouldn't you agree that the ... I mean, if there's any sort of major trend in response to this increase in subsidization by hospitals, the single trend that we're seeing, of course, is the direct employment of anesthesia providers as opposed to the continued contracting with private groups. So with that development, what do you see as the future now of these big hospital systems that for the very first time, for most of them, they are in a position of having to manage these anesthesia practices. They've lost with the private groups, arguably maybe they've saved some money by doing so, but they've also lost both the knowledge and wisdom of these private practice groups. They've also lost that intuitive leadership that private groups were able to provide now for the first time these groups are on their own or these hospital appointment centers or on their own trying to manage these services for which they really have very little knowledge of or understanding of.

(34:53):
So where and how do you see anesthesia manager playing a role as that trend probably continues to increase?

Jeff McLaren (35:05):
Yeah. I think as hospitals employ in the groups that were formerly contracted, in a way, there's a certain amount, and this may be somewhat of the wrong term, but there's a certain amount of disenfranchisement that's introduced. When you take someone that was incentivized to run their practice efficiently because they knew they had to come in and justify a subsidy, there's a certain amount of diligence that happens from a management perspective and a certain amount of diligence from the hospital. There's a balance that's created. It's not always a fun conversation, certainly, but at least there's a balance and a certain level of hope for transparency in that. When that becomes insourced, that window into efficiency in a way through that mechanism evaporates, because you don't have the manager that had high incentive to maximize their staff, and you don't have the transparency of a clean look at cost as a whole unit, because if it's buried in a P&L, it probably depends on the hospital organization and how clean they can pull that out.

(36:17):
I think it presents a real challenge for hospital organizations who are trying to treat anesthesia just like another service line that they're now employing where they used to contract. Well, they've employed a service line that is highly complex and very, very different. And you can't just hoist that on someone that ran cardiology or ran some other specialty. It's just not the same for everything we've been talking about. It's just so unique and so

Bob Johnson (36:46):
Different. And I can remember in some of our conversations where we would try to understand how these hospitals are going to manage anesthesia going forward. You asked me this question, you said, Bob, what is good anesthesia? And since that question- It's the key question, isn't it? It's the key question. What is it? Let's put the clinical aside, being able to deliver safe anesthesia, that's something different. No, but how to perform as a service to be responsive, to have the throughput of versus you can't spend forever anesthesia. You got to get people in and out. So what is good anesthesia then? I mean, doesn't that still remain the question we need to answer?

Jeff McLaren (37:35):
I think it does. And I think in the end, it does come down to the economics of providing that quality care. And what we're seeing now is just the extreme pressure from an economics perspective on a service line that is critical for all surgery that used to be affordable in certain patterns of staffing that no longer is affordable with those older patterns. So the problems, as we talked about, have existed for decades, but they were just more affordable because they were so darn complex to solve. Well, now those complex problems have to be solved because it's not affordable anymore.

Bob Johnson (38:13):
And so I think what we in MedAction and our development of anesthesia manager have really understood and now I think are able to go forward with is ... Let me put it this way, as a consultant in my years of consulting, I went into large, small hospitals and always trying to answer from a business point of view, what could be done better, more efficiently, better P&L, whatever, more productivity. But what I would end up with almost always was a stack of spreadsheets for which only a complete anesthesia nerd would have any interest in and trying to present that in a- I

Jeff McLaren (38:55):
Would never say that about you.

Bob Johnson (38:58):
And it could present that in a concise, meaningful way to hospital leaders, especially who didn't have the time to spare it through all this data. And even to the point where I couldn't even ... The ability to put these concepts together to understand the various dimensions of anesthesia, NORA versus Main OR, primetime versus nonprofit, these different dimensions really are complex. And with a stack of spreadsheets in front of you, and even a powerful Excel system, it was very difficult to pull those things out, much less explain them to anybody. What is it about anesthesia manager that you believe that we have, at least if not identified, that we've partially solved and one day will completely provide a better answer for hospitals?

Jeff McLaren (39:47):
I think to me, you probably have a more coherent answer than I do, but I think it's understanding the stack of factors. It's when cases have scheduled, where they're scheduled. It's patient acuity, it's the type of surgical case. It's the dynamics around anesthesia provider staffing, the commitments you need to make, the shifts you need to organize, and the cost of that. And then there's the commitments that the hospitals made to surgeons for certain blocks of available time to do cases, which they may or may not fill, which you talked earlier about the best they're going to do is 60% efficient, which means you're not going to be funding or you're not going to be reimbursed for 40% of the time. That is very, very expensive now. And so it's understanding all of those stacks and how they relate to each other and the different elements in each of those stacks, it's not always a one for one.

(40:53):
It depends on the context of each element in the stack. So it's all of that in context that I think gives the power to what we've made.

Bob Johnson (41:03):
Yeah. And I would say when you look at the delivery of anesthesia services, I always see three different levels. There's that immediate leader, maybe the anesthesia chief, maybe anesthesia manager that's on the front lines and their ability to say, how should I staff tomorrow? How should I staff next week? And then because we understand there's a lot of variability there, but there is reproducible variability there. And that's what I think anesthesia manager has been able to pull out and-

Jeff McLaren (41:38):
There are patterns. There are patterns to it all.

Bob Johnson (41:40):
But those patterns are only understood almost visually, especially for people who don't have the time or the interest or ability to spend a lot of time understanding all these different data points. You got to see it and being able to see it makes all the difference.

Jeff McLaren (41:57):
I think that's right, Bob. And with this new generation of anesthesia managers and OR managers that are coming into the specialty because the models are changing, I think what anesthesia manager, what we're doing does is it raises the floor for those new people coming into the industry that are responsible for the service line, that don't have that intuitive sense. I mean, it is really complicated stuff to understand how to mix all those stack of factors to make staffing efficient. And then you add in the emotionality of the commitments and the expectations of people on top of that and the ability to have a certain level of EQ. But even EQ amongst the best anesthesia managers and OR managers is tempered by a certain amount of facts that they can talk to to make that potentially emotional situation with a surgeon that might have an expectation that's not being met managed more effectively.

(42:59):
So

Bob Johnson (42:59):
There you go.

Jeff McLaren (43:00):
It's raising the floor so that as new people come into the industry and as organizations are now responsible for the anesthesia service line, they can apply people more effectively that don't have 30 years of experience in anesthesia.

Bob Johnson (43:14):
Exactly the problem. I mean, we were always able to say, "If you show me a well-run anesthesia group, I'll show you a really good leader. I'll show you a chief of anesthesia, a manager who was really good." And when you looked closer at those individuals, it was almost an intuitive ability to manage. That's right. They may not even have been able to tell you exactly what it was they were able, what factors led them to say to do X, Y, or Z. They did it intuitively, years and years of being in that frontline, knowing how things are going to evolve, maybe not even being able to express it well. They were able to manage it well. You remove them as often been the case now with larger systems, larger groups. So then who does have that ability, right? Well, guess what? That's where having a understanding that and visualizing it is going to be just absolutely key if you're going to manage anesthesia well going forward.

Jeff McLaren (44:11):
And it's interesting. So as the models have changed, and I spoke earlier about groups that when I would go around and I would feel that they had high cohesion between the board of the group and the local site chiefs and the leadership team at each site, that excellence in the group also drove excellence in OR management because the expectation was higher. The bar was higher. And when you have one or those two elements that drops a bit because of maybe they've retired or there's been some disenfranchisement of people that used to manage stuff, the bar just drops. And when that bar drops, it just becomes more expensive. Absolutely. You're just less efficient.

Bob Johnson (45:01):
Well, even take the statement about well-run practice as a leader. Also, a well-run operating room, the management of operating room, when they're really done well, highly efficient, highly productive, guess what? You're probably going to find that anesthesia is a partner in that governance and management, or is in fact actually the director of OR services. Because anesthesia has two things about it now. They have the knowledge and ability, but they also are able to speak to surgeons on a peer level, very critical in running an operating room. It's being able to speak to a surgeon as a equal as opposed to, "Well, doctor, we're going to have to move your case till tomorrow and suffer the consequences for that bad news."

Jeff McLaren (45:52):
Well, when it's healthy, the surgeon group knows that anesthesia's got their back. And if they really raise an issue, it's because it matters and they need to pay attention because there really is, it's an overlay of liability and objective is to do this efficiently and safely. I was always struck when I'd go into hospitals and I would see ... It was almost not as someone ... I'm someone who never managed an anesthesia practice, but I saw a lot of anesthesia practices and operation. I could almost tell walking into a hospital when it was run better than another one, it just felt different. There was a way of communication at the board, there was a way of that the OR director would interplay with anesthesia that just felt healthy. I'm sure you've seen this dozens of times when you can just tell the difference right away.

Bob Johnson (46:52):
Those individuals usually involved in that management of the operating room, we call them board runners, right?

Jeff McLaren (46:58):
Yeah.

Bob Johnson (46:58):
And you find a good board runner, you find a symphony director. This ability to understand that these operating rooms, there's multiple things happening all concurrently and to be able to both understand and to visualize to themselves what's happening and to predict what's going to happen next, that's the key. And what I believe we're doing with anesthesia manager, we're giving that ability to people now that they don't have to spend 30 years in the operating room trying to figure this out.

Jeff McLaren (47:31):
We guide them to what good anesthesia is. And that is good anesthesia at multiple operational levels. It's a rise in expectation, isn't it? Buttress by data and buttressed by trends and metrics and best practices that we've woven into the product.

Bob Johnson (47:51):
Jeff, sometimes I hear when from hospital leaders, when we discuss anesthesia manager, they'll say, "Well, this is great, but it's information only." You're telling me what's happening, but you're not telling me how to deal with it. What is anesthesia manager going to provide that will actually help me manage my anesthesia practice, not just show me what could be done.

Jeff McLaren (48:16):
And so to me, that kind of response, which is natural, it makes sense. That would be like saying someone right out of medical school or out of an early set of training is qualified to do a cardiac anesthetic. Having raw precursors is not the same as having the injection of experience and context that happen as you evolve as a professional. You get a certain amount of experience, your prior training that is put in context, you start to leverage that up. And I think that that's what we're doing. The data is a precursor, certainly none of this is going to happen if there's not the data that can fuel it. It's almost as if you've got gasoline over here and an engine without lubricant in it. I don't know what the right analogy necessarily is here, but data without the right mechanism to put it in use, and it's the injection of experience and accepted norms and benchmarking and thresholds that give the power to it all.

(49:42):
The data certainly is a precursor, but data's been around in the hospital settings for decades and not applied correctly.

Bob Johnson (49:55):
What new features or anesthesia manager do you see that don't even exist in the industry today? Specifically the ability to understand and predict the number of shifts and types of shifts you're going to have. I think that's important. What's in the future for anesthesia manager?

Jeff McLaren (50:14):
I think that's an important advance, and you just indicated it, what makes of shifts, what makes of eight hour, 10 hour, 12 hour shifts are appropriate given the demand that happens on a given week and given the beta, right? What's the variability of demand either on a daily basis looking at a certain day of the week or looking across the days of a week? How is that appropriately balanced and what are the opportunities to bend the cost curve relative to that staffing projection and prediction? It's one thing, of course, the first run we're making at the improvement exercise is reducing the coverage requirement to get a certain amount of cases done, but we're also highlighting certain movements in the schedule that can make a large difference without rewriting the whole schedule.

Bob Johnson (51:15):
There you go. Yeah.

Jeff McLaren (51:17):
You don't have to rewrite the whole schedule. That's not what you have to do to make a large initial difference. And I think also unifying NORA with the OR, now there's such separate domains in terms of scheduling, in terms of how anesthesia is even asked to service NORA versus the OR. So it's very different in a lot of hospitals.

Bob Johnson (51:35):
Yeah, and you know,

Jeff McLaren (51:36):
Record keeping, everything.

Bob Johnson (51:37):
Everything. What we understand today about non-OR anesthesia or NORA is that of all the things that have ... Of all the issues arising in anesthesia, that's the single one that is probably driving a lot of this cost phenomena upwards. NORA, by definition, is by definition inefficient anesthesia. Anesthesia in a main operating room, we have this ability of maybe a single physician managing three or four CRNAs or AAs or supervising them in several rooms. They're usually the rooms next to each other. It's easily visible. A single physician can walk between rooms and do that on a pretty effective and efficient way. When you go outside of the operating room though, once you have locations like the cath lab, the EP lab, ECT, all these locations that may even be floors away, if not even a building away from where the main OR is and your largest supply, if you will, of providers is now you've got people way out there that ... And how now do you provide a physician managing CRNAs?

(52:56):
Do you have a CRNA and a physician and a single endo case, right? That's prohibitively expensive. How do you manage that? How do you even know how that level of that problem provides you with

Jeff McLaren (53:10):
NORA?That's right. I mean, in those rooms, what's even worse is those rooms are less well-equipped than OR and you've got sicker patients in those rooms than the hospital population at large too. That's what the data's showing. The data's showing that the NORA environments don't have healthier patients, you have sicker patients.

Bob Johnson (53:29):
Exactly.

Jeff McLaren (53:29):
And once more, the after hours, NORA, which is a smaller component, they're sicker yet on average.

Bob Johnson (53:38):
And one of the things we're finding from studying this data is also the anesthesia activity beyond the prime hours, beyond that 3:00 PM or 5:00 PM cutoff, right? Those seem to be probably the least efficient. And you look at that staffing, how do hospitals or groups staff those hours, usually just by tradition or by what surgeon complained about not having the ability to start a case within 15 minutes? Well, we'll add another provider. The main OR is often governed by some pretty strict rules on block time, but non-prime time anesthesia nor anesthesia, there's almost no rules there. I mean, it's like you provide whatever that you're not ... So as an anesthesia manager, you're not going to get yelled at. So what are you going to do? You're going to overstaff. And that's what we're finding. I think as we go forward with anesthesia management, that's one of the big differences I think we're going to make is how do you manage neuro, how do you manage non-primetime anesthesia?

Jeff McLaren (54:43):
That's right. And to break those prior traditions of, well, we've always done it this way, when you have less experienced people that are now put in positions of responsibility to manage that, they need data and processes and metrics and experience brought to bear to manage that potentially emotional situation in negotiation that happens with that proceduralist or that surgeon. Right. Well, Bob, I think we've been doing this for about an hour here today. This has been awesome. As always, it's so much fun to have these conversations with you.

Bob Johnson (55:20):
It is indeed.

Jeff McLaren (55:21):
Yeah. Thank you.

Bob Johnson (55:22):
Thank you. All right.

Jeff McLaren (55:23):
Yes. Stay tuned for the next Anesthesia Economics.

Bob Johnson (55:28):
Next edition of Anesthesia by Jeff and Bob.

Jeff McLaren (55:31):
Yes, exactly. Take care. Bye.

Bob Johnson (55:33):
Take care. Thanks.

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