Sheridan buys big group in Northern California

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This has long been a very desirable group for graduates of bay-area programs. I don't know any of the details but one would have to assume that it will not remain an MD-only group and, of course, that other groups will be targeted by Sheridan in the near future.
 
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Why would an AMC be able to practice more efficiently than a private practice group? I understand many groups get subsidies from hospitals and this is where AMCs can make a difference. But if a group is already 3-1/4-1 and is facile with everything the hospital requires, what is the incentive to change to an AMC? Can AMCs negotiate better billing from insurance companies?

My group is contracted by the hospital and given a sum every year while the hospital collects the billing. That way they can negotiate unit increases that we were unable to do ourselves. Isn't this a better model? Or are there inherent dangers that I'm missing? My group is in a small city 25k-75k in the Midwest. I think an AMC would have a hard time finding enough staff (20ish) to push us out if we chose not to sell out to them under pressure -- non-compete clause is 2 years I think.

I wonder if AMCs are growing in large part due to the greed of older partners who simply want a cash bolus before retirement. What is the typical buyout agreement that groups get?
 
chmd said:
Why would an AMC be able to practice more efficiently than a private practice group? I understand many groups get subsidies from hospitals and this is where AMCs can make a difference. But if a group is already 3-1/4-1 and is facile with everything the hospital requires, what is the incentive to change to an AMC? Can AMCs negotiate better billing from insurance companies?

My group is contracted by the hospital and given a sum every year while the hospital collects the billing. That way they can negotiate unit increases that we were unable to do ourselves. Isn't this a better model? Or are there inherent dangers that I'm missing? My group is in a small city 25k-75k in the Midwest. I think an AMC would have a hard time finding enough staff (20ish) to push us out if we chose not to sell out to them under pressure -- non-compete clause is 2 years I think.

I wonder if AMCs are growing in large part due to the greed of older partners who simply want a cash bolus before retirement. What is the typical buyout agreement that groups get?
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AMCs can be used as leverage against current groups in hospital negotiations.

If your group receives a subsidy and if it's a very big subsidy than it can be ripe for take over unless all of you stick together and provide coverage administration needs.

If group receives no subsidy and functions well within hospital. It's near impossible to AMCs to take over. Even AMCs have admitted this.

Yes the larger the AMC the more negotiating power they have with private insurers. But if hospital has bad payer mix than they really can't do much about it.
 
GypsySongman said:
Of course that's why. The older guys sacrifice the younger docs. That's 100% why they sell. No job ever got better after selling to an AMC. The older guys don't care and the younger guys have no choice. Ethics are absent from the equation.
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I guess I wondered if groups were being forced out rather than trying to make a quick buck. How much money would each partner need to receive from an AMC in order to ruin their partners, future so to speak?

If one makes 500k ish yearly, than that sellout amount must be quite high. 2 years salary equivalent? Shares of AMC? I'm curious about the details.
 
The three largest anesthesia groups in the state of Tennessee have sold to AMCs over the past 18 months. These are all very large groups:

1. Nashville/ AMG
2. Chattanooga
3. Knoxville

In the great state of Texas more than 1/2 of all private groups are AMC owned:

1. Houston
2. San Antonio
3. Several in Dallas/Plano
 
GypsySongman said:
Of course that's why. The older guys sacrifice the younger docs. That's 100% why they sell. No job ever got better after selling to an AMC. The older guys don't care and the younger guys have no choice. Ethics are absent from the equation.
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Remember the movie "WallStreet": "Greed is good"

The day of the private practice anesthesia group is almost over. There are some too small or unprofitable for AMCs. The few profitable holdouts will eventually sell as the pressure mounts in the field over the next few years. Those who don't sell may be forced out by a hostile takeover where the AMC offers the hospital CEO a few million dollars to give them the exclusive contract. That's the next phase of AMC takeovers.

I'd rather sell and get a buyout than be told by administration that Sheridan is now my new employer. Anesthesia is a commodity product and one that large AMCs know how to run profitably.
 
STAR and Tejas are the big boys on the block in San Antonio… are they not? Tell me they didn't sell out… cuz they've always have had a strong foot hold on San Antonio.
 
>90% of anesthesiologists will either be hospital employees or employees of an AMC in 5 - 10 years. You heard it here on SDN.
 
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Is this only happening to Anesthesiology? Aren't other practices like FM, IM, and even sub-specialty groups becoming part of major management groups?
 
Can someone explain the economics of selling a group to an AMC or a hospital?

Let's use my old private practice group as an example: 30+ anesthesiologists, 60+ CRNAs, and a billing office. All anesthesiologists are equal partners after 3 years. CRNAs are employees. Exclusive contract with the hospital. Contract is renewed every 2 years.

So let's say an AMC wants to buy the group or the hospital wants the group to become hospital employees. I keep hearing that a one-time buyout is offered to the partners (there are 30+ partners in this case) of around $1-2 million per partner.

My question is: what exactly is the AMC or the hospital "buying"? The group really doesn't have any physical assets. The contract is up for renewal every 2 years, so they are not really buying the contract. Are the assets the physicians and CRNAs?

I just find it improbable that hospitals and AMCs are willing to pay tens of millions of dollars to buy these groups, when they aren't receiving anything tangible in return.

Can anyone explain what's going on here?
 
They're buying future accounts receivable in the form of billed professional fees for anesthesia care. The part I don't get is why some groups (as in this case) volunteer to be bought or, as I understand it in this case, SEEK to sell themselves to become salaried employees (that is, this was not a case of Sheridan going to the hospital first). Moving forward, Sheridan collects the billings and pays the anesthesiologists a salary. The upside for the partners, other than the buyout, is a guaranteed salary, albeit lower than what they were earning before, in an uncertain marketplace. But let's not fool ourselves; if FFS goes away, or reimbursement goes down, it's not like Sheridan won't just lower the salaries even further to maintain profits. Selling out seems like a poor hedge against declining reimbursements unless, as other have said, the buyout is huge and you're near the end of your career.

What kills me is that this was a very busy, very highly paid group. People really hustled, but they were hustling for themselves and for a lot of money. Now, according to the associates I've spoken with, they're still going to be hustling just as much, but for 60% of their previous income, with the rest going to line the pockets of Sheridan.
 
cchoukal said:
What kills me is that this was a very busy, very highly paid group. People really hustled, but they were hustling for themselves and for a lot of money. Now, according to the associates I've spoken with, they're still going to be hustling just as much, but for 60% of their previous income, with the rest going to line the pockets of Sheridan.
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This is the part that makes no sense whatsoever to me. I work in a MD-only group, we run extremely lean, take absolutely no money from the hospital, and we hustle really hard. I just can't imagine any of my partners, or us as a group, wanting an AMC to take us over and pay us significantly less to work just as hard. To be more succinct, I'd say no F-ing way.
 
The future is uncertain. Obama is going to pay you less to work just as hard. Insurance companies will cut reimbursement as well. AMCs offer a guaranteed upfront payment of over $1 million in buyout money then a salary for 5 years. With the way health care looks these days many want to sell out to get that guaranteed upfront cash (usually over $1 million after taxes) before the health care system gets trashed by Obamacare. The smart move for many partners is too sell now while the iron is hot. Otherwise, the group may find themselves as hospital employees for the same salary Sheridan is offering without the buyout money.

Research the facts and you will see most large groups have sold or will likely sell in the next few years.
 
BLADEMDA said:
Otherwise, the group may find themselves as hospital employees for the same salary Sheridan is offering without the buyout money.
.
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Why would any group become a hospital employee without getting the standard buyout that AMCs offer? That doesn't make any sense. You don't just give them the keys to a successful business that has been around for decades without a substantial buyout.
 
DrRobert said:
Why would any group become a hospital employee without getting the standard buyout that AMCs offer? That doesn't make any sense. You don't just give them the keys to a successful business that has been around for decades without a substantial buyout.
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This is my first post in the anesthesiology forum in about 2 years (I had a dustup with dbag1234, and that was that). The EM group with which I worked first out of residency was huge - about 60 docs, and about 20 partners out of that. Covered 3 hospitals and a freestanding ED, all in the same health system. What did the hospital do? Just declined to renew the contract. There was no offer from EmCare or EMP or any of them to buy out the group. The hospital just said, "become hospital employees, or walk. We don't care." Interestingly, the hospital had bought up many practices, including a huge cardiology practice, general surgery, and radiology, but that was 5 years ago. Now, instead of a $30 or $50 million purchase, they got the group for free. And, before you say "work somewhere else", that's not really an option for everyone, because the reasonably located places (that are less than an hour or 100 miles away) can only absorb so much, like maybe 20% of any group at any time (for all opportunities - not just at one hospital).

So, instead of giving them the keys, they just said "we don't care for your business - come work with us, or don't", knowing that a large majority would do just that. And, when your group only covers one health system, has a catchment area of >1 million people, sees over 200K patients per year in the ED, and has been there for 30 years, with 5 or 6 contract renewals in there, you don't think it will ever happen, until it does, and you got nowhere to go. Just remember that business, as a "virtual person", is a sociopath.
 
Apollyon said:
This is my first post in the anesthesiology forum in about 2 years (I had a dustup with dbag1234, and that was that). The EM group with which I worked first out of residency was huge - about 60 docs, and about 20 partners out of that. Covered 3 hospitals and a freestanding ED, all in the same health system. What did the hospital do? Just declined to renew the contract. There was no offer from EmCare or EMP or any of them to buy out the group. The hospital just said, "become hospital employees, or walk. We don't care." Interestingly, the hospital had bought up many practices, including a huge cardiology practice, general surgery, and radiology, but that was 5 years ago. Now, instead of a $30 or $50 million purchase, they got the group for free. And, before you say "work somewhere else", that's not really an option for everyone, because the reasonably located places (that are less than an hour or 100 miles away) can only absorb so much, like maybe 20% of any group at any time (for all opportunities - not just at one hospital).

So, instead of giving them the keys, they just said "we don't care for your business - come work with us, or don't", knowing that a large majority would do just that. And, when your group only covers one health system, has a catchment area of >1 million people, sees over 200K patients per year in the ED, and has been there for 30 years, with 5 or 6 contract renewals in there, you don't think it will ever happen, until it does, and you got nowhere to go. Just remember that business, as a "virtual person", is a sociopath.
Click to expand...


Exactly what I implied in my previous post. All it takes is a "non renewal" by the hospital CEO because he/she wants to employ the doctors directly. Or, an AMC offered the hospital CEO money to get the contract.
 
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