In 1988, there were 11 anesthesiologists providing services to three facilities in the Florida Hospital system in Orlando. A physician could apply for privileges at the hospital, interview with leaders of the independent medical staff, provide services as an individual, and commit to share in the on-call rotation. Each anesthesiologist was an independent contractor, only associated by sharing a common outside billing vendor, and set their own “usual and customary” reimbursement rates with payers. Over time, the hospital system demanded agreements for coverage commitments, and payers increasingly wanted to negotiate with a collection of clinicians for “network” contracts. The physicians recognized the need to form a group and cautiously entered a partnership to serve the hospital system. They nurtured relationships with surgeons and administrators, and they invested in recruiting and training an expanding team of caregivers for more complex services. When their billing vendor shuttered overnight, they invested in creating their own billing company and hired administrative professionals to manage facility contracts, accounting, payer negotiations, risk and quality, and human resources functions. By 2003, the practice and business units were known as the JLR Medical Group (JLR).

As I was leaving residency training at Hopkins, I interviewed with several groups around Florida, which was unfamiliar territory. I was impressed with the infrastructure JLR had built with a substantial financial investment out of the partners’ earnings to provide resiliency and stability. I was offered a partnership track position, and it was a privilege to join JLR as the 30th physician on the roster. Over a three-year partnership track, I also made a corresponding financial investment in the business, with a considerable “sweat equity” buy-in, typical of many private practices at the time.

The founding partners had created a practice governance framework to safeguard against any one person or group asserting perpetual control. Partners participated in regular, externally monitored elections for the board. Any individual serving as president was restricted to two nonconsecutive two-year terms. Due to the firm principles of the leaders over the years, the practice was (and still is) a democratic, egalitarian, partnership-oriented, physician-governed practice that enshrined fairness in compensation plans and distribution of work.

Importantly, the physicians governed all the following domains:

  • Compensation
  • Scheduling
  • Partner promotion
  • Hiring, firing (rare)
  • Facility coverage
  • Clinical quality
  • Staffing arrangements
  • Models of care coverage – care team ratios or physician-only cases
  • All decisions impacting clinical care in any way.

Only physicians had voting rights on the board, which had jurisdiction over those key areas. And this remains true today.

Over the next 10 years, the physicians continued to invest in JLR, growing to nearly 80 anesthesiologists and 130 CRNAs. Anesthesia services became ever more complex with the addition of neonatal care, ECMO, LVADs, and liver, cardiac, lung, and even pediatric transplant programs. We invested in more experienced professionals for business support. We supported our profession through collective contributions to ASA and the Florida Society of Anesthesiologists (FSA), and we shared the cost of getting partners out of the OR for state and federal advocacy. The physicians supported their partners’ time serving in FSA leadership, including several presidents. JLR was also trailblazing with respect to clinical quality, as one of the first participants in the Anesthesia Quality Institute’s National Anesthesia Clinical Outcomes Registry and one of the first to institute universal patient satisfaction measurements.

Around 2013, our practice watched cautiously as our hospital, and others, acquired physician groups – cardiology, urology, radiology, and hospitalists. Some of those transactions were a gambit to seek refuge in the hospital’s business infrastructure, amid a constellation of challenges. Others were private contracts abruptly pressured into hospital employment. Groups around the country were undergoing structural changes, recognizing the substantial capital needed to manage the information technology burden of electronic medical record mandates and quality metric reporting. Hospital anesthesia contracts were increasingly being put up for competitive bids to meet a growing demand for comprehensive clinical services. Many were wondering if practices could continue to thrive simply focusing on service, quality, and relationships.

We wanted to remain masters of our own destiny. Just as the original 11-physician group had recognized the requisite need for scale to remain viable, we recognized the need to explore practice model changes as we scoped the paths forward. The group retained advisory professionals and performed due diligence on the options, including a “sale” to the hospital, a transaction with one of the large anesthesia companies, remaining status quo, and seeking investor backing or debt-backed access to capital.

Contemporaneously, the Greater Houston Anesthesiology (GHA) group had undergone a similar analysis and chose a partnership with a private equity firm as a capital and resource partner to invest in its growth, thus founding U.S. Anesthesia Partners (USAP). Our partners were introduced to each other and valued the same guiding principles: to build a larger organization to provide resiliency and stability while maintaining physician governance and control. The GHA leadership had set out extensive terms to protect physician governance rights, while also incorporating capital partners. It was no easy task to convince an investor to not have control of the material components of a business where they are invested. And it was also no easy task for physician owners to admit outsiders into the businesses they built from the ground. Weeks and months were spent meticulously constructing covenants over three key areas: governance, economics, and equity. The founding practices memorialized this consensus in extensive legal agreements to preserve our model in perpetuity. Our anesthesia practices were all at the top of the profession, innovating on clinical quality initiatives, serving the complex needs of quaternary health care systems, strongly involved in our professional societies, and managing very sophisticated businesses. As JLR came together with GHA in Houston, and also Pinnacle Anesthesia in Dallas, each practice continued to run its own shop, as we affiliated to form a more sustainable partnership and collaborate across the newly formed management services organization on broader business initiatives.

Together, we all made considerable financial investments in our company. USAP hired seasoned C-suite leaders from large health care systems to support our practices’ facility relations, negotiations, and contracts. We hired senior executives from some of the largest health insurance companies to lead teams for complicated payer contract management. We invested in a chief quality officer to build a vast clinical quality infrastructure to measure, report, improve, and prove our quality outcomes and processes, including a clinical quality data warehouse with millions of encounters measured. We consolidated revenue cycle management operations (harmonizing functions of the three different billing companies that our legacy founding practices had built), improving on collections, reporting, and accountability with performance surpassing reported best-in-class metrics. We constructed a national recruiting and education program to support our practices amid industry-wide staffing challenges. We invested in a robust arbitration infrastructure to handle the state and federal Independent Dispute Resolution (IDR) processes to challenge, when necessary, payer exploitations of the No Surprises Act, and their contract terminations that might push our individual practices out of network. This wasn’t easy, nor was it inexpensive. The capital needed to make these investments was orders of magnitude greater than when my practice scaled infrastructure over the previous two decades in Orlando.

As the son of a Wall Street banker, and having been through business school, I am not naïve to the methods and reputations of some investment firms. I can only say that the common perception has not been my experience. We have had a great relationship with our investor partners, who have provided resources and support to our company through the years, through accomplished and uniquely qualified colleagues. Our private equity partners’ network allows us to interface with advisors such as the former CEO of the Yale School of Medicine; a former CEO of one of the largest health systems in the U.S. and past chair of the American Hospital Association; and a former administrator of the Centers for Medicare & Medicaid Services. Defying the media stereotype, they do not run the company, they are not on the management committees, and they have no say in the clinical operations. Our three current financial partners have funds, each with a minority share stake of the overall equity. They invested alongside the physician partners who are the largest cohort of equity owners, and we have had a mutually trusting relationship spanning over 10 years. If the company and physician owners benefit from equity value appreciation or dividends, then our investors do as well. In my opinion, the winning strategy was to conscientiously structure financial ownership to preserve aligned interests.

We have all endured exceptional challenges. The Change Healthcare disruption and the pandemic each impacted cash flow by many millions of dollars. In both cases, access to financial resources, liquidity, and the infrastructure we built provided for stability and resilience. But no one promised that this was going to be unshakeable. Many groups around the country – small, large, even part of national practices – have been displaced or unwound. Some have even had to recast themselves as associations of locum or independently contracting physicians, resembling my group circa 1988. Some of the USAP partner practices have also encountered considerable difficulties – payer pressures, recruiting challenges, the heavy tax of hospitals indulging OR inefficiencies – and many of the same challenges faced by peers in their regions. But each USAP practice, and its physician governance board, owns the responsibility of managing their business with jurisdiction over their own profit and loss.

As we all navigate complex choices in a challenging environment, I am here neither to defend nor disparage any practice model, nor question the motivations of fellow anesthesiologists. As ASA Immediate Past President Michael W. Champeau, MD, FASA, reflected in his recent Monitor article titled “Fragmentation: Our Greatest Threat,” the heterogeneity of practice or practice ownership models is leading to increasing fragmentation of both our specialty and our society. (ASA Monitor 2024; 88:8-10) While diversity of models is good, there remain issues that require professional unity.

At the top of this story, I mentioned that I had interviewed at several groups in Florida when I came out of residency. Over the years, all those other practices became employed, sometimes with significant turbulence. I do not believe that the same physician governance and control as I have held survived in those arrangements… let alone ownership interest nor the “sweat equity” paid-in-capital in the partnerships.

Today, my local practice continues to grow. It has developed educational initiatives and trains students from several CRNA schools, and it will soon support students from a brand-new CAA training program. Supported by expertise and resources from our broader partnership, it is again investing to build newer capabilities – the first anesthesiology residency in one of the largest metropolitan areas in the state. At present, half of our practice’s governance board is led by physicians who were not here when we joined USAP. They have been made partners and promoted to leadership. These physicians did not buy into shares of the JLR Medical Group of Orlando, but like me, they became equity shareholders of a much more diversified set of practices. We have retained our physician-owned culture and remained investors in this company, building a more resilient organization to survive on the health care chessboard. In my career, I have more years in the rear-view mirror than looking out the front of the windshield. I see my colleagues across all of USAP as my partners, and with the benefit of hindsight, I would personally vote to do it again.