Why Non-Competes Exist (And When They Should Die)

Joe: [00:00:00] It's kinda like Satan, right, is the most hated person, and then just above them is the insurance companies in this country

Welcome back to About the Rest. We're gonna aspire to be the number one anesthesia podcast in the known world. This is a podcast about leadership, business, and performance. With me on the show, some regulars, Randy Moore and Gerry Keeling. Randy is the Executive Vice President and National Chief CRNA at North Star Anesthesia.

Randy, thanks for being on. Gerry is the Vice President of Anesthesia Services at Coronis Revenue Cycle Management. Gerry, thank you for being on. 

Gary: Thanks for having me. 

Randy: Before we get started, Joe, maybe there's some, uh, congratulations is in order for you. Oh. So, uh- Oh, thank you ... we're recording this in late May and just learned that Joe was elected to be the, uh, incoming treasurer of the AANA, so he's coming back to the board of directors, so congratulations, Joe.

Joe: Well, congrats, Joe. Thank you. Thank you, sir. Yeah, should be fun. Should [00:01:00] be fun. Hopefully, we can do some, some good things there, and it's a lot of diverse voices, educators and practice leaders, and, uh, I benefit greatly, I think, and I really mean this. I benefit greatly from interacting with people like you all, where you guys have a different view.

Randy, you have as... an especially unique view, but Gerry, as a business person, really understands this whole thing. These are the conversations we need to have as a community and bring some of that value into that boardroom and hopefully, you know, make things more valuable for everybody who's involved. So yes, thank you for the very kind word.

All right, so the docket for today. We got a number, number of things. We're gonna review this reimbursement bill from Arizona, this non-compete, uh, and then we're gonna close out with some comments worth commenting on and ruminations. All right, so last April, uh, the Arizona Association of CRNAs, they tried to pass a bill stopping United, stopping Cigna from paying 15% less on QZ cases.

And for those in the [00:02:00] audience, QZ is primarily associated with non-medically directed or more autonomous services generally speaking. I testified here. 

Video Clip: Madam Chair, members of the committee, I am here representing Arizona Association of Health Cover- uh, for Affordable Health Coverage. SB 1372 may look familiar to you.

Uh, it mandates equal reimbursement rates between certified registered nurse anesthetists and physicians across multiple insurance lines Mandating reimbursement parity obviously increases costs and eliminates market-based contracting. This bill requires insurers to reimburse CRNAs at the same rate as physicians, and they say this is a fair rate Effectively setting prices in statute rather than allowing a market-based negotiation does not expand access or scope of care.

It mandates payment levels. More [00:03:00] than anything, if this is no different than what if, if nurses do no, no different than what docs are doing today, then let's ask CRNAs, since we appear to be dictating contracts, to pay certain things like malpractice insurance, for instance. Or if we're going to pay them the same, maybe we should regulate them the same.

Let's put them before the medical boards. Let's, let's do that. So government price setting not, is not access policy, and it increases costs. 

Joe: He went on to, uh, effectively restate his positions just for the sake of time. So I wanna summarize for the audience basically that... So, so you know, that was a lobbyist for an association which represents a number of healthcare plans in the state of Arizona, and he effectively made three points.

So first one was mandating reimbursement parity increases costs. The second one was that these bills that are going on through the Na- the United States right now [00:04:00] is, quote, setting prices. Third, he said, if we're gonna do all this, we should regulate them like doctors and put them before the medical boards, uh, which is a whole subject unto itself.

So again, mandating parity increases costs and setting prices. Gerry, you're the, you're the reimbursement guru. 

Gary: Well, I, I don't wanna get mad when we have this discussion, but, uh, I just gave a speech about this at the ANA Leadership Conference. This is a pure money grab from the insurance companies. The patients are being s- still put to sleep.

The patients are being, uh, treated for their surgery, and they just are arbitrarily pulling back 15%. And all they're really doing is transferring the savings on the insurance side, they're transferring it to the facilities, right? Because currently in this nation, it's virtually impossible to run a hospital or an ASC without some sort of subsidy, because as the [00:05:00] population ages, you're gonna have more s- Medicare age patients being treated, and revenues are gonna go down, which requires a subsidy.

This is just a, a backdoor money grab to grab back 15% of the reimbursements with CRNAs doing the cases. 

Joe: Randy, does, uh, mandatory reimbursement parity increase costs? 

Randy: Well, his whole set of comments were, were pretty underwhelming, period. But I mean- 

Joe: I 

Randy: agree ... there are elements of his argument that I would say like, "Okay, that's, that's the way I would run at it too if I, if I were them," in terms of the government intervening and regulating on what's happening in, in a, you know, from a commercial perspective on contracts.

I don't agree with this position, but I-- that's exactly what I would say if, if I were him. And then there are other elements of his arguments where, which was just kind of complete nonsense. So this idea that, uh, nurse anesthetists are not regulated, um, I feel pretty regulated as a nurse anesthetist from my state licensure all the way through to credentialing at a facility.

I, I honestly feel [00:06:00] like I'm over-regulated in, in, in some, uh, uh, as- aspects of my, uh, clinical practice. So that's obviously nonsense. So as, as we think about what is happening, and, and Gerry's one hundred percent correct, this is a cash grab. There's no other way to say it. We've talked about this in the past.

It's no surprise to anyone who's actually paying attention. When there are issues with reimbursement and cost, at the end of the day, the hospital's the financial backstop. And so, uh, what this is, is this is additional-- this is an additional cash grab for sure, but it's, it's gonna come out of the hospitals and health systems that are actually least prepared to deal with this.

So if you look at QZ billing, which is not necessarily just a rural or, or underserved area phenomenon, we are increasingly seeing and we are cr- increasingly utilizing QZ billing across kind of the anesthesia ecosystem. But you will see that the, the facilities that use it the most are the ones that are, that are least prepared to deal with the, the, the, the revenue hit that comes with it.

So [00:07:00] you, you add that with what else is going on in rural and underserved healthcare in the United States, and it's just bad policy. It's all it is. It's just bad policy. And they can do all kinds of gymnastics in terms of, you know, this is, you know, the in- the government intervening in, in private commercial matters, which is fine, but, you know, we-- And again, that's what I would say if I were them.

It-- But it doesn't hold water when you actually kind of peel the layer of the onion back. 

Gary: My frustration, this is just as a human being, right? I hate when people play both sides of the fence, right? So they fought to, to make it that groups cannot go out-of-network, right? That was part of the No Surprises Act.

And then as part of that government bill, they set the in-network rate So they're using that to set a rate for all those services, and now it serves them to say, "Well, we don't want the government involved, so we can pay them 15% less." So they're playing both sides of the fence, and it's just, it's just a disingenuous [00:08:00] way to do business, and that's the reason why...

And again, we're g- we're going macro now. Mm-hmm. That's why our society dislikes health insurance companies so much, is every year my premiums grow up- go up, every year I see you're making record-breaking profits, and every year you're making it harder for me to get good care. It is, it's... I, I don't wanna get mad on a podcast and- No, no.

Get, yeah ... you'll see my face turning red, but they just do business poorly. I'll say it that nicely. 

Joe: So I have a anesthesia thought and then a broader thought. The anesthesia thought is, you know, his basic point is in, you know, reimbursement parity increases cost because if I have to pay both of these groups the same amount, and I could pay one less, I'm gonna spend more.

Which is, it's kinda like prima facie logic. That's true on its face, right? But in the context of anesthesia, you know, again, for the people watching on at home, compensation [00:09:00] is here, reimbursement is here The subsidy makes up the difference. You guys both know that. That's the problem with his argument. He doesn't...

A- and look, this is why people who don't know about anesthesia shouldn't be regulating anesthesia, which is a, a, a whole subject unto itself about who should actually be making these rules. So that's part one. But it's funny, Gerry, you said about insurance companies, when I was talking to the, uh, the lobbyists about this, the government affairs professionals, uh, they said, "Well, look, things are generally on our side because it's, it's kinda like Satan, right, is the most hated person, and then just below, just above them is an insur- the insurance companies in this country."

And I guess, you know, you guys are both really smart individuals, so if someone says, "Well, what's the solution?" at a broad level, we'll c- we'll bring it back down to the individuals shortly here, but at a broad level, what is it? Is it getting rid of insurance companies altogether and moving to a cash-based system?

Is it single payer reimbursement and, you [00:10:00] know, you know, g- going in that direction? Like just, again, I'm not gonna hold you guys to it forever and ever amen, but, you know, what, what is the solution? 'Cause you're right. I mean, I'm paying 30% more than I was just a few years ago, and I barely use my insurance ever.

Randy: I think it's important to understand the political context of that question. So this country has, you know, in the past ha- had gotten very, actually very close to single payer healthcare. Uh, there, there were m- there were a few instances, what, after the World War, and then in the '60s where there was, like, s- significant movement in that direction, and it was the American Medical Association that ultimately put the death nail in that.

So that, in my mind, if you look at, you know, having spent quite a bit of time in DC myself and, and, and state legislatures, y- you know, it's like you think about, like, NASCAR and how, like, the drivers and the cars have all of the sponsors all over their, uh, you know, all over the car and all over their gear.

If you go to Congress and you l- and, and you a- ask, and you ask them to put their sponsors, their biggest donors, you're gonna see UnitedHealthcare, Blue Cross [00:11:00] Blue Shield Uh, almost everywhere. And it's, it's bipartisan, right? So, uh, in a very real way, uh, pr- you know, the private commercial healthcare industry owns most of Congress, uh, and it ha- has significant political sway, so 

Joe: And they're managing a lot of the government products th- through Medicare Advantage as well.

Absolutely. Right? Absolutely 

Randy: right. That's kind of the nature of the beast, which is if we were to build this thing together, you know, we were gonna greenfield what healthcare would look like in the United States, it would look very different than what it is now. And I think we're kind of in this entrenched status quo where kind of big provocative moves, which the last and biggest was the Obamacare, that's not on the table.

So just based on because of the political climate, uh, in Washington, DC, and the amount of leverage that, uh, these folks have. So now it's more smaller, incremental change over time, and I-- if we are not able to have kind of a transformational systemic change in the way that healthcare is [00:12:00] financed in this country, then we're going to be, you know, we're gonna have to approach it a slightly different way.

And if that is, or I think a, a, a materially different way, and I think that is more around competition And so introducing competition, removing anything in healthcare that artificially constrains competition, uh, is typically, you know, again, maybe I'm a hammer looking at nails there in terms of my overall a- approach on these kinds of things, is probably where, you know, we're going to see the biggest amount of progress.

So competition around price, competition around access- Mm ... competition around quality of care. The more that we can inculcate that into healthcare, the probably it's better it's going to be for the consumers, uh, whether that's the patients or the health system or, or, or the clinicians. 

Gary: That is such a complicated issue, right?

And it started after World War II, right? Uh, they started the Medicare cost plus system after World War II. We- All the guys [00:13:00] came back from the war, and there wasn't enough hospitals and facilities in the country, so they granted land grant hospitals where, "Mr. Rodriguez, we're gonna give you some land. You have to build a hospital."

And you're like, "Okay, I'll take the land, but what if I lose money?" They took whatever your costs were that year, and you were allowed to make a small profit, and if you made more profit than you were supposed to make, you had to give it back to the government, right? Guess how many people gave money back to the government.

Joe: I don't know. None? 

Gary: Nobody. So, so they s- they said, "Okay, we have all this extra money. Let's build a wing on the hospital." That's why they all look like Lego hospitals. There's wings going out. So every year, it just evolved. So these systems were created to bring more healthcare to the US, and then they got rid of the Medicare cost plus system.

So at this point, we have... And now what you see is hospitals are going after people like us that have insurance, so they're making beautiful outpatient hospitals and everything else. So the supply of beds [00:14:00] is greater than the demand for beds. So it's all-- it's like a vicious cycle we're in, where the hospitals need a lot of money.

They have to go back to the insurance companies and hit them up for bigger facility fees, and they pass that cost b- right back to us. But I agree with Randy. The only way to move it is to bring in competition, right? And I talked to a broker friend of mine, he was my old boss, like, 20 years ago, and, uh, very smart guy.

His plan, they go to Uh, employers, and your employer says, "I'm gonna pay the first half a million dollars of claims." And it's typically in the health system there in town, they negotiate a deal with them. Mm-hmm. And then they buy backstop insurance from Blue Cross or UnitedHealthcare, right? So it only kicks in after they've hit that number, which the insurance companies hate this because they want all the, they want all the premiums.

They don't want them once you hit a certain level. But [00:15:00] s- more competition, more creative ways to, um, have better control of your healthcare spending. It's a very complicated one. I don't know how you turn this around. There's so much, there's so much infrastructure out there that's built. You know, once a building exists, there's no congressman in America that wants the hospital in his town to go out of business.

Right. That, that, that doesn't get you reelected. Right. Right? 

Joe: Of course. That's interesting, man. I, uh, we're gonna-- I know out in the, the social media world, there's a lot of people, you know, saying, "Hey, we should just move to a single-payer system," or something like that. I think, you know, it's an interesting idea when you're regulating a really small area like, you know, Scandinavia or something like that.

Hard to implement across, you know, a giant system like ours. I don't know enough, and I'm, I'm comfortable saying that I don't know enough to have a strong opinion on, on the broader issue. Let's circle this back to, you know, individuals, right? Practices. Practices like mine who use QZ almost predominantly or almost exclusively.[00:16:00] 

Ultimately, we receive less reimbursement. I'm gonna put a slide up on the screen. So we did an analysis here in Arizona. Here in Arizona, something like three hundred thousand cases a year billed through QZ. And we did the analysis to effectively say, look, if you cut this fifteen percent from our reimbursement from the commercial payers, and we're all, you know, in this scenario, all on revenue guarantee contracts, the hospital's backfilling, and that shifts eleven point five million dollars in the Arizona economy back to the hospitals.

Of that portion, about seven million dollars was straight from the taxpayer because ultimately taxpayers fund hospitals, hospitals fund the anesthesia group, b- and ultimately that's eleven and a half million dollars going to the health insurance companies, right? So for practices like ours, we're adjusting.

But I mean, you know, l- look, I mean, eighty-five percent of dollars, ninety percent of dollars go out to clinicians. That doesn't leave a lot for an operating margin. I'm not even calling it profit, just an operating [00:17:00] margin to call it financially viable. So we're having the conversations and letting the hospitals know like, "Hey, there's, there's changes coming down.

We're gonna see slight decreases." Arizona has largely stabilized from a market point of view. Uh, so thankfully, um, you know, that is not a such a big stressor. What are you guys seeing? What, what are practices doing out there when they're facing these cuts? 

Gary: Basically, it, like you said, it rolls right, right back to the hospital, right?

So they're, they're getting hit with this fifteen percent reduction for QZ. Um, they can go medically directed, but that's not a saving to the group at all, right? No. No, that is- 

Joe: Because- Expense goes through the roof, right? 

Gary: Right. So there's really no way around it. You literally have to sit down with the hospital and explain, hey, the, the sub C's gonna go up with these fifteen percent cuts.

And right now, the only major payer... And Blue Cross is kind of odd 'cause it's It's like a congregation of states. They're all Blue Cross, but they all run independently, and some of them are, are charging the 15% [00:18:00] reduction, some of them aren't. But the only pure big four company that isn't going with the QZ reduction is Aetna.

But you would think as time goes on, that's gonna change there as well. So the, the only... At, at this point in time, the only way to make up the difference is going to the hospitals and having them pay more. And look, again, I'm going macro again, is 40% of the hospitals last year were losing money, and I believe the insurance companies had record years of profits.

So how can Health insurance companies have record profits and the underlying support- Of course ... 'cause you don't need insurance companies if you don't have healthcare. The, the people actually delivering the care, the facilities are losing money, and the vendor, in essence, they're a vendor, is making record profits.

Yeah, it's wild. There's something broken, and I'm not, I'm not a government regulation guy, but I don't know how to tilt that to fairness. I, I, I don't know. It's a [00:19:00] very, very tough one. 

Joe: Randy, how are you guys adjusting to the practice level? What are you, what are you advising other practices to do with this stuff?

Randy: Yeah, I mean, I mean, the, the practical implications in terms of the way that we are working through this is there are contracts that we have, contracts that obviously, Joey, that you have, that are QZ will always be QZ. And so if there is a, you know, a reimbursement hit because they've made a decision... the commercials have made a decision to decrease CRNA reimbursement through QZ, then the backstop, as we've talked about, is gonna be the hospital or the ASC.

They're gonna pay for it. If they don't pay for it, then you're gonna leave. Uh, ultimately, right? The, the, the math stops mathing. Then there is a kind of around the edges and which is there are facilities that actually could be QZ or could be medically directed. And so there's that segment of facilities that we, you know, that we have, and I think the others have, where the math around the edges actually is deterministic of whether or not we will do a QZ model there, or we'll do a medical directed model, or we will advocate [00:20:00] for changing a medically directed model to a QZ model, or advocate to the client changing a QZ model to the medical- to a medically directed model.

In most of those scenarios, the status quo usually wins, uh, because the change management of it can be complex, and the dollar bills or the dollars don't make a huge difference. But it's around these edges where we'll have a, let's say, an RFP comes in, and the facility will initiate a conversation with us, or maybe we'll initiate that conversation with the facilities like this really it, it, it looks like this could be QZ model, and it could be a QZ model with the anesthesiologist, or it could be a QZ model without.

And let's talk about the different permutations and, and the cost associated with that. What we're seeing is, you know, the facilities get really excited about QZ be- until we start to actually show them the math. And the math becomes harder if there are-- if there is th- when this QZ, you know, reimbursement delta comes into play.

So it does have practical [00:21:00] implications. The other thing to call out and, i-is that North Star or any other really large platform's ability to negotiate on this is different than most other groups, and whether it's the hospital that's employing the CRNAs and anesthesiologist or whether it's a smaller, uh, mom and pop shop or even regional group.

So There's a disparity that is not theoretical in terms of how much leverage I have- Sure ... or we have- Sure ... in a conversation versus a smaller organization. And if we have, you know, if we have significant market presence in a state and a commercial wants to do this, well, we're gonna have hard conversations with them, and we're gonna have some- Sure

leverage at the table. But if you look at this from a group like this is their only contract, uh, uh, and they have a, you know, relatively small market presence, then their leverage is compromised. And I, I don't think that's fair. I don't think it's right, but that is, you know, the nature of the beast here- It's what it is

when it comes to these th- these, these reimbursement issues. 

Joe: I hear [00:22:00] two things. You know, first, if I'm the individual, if I'm an individual CRNA, I think the real takeaway is this QZ stuff just weakens my overall position, right? It's one more cut from my... the ability to provide my services to the, to the full extent of my ability and skills and talent and be compensated fairly.

It's one more cut, right? So that's why it matters to the individual. And I think, you know, to your point about the smaller practices level, gosh, I mean, you're right, that's not fair, but man, when, when Guide was starting and AZAS was a thing, that's when Gerry and I worked together. Um, you know, Blue Cross Blue Shield You guys are gonna know.

Tell me if you, you have heard this in other states. Blue Cross Blue Shield would not pay us. They pay $24 a unit. They wouldn't pay us, they would pay the patient directly. So let's say the fee was 200 bucks. They pay... They'd write the check to the patient with the patient's name on it. The patient would then go cash that check, then three months later we'd be like, "Hey, [00:23:00] can we please get paid?

We, we, we spent the money." And they did this for years to us. We dealt with that probably a- at a high level, like eight years of pain, right? So we basically had no operating margin during that time. And you're right, it's not fair. Uh, but yeah, it's, uh, it's the only system we have, I suppose. 

Gary: The one thing on those lines, you know, I don't wanna be a doom and gloomer, but, uh, recently, the Blue Cross plan in Pennsylvania and contiguous states, you see they're doing a 15% reduction on all models, meaning the CRNAs are getting a reduction of 15%, even medically directed.

So- Wow ... you see what I'm saying? Nick- It's ridiculous ... now wh- where, where is that gonna go? Are we gonna... Is that gonna be the new evolution, or hopefully that can get stopped, because it's... What's, what it's going to do, it's going to force everyone, even hospitals, they're gonna have to create a separate tax ID for anesthesia, and they're gonna have to go to arbitration.

Joe: Well, and [00:24:00] yeah, and that's a mess. 

Gary: It's a mess, right? So it's, it's one of those things. It's, it just something has to give, and hopefully it doesn't turn into a war. 'Cause in essence, going to arbitration, you're just going to war, right? 

Joe: Exactly. 

Gary: And wars are never good for anybody. 

Joe: No, I, I see more government regulation here in the future.

'Cause I, I'm actually g- so you know, I'll, I'll end with this thought. The committee that I was testifying in front of was majority Republican, and they said, "Typically, we don't want the government in our business, but we're talking about market failure here. Like, the market is not working, and you have patients in these urban underserved areas, not just rural areas, but the city of Phoenix, fifth biggest metropolitan area in the country, has a massive impact here, and that's why we're asking you to intervene, not because of any other reason."

So I think the government'll step in.

Speaking of the government, let's go to segment two here. Non-competes. A couple years back, just to set the table here a little bit, FTC, I think this [00:25:00] was, uh, this may have been Lina Khan, created this non-compete rule. Basically said no enforcement at all. That was then stopped by a district court. They had stopped that rule.

Then the FTC appealed. Then the FTC s- steps to dismiss its own appeal in the Fifth Circuit Court of Appeals. So that non-compete rule, again, comprehensive ban on essentially everything, that is not in effect. And then just, uh, last month or so This is from human resources director. Texas court enforces a non-compete after rival employer promises to cover fallout.

Let's just review some of the facts here, and then we'll get your commentary. Anesthesia Associates, a group that's been in this area for decades, right? Uh, lost the contract for one reason or another. These were the four CRNAs involved. Those are the names straight from the public disclosure. Emergent Self, whose chief operating officer we just had on the show last week, Tracy Young, [00:26:00] friend of the show, uh, was here, but we did not talk about this 'cause he's under a, uh, non-disclosure agreement.

So just to review the timeline here. They lost their contract August 1st, right? Post-contract, the CRNAs move and join the new group, and the agreement, as outlined in the legal documents, was effectively that Emergent's Health contractually agrees to cover the legal costs and damages. It d- they said, "Hey, we'll take care of it.

We'll buy you out." Right? It goes to court. Now the latest has been the court is siding with the plaintiff, that is the original anesthesia group, Anesthesia Associates, against those CRNAs. And now this is heading to a full trial on June 8th. So a lot of ways we can take this, but I wanna get your initial thoughts and comments, not just on this case, but maybe restrictive covenants generally.

This won't be the last time this comes up in the service sector. Randy Moore, thoughts, uh, any thoughts from you on this issue? I 

Randy: mean, we spend a lot of time thinking about, in some cases, trying to navigate around the barrier of non-competes, right? So- Yeah. Yeah, 

Gary: us 

Randy: too ... we're a [00:27:00] company that- Too ... yeah, that, that is growing.

We like to grow. Uh, it is, um, uh, it'd be a stretch to say the industry standard, but is the industry norm to say that, you know, most anesthesia clinicians have some form of restrictive covenant within their, their employment contract, whether it's with a hospital, but cer- certainly more typ- you know, you, you see this much more frequently with a, a private group.

And it's not uncommon for us to take contracts for the, from these private groups, and then we have to kind of navigate around these non-competes. Uh, I think the, the Texas case is, is particularly interesting, not just because w- we know all of the players and, um, uh, you know, we have a significant presence in Texas, and we're growing in Texas for a variety of different reasons, um, uh, with some of which inv- involve the FTC, uh, in- intervention with USCP, is that the challenge here is that you, you...

And this is where I go back to my other comment about competition and, and I, you know, kind of, I have a knee-jerk strong predisposition towards Uh, [00:28:00] ensuring that competition is in play so that things get better. Service, cost, quality, uh, get better. I think the, the hypothesis that the, the group that won the contract was that, "Okay, we're, we're gonna protect the clinicians, and we're gonna buy 'em out.

We're gonna do the buyout." What the fed- what, what the court has said, "Well, time out. This is not just a buyout. This is..." You know, they have to... I can't rem- Was it two years? That they, they would have to sit on the penalty bench for two years before they can- Yes. 

Joe: I believe three years and 20 miles was the- 

Randy: Yeah, three year-

the restrictive covenant ... okay, three year- 

Joe: Yeah. 

Randy: That's insane. I don't, I don't know why- It's a lot ... you would sign a three-year, uh, restrictive covenant. But- 

Joe: Because somebody on the internet told him it wasn't enforceable. That's why. I mean, I'm serious. People do that, right? 

Randy: I think the h- you know, the kind of the hypothesis was, "We'll, we'll buy 'em out.

We'll, we'll, we'll buy 'em out," and then that will give them the leeway to be able to, to be employed by this in- this incoming group. That doesn't seem to be... And we'll see how this plays out, but that, that doesn't seem to be the way that the courts in [00:29:00] Texas are, are viewing that. It's, it, it's, that, that restrictive covenant is enforceable for the length of time that was, uh, that was found within their employment agreement And that has significant implications, obviously, not only to the clinicians, but to how folks approach anesthesia transitions in Texas.

Joe: Gerry, thoughts here? Do you have a restrictive covenant you wanna share? 

Gary: Yeah, I have a restrictive covenant, right? 

Joe: Me too. 

Gary: I understand the need for a, a restrictive covenant. I really do, right? Is that, you know, you don't want it to be a free-for-all where people, you know, quit today and they go compete with the same group the next day in the same location.

I, I totally get that. I think, though, there needs to be some, I, I hate to say the court's gonna have to decide, something reasonable, 'cause I've seen it from both sides of the fence, right? I've seen hospitals that wanna change out their anesthesia group, and the cost to get out from underneath these contracts may be $20 or $30 million because they're gonna charge half a million dollars per provider [00:30:00] that was part of the original contract.

Well, you realize, I mean, this is a very scarce resource. Anesthesia is a very scarce resource, and when you don't have those resources, what happens? People die, right? I'm from Pittsburgh, and there was the original big suit on this probably 30 years ago, and the, the judge in Pittsburgh ruled you cannot have a non-compete that goes against public policy, right?

You can't have patients dying or not getting their surgery because of a non-compete. So I think it has to be somewhere in the middle. Twen- three years, 20 miles, that's, that's too big on a very scarce resource, but it has to be reasonable for both sides. You can't have companies basically losing, losing contracts because they won't enforce any non-compete because they've invested a lot of money into those contracts, but it can't be so onerous where the, the hospital goes out of business because they gotta pay $25 million for a buyout to get out from underneath these contracts.

So I think there's gonna [00:31:00] have to be some reasonable middle ground and especially with healthcare 'cause it is so government-subsidized and people die, right? If, if, uh, someone leaves Elon Musk's company, who knows how to shoot rockets, and he goes somewhere else to, to, to shoot rockets, then he has industry knowledge.

He needs to sit out for a while. That all makes sense, right? But when it comes to anesthesia, the, the results are people are going to die, and you gotta come somewhere in the middle to keep it fair for everybody. Does that make sense? I kinda talked around myself- Oh, yeah ... there, but I think you see my point.

Joe: Look, if I'm the solo anesthesiologist, if I'm the solo CRNA, I'm thinking, "I don't want this at all," right? But if I'm also the solo anesthesiologist, solo CRNA, I'm thinking, "If I start a job, I wanna get paid right away Right? I mean, I wanna get paid two weeks after I d- do, do my cases. And, you know, you might...

You, Group, are taking on the financial [00:32:00] risk. You're gonna get paid three to six months. I wanna get paid next week, and that's, that's the exchange of value that's reasonable. I start from that perspective because my next question is, why do restrictive covenants exist at all in Unit- the United States law?

Who, who came up with these? Why are they enforced? So on and so forth. And I think, you know, the best example I can give is, you know, we started a small contract, you know, maybe 10 people, right? And payroll was, I'm just using a rough number, 4 million, right? Um, so rough payroll that month is, like, 350,000 per month.

So we have to shell out somewhere between 800K and 1.2 million in the first three months before really getting paid, right? Especially by insurance companies. So if you're gonna do all that and then somebody could come in month three and be like, "We could do it cheaper," and you lose $1.2 million, that's called a legitimate business interest.

That's why these things exist, right? So that's number one, there's an exchange between the individual and group, and that's how it [00:33:00] should work. That's how market works, exchange of value. Number two, it's the financial risk that you're really mitigating, right? That special knowledge, right? Now, all three of us are probably buttoned up.

Like, I'm buttoned up like Fort Knox, so if I decide to leave, I'm basically done, uh, in Arizona, right? Or in anywhere that Guide operates, and that makes sense 'cause I know how the sausage is made. For the ind- and so I have a non-compete Individuals, however, generally speaking, these non-competes are, I think are unreasonable.

If you shrink them down, becomes much more reasonable, right? But the other aspect is there's different types of restrictive covenants. There's non-compete to there's non-solicits. And non-solicit I think, uh, and some, some of the language on these things can be almost identical. They're-- it's a difference without a distinction.

But I think the point is, if you're an individual and you're going into a group setting and you're getting access to that surgical hospital and all those surgeons and all those referrals that are coming to you, you can't undermine the platform that got you there, or the group or the partners or whomever, [00:34:00] right?

It's like you can't... That's shady. So when I explain it to people, they're like, "Oh, yeah, that makes sense." You know, another-- I've actually seen this occur, which is, "Hey, Dr. Keeling, I make more money at this surgery center down the street. Why don't you bring your cases down there, and I'll cover you directly.

I'll get-- 'cause they pay me more down there." Or Dr. Keeling comes to me and says, "I'm gonna take you out of here 'cause I make more money at..." It's like you're, you-- it's a little shady, right? If you wanna do it in, in our company at least, I don't know how you guys roll, but in our company, we, we don't have non-competes for individual clinicians.

So if you wanna compete right down the street, no problem, but you can't solicit people. You can't steal business. You can't do shady things like that. The last point I'll make on non-competes is there's just so much bad information out on the internet, you know? I mean, do you, do you guys deal with that?

'Cause I do. Owner like, "Well, I saw on the internet this is not, this is not unenforceable." 

Gary: Uh, I mean, I just think it has to be fair. Like in my world, I'm a CPA by trade, but I know nothing about taxes anymore. I haven't practiced in 30 years, [00:35:00] right? Believe it or not, I started my career in healthcare at Blue Cross, so I was on the other side of the fence, and I've been in anesthesia for 29 years.

So I'm like a one-trick pony, right? Like I know one thing, and if I have to sit out three years, I can't work anywhere. Right. But I have a non-solicitation where I can't go pursue any of our clients, which is fair, right? Is, you know, I can go do something. I could go work for an anesthesia group. I could go work for a hospital and, and manage their anesthesia department, but I can still make a living.

So that's a very reasonable compromise. I'm not gonna hurt the company, and I can still make a living. So I think there's a need for these, and I think they gotta bring that logic into these anesthesia provider non-competes as well. Those people still have to make a living. Yeah. That's right. They can't move their whole family across the country just to work, right?

It's just... It needs to be fair on both 

Joe: sides. I'm gonna bring on-- We're gonna, we're gonna bring on like some influencer who says we're all evil people for admitting that these things have a le- [00:36:00] legitimate reason. 

Randy: My hunch is that the, the clinician who's listening to this understandably is kind of thinking about this in terms of how this impacts them and their employment- 

Joe: Of course, yeah

Randy: uh, uh, prospects. So, uh, if, you know, they become unhappy with their current employer, what are their options, uh, relative to the non-compete that they signed? Which is totally understandable I think that it's important to kind of also zoom out a little bit and think about how groups are utilizing non-competes to create stickiness with their contracts.

And Meaning, you know, think about this as switching cost. So if you're, if you're going to switch from anesthesia group A to anesthesia group B, and there are non-completes, non-competes in the contract, that is a, that's, that's a, at best, speed bump, at worst, could be a significant financial implication from a transition.

I'm in Gary's camp, which is, I think there are legitimate business interests that need to be, uh, respected. So [00:37:00] if a group comes in, uh, and we've seen this, and we've experienced this. We've come in, w- uh, the contract is on fire, uh, it's shit culture, uh, it was 75% vacant, vacant, you know- Mm ... people were miserable.

We come in, we turn it around, we put good leaders in there, uh, we get them up to 90% W2 staffed. We've got, you know, great engagement scores- Stability, stability ... the economics look great. Yes. And then, you know, s- the, the hospital says, "Okay, good. This has been optimized. Now it's time to switch to, uh, we wanna insource, or, you know, we want to go- Right

to the lowest bidder." 

Joe: We wanna take all the work that you just did and take the value. 

Randy: For those who are listening and, and saying, "Well, this sounds like very corporate, you know, conversation," it, there are legitimate business interests here that need to be respected. But that doesn't mean that the switching cost in terms of how we deal with the non-compete situation is so exorbitant that the hospital's stuck with a shitty vendor.

That's where I think, you know, that's where... And [00:38:00] we do see this. We see-- We will have conversations, and then as we start to peel the layers of the onion back and talk about this is how, this is what your strategy should be for non-competes, the best thing to do is to buy them out m- more often than not. Uh, and then they start to do the math, and they've got a terrible anesthesia group who's going to, you know, really lean into using these non-competes as a barrier for switching, then that, that I don't agree with.

I think a hospital should be able to switch their vendor, and I think the hospital should pay, or the incoming group, or usually it's a combination of both, should pay what needs to be paid at a reasonable price in order to effectuate that transition. But if it's like, and we've seen this, $30 million t- in order to transition a contract just to pay out the non-competes in a certain situation, then to me, that, that is onerous, it's anti-competitive, and it's not right, 'cause I think the hospital should be able to switch their vendor.

A- 

Gary: and I agree with Randy. It should hurt, right? It shouldn't kill you, right? [00:39:00] So and I'm just throwing out numbers. Let's say it's a 20-person group, and the, the hit is 100,000 per head, right? So the hospital ponies up two million bucks, right? And they move on, and they bring in a new men- vendor. But if it's 500,000 a head, is it really $10 million to get out from a relationship- Right, onerous

with a bad vendor? It should be, it should be painful, but not gonna kill me, right? That's like any decision we make in life, right? If, if You know, I'm, I've been married 28 years, so I don't have any intentions of getting a divorce. But if I get a divorce, should I become a homeless person laying on the side of the street?

No, but- Your wife 

Joe: says 

Gary: yes ... should my, but should- If your wife says yes ... should it be fair that me, m- my wife and I can move on with our lives and enjoy the rest of our lives? I think it's gotta be somewhere in the middle. It, uh, it needs to be reasonable, and I think that's where the courts are gonna have to get involved and say, "It's not reasonable in a city of a million people to put a 50-mile non-compete- Yeah, [00:40:00] it's crazy

'cause they gotta move their whole families." Is it a five-mile non-compete? Maybe. Maybe it's 10 miles, I don't know. But it needs to be somewhere that a reasonable person could say, "Yeah, I signed this, and I can drive 10 miles and get another job," right? I, I don't know how you govern that, but I think it's gonna have to get settled in the courts.

Randy: I was just going to m- maybe put a, a finer point on this, going back to the, the clinician, which is why it's incredibly important for you. Like, when a clinician is signing a contract, there is this honeymoon period. They're excited about, uh, you know, making the move, whether it's their first job or their next job.

It's always important, just like when you're going into an operating room, you have a plan A and a plan B and a plan C for your airway. Uh, for your employment, just 'cause things look good now does not mean they're gonna look good a year or two or three years from now. And know what your exit strategy is.

That's right, things change. And if you're signing a non-compete that is incredible- it's draconian in terms of what, how this is gonna impact your ability to be employed in, in the f- in the community that you live, [00:41:00] then you should think really long and really hard about whether or not you wanna sign that, that non-compete 

Joe: Yeah.

Well said. Well said. I am, uh, waiting till this conversation gets clipped up, downloaded by some, you know, internet influencer that I never heard of and gives an example of all these corporate guys who are, you know, saying that non-competes are good. But no, I think, I think the takes are very reasonable, right?

It's finding the balance. Let's-- We have two more segments here. Let's, let's, uh, keep moving here just for the sake of time. This episode's comment worth commenting on. So you guys know I'm all on social media and whatnot, always ask people to comment. What are your thoughts about the facts that many of these evil private equity groups-- We didn't talk about private equity so much today, but I think that's, uh, you know, maybe they're just one, you know, Satan, insurance companies, and then private equity, something like that.

Randy: You forgot about politicians. 

Joe: Exactly. Exactly. Uh, they're, they're below Satan. What do you think about these evil private equity groups that happen to be very pro-CRNA independence or high-ratio supervision, collaboration, et cetera? All those words get intermingled. Are they also, are anti-aid [00:42:00] legislation moves good or bad for patient care access?

Uh, big argument commonly pitched for CRNAs. 

Gary: Evil private equity groups, that's kind of the, the term of the day, right? But private equity had to get involved into healthcare because you needed capital to improve the whole system. So th-they're, they're not all evil to do that. Uh, the pro-independent CRNA, again, we're down to the reasonableness test, right?

Is, uh, one doc and six ORs reasonable? Yeah. Eight re-

eight ORs reasonable? Yeah, that's reasonable too. But is it one to 50, right? You're gonna have one anesthesiologist and 50 CRNAs You know, the, the, again, we gotta get somewhere in the middle there, right? But it, it's, it, it-- I don't think private equity is in, in essence evil, but they, it was a necessary, um, source of capital to bring our overall health system where it is today.

Does that make sense? 'Cause UnitedHealthcare, I believe, started with private equity, and now everyone detests [00:43:00] UnitedHealthcare. But you needed, you needed that capital to move the industry forward, the whole healthcare industry. So again, back to the reasonableness. As long as everyone's reasonable, it, it's, it's, uh, good for the industry.

Joe: Randy, before we, uh, we-- I mean, this is probably Sound who they're referring to. They kinda have that reputation. I'm just-- I mean, that, that seems to be out there. I don't know 100%. 

Randy: I mean, this is a broad brush. Private equity comes in different permutations, and there are all different kinds of anesthesia companies in terms of scale, uh, strategy, uh, and culture.

And I, I, I would say, you know, the fact that the, the- Mm-hmm ... I don't know if, um, exactly what the, the inference is or the implication is here with, uh, the question, is that if you look at most private equity-supported large anesthesia platforms, they're not particularly pro-CRNA. Uh, I mean, in term-- You know, if you-- I know because we, we go in there and we take contracts from them, uh, because they are unable to recruit and retain [00:44:00] CRNAs 'cause they can't establish the culture and the scope of practice.

So I, I think it, you know, they're-- Without knowing exactly what this person's experience or perspective is, I think that is... It's, it's, to me, the, the, the question doesn't exactly resonate in terms of what I actually see. And I actually see kind of the inverse, which is a lot of these large anesthesia companies don't have CRNAs on their executive team, don't have CRNAs on their senior leadership team, uh, are often struggling with their contract relationships because they're unable to recruit and retain CRNAs because they don't have good culture and good leadership.

So I, I-- that's actually been one of the, my major criticisms of these large private equity-supported groups, uh, because they don't-- they're, they're focusing on growth, which is understandable, but they're not really focusing on their product, which is, uh, providing a great service to their client and, uh, providing a, you know, a great clinical practice for their physicians and CRNAs.

So whether this is targeted towards Sound or not, we could have some fun with that, for [00:45:00] sure. 

Joe: We might have to cut that out. I 

Randy: don't know. That's fine. I didn't say anything negative, did I? Uh, so, uh- 

Joe: No, no, me. Me. Yeah. Uh, what I meant-- I mean, they might not wanna be known... I think they're known as, you know, they, they have a lot of autonomous sites and that I'm guessing- Sure

that, you know, that, that reputation is out there, generally speaking. Look, uh, I'm a CRNA, CRNA. I've done all the things, but I've also seen a lot of CRNA groups or a lot of even anesthesiologist groups who try to push in that area on the scope of practice issue, and they don't do it well. They don't have good leadership.

They don't have good quality management. They don't have good oversight. And I think, you know, when people say, "What model should we use?" my answer is always, "Well, what are the talents? Uh, what, what's the talent?" I have no idea. Like, we should be making models based off competence, right? And rather than just, "Oh, you have a degree, therefore you do this."

No. You earned that degree 30 years ago. Uh, it's almost irrelevant today, right? So, uh, we're gonna, just for the sake of time, we're just gonna leave it right there. And then, uh, last, last thing here, gentlemen, we have a section called Ruminations where you just [00:46:00] share what's on your mind this week. Anything that you think provides value to the listener.

And what I'm gonna share is, uh, you know, we just went through this ANA election, right? And it occurs to me, what I can't figure out exactly how to do is, you know, my election was a plurality election, right? So I won, I won by 11 points. It was f- but I won on- only won 41% of the vote. It's a little screwy to me.

Um, so I am always thinking about how do we capture the upside of leadership which is responsive to the people, its members, its shareholders, whatever, right? You n- you need some sort of accountability there, right? But we can't go into also just mob rule and leaders just say whatever they need to say so that everybody feels good and they're angry, and, "I'm gonna lower your taxes, I'm gonna make gas cheap," right?

Look, there's gotta be a balance there. I'm still figuring out what that is. That's what I've been thinking about this week. Gerry, what, what about you? 

Gary: All these problems we discussed [00:47:00] today and all these issues we talked today, they have one underlying segment to it, is the shortage of providers, right? So how do we get more MDs through residencies?

How do we get more CRNAs into the market? How do we get more AAs in the market? I know AAs, that's a different subject. But if you had enough supply, everything kinda solves itself, right? If I have an anesthesia group and I treat Joe Rodriguez and Randy Moore bad, you leave. You go somewhere else, right? So now I gotta change the culture.

I gotta improve things in order to get you to come with me, right? So what it's becoming now is because of the shortage, people overpay. They just will-- I tell groups, I said, "When a guy sends you his resume from Hawaii and he wants to move to Reading, Pennsylvania," where, where Joe's from He's coming for money.

He wants 800,000. I'm not gonna work any holidays. I don't wanna work any weekends. I'll come from Hawaii. And I tell groups, "Don't even interview those people," right? 'Cause [00:48:00] they're just trying to grab some dollars a- and get out of town. So the problem is the shortage is causing a lot of these problems.

Joe: Things are not in balance. 

Gary: They're not in balance, exactly right. That seems to be more of what we should focus on, is getting a bigger supply into the marketplace. 

Joe: Yeah, and maybe we need the government to control the supply and balance. That way we always reach the right balance. I think that's called communism.

And so now I've now written down Gary Keeling as a proponent... Uh, no, I'm just kidding. Um, from each according to their ability, to each according to their need. Sorry, I'm just kidding. Totally, that was a joke. Uh, Randy, go ahead. You have, you have the last word today, my friend. 

Randy: I spend a lot of time and, uh, I pontificate a lot with my team around this concept of disruption of status quo.

Uh, and so a lot of what gets, um, teams in trouble, uh, and individuals in trouble, and companies in trouble is their inability to either self-disrupt or understand how the environment has changed. If North Star comes into a site, um, [00:49:00] typically we're being called because things aren't going well. And, you know, the first question I have for my team as we're, as we're approaching a startup, or let's say it's a, a, a, a s- a legacy site, it's one of our own sites we've had for, you know, two, five, 10 years, is what's the first thing we're gonna do to disrupt the status quo?

Or what is the most important thing that we're gonna do to disrupt the status quo? And I think the more that we understand it's the disruption of the status quo is where success comes- And this idea, and it's another idea that I think a lot about, is the law of inertia, which is, is that even when thing...

And, and I, I often say, like, when things are going really well is when I get the most nervous, is because, because I, I know it- the law of inertia will d- will dictate that at some point in time, things will stop going really well. And I, you know, I've got, you know, examples, personal examples and professional examples of, you know, where complacency, and this is really the issue with, you know, the law of inertia is [00:50:00] complacency.

Uh, and this idea that status quo is a good thing, and status quo is almost never a good thing because the law of inertia and the idea that, you know, we need to continuously be thinking about how we self-disrupt ourselves. Um, I just said selves, uh, a couple times in a row, but this idea that- 

Joe: I like it. 

Randy: Um.

Joe: Yeah. 

Randy: Yeah. I, I don't know if that actually was coherent, but the, the idea that, you know, we are- I think it was 

Joe: better to disrupt yourself than be disrupted by something else, I suppose. 

Randy: Yes. And of course, I, I'm now using the most annoying corporate buzzword ever, which is disruption. Uh, so, but I haven't used the word dis- synergy, uh, so, uh- Yes

I've done a pretty good job of keeping the corporate buzzwords down. Yeah. Um, so I ca- Yeah, I guess I just came off the tracks there. But th- this idea that, you know, it's really important to, to be focused on how we can, whether it's our existing sites or new sites, really orient towards d- um, disrupting the status quo 

Gary: Along those lines is I think [00:51:00] an organization that's cons- constantly disrupting the status quo, you build a better culture, right?

Mm-hmm. 'Cause at the end of the day, you're gonna stay for a corporate culture, you're not gonna stay for money, and that goes for CRNAs, that goes for MDs, it goes for guys like me as well, right? If I like the culture, I feel it's fair, I feel that people listen to me, you're not gonna get me to leave for $20,000, $50,000, $100,000, right?

Because y- we spend the most of our time working. You gotta like who you work with and who you work for, and if you're saying, "It's always been that way, so you can just go ahead and leave, Joe," guess what? Joe's gonna leave, right? So the only good corporate companies that continue to rocket in the US, they adapt, and they're constantly changing the culture because that's how you keep, you keep and re- and attract the best people is a good corporate culture.

So when I hear... I, I just like Randy, I go and meet with these groups, and they're like, "That's how we've always done it." And I'm like, "And you wonder why you can't recruit anyone. You [00:52:00] wonder why everyone keeps ke- leaving, and that's how you've always done it." It just doesn't work. 

Joe: Well said. I love talking to you guys.

I learn during this show, so that's, that's... And that's my own litmus test. Like, if I'm not interested, then other people probably won't be. All right, everybody, hope you enjoyed that episode. There's a lot of ways to reach us. We're doing really cool stuff here at About the Rest. We're really trying to bring the conversations that happen in the hallways at the conferences, bring that, bring the high-quality insights, the takes, bring that to your listening enjoyment.

So there's many ways to reach us. You can email us at social@abouttherest.com. You can go to our website, abouttherest.com. You can find me on the internet, JRoddCRNA or Joe Talks Anesthesia. You can find About the Rest on all the social channels as well. Human Content produces this, and you can find them @humancontentpods.

They're a great company to work with. We have reviewed some of the comments today, so if you have feedback, if you have comments, please reach out. Comment on our social posts as well. Typically, during the episode, [00:53:00] one comment we'll take and talk about and just digest a little bit. We're on YouTube as well.

So I'm your host, Joe Rodriguez. Thank you for listening. Our executive producers are myself, Aron Korney, Rob Goldman, and Shahnti Brooke. Our editor and engineer is Jason Portizo, and our music is by Omer Ben-Zvi. To learn about About the Rest's program disclaimer and ethics policy, submission verification and licensing terms, and HIPAA release terms, you can go to abouttherest.com, reach us at production@abouttherest.com with any questions, concerns, or fun medical puns or if you're looking for general life advice.

About the Rest is a Human Content production. Thank you so much for listening, everyone. Have a great [00:54:00] day

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