Goliaths at War: The Fight Over Anesthesia

Randy: [00:00:00] I tend to think competition provides a better service at a better price. I, and it actually makes us better. 

Joe: Not gonna be shopping at any, uh, government-owned grocery stores? Is that what you're saying? 

Randy: I 

Joe: hope not. You know, it's a Mom Nati reference. It's a Mo- or it's a New York- I know. I got it. I got it.

There you go. I, yeah, I don't even know. But look, get, get as uncomfortable. We're making them uncomfortable

Randy Moore and Gerry Keelan, how are you guys doing? 

Gary: Doing well. Thanks for having us. 

Joe: Great to be here. Yeah. Yeah, yeah, yeah. We- we've- we've evolved from Anesthesia Deconstructed, which was a lot of one-on-one interviews, and now we wanna, we wanna hear more consistently from people who know what they're talking about.

So Randy, I just wanna introduce you first. You're a great thinker. I've known you for a long time. You're the Executive Vice President of Strategy. 

Randy: Yeah, that's... And, and Chief, Chief Anesthetist Officer as well. 

Joe: And the, and the Chief, the Chief CRNA for the whole company. About how many, how many CRNAs and anesthesiologists over at North Star now?

Randy: About 4,000. 

Joe: 4,000, so tiny. See that look [00:01:00] on Gerry's face that says, "I know about that, but I'm not gonna talk about it"? Yeah. Exactly. Yeah. What's up, Gerry? Good to see you. 

Gary: Nice seeing you. 

Joe: You're the, is it Chief of Business Development? 

Gary: Not quite. You're promoting me. I'm the Vice President of Anesthesia Services.

I work on consulting work for clients and prospects, and I do a lot of business development as well, so- Kind, kind of the icing on the top of my career. I've been doing this for twenty-nine years. People ask me about radiology, I can tell you, I can spell X-ray, but that's about it. I only really know anesthesia.

Joe: So obviously this is gonna be a hundred percent serious podcast, as you can tell. But we'll, we'll have some fun. So first things first, Randy, you wrote about the, uh, the FTC and USAP. Federal Trade Commission reaches preliminary settlement with US Anesthesia Partners. These guys are in your neighborhood, right?

They're a Texas company. 

Gary: Yeah. 

Joe: Uh, in the sense that they're also in the, the neighborhood of your size. So, uh, this was the [00:02:00] headline from the Federal Trade Commission, the FTC charts path to restore competition in Texas anesthesia markets in USAP litigation. And then Randy, I th- this is from your article.

For most of the last decade, anesthesia consolidation was treated less like a risk and more like inevitability. Bigger was safer, stronger, and more stable. Hospitals and investors rewarded it, and regulators ignored it, and the environment changed. So well, well written there, and I'm gonna close with this and, and get your reaction to this whole thing.

The substance of the agreement is confidential to facilitate the negotiations between USAP in order to execute the settlement. But the terms, this is from the Federal Trade Commission, if fully executed, will restore a competitive market structure be consistent with longstanding FTC settlement practices.

And if USAP fails to execute, and they refer to restructuring in the document, the FTC will return to district court and litigate these unlawful acquisitions. Randy Moore, what do you think? 

Randy: Yeah, I mean, it's never a good thing to be on the target list of the Federal [00:03:00] Trade Commission for any reason. I would imagine that USAP, despite the fact that they're going to have to, to pay a price here is, is breathing a sigh of relief.

And it's also important to call, like this is not their, their first rodeo when it comes to, uh, to this kind of situation. So in Colorado, they were targeted by the state of Colorado, and, and they had to, uh, reach... I-- my, my assumption is it's gonna be a similar agreement. I, I don't know that it will be identical, but a similar, similar agreement where they had to Uh, back out of some contracts.

Uh, they had to make some new- Essentially 

Joe: divest ... 

Randy: that, yeah, certainly di-divest and, and, and they had to decrease their market share and, and they had to do it in a way where they didn't enforce their non-competes with their clinicians. My hunch is there's gonna be a similar playbook for them in Texas. So if we zoomed out a little bit, and this is where the article's going, and I've been accused even in the comment sections of being too nice to USAP, private equity.

You know, as a rule of thumb, I, I don't engage in [00:04:00] these, these binary like good or bad conversations. If you look at the playbook that USAP used and they had a lot of capital to go after do it, I mean, it looked very str-strategic and, uh, it was very, very successful. The problem is that it, it was too successful.

They were gobbling up a material amount, a significant amount of, of market share in key markets and I think that's, that's where I think they flew a little too close to the sun. My other hunch is that, you know, I'm not gonna lose any sleep over, uh, you know, the commercial health insurance payers in the United States, but I think that's probably what Move the federal government faster is that I, I think the f- the, the commercials were saying, "Hey, this is, you know, there is a monopoly or near monopoly situation in some of these markets."

And that's probably one of the key kind of drivers of, of why the federal government moved so aggressively. The other thing that is interesting here and-- is that this spanned two administrations. So when the Federal Trade Commission [00:05:00] initially targeted USAP, I thought that when the Trump administration came in, that maybe they would lose interest, and that's not what happened.

Uh, in, in fact, they, they, they took the ball and they ran with it, which leads me to think that there are very rare things that are bipartisan in this world. But this, this particular pursuit by the FTC, uh, seems, uh, certainly seems to be the case. 

Joe: Yeah, just to put what you're saying, we're gonna come back.

This is a big, this is a big thing. As far as I can remember, this is probably the biggest FTC lawsuit in our careers, right? I, I mean, Ray, uh, Gerry, I see you nodding. Just, uh, to give a sense of the, uh, breadth of how big USAP was in the biggest state or one of the biggest states in the country, for those listening, this is the FTC's version of it effectively.

Sixty-five percent of company profit came from Texas alone, Houston, Dallas, and Austin, seventy percent to fifty-two percent respectively. [00:06:00] It's really... I mean, to own seventy percent of major markets like Dallas, I mean, this is wild, right? And they-- and forty-five hundred providers. So I think, I think actually Napa is probably the only one who's bigger.

I think they're around six thousand. Uh, Gerry, what are your thoughts about this entire situation? 

Gary: Well, I think this is more of a result of, you know, the last twenty years of market shift, right? So the, the industry was built with private equity money, and then you could always go out and network with the payers and get higher rates.

You go after patients, et cetera. Well, we all know that's bad, right? Because people were going bankrupt over, uh, their medical bills. Sig-significantly, it was the air ambulance service. People would get a bill for seventy thousand dollars and have to declare bankruptcy. So they created the No Surprises Act.

It got filed, and the private equity companies like these staffing companies chose a different route and started to basically, a-again, like Randy said, flew too close to the sun and grabbed market share, right? [00:07:00] So now the NSA is kind of getting its own sea legs, right? It's, it's starting to get, get traction, and cases are going through the process.

So now they're losing in IDR, right? So before they wanted competition because they could pit groups against one another, they went to... I'm talking about the insurance companies. The insurance companies like competition, and now they control that marketplace. The, the shortfall in, uh, paying the anesthesia providers has to be made up by the hospital, right?

So they gotta... You can't run an anet- you can't run a hospital without anesthesia, right? It, it doesn't work so well. Sure, 

Joe: sure. 

Gary: So the hospitals are filling in the blanks with the subsidy, and the insurance companies are now getting squeezed by hospitals saying, "You gotta get us higher facility fees because we're losing money on anesthesia."

So my feeling on this whole FTC o- lawsuit is these are the big time, the big four, right? We all know the big four is Blue Cross, UnitedHealthcare, Aetna, and [00:08:00] Cigna. They were in someone's ear at the FTC or some politician, and they said, "You gotta break up these monopolies." And that's really the driver behind this.

It's coming from the big insurance companies. 

Joe: I have a lot of thoughts on how private equity has changed over the last, in our, in our country over the last 20 years, but I'm curious, you know, Randall, you're in, you're in, I assume you're in the boardroom of some sort at a very large company. Are you guys thinking about market share?

Like, does this enter into your minds when you guys are having conversations? And again, y- I mean, don't share anything secret, of course, but I'm just curious. 

Randy: No, I, I'd like to keep my job. So I, I think, you know, as we- Yeah, 

Joe: me too. Um, uh- 

Randy: Yeah ... so, you know, the, I think it's important to understand that there are different growth histories, trajectories, and strategies, even in the, in a hyper-specific niche business sector as, as anesthesia.

So my company, North Star, we grew, m- m- the vast majority of our growth was through organic growth. Makes [00:09:00] us look really smart right now, uh, but you know, if you look at the USAPs in the world, for example, or NAPA, you know, the vast majority of their growth was through acquisition So w- we neither had the interest, nor frankly the capital at that point in time to go say, "Hey, we're gonna go...

Let's go own Chicago," or, "Let's see if we can get, you know, 60% of market share in you name the city." 

Joe: Right. I mean, this was the boom. 2012 to 2021 was the boom. This is where USAP just exploded. NPH came out of that. I wasn't really paying attention to this stuff at this time, but NeuroStar was more organic in nature.

Randy: Yeah. I mean, e- even to this day, we will look at potential acquisition targets, but we, we tend to kind of go back to, like, organic is the way for us. And, and opportunistically, sure, we, we would, we would pursue an acquisition if it made sense. But we don't really think about this as, "Can we own a market?" It is, "Can we be successful?"

Right? Can we be successful in delivering the services, which is primarily based on can we recruit and retain CRNA and [00:10:00] physician talent, full stop, so. 

Joe: Yeah. To actually do the job. 

Randy: Yeah, 100%. So I think, you know- Yeah ... being on kind of the other end of this, which is, like, there are times where, you know... And we have a significant presence in Texas, to be clear.

But, you know, there are times where we've had conversations with facilities who are in those markets you just stated, and who may or may not have been clients of the aforementioned company that we're talking about. 

Joe: Yeah, absolutely. I mean, I was at the conference, the mid-year. Actually, Gerry and I were both there, and I talked to multiple people.

They're like, "My phone's ringing off the hook this weekend"- Yeah ... 'cause it was the same weekend this happened. Yeah. 

Randy: I mean, the- 

Joe: Right ... 

Randy: our business development team is very busy right now based on inbound Tex- Texas business. Yeah. Which is, uh, uh, invariably, undoubtedly related to USAP is now divesting itself of- They have 

Gary: to

Randy: yeah They have to ... of, of facilities, so. So it's happening. I tend to be philosophically and personally pro-competition. And so I tend to think competition provides a better service at a better price. I... and it actually makes us better, right? So when we are, as a company, we're- You're not gonna 

Joe: be shopping at any, uh, [00:11:00] government-owned grocery stores?

Is that what you're saying? 

Randy: I 

Joe: hope not. It's a Mom Gnotti reference. It's a Mo- I know. I got it. I know. I- Yeah, I don't even know. But look, Ge- Gerry's uncomfortable. We're making him uncomfortable. Yeah. No, not 

Gary: at... 

Randy: So, uh, I, I tend to, like, philosophically have issues with if there is a perception or a reality of, like, this is not a competitive market because someone owns it.

So- Right ... I think every- everybody benefits from, from competition. As, as you think about how this plays out, I do think it's going to Have a pretty big impact on... One, one, there's not a lot of acquisition growth going on in anesthesia right now. Uh, so, uh, will that change? I think it 

Joe: is- What, what, why do you think that is?

Why do you think that? I'm, I'm curious on your take. 

Randy: The value, the, the, the valuation of these companies plummeted. Go back to the COVID period, and this is not a COVID problem. COVID was an accelerant. It wasn't the necessarily the change agent. But you look at the valuation fall out of the bottom of these companies, uh, because they're, you know, they were, they had too much [00:12:00] leverage.

Uh, the, their margins, uh, evaporated virtually overnight because their labor costs were, you know, e- exploded. And all at about the same time, the reimbursement headwinds really started to hit, and the new- no surprise billing came in, and that threw gasoline on the reimbursement, uh, headwinds issues. Oh, yeah.

So- 

Joe: Oh, yeah ... 

Randy: so we would look at these firms, and we would say, you know, we, we would look at pot- potential acquisition targets. And we're like, "We're not paying for that. We're not... We... I know you think you were valued at X, um, but that's, those are pre-COVID valuations." And so Uh, this private equity companies, um, most of them want to get rid of their assets, but they can't because they're underwater from a valuation perspective.

A lot of these groups who are, who are seeking acquisition, so think of like these regional groups who either have private equity or seeking private equity sponsorship, are having difficulty getting interest because there's, you know, there's this real concern around the, the value and the, and the future value of those firms.

Gary: And along what Randy [00:13:00] said is North Star did it the right way, right? And I'm not, uh, I don't have North Star in my business card, right? 

Joe: North Star, we, we do, we do take advertising dollars. Right. So, uh, anybody who's listening to them from to- 

Gary: Yeah. 

Randy: Yeah. 

Gary: But what like Randy said, they grew in- organically by trying to deliver better service, better solutions for the health systems, right?

I'm a CPA by trade, so I always look at the bottom line, right? So it's like living your life. If you live with your life with too much debt, you become very unstable, right? You got your Lamborghini, you got your million-dollar house, you lose your job, you become unstable quickly. So these, uh, and I'm not, I don't-- I probably shouldn't name any firms, but the, they're all out there, and USAP's one of them.

They became highly leveraged, right? So we're not talking millions, we're talking billions with a B, right? So when, when you're, when you're billions in debt and the market shifts, a lot of hospitals are saying, "Geez, I've been paying $1,000 a day. I've been pay..." I always use the ex- example. I'm not a car guy, but if I was, if I [00:14:00] could pay $20 a day and drive a Lamborghini, I'd probably do it, right?

Like, you'll just keep renting it for $20 a day. But when it becomes $1,000 a day, I might as well just buy the Lamborghini, right? And I think that's what health systems looked at, is they kept seeing their subsidies going up and up and up and up, and they said, "Well, heck with it. We're just gonna employ everybody, 'cause if we're paying all this money, we might as well control it."

So now these staffing firms that are highly leveraged have a smaller pool of clients to spread that debt service over, right? So they gotta raise their profit margin to cover the debt service. Hospitals say, "Okay, you're gonna raise your rate? We're gonna employ them then." So they're fighting for, they're trying to support that debt from a smaller core business, and a lot of these private equity firms have l- or these staffing companies, the nationals, have laid everybody off.

They're running on, uh, a skeleton crew because they don't have enough revenue to keep the wheels of the, the business going 

Joe: Th-this [00:15:00] is the fundamental challenge of the short-term private equity. And I'll distinguish the Warren Buffett firms of the world, the Cranemares of the world, uh, versus the, you know, the soulless private equity companies that bought up Red Lobster, that bought up the health system right outside of Philadelphia, Crozer, right?

You buy it with borrowed money, right? You, uh, obtain the asset, then you own it, and you put all the debt on those books, and that, that asset, that service, that company does very poorly, and then you jettison it, right? You put it in the bankruptcy. And not my area of expertise per se, but I, I think that is why at a broad level, we've seen such a negative social reaction towards all these private equity companies, and it does not, you know- We all speak around the country, right?

And one thing that I share with, uh, you know, companies at the smaller end, which I'll say five hundred and below, right? Which is if you wanna generate a, a margin, a profit margin in any service sector business, whether it's plumbing or neurosurgery, you should expect [00:16:00] between six to fifteen percent for your time and trouble.

I say, "And if that matches what you would get in the stock market, that's probably for a reason." Markets tend to consolidate like that. The issue with private equity is when you drive it so far up and bring things so out of balance, there's a natural resentment towards that, and now we're seeing the, the system correct, right?

I mean, this is why the FTC exists. I am surprised they kept going when w- w- Lina Khan or Lisa Khan, who was the Biden FTC chair, when she left, she was much more aggressive on these issues, and I'm surprised it kept going as well. 

Gary: Well, unfortunately, I mean, the way I see this is, you know, I... and I don't think I'm gonna offend anyone if I say this, is these big healthcare companies have m- The, the government has the most resources than anybody, right?

But these healthcare companies are probably one notch below that, right? So, uh, the staffing companies, when the No Surprises Act, before the No Surprises Act, they could leverage the healthcare [00:17:00] companies by going out-of-network and driving up reimbursements. As soon as the NSA was passed, now they're using, the health insurance companies are using that to put a squeeze back on providers, right?

So they went out and cut reimbursements, right? So salaries are going up seven percent every six months for CRNAs. That's what I heard last year at the ASA, right? So seven percent over 16 months is fifteen percent a year. These h- health insurance companies cut reimbursements at the same time, which created this, that basically I think they wanna drive them out of business, right?

We'll just keep lowering the rates. Well, now the IDRs- Of course ... now the IDR's swinging back and they're winning again, and now we're gonna get the FTC involved and everything else. So you have two Goliaths that are trying to, meaning industries, two industry Goliaths, the health insurance company and private equity.

They're battling through the media, through legislation, through everything else, trying to get their agenda passed, if that makes sense. So it's [00:18:00] gonna be a mess for a little while until this all settles out. 

Joe: So I wanna kinda double, I'm gonna use the cliché corporate America term. We could do whole episodes on the clichés of corporate America.

I'm gonna double-click on a topic. While we were discussing, uh, prior to the show, I think, Derek, if I can characterize your position, Cranium Sounds like a private equity firm to most outsiders, right? Um, am I characterizing that correctly? 

Randy: I think it depends on, like, what audience you're talking to. My, my, my general assumption is that 95% of the CRNAs and anesthesiologists walking the streets could not give a shit.

Have no interest- Right, 

Joe: yeah ... 

Randy: uh, and, um, it, it, and don't care as long as it doesn't direct, it, as long as it doesn't directly impact them. And then when it does directly impact them, they go, they start googling and trying to figure out, like, what, you know, what does this mean and, and all of that. Then there are the, the nerds like us, the, the folks who, who like to sit around and talk [00:19:00] about this stuff, and I would say that I think there probably is a growing understanding that long-term versus short-term orientation is a competitive advantage in our, in our world.

And for short-term-oriented private equity, they're just not, there's just a gross misalignment between the way that they're structured and how they're focused and their exit plans versus, uh, what you need to do to be a successful staffing firm in this country, like full stop. The-- And you have to be long term-oriented in order to be successful 'cause that's relationship development, that's leadership development.

That is, uh, you know, making less money this year- Well, it's the 

Joe: substance of a business. 

Randy: Yeah, 

Joe: 100%. Right? And it, it's the same thing as an individual. Like, you have to think long term as an in- You, you spend less than you earn, and that's where I think for the individuals is like you have to figure out who you're associated with.

I hope people care who they're associated with. 

Randy: I think the other group of folks who do care, um, and sometimes [00:20:00] are misinformed are the hospital and health system folks who are making decisions about their anesthesia program. I think there is an understandable level of concern, in some cases distrust for, you know, big private equity, which is totally understandable.

And if I, if I were in their shoes, I would have questions too. And I think that's why the way this is playing out is, and sometimes it's not playing out to their advantage, which is, you know, they, they, there is a strong and understandable predisposition to, you know, s- you know, local and regional level groups, right?

And totally understandable. I think the challenge is, uh, if you're sticking with a local and regional group, even though their service is terrible, and you're sticking with them because they live in the community and you're afraid of what a larger firm might bring in terms of baggage relative to private equity, then, then you just make sure you're making your decision, you know, based on the best available op- options.

And so I think I've seen that where, you know, there are folks who are spooked by these large anesthesia plat- um, management companies, and [00:21:00] sometimes it's totally legitimate. Like, there's a lot of bad ones, to be clear. Um, but then they s- they stick with who they have which is often worse than what their other options are.

Wow. So, uh, and I know I ha- I have a particular bias based on the work that I do on that, so feel free to challenge me on that. 

Gary: Yeah. Uh, well, I'm, I'm very much a, I'm very much a macro guy, right? And a- as human beings, our, our worst e- em- emotion is ego, right? So basically, private-- And I've, I've been a big pra- private practice guy the majority of my career, but egos all got in the way, right?

So there was a shortage of anesthesia providers. They would go pound on the desk in the CEO's office. They'd say, "Well, can you keep the room open till five o'clock at night?" "Well, y- I can if you're gonna pay me five hundred dollars an hour," right? So then these staffing companies came in and said, "Hey, wait a minute.

We're going to work with you and provide a service that meets your [00:22:00] needs," right? And they'd go back to the private practice, and they'd still be pounding on the desk, and then they'd, they'd kick them out. And I even went to groups, 'cause I h- honestly, Randy, if, if egos were out of play, there would be no such thing as these national staffing firms.

I would go to groups and say, "Why don't you merge with the group down the street and merge with the group two, two, two towns over and become a bigger group? You can share call. You can, you can bring a lot of economies to scale." And they would be, "Well, whose name's gonna be on the group?" You're like, "Doesn't matter.

Let's call it Happy Anesthesia or Great Anesthesia, whatever." "No, I want my name on the group." Right? So I've seen one merger in my career work, five groups merged down in Florida, and they finally put-- they put their egos to the side, and they built a very successful group, and then they were ended up getting, getting purchased by, uh, Sheridan, which is now Envision.

All the rest of them all fall apart because, "I wanna use my re- my retirement guy 'cause he's the smartest [00:23:00] around." And you would say, "No, I- my retirement guy is the smartest around." So the, so the-- it would all fall apart, and they'd go back to pounding the desk on the table, uh, with the CEO. They'd be short-staffed.

They couldn't cover call. They couldn't cover weekends. So staffing companies would come in and say, "We can solve all this for you, and we're not gonna pound on the desk," right? Yeah. 

Joe: Yeah. 

Gary: So that's how it starts. So it's gonna swing back 'cause now hospitals are-- I-- Most of what I see is hospitals wanna employ.

If they get rid of a staffing company, they wanna employ them 'cause they think that'll be a better solution. But, you know, you, you have control, but now you have Fred Flintstone, right? Like, he's going down the back of the dinosaur. Yeah. "I'll stay late, but you gotta pay me more." 

Joe: Yeah, we can have some-- So one of these days, we'll have somebody em- employed, uh, come on.

I think the challenge with employed is fundamentally groups that are outside, they rely on fee-for-service revenue excellence. They rely [00:24:00] on- A different level of focus than an internal f- service will ever give it, right? Agreed. If you look at the... And Gary here, confirm or deny, right? Effectively, facility fee, surgeon fee, anesthesia fee, especially in regard to CMS and its size.

So naturally, if you have a third-party RCM firm, they're gonna go after the big hospital fee first, right? Or, or even an internal service where there's some sort of metric. I think, you know, Randy, you, you made a very good point in terms of there's... Fundamentally, there's gonna be things that North Star and its peers do better than mid-size firms like Guide, right?

I mean, just at, at scale, there's gonna be leadership infrastructure. And look, my business partners are probably gonna hate this next statement, but at scale, like if you're taking on a 50-site hospital, that's a massive lift, and the hospitals have to make the, the question, do we bring this internal or use a company like North Star or Napa?

You know, I think the main upside is control, but you probably lose [00:25:00] 15% on revenue. You probably lose another 5% to 10% on, uh, employee costs because you're just not as good as managing it. You just don't know the market as well. Um, we'll see. I could be wrong. I mean, AC, I, I don't know the status of some of these, uh, big internalization projects, but my understanding is they've not gone well, right?

It's a hard service. 

Gary: Yeah. Productivity goes down too, right? I mean- Yeah. Of course, natural incentive ... you know, when, when 

Joe: I, 

Gary: when I worked with Joe and his partners, they, they were, you know, with Shoestring, right? And we would go meet with these facilities, and Joe's very, you know, very honest, very, very, uh, high-integrity guy.

He'd be like, "Yeah, we'll stay till the cases are done. We'll get in early if the cases are, are gonna be early. We'll, we'll come in Saturday if you wanna run, run some Saturday cases." And they were like, "Oh, this is great." And you still have that outlook as an owner of a bigger group. But I think when you become employed, you lose that desire to make the hospital successful.

You don't have as much of a A [00:26:00] vested interest. 

Randy: Yeah, a drive. 

Joe: Final thoughts on, on this topic, Randy? 

Randy: We've got some data that I think we think we feel pretty comfortable with that is accurate around what's going on from anesthesia transition. So at any given moment, 3 to 5% of hospitals in the United States are, are looking to change their anesthesia program.

So they're either outsourced and wanna move to a different outsource firm, or they're outsourced and they wanna move to insource, or insource wanna move to outsource, or some- Right ... some variation of that. So that's different level of the cycle. And what we're seeing now is, and these things are cycles, um, is that about 1 to 2% are moving from outsource to insource.

So what that means is the, the insourcing, and, and maybe this is me again being, you know, I get biased, but the, the insourcing trend seems to be decelerating, and the outsourcing, and we're moving into another cycle of, uh, of outsourcing. And we've seen this, you know, at my firm, which is we'll have conversations and they'll decide, actually, we're gonna insource, and then they call [00:27:00] us two years later.

And so that cycle is playing out, and it's about two years. It takes them two years to really get... understand what the financial and operational consequences are of insourcing. And just to be clear, I, like, I'm not anti-insourcing. I, I think there are some legitimate reasons why you should do it. There is a subset of hospitals, uh, that actually do it well.

Yeah. Uh, but the majority don't. And, and you have to be- It's just 

Joe: not their core competency. 

Randy: No, it's, yeah, and you know- It's just not what they do ... it's, I mean, it's a knife fight on our end, and this is what we do every day. It's, it, this is hard, complicated work. So You just have to be clear-eyed of, like, what your priorities are.

So 70% of folks change their anesthesia program because of coverage issues, and then 30% because of cost. That's roughly how it plays out. So if you understand the consequences to coverage and cost w- with whatever path you take, and you've done your homework, then that's fine. And if you're willing to give up revenue in order for control of your anesthesia program, then that's the right [00:28:00] answer for you.

And that tends to work better for the kind of academic medical center- medical centers, but the community hospitals of the world, the rural hospitals of the world, or even these affiliate medical hospitals that are with a, uh, AMC don't have the luxury of not being focused on financial performance. And, and, and those tend to move very aggressively towards outsourcing.

Joe: Makes sense. And I know, I know what, I know what Gerry's thinking. He's thinking, "And Coronis billing can help you decrease- ... your financial outlay. Please find us at, you know, GerryKeeling. or whatever it is. We take advertising dollars." 

Gary: From my experience, uh, we're not seeing that. We're seeing probably 60% to 70% of the people that pick up the phone, that call me, are hospitals that wanna employ their group, right?

And again, egos are, are a dangerous thing. I've had a hospital administrator talk to me recently. They had, like, seven hospitals, and he said, "Could you help us out? I think we, we would at least wanna make about 5 or 10% off the backs of the anesthesia department." I said, "Are you [00:29:00] crazy?" And 

Joe: you're like, "All you can do is reduce your subsidy by 5 to 10%."

Uh, 

Gary: I said, I said, "There is no profit." I said, "The... It's going to be subsidized." And he could not understand why. I said, "Because Medicare pays so low, and who are the frequent flyers to the hospitals, right?" I mean, these are... Like, if you think it common sense-wise, like, I've had two operations in my life, and I'm 57.

One was a foot operation, and I got my t- I got my, uh, tonsils out when I was a kid. But the people going are all of Medicare age. So reimbursements are going down on a per case basis. There is no profit to be had, but that's where these administrators don't understand the dynamics, so they have these, like, kind of warped opinions, right?

Like, we're gonna, we're gonna hire you all, and we're gonna make money off the back of Randy and, and Joe, and, you know, it's not gonna happen. 

Joe: Gerry, we're gonna leave it right there. Uh, we are gonna go on a quick break. For those who are listening and watching, we will be back in a moment

So we're gonna switch gears [00:30:00] now. We won't have time to go into all this, but just real quick to set the table. So there have been so many bills. The most recent one was Kansas. I thought for sure, I'm a keen watcher of these things. I'm on all the private Facebook groups where all the chatter is going on, and the Kansas CRNAs did very, very well in their legislative effort, and that's why you see died on the screen.

Over the past 30 years, this has been-- these pieces of legislation have been submitted around 60 times, and it's failed the vast majority of the time. And I- if you're watching on the screen, bring your eyes to the 2010 to 2019 era, 47 attempts and 47 failed, right? Then you fast-forward to 2025, which has probably a historic shortage, which the shortage in and of itself in certain areas has certainly changed.

Um, but if this was-- If they were gonna do it, this was the time, right? And they passed five in out of 40. So not so good for the American Academy of Anesthesiologist Assistants. Gerry, thoughts and reactions from you first [00:31:00] as the accounting background on the call. 

Gary: Before we start, I'm actually glad we're in different parts of the country because, you know, if we were in the same room, uh, this would be a maybe see a murder on, on a podcast, right?

From my perspective, and I'm, I'm talking to CRNAs on, on the client- Darshan, this is a safe 

Joe: place. This is a safe place. 

Gary: Uh, and I mean, we're in different cities, so I, I, I don't-- I'm not gonna get shot. From my perspective, there is more work than anyone could do if you work seven days a week, twenty-four hours a day for at least the next ten years, right?

So these states that are trying to bring in AAs are just trying to, you know, bring supply up to meet demand, right? Salaries have gone to the moon. You know, I just did a presentation at the, uh, AANA in, in Washington, DC, and you-- the salaries looks like a hockey stick. So I, I know this is one of those things that AAs are kind of pushing into the marketplace But there's such a shortage of anesthesia [00:32:00] providers, you can see why this is happening.

And for the long term, 30 years down the road, that could be a problem for CRNAs, without a doubt. But in the short term, I don't think it's gonna im- Like, my career, I'm 57. I got at least 10 years, maybe 15 years. I don't see it really hurting the industry from a salary, job availability standpoint for, for the rest of my career.

So that's just my opinion on these, uh, AA bills. 

Joe: Gary will now... And what's your- Just get- can you give us your email so we know where to send the hate mail to? Just wanna, just wanna clarify. I'm just kidding. Randy, Ran- 

Gary: I feel like, uh- Uh ... that old movie, Can't We All Just Get Along, right? There's, there's, there's plenty- 

Joe: No, 

Gary: it's, yeah, no, it's a 

Joe: valid perspective.

It's a 

Gary: valid perspective ... there, there's, there's a plenty of work to go around. Like, can't we all just get along? So- 

Joe: Yeah. Randy, thoughts? Reactions? 

Randy: Yeah, I mean, this is one of those hot button topics that, like, no matter what I say, I'm gonna get hate mail. I know that. So- Right ... uh, so- Yeah, it's 

Joe: Randy at... No, just keep, just keep, 

Randy: keep going.

Yeah. No, it's, it's fine. [00:33:00] I think it's, it's a really- Like, if we zoomed out and said, like, just looked at this from a macro perspective, I think it's a really interesting problem, right? So we, uh, there is definitely a significant supply-demand imbalance of CRNAs and anesthesiologists. Uh, the anesthesiologist pipeline is just cannot respond in the way that the CRNA pipeline is.

So you're seeing significant growth in the CRNA pipeline. You're seeing significant growth in the year-over-year graduates of, of nurse anesthetists, but, you know, you're also seeing the demand dynamics continue to change in a way or that, um, they're just gobbling up all of those new graduates. So there, there is definitely a supply-demand, and my hypothesis on this has changed.

For years I've been talking about cycles versus structural, and I said this is just a cycle. I actually think the workforce issues that we have in anesthesia are structural. I, I think, you know, this is not likely to abate or normalize in a meaningful way in the next five to seven years, which from my perspective, that is a [00:34:00] structural problem, not a cycle problem.

So- What, what makes you say that? I think there is, um, I just don't-- If you look at the pipeline and even though the CRNAs are, you know, they're, th-they are real- I mean, the number of nursing anesthesia programs, uh, that have come online or are coming online and the number of like 100% of the existing programs have grown their cohort size.

So you're seeing significant increase in nursing anesthesia program growth. The challenge is, is that the, the demand is, is crazy. Uh, and that's, you know, that's because once we are using more and more CRNAs, uh, we're changing c- uh, anesthesia care models, uh, out of OR anesthesia. Ambulatory, uh, cen-centers love CRNA models.

So you're, you know, it's just hard to, to keep up. And the physician model, the physician Uh, it, the physician development model is just too fixed. They, they, it takes them forever- Well, they have to 

Joe: get approved by the government ... 

Randy: 100%. So, and 

Joe: it's- Right? They cannot respond to the market fun- [00:35:00] 

Randy: fundamentally.

Yeah. And so, so they're much less market responsive. And so all of that is true. So what does this mean from a supply demand imbalance? The challenge with AAs is that, you know, if you zoomed out and said, and these are big round numbers, so feel free to criticize me if I'm, I'm off. But you know, there are, call it 65,000 CRNAs walking the streets today and, and, and maybe 45,000 anesthesiologists.

And then there's 4,000 AAs And what is happening is, you know, the w- the idea of increasing the number of anesthesia clinicians makes a lot of sense from the macro. But when you get into the micro consequences of that in terms of like how do you bring AAs into a model that never had AAs, it was always CRNA model.

That is a incredibly complex and almost 100% failure in terms of you often lose all or most of the CRNAs when you do that. And then you get into just like, it's just hard to move legislation. [00:36:00] So just from a strategic perspective, it's much easier to play defense than it is to play an offense. So- 

Joe: Oh, yeah.

It's way easier to kill a bill than pass a bill. 

Randy: Yeah. And so they, they've got their hands full, you know, in terms of like, you know, their strategy and the investments that they're making in that strategy to increase the number of states that recognize AA licensure, increase the number of programs.

They're just experiencing just so many headwinds and they're, and this is really, really hard. So I tend to think in my role that, I tend-- I take this from a very pragmatic perspective. I don't get into the politics and the title stuff and the hurt feelings because I am acutely aware of the fact that a lot of the criticism that CRNAs level at AAs looks a lot like the criticism that anesthesiologists sometimes level at CRNAs.

Gary: Exactly right. 

Randy: Yeah. And so, uh, and I just don't think that-- And I don't think legislators give a shit about the anesthesia politics. Well, 

Joe: I think, uh, when you look at-- Uh, we- if you ask the question, what's the best way to expand the anesthesia pipeline? [00:37:00] 

Randy: That's where I'm going. Yeah. 

Joe: Right. What like, what-- Really compelling, really difficult to say, is it a good idea to drop 60, and I, I think it's a really conservative estimate, it's probably closer to 80, uh, pieces of legislation and spend all this time and money doing that.

Right? And not only that, but you get into, and this is not a comment on anesthesia models per se, but why create a professional that can only operate in one? Right? I mean, fundamentally, they are constrained. Uh, and that's not to say they don't have a place or that's inherently bad or wrong. It's just, it's just what it is.

Gary: Yeah. 

Joe: Right? So I think we're asking the wrong question with this legislation. And I think that's what I would ad- you know, I advise. We take, in our group, we take a pretty firm line on we don't think in the world of either/or, we think in the world of both/and or best of both. And I think this legislation just doesn't have that point of view, right?

And that's why it's been, you know, that's why it's failed so many times. So I do have a bias in that sense. I think it's bad policy, right? And it is, it's bad [00:38:00] policy that ultimately takes more money out of taxpayers' dollar. Um, so Rand, I'm not sure if that's where you, you're going, but I ha- I had to weigh in there 'cause I know-- I, I understand Gary's point of view, like, "Hey, there's more than enough work for everybody."

Yes, but if we're answering a different question of what's the best way to expand the pipeline, this is not it. Go ahead, Randy, I'm sorry. 

Randy: And, and just for the audience, um- For those of the folks who are listening or watching, so I was the CEO of the AANA for four years. Uh, so like I, I 

Joe: was- Yeah, that's right.

We, we didn't even introduce you that way. 

Randy: Yeah, and so I, you know, I was definitely on the inside, and I, I would argue I was probably the, the chief architect of AANA advocacy strategy at state and national level. And I think what I'm gonna say next is, like, this is the part that might get me in trouble, which is, like, I tend to not be open to these turf war arguments, uh, around anesthesia, whether it's anesthesiologists, CRNAs, or AAs, because I don't think it really holds water Now, where I move to and what I think about is like what are the practical implications of utilizing AAs?

The [00:39:00] AAs were created by anesthesiologists f-for to be dependent on anesthesiologist participation in anesthesia. The challenge is that is what is limiting their growth and adoption, right? So if they were to say, "Hey, actually, we would be more open to models that would look a little bit more like what we could do for CRNAs, whether it is less restrictive for medical direction, uh, and, and similar models," then I actually think you would see a greater openness to utilizing AAs.

The challenge is that they are not, and the market is moving in a different direction. The market wants something different than one to three medical direction in many, many facilities, especially community hospitals and rural health or, uh, rural access hospitals or critical access hospitals. And AAs are just not a good fit there in the vast majority of those because of the practice model that they have to be in and the consequences of what happens under failed medical direction.

You know, failed medical direction is a, is a regulatory and financial problem [00:40:00] that is significant. And so when you start to look at it through the lens of like the business of this and the financial and operational consequences of it, then it becomes harder and harder to really embrace this concept of bringing AAs into these models.

The vast majority of models, it just doesn't work. 

Joe: You're fundamentally approaching this in non-ideological terms. Yeah. 

Randy: Yeah. 

Joe: And, and effec-effectively saying, "Even if you sold me on the policy, it's hard to effectuate in the real world." 

Randy: Right. Right. 

Joe: Right. Is that a fair characterization? 

Randy: And- And that's, and that's where I'm at.

That's what-- That's the job I have which is like driving outcomes- You have to do in the real world ... for our clients and for our clinicians and, and, and for our company. And if the ROI was different from my perspective, my opinion would be different, uh, because I... Yes, I'm a CRNA, but I need to be able to deliver outcomes for our clients, and that's how, you know, I and we tend to think about this.

Joe: I want to, just for the sake of time, I wanna close on, and we gotta stop at the bottom of [00:41:00] the hour. This has been a really good first episode. This is exactly what I was hoping for. A little bit of fun and a little insight. I wanna close on this, the pipeline idea, all right? 'Cause the AA thing, Garrett, to your point, there's more than enough cases out there for everybody.

You, you know, if we pass all these laws right now, would it really impact? It takes them a long time to build up, all that sort of thing. There's seventeen in the pipeline. A hundred and forty-seven nurse anesthesia programs as of March sixth, twenty twenty-six. This is from my slide earlier in the month speaking in Florida.

Another seventeen in the pipeline. Every existing program is expanding. We're looking at A major increase. And I'm just gonna go on the record right now. I'm a huge believer in cycles, uh, everything from Polybius and Plato governmental cycles. And I'm just a big believer in economic cycles, you know, period, right?

Everything is on a cycle. The, the, the success of this podcast will be on a cycle, right? This will evolve into something else over time as well. Uh, so I think there's some variables, though. We don't know, you know, aging population, more anesthetizing sites, all that sort of thing. My general sense is that I don't know when that will [00:42:00] happen.

It just seems awful likely, and I'm preparing personally, financially It like contraction, like the market will contract. It seems quite likely in my view. Not contract overall, demand will contract slower growth. 

Gary: Yeah, I agree with that, uh, at a macro level like this, this cycle is going to change. But what- 

Joe: Okay, Gary agrees with me.

I just want that on the record. Keep going 

Gary: please. But the way I see this, I don't think hospital administrators really care, or facility administrators care if you're an AA or a CRNA. They, they really don't understand it because the salaries are about the same, right? CRNAs have extra value to the facility because they can, they can practice independently under the QZ billing model, right?

So if you have MDs there, you're gonna have to always do medical direction. So at the end of the day though, they're just trying to get bodies into the room. 

Joe: Yeah. They're trying to get the cases done. 

Gary: And if you think about it, right, is the, the one of the major pro- not one of the major problems, it's one of the major benefits to anesthesia now you can, right, [00:43:00] you know, uh, reframe your brain.

That was a, that was a book that came out a couple years ago. It's actually very good. It talks about s- how you look at things. It's either plus or minus, right? Uh, case volumes are not going up that much across the US. They really aren't. Anesthetizing locations are going to the moon, and I went and got a little procedure the other day.

It was a test basically, and I went to the Starship Enterprise to get this test done. Uh, a hospital here in Pittsburgh, it literally looks like you're walking into this, into a spaceship. It's such a nice hospital and you know, they're, they're trying to get guys like me that have commercial insurance, quick, easy cases, blah, blah, blah, blah.

So you can see why they're just trying to fill the rooms, right? Uh, the mothership hospital's doing more tertiary care cases are gonna want higher educated and trained providers in there. But as these anesthetizing locations keep expanding, the, the demand is just, we'll get-- give us a body. We don't care if you're an AA.

We don't care if you're a CRNA. Yeah. It's- [00:44:00] Just give us a body ... 

Joe: it's a numerator denominator- Exactly ... issue, right? So, I just for the sake of time, uh, this has been a, again, very good conversation. We're gonna end this segment. We'll come back to the whole pipeline issue in the future. We're gonna go to a segment called Still On The Table, and that is effectively where we talk about something that's unresolved, something you're thinking about, something that's stuck in your brain and you've just been observing lately.

Uh, so I-- Irani, what's something that you just can't let go that you know has been circling around in your brain for the last few months? 

Randy: That's a dangerous place to be, uh- You have to ... circling around in my, uh, my brain. I mean, I think I, I spend a lot of my time and energy thinking about how do we deliver the commitments we make to our clients.

If you're calling me, our group, and we're gonna come in and we're gonna take over your anesthesia program, by definition, you are unhappy with the status quo. And so a lot of what, you know, getting down to what is the essence of like that delivers those outcomes, and it, it's, it's mostly inflected by [00:45:00] vacancy and turnover and decreasing the premium labor spend at that site to put it on a financial trajectory.

Now, those are kind of the, kind of the lagging indicators, but what are the, the leading tactics that deliver that is something, and how do you do that with scale? So, you know, we're a large per-- we're a very large company, and we're getting bigger and bigger. And the bigger we get, the higher risk that we have of diluting our culture and diluting our ability to inflect at the site level.

It's an interesting business problem, which is how do we get better as we get bigger? Because most com- most companies get worse as they get bigger And so that execution risk, understanding what are the 80/20 for any given site or across the platform, like what are the 20% of the interventions that give you 80% of the outcomes, is something that I obsess about, uh, in, in my role and try to understand how we can inflect on that in a 

Joe: meaningful way.

Love it. Very insightful. Gerry, what's, uh, what's still on the table? [00:46:00] What's, what's on your mind as we close out? Um, 

Gary: I, I don't think I've ever had an original thought in my life. So I talk to lots of different people, and I think that people are smart. I learn from them, and people that are dumb, I learn from them, too, right?

And what I see, though, is I met with a hospital, I'm not, I'm not allowed to say names, that I think are good. Uh, so, and these are good things. So it amaze- Totally up to you. 

Joe: Yeah ... 

Gary: it, it amazes me that some of these are trying to do business as usual, right? So I met with, uh, Orlando Health recently, and I met with, uh, an anesthesia staffing company, they're still small and regional, called Arlington Anesthesia Partners.

And the reason they're successful is they are bending to the market, right? We need staff. Staff is limited. Uh, you wanna work three days a week and be off the next four days? If you are a parent that wants to be home with your kids, you wanna work till two o'clock every day? They basically build pools of providers, and if you [00:47:00] don't wanna take any call, you're gonna take a pay cut, right?

But if you wanna take call, you can make a heck of a lot more money. And so basically, they build a lifestyle... And again, this is lucky, uh, these are all problems, but they're all problems in a relative term, right? Uh, CRNAs have so many options now, the problems are where do I wanna work that best fits my life?

So the, the groups and the hospitals that are successful build flexibility into their program. They don't try to jam it business as usual, is, you know, you're gonna be on call every sixth day, every 10th day, whatever, because those people are just gonna leave. So you, you gotta be adaptable, if that makes sense, right?

It needs to... And it has to be fair, right? If, if I'm taking call and Joe's not, and I make 5% more than Joe, well, that's BS, right? But maybe it needs to be 20%. Maybe everyone-- I think everyone in the world, as long as they feel it's fair, they can get behind it. So what I think is the whole system has to become more, more [00:48:00] fluid and more adaptable, or you're gonna just, like Randy said, you're gonna have the same hospitals that keep churning providers, and they're calling locums.

And these locums now, I mean, they can charge whatever they want, really. And then they come back to me and say, you know, "You're a CPA, you've been in anesthesia. Can't you come and work for our hospital and save us a whole bunch of money?" I'm like, "No. You can't. You gotta change the fundamental way you look at this."

So, uh, that's what I see, is that successful groups are more adaptable- to the marketplace, right? And that, that's where I think you need to be now 

Randy: His concept of adaptation really resonates with me. Um, you know, it was Darwin that said it's not the strongest or the smartest, it's the most adaptable species.

And as you look at the, the groups that are struggling, and some of these are massive, large anesthesia management companies as, and all the way down to the site level mom and pop shops, fundamentally what is happening is their inability or [00:49:00] resistance to adapt to the changing business environment.

Gary: Exactly right. 

Randy: And, um, once you see it, you can't unsee it. And it then it becomes a like core, it should be a core competency for anyone in any business is how do we, regardless of our size, how do we ensure that we're adapting to the changing landscape, uh, that we're in? 

Gary: And the reason that I can say that I think they're very well-run organizations, and I'm not on the inside, I'm very much on the fringe, is they have excess staff, right?

I meet with 100 groups, 98% of them say, "We are so short-staffed. We're paying a fortune for locums. We're paying a fortune for CRNAs, AAs, whatever, and we can't get any." Well, then when you meet two organizations that say, "We have extra people," right? "We don't wanna hire anybody else 'cause we have too much staff."

They're doing something right. And what they're doing is they are building a, a culture where everyone fits in, right? Like, we don't all need to be the, the, in the four spot, you know, hitting home runs, right? We [00:50:00] don't, we all, we all don't need to be the cleanup hitter, but there's a spot for you in the eighth spot, and you, you can play catcher or whatever.

Is you gotta put the systems in place that you can be successful, and I think a lot of organizations don't do that. 

Joe: Uh, fully agree. I, you know, something I've been thinking about different, uh, from where you guys are at is this idea of see a lot of Large language model-driven confidence. And, you know, everybody on here is probably using ChatGPT, Claude, or Perplexity to some degree.

And I find the further I go down on some of these topics on which, you know, that are relatively new to me, and I talk to the actual experts, the actual compliance lawyer, corporate lawyer, accountants, whomever, I realize there's more to these things than a large language model can give me. And now I'm realizing it's the framing of the question where the actual power and influence goes.

It's not just the asking of the [00:51:00] question, it's knowing which questions to ask. To, to say it like that, and I see this a lot in, uh, in our world right now, 'cause all this information is democratized now, right? If you ask the right question, you'll get there. You just usually don't know what to ask. Uh, all right.

So, uh, Randy Moore, Gerry Keeling, thank you so much for being here. I think this went very well. This is exactly what I was hoping for. I feel like there's a lot more to talk about. To put it in context, when I would do some of those, maybe about 50% of the interviews, I would be waiting for the episode to end, you know?

And this, I feel like we, we have a lot more to talk about. So, uh, for those listening, there are many ways to reach out. You can email us at social@abouttherest.com. A website is going to be released by the time this episode is released, abouttherest.com. Uh, Randy, uh, I know you're active, you- you're both active on LinkedIn, correct?

I don't know if you guys are active on the other social channels. I'm on IG and TikTok and whatnot, but Gerry's like, "No, no." I- I'm too 

Gary: old school. I got LinkedIn. That's the only thing that I [00:52:00] have, and email. 

Joe: And yeah, you and Fernando Mendoza, you know? 

Gary: I spend most of my time on MySpace these days, so 

Joe: You can find Randy Moore on MySpace.

Uh, so check these guys out. You can check, you can find me on there too. We'll, we'll be clipping this episode up. Uh, all of the Human Content podcast family, uh, is, uh, on Instagram @humancontentpods. Uh, so again, if you have feedback, please listen to us. You can also find us on YouTube. I'm your host, Joe Rodriguez.

Uh, Randy Moore and Gerry Keeling, thank you for being on. This was produced by me, Aron Korney, Rob Goldman, Shahnti Brooke. Uh, and our engineer was Jason Portizo, and Omer Ben-Zvi did the music, so thank you everybody. To learn about About The Rest's program disclaimer and ethics policy, submission verification and licensing terms, and HIPAA release terms, all things the lawyers told me I had to say, you can go to abouttherest.com or reach out to us at production@abouttherest.com with any questions, concerns, or fun medical puns.

This is a Human Content production. [00:53:00] Thanks everybody. Have a great week.

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