It’s easy to characterize what’s happening between Atrium Health and Southeast Anesthesiology Consultants as a messy contract dispute.
Put simply, the hospital group — formerly known as Carolinas HealthCare System — has said it will not renew its deal with the anesthesiology practice effective July 1 to instead hire a doctor group it has more control over.
It sounds like a minor change, but it’s really not. Thousands of patients will be affected.
And the dispute has gotten nasty. Southeast and its parent company, Mednax, have waged a public relations battle in print and on the internet saying that Atrium’s move would jeopardize patient safety.
Here’s what you need to know.
What exactly is happening?
For nearly four decades, Atrium Health has contracted with Southeast Anesthesiology to work at its hospitals.
So when you go to have a surgery at CMC-Main, it’s a doctor from that group that is putting you under (or rather, more directly it is a nurse anesthetist). Then afterward, you get two bills: one from both the hospital and one from Southeast.
CMC Main. Photo via Atrium Health.
Southeast Anesthesiology started in 1981 as an independent physician group but was acquired in 2010 by the publicly-traded company Mednax. Today, they serve more than 100,000 anesthesia patients each year.
The conflict between the two comes as part of Atrium Health CEO Gene Woods looks to cut $300 million in costs while increasing quality.
Woods says the cuts are necessary as the healthcare world struggles with rising costs and potential disruption. But the plan has also led to a lot of friction, including the departures of numerous pediatricians in south Charlotte and a lawsuit from Mecklenburg Medical Group.
[Agenda story: Amid doctor departures and lawsuits, Atrium Health’s strategy is actually going better than planned]
But the change to anesthesiology would bring with it major disruption: The 88 current doctors with Southeast Anesthesiology would no longer be able to work with Atrium. The hospital is having to hire and train a brand new crop of doctors for its surgeries.
What’s at stake for Atrium Health and its patients?
Woods says Atrium is declining to renew the contract with Southeast Anesthesiology and bringing anesthesia closer in for two reasons: 1) To perform the work at cost instead of paying for a private company’s profit margin, and 2) So patients get one bill instead of two.
Atrium is essentially betting that it can provide anesthesia services as good or better, for cheaper.
But the move brings with it considerable risk. The hospital will have to train new doctors on its systems and have them up and running effectively from Day 1. There’s no room for error with anesthesia.
That’s essentially what Southeast Anesthesia is warning about in its PR campaign against the change. They’re saying that a hospital is not an assembly line, and you can’t just drop in new doctors and expect immediate success.
An example of an ad run in The Charlotte Observer.
They are justifiably proud of their patient safety record. Even Woods admits that he loves the doctors and would love for them to be able to stay.
For its part, Atrium says that the claims about patient safety are disingenuous and points out that in the past, Southeast would send new doctors over with no onboarding at the hospital. Atrium says it has moved away from Southeast Anesthesiologists at other hospitals in the system without an impact to patient safety.
Atrium has brought in Dr. Thomas Wherry to build a team under the name Scope Anesthesiologists, and they are already training.
Here’s an ad Atrium has put in The Charlotte Observer to counteract the ones Mednax is doing.
Still, there will be considerable pressure on Atrium to show that they’ve reduced costs for the patient while keeping them safe.
Already, some patients have been asking whether they should try to squeeze their surgeries in before July 1.
What’s at stake for Southeast Anesthesiology and its doctors?
For the parent company Mednax, there’s a lot of money at stake.
Anesthesia makes up 38 percent of Mednax’s overall revenue, or about $1.3 billion in 2017, according to corporate filings. And North Carolina is one of the biggest states in the company’s overall business.
In 2010, Southeast brought in about $100 million in revenue each year, according to reports at the time it was acquired.
So it’s not the end of the world for Mednax, but it would be a material impact.
The larger effect would be on the 88 Southeast Anesthesiology doctors. Many have been there for decades, and have put down deep roots in Charlotte.
Mednax says it will enforce its noncompete agreements with the doctors, which are in effect for two years and would prevent them from working with Atrium Health or anywhere near an Atrium facility.
The company says it will give the doctors severance packages and help them find new jobs.
Atrium says they hope Mednax will release the doctors from their noncompetes so they can continue to work in Charlotte.
