Outsourcing push ends with nurse turnover at two Michigan hospitals

The 66 certified registered nurse anesthetists who lost their jobs Dec. 31 at two Michigan hospitals were caught up in a push by area hospitals to reduce costs and increase reimbursement potential by outsourcing support staff.

Over the past couple of years, a number of hospitals in Southeast Michigan have signed contracts with regional or national anesthesiology groups that employ both CRNAs and anesthesiologists. That's been driven by declining reimbursement for CRNA services and to improve surgery scheduling.

The outsourcing of hospital employees—including housekeeping, food service, laundry, information technology, supply management and emergency services—is driven by the broader need to reduce costs and improve efficiencies because of federal and private payer reimbursement cuts stimulated by the Affordable Care Act.

The latest and most contentious example of outsourcing CRNAs occurred Jan. 1 at two hospitals owned by Warren-based St. John Providence Health System, a five-hospital group owned by St. Louis-based Ascension Health, the nation's largest not-for-profit chain with 131 hospitals.

While most CRNAs are outsourced without major protests, experts interviewed by Crain's Detroit Business agreed that the process St. John Providence used was unusual and extremely quick, and it apparently backfired because only a handful of the CRNAs went along with the plan.

After about two months of talks with PSJ Anesthesia, a newly formed CRNA company owned by a longtime St. John Providence anesthesiologist, Dr. Dominick Lago, 66 of the 74 CRNAs at Providence Hospital in Southfield, Mich., and Providence Park Hospital in Novi, Mich., rejected the contract they were presented with in October. They lost their jobs Jan. 1.

Lago is also a partner with Northland Anesthesia Associates, which has held an anesthesiology contract with the Providence hospitals for at least 40 years.

Officials for Ascension Health, which owns St. John Providence, declined interview requests for this story.

However, Jean Meyer, CEO of St. John Providence, responded in an email that St. John Providence explored “all options for management of anesthesia services in great detail, including looking at other external business partners.”

St. John Providence said PSJ is fully staffed with CRNAs, including 14 CRNAs from the Providence hospitals. It is unclear whether PSJ has as many CRNAs as the hospital had when it was employing them itself.

Meyer said PSJ has not hired temporary CRNAs. She said there is adequate supply of CRNAs in metro Detroit and PSJ hired experienced CRNAs that “are being paid in line with the base pay rate offered to the former hospital-employed CRNAs.”

Sources told Crain's one of the contract disputes the CRNAs had with the PSJ offer was that it substantially cut overtime pay and other benefits, including time off.

PSJ is offering above-market salaries to entice CRNAs to join the new company, said Lisa Mueller, a CRNA and president of Mueller Anesthesia Services, a temporary staffing agency with about 15 CRNAs.

The median salary for CRNAs in Southeast Michigan is $168,000 with a range of $154,000 to $182,000, which is just about at the national average, according to

Besides the two Providence hospitals, at least two other Southeast Michigan hospitals in the past year have outsourced their CRNAs to anesthesiology groups.

McLaren Macomb in Mt. Clemens, Mich., recently completed a nearly four-year process to outsource CRNAs into Great Lakes Physician Resources, a Bay City, Mich.-based anesthesiology group.

“There was a lot of pre-planning and discussions. …” said Mark O'Halla, COO at 11-hospital McLaren Health Care in Flint, Mich. “Because we talked about it for so long, it did not come out of left field. The CRNAs, many of whom had been with McLaren for 15 years, became comfortable with the new company.”

Andrea Teitel, president of the Michigan Association of Nurse Anesthetists, said McLaren Macomb is a good example of why CRNAs should be involved in the process at the beginning.

“Hospitals that include CRNAs in decision-making process are the most successful in transition,” said Teitel.

The Detroit Medical Center has also hopped on the outsourcing train. It replaced its anesthesiology group, Anesthesia Staffing Consultants, Bingham Farms, Mich., after Northstar Anesthesia, a for-profit group based in Arlington, Texas, acquired ASC.

Hospitals primarily are outsourcing CRNAs because reimbursement is declining due to healthcare reform and increased financial subsidies hospitals must pay to compensate their CRNAs, said Vicky Myckowiak, a partner with Myckowiak and Associates in Southfield, Mich.

Some McLaren hospitals were paying “subsidies”—payments to supplement CRNA-generated revenue—that annually increased by 1% to 5%, O'Halla said. “When CRNAs are integrated with the anesthesiologists, we experienced less growth in costs and in some cases, some cost reductions,” he said.

For example, McLaren Macomb was able to reduce its CRNA subsidy by $1 million with a hospitalwide anesthesia agreement, O'Halla said.

Mueller said hospitals often fail to properly account for CRNA revenue generation and lump them in as an expense like other nurses.

“Hospitals don't know about anesthesia revenue,” Mueller said. “If they billed properly, there wouldn't have to be a subsidy, and we would be revenue generators, which we are.”

Hospitals are also looking to reduce anesthesia costs because of the push by private and government payers to “bundle”—or pay a flat rate for—surgical services, said Dr. Matt McCord, chief of anesthesia at Beaumont Dearborn.

“I can see how hospitals with the changing healthcare want to offload these resources and have someone else manage them,” McCord said. “They need to deliver services more efficiently” because bundling surgical services rewards lower-cost providers.

"CRNA job cuts continue national outsourcing trend" originally appeared in Crain's Detroit Business.



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