hey it's justin harvey thanks for tuning in to the anesthesia and pain management success podcast with apm success we take a close look at important topics pertaining to business practice management personal finance and careers for anesthesiologists and pain management physicians we work hard to take your critical questions straight to the experts thanks for listening hello and welcome to episode 115 of apm success i'm going to be looking at a topic a handful of times in the coming weeks specifically labor markets in anesthesia and what it means for anesthesiologists the regional sensitivity around this issue what it means for income what it means for employment what it means for non-competes today we're going to look at a specific case study not far from here in the pacific northwest in washington specifically but before we do that i want to talk for a minute at a high level about the evolution of labor and the rights of employees and what's happening right now in this country initially this is a patchwork that is evolving in real time and there are labor shortages all over the place not only in anesthesia but i mean all across the labor market at the same time there's huge amounts of unemployed people which it's a very just crazy time in the last month i've heard about more than one hospital cancelling elective cases not because they have covered capacity constraints but because they can't staff ors with anesthesia staff because they just can't find doctors to run the rooms i've heard of others where they're actually canceling elective surgeries because there's nursing staff issues so staffing is a recurring major problem right now and basic hospital economics if there are ors in a hospital and they're not running that's a big problem because ors or where hospitals make money if they can't get them to run then you can bet that they're trying desperately to get them to run at any given time and to staff them appropriately the fact that hospitals are having trouble running ors because of lack of anesthesia providers anesthesiologists crnas aas etc shows just how significant this shortage is there's a lot more i can say about this but one area of the anesthesia labor market i want to focus on today specifically has to do with developments around non-competes this has been something that has been in the crosshairs of the biden administration back in july president biden issued an executive order which he entitled the executive order on promoting competition in the american economy and this executive order order had a specific intent specifically it asks the federal trade commission to use its regulatory authority under the federal trade commission act to quote curtail the unfair use of non-compete clauses and other clauses or agreements that may unfairly limit worker mobility now this is a federal expression of a state trend that has been happening for some time in various places one that we're going to talk about in a minute in washington at the beginning of 2020 there was a rule enacted in the state of washington that said unless you are a w-2 wage earner of less than a of sorry of more than 100 000 or 1099 of more than 250 000 unless that was true of you then a non-compete was unenforceable meaning if you made less than 100 grand as a w-2 or less than 250 k as a 1099 then you can do whatever you want in terms of non-compete it would not be applicable to you so in brief as we think about the historical context of non-competes and the fdc federal trade commission the ftc was founded in 1914 as a vehicle to give teeth to the anti-trust legislation around the sherman and clayton antitrust acts which came about because of you know oil railroad manufacturing monopolies sort of after the civil war and the uh the rebuilding that happened post then uh these big uh monopolies created an anti-competitive environment and this is sort of the era of the you know the robber barons the titans of industry and the ftc was created in large part to keep them on a short leash the mandate of the ftc this is taken from the ftc website is to challenge anti-competitive mergers and business practices that could harm consumers by resulting in higher prices lower quality fewer choices or reduced rates of innovation the ftc will monitor business practices review potential mergers and challenge them when appropriate to ensure that the market works according to consumer preferences and not illegal practices and so this is what i'm after today understanding the anesthesia labor market as it relates to this zeitgeist of the pendulum swinging towards the employee and the the rights of the employee and employee mobility what does this mean for an anesthesiologist who wants to know what does this mean in terms of employment stability compensation stability this is these dynamics are important to understand and are going to be determinative of you know future employment viability here's the reason this matters for the individual there are life decisions big important life decisions made on the basis of your employment i have clients i have friends i myself am impacted by these and many people close to me have made decisions about preparedness for marriage about can i have kids and when about should i spend five hundred thousand or a million or two million on a house etc these are life altering decisions that are made with some assumptions baked in about will my job work out will i be able to keep my job will i continue to earn what i'm earning now will i be forced to leave my city or my county or my state in the event that i lose my job or if my employer loses the contract or whatever so understanding this can help prevent hopefully regret and poor and costly decisions in your personal life so here's where we're going with all this um right now we've got a pandemic we've got executive orders we've got supply constraints among anesthesia professionals where we can only make quote unquote so many anesthesiologists every year because as we've talked about in the past residency seats the number of residency acgme accredited anesthesia residency programs is capped by cms so we can't make more than you know a certain number because it's it requires a congressional approval for budget increase in order to do so so there's the supply constraint crnas and aas are here to help in terms of the supply constraint but there's still a massive bulge of baby boomers moving into high utilization years of health care where just demand for anesthesia is at all time high and only getting much worse it's imagine the the boa constrictor that swallowed a hippo that big bulge of the hippopotamus that is moving through the snake is about to get to the part of the curve where healthcare is needed as much as it ever has been as a demographic group with the baby boomer boomers so that is the context with a specific case i want to address today in the state of washington which i've been following closely for a handful of reasons this case has to do with bellingham anesthesia associates in bellingham washington i'm interested to see if this case becomes a bellwether for the direction of anesthesia employment in the future and the we'll call it employee portability uh and flexibility in the future as a total aside i learned today that the word bellwether comes from the middle ages in jolly old england when shepherds would attach a bell to the neck of a castrated ram in their herd the shepherds would then track the sound of the bell to know which way the flock is going and would have an indication as to the direction of things so don't worry i'm throwing that tidbit in for no charge so will this case be a bellwether we will find out so what happened in bellingham first of all an official judgment came down just a couple of weeks ago august 26th hot off the press as a consent decree what that means is that this was a settlement essentially between the defendant which is bellingham anesthesia associates and the washington state attorney general they agreed to terms formally they have signed off on it and they're waiting for the judge to approve it this consent decree stipulated that stipulated the following allegations there were two allegations this is what the attorney general said bellingham anesthesia associates did wrong number one there were exclusive contracts that the anesthesia group had with different sites of service in bellingham that were unnecessarily restrictive and were monopolistic and anti-competitive because they were exclusive and required exclusivity this was true with both the hospitals in the area as well as the surgery centers and that was the big thing for the washington ag they didn't take issue with exclusive hospital contracts what they call acute care settings but they did have issue with the exclusive contracts in the non-acute setting namely the surgery centers so that was number one that was the first challenge that the ag had with bellingham the second allegation was that there were non-competes that bellingham anesthesia associates had with its anesthesiologists in the contract of both partner physicians as well as employed physicians both of them they had different non-competes and they were both unduly onerous per the updated and acceptable language defining the rules in the state of washington the non-competes as they were most recently written were three years for partners and 18 months for non-partners so some additional context in 2020 the state of washington essentially was a little bit ahead of the curve compared to you know president biden in his executive order this is something that washington had addressed prior to try to make employees more portable they revised their laws to say um you know that employees of less than 100k or 1099 contractors of less than 250 would not have applicable non-competes however there are other language updates to the rules that in general said employers you need to loosen up a little bit you need to make these non-competes less onerous prior to that rule being enacted in early 2020 at that time so in 2019 and prior bellingham anesthesia associates had non-competes that were three years for partners and three years for employees post this revision that washington made in 2020 the partner non-competes stayed the same at three years the employee non-competes were cut in half from three years to 18 months by the way all this technical detail is outlined in the consent decree which i'm going to link to that and a bunch of other resources that i've referenced in this episode so if you go to apm success slash 115 for episode 115 you can read the consent decree you can read all this other stuff but the point is there has been this trend with bellingham anesthesia associates they have loosened the rules for their physicians one notch we'll say uh one when these rules were passed in washington a year ago the attorney general circled back and said hey listen guys we know you came a little bit in this direction but we want you to come even further and so per the consent decree here's what was agreed upon with the two sort of points of issue that the attorney general had number one the exclusive contracts in both acute and non-acute settings and number two the onerous non-competes here was the agreement that was reached between the attorney general's office and the annist bellingham anesthesia associates number one with regards to the monopolistic contracts bellingham anesthesia associates is no longer permitted to have exclusive contracts with the non-acute settings so surgery centers basically or office settings or dental anesthesia there's no exclusivity that will be enforceable in any of those settings number two as it relates to the non-competes bellingham has agreed to further moderate their non-competes effective immediately for any current employees or partners or past employees or partners to cut everything in half again so partners have gone from a three-year non-compete to an 18-month non-compete and employees have gone from an 18-month to a nine-month non-compete so what does this mean it's much easier now for any of these physicians to wait out the terms of their non-compete which is good but let's think of it for a moment from the standpoint of practice owners so for any partners in bellingham anesthesia and any other practice owning physicians out there this dynamic will affect you it will and it will affect the value of your business so your business is valuable if you the less competition you have if you're the only game in town you can do whatever you want you can charge whatever you want to use an extreme example the more competition there is the more your profits will be eaten into the more your business value will go down and this is just basic economic sort of relationship so your business is worth less um and competition is more fierce so all things being equal you'd rather run a monopoly than a non-monopoly because you can do whatever you want so as the pendulum swings towards employees this will probably impact the value of businesses of anesthesia groups from the partner standpoint furthermore if there are other employers in town this is going to shift the dynamic you know rather than saying it's literally illegal for you to go and work anywhere else in these two counties as an employer as a practice owner you now perhaps are going to need to take a different approach and rather than threatening those who might leave you want to entice employees to stay you can't just make it illegal to walk out the door it's the classic carrot versus the stick paradigm the stick is where if you're threatened if you leave you're gonna get sued the carrot is we want you to stay you know here's a snack for you because the environment in which you work the pay the job description the perks are desirable so retention costs for business owners may go up which again could impact business profitability but perhaps everyone may be happier in the process it's hard to there's a lot of trickle-down effects here these are some of the potentials that i had sort of brainstormed as i was thinking about what all this could mean if you're an employed physician what does this mean that the fact that there's this zeitgeist of employee rights employee portability and employee right to work if there's more competition and more rules about whether or not a non-compete is enforceable that means you're going to have a lot more options and you might not need to sell your house and leave the state if you lose your job or if you want to leave there may be more carrot and less stick so in the short run you might have better benefits you might have you know better perks at your job whatever because they're trying to entice you however here's the other side of this coin if and when you become a partner if you do the value of your business may be impaired maybe diminished and the certainty of ongoing employment may also be diminished if there's increased competitive forces it's kind of hard to say how that's going to shake out so this is just one case study again i i do think it's going to be the first of many opportunities the local attorneys general whenever there's a revision in guidance from either the state or the fed sometimes they like to try to find a case to make their point this just happens to be one not far from where we are here in portland but i expect we're going to see more and more of these in the coming days uh in summary i do like it as a you know someone who works with individual doctors i like it when doctors don't need to sell their homes and move to new areas if they want a new job it's really an unfortunate dynamic that that is the case in certain places right now and with certain companies uh there are some cases in employment where it's necessary to protect special knowledge trade secrets you know business secrets where a non-compete really is the only way to do that um i have it's been long been my opinion that practice of clinical anesthesia just is not most of the time one of those places and to have these really onerous non-competes applying to general anesthesiologists just doesn't make a lot of sense so i'm heartened to see increased portability for the average anesthesiologist so good news for job seekers maybe a headwind for practice owners um i'm really uh interested to see how this continues to unfold and i will continue to cross closely track it and provide you with updates as i see them there's a handful of really interesting articles i've referenced as i put together the notes for today so again check out the show notes apm success dot com slash 115 if you're interested in any additional reading as always thanks for listening and i'll talk to you next week if you liked what you heard this week head on over to apms.com where you can find more content and free resources to help you build a successful career in anesthesia and pain management if you wanted to leave a review in itunes i'd also really appreciate it thanks for using some of your valuable time to join me today on apm success [Music] you