Anesthesiologist shortage at Providence raises concerns over private equity

This article has been updated to incorporate additional comment from Providence Health.

Dr. Jennifer Balentine, a Portland ophthalmologist, said she would “love” to perform surgery as she has patients who need operations to treat retinal detachments, cataracts and others. 

But Balentine and other physicians are unable to, because of a sudden shortage of anesthesiologists at two hospitals operated by Providence Health & Services that’s expected to last through the end of the year. The shortage, first reported by The Oregonian/OregonLive, followed the health system’s move to drop Oregon Anesthesiology Group, its longtime provider of anesthesiologists in favor of Sound Physicians, a company backed by private equity. 

The health system is only allowing emergency and obstetric surgeries at its Providence Portland Medical Center and Providence St. Vincent hospitals. The situation has added fresh fuel to concerns about the presence of private equity or other large corporations in Oregon’s health care system.

“It's a disaster,” state Rep. Ben Bowman, D-Tigard, told The Lund Report, of Providence’s cancellation of surgeries. Bowman is drafting legislation for the upcoming legislative session designed to curb private equity and other large corporations from acquiring medical practices in Oregon. 

Local contract canceled

In July Providence notified Oregon Anesthesiology Group its contract was being canceled without cause, the company’s CEO, Ursula Luckert, told The Lund Report.

She described the termination as surprising; Providence has contracted with OAG for anesthesiologist services since its founding in 1989. 

OAG is a professional corporation that is completely owned by the roughly 170 to 200 anesthesiologists who are also its employees, said Luckert. While OAG is a for-profit company, she said it basically seeks to “break even” each year, meaning physicians are adequately paid and patients are cared for. 

After cutting ties with OAG, Providence contracted with Sound Physicians, a Tacoma, Washington-based staffing firm that has a national presence. A group of investors, including private equity firm Summit Partners in 2018 purchased Sound Physicians in a $2.2 billion deal. The investors also included Optum Health, a subsidiary of insurance giant UnitedHealth Group, which owns a chain of clinics nationally. 

Sound Physicians did not answer questions from The Lund Report and referred inquiries to Providence. 

Providence spokesperson Gary Walker told The Lund Report in an email that Sound Physicians is staffing up to meet demand in the Providence system. “Sound Physicians continues to add anesthesia providers every week,” he said. “We expect to be well over 125 total for the two sites by the end of January.

“We know the impact this change has had on our patients, and we apologize for that,” he added. “We expect our surgical volumes at the two sites to be back near our typical levels after the first of the year.”

Between Nov. 22 and Dec. 18, he said, a total of 1,353 surgeries or procedures required anesthesia at Providence St. Vincent Medical Center and Providence Portland Medical Center. 

Business model questioned

But some say the issue is not just staffing levels.

“The business model is a significant difference since their ownership is private equity and United Healthcare a large public company,” Luckert said. “The profit motive is quite a bit different. There are other parties that are in the mix, to find profits or to pull money out of the system.”

According to industry tracker PitchBook, Sound Physicians received $157.154 million of development capital from undisclosed investors in October 2022. The company also took on $235 million in debt after the buyout, according to industry tracker PitchBook. 

The investment in Sound Physicians follows a wave of activity by private investors who have poured money into buying up dental offices, eye care clinics and other physician practices. Critics worry that private equity-owned health care providers cut costs or provide unnecessary services in order to maximize returns. 

Oregon has a relatively low concentration of physician practices owned by private equity. For his part, Bowman, the lawmaker, argued to The Lund Report that  private equity is incentivized to “squeeze as much profit as humanly possible out of an entity in a short period of time.”

“It’s patients who get squeezed,” he said. 

Oreon law requires licensed physicians to have a majority control over professional corporations set up to practice medicine. Bowman’s bill seeks to close a loophole that allows corporations to get around this requirement by setting up a limited liability company or a limited liability partnership.

How Sound Physicians is organized in Oregon is murky. 

In October, a company called Sound Physicians Anesthesiology of Oregon registered to do business in Oregon, according to state filings. It was registered by a Brentwood, Tennessee-based company named Hospitalist Medicine Physicians of Washington - TCS, PLLC. 

The same company is also registered in Washington where state filings list Robert Bessler as its manager. Bessler is founder and board member of Sound Physicians. 

“Everyone is suffering”

Around the county anesthesiologists are in short supply. 

After losing the contract with Providence, Luckert said she worried it would result in an exodus of anesthesiologists from Portland who might see it as a chance to transition to another job in another part of the country. She said she heard from anesthesiologists who told her they received five texts from recruiters. She also worried they might jump ship to staffing agencies and travel to Florida or Texas for a few weeks. 

But she said that so far that hasn’t happened. 

It’s not clear why Sound Physicians lacked staffing to fulfill their contract with Providence when it went into effect.

Sound Physicians is offering $575,000 to $650,000 to recruit anesthesiologists in Portland with a $75,000 bonus. The average salary for an anesthesiologist in Oregon is $312,924, according to job website Glassdoor. 

Jane Zhu, an assistant professor of medicine at OHSU who has studied private equity, told The Lund Report that there are a lot of factors that go into a business decision on contracting, including local market contexts, costs and management decisions. 

“The reasons for this contracting change are unclear to the public,” she said. 

Balentine told The Lund Report she did 50 surgeries between Oct. 1 and Nov. 15 before Providence curtailed procedures. Those included surgeries to treat retinal detachments, cataracts and others, she said. One of her patients can’t drive at night because they need cataract surgery in both eyes, she said.

“It affects every speciality,” Balentine said. “Everyone is suffering.”

You can reach Jake Thomas at [email protected] or via Twitter.com at @jakethomas2009.