Out-of-Network Surgery Centers and the Anesthesiologist

Clinical Case for Discussion:

You’re planning a career in private practice anesthesia following your residency. One night during a dream, a wizened man with a long white beard speaks to you and says, “Beware of lateral spread, and the OON model….” He retreats into a swirling fog, and you wake up in a cold sweat. What was he talking about, and why should you care?


Whatever model of anesthesia practice you are employed in, your income will depend on two things: how many hours you spend giving anesthetics, and how much you are paid per hour. In a sense operating room anesthesia providers are like taxi cab drivers—the more rides we give, the more fares we collect. The busier your surgeons are, the busier you will be. If your surgeons operate from 7:30 a.m. until 3:30 p.m., you will be earning money for 8 hours, minus break times between cases. If your surgeons operate from 7:30 a.m. until noon, your income may be halved.

Ideally your anesthesia group will employ n anesthesiologists, working in n rooms, for 8 hours in each room. What if the number of operating rooms your group covers each day increases to n+5, but the total number of surgeries stays constant? This is happening in the surgical/anesthesia world today for several reasons. We call this phenomenon “lateral spread,” and it refers to the same surgical volume spreading out over more operating rooms, all starting at the same 7:30 a.m. time, yet now finishing hours earlier.

Reasons behind lateral spread include: (1) Surgeons prefer to operate at 7:30 a.m. when they are not following another surgeon, and therefore will not to be delayed. They can schedule their afternoon as clinic or personal time, instead of waiting to do their first case at an undependable later time slot; (2) Some busy surgeons like to run their cases concurrently in two operating rooms, so that they can operate in the second room while the first room is turning over between cases. This enables them to do more cases in less time; and (3) Many surgeons are opening their own operating rooms in freestanding surgery centers or in their offices, which gives them the advantages of controlling their own operating room schedule and environment, and the opportunity to make extra income from owning and billing for the operating room.

This last point, the extra income from owning a share in the operating room, has become a significant business issue in the current surgical/anesthetic world outside academia. By owning an operating room and then referring cases to that operating room, it’s possible for a surgical specialist to augment their surgical income significantly.

Note: It’s unusual for anesthesiologists to own the surgery center and enjoy this same advantage. Why? Because the surgeon has patients to refer to the surgery center, and most surgeons see no advantage in diluting their income by sharing it with anesthesiologists who do not refer any patients to the surgery center. (An exception to this is an anesthesiologist who is a pain specialist, and who refers his or her patients to the surgery center, thus bringing value and money to the surgery center.) A surgery center may employ an anesthesiologist as a Medical Director, and may allow a small ownership share in the surgery center to the anesthesiologist for this role. In full disclosure, I am the Medical Director of Waverley Surgery Center in downtown Palo Alto.

Waverley Surgery Center is contracted with all major insurance plans, but some surgery centers remain out-of-network (OON) with insurers. Why remain out of network? Let’s look at an example. Let’s say a patient’s health insurance pays 80% of a usual-and-customary rate for contracted physicians and health care facilities, and pays only 50% to out-of network physicians and facilities. But what if the OON facility chooses to charge a markedly inflated charge to out-of-network patients? For example, what if the facility charges $35,000 for a surgical procedure when the in-network, contracted rate is $6000? What if the insurance company then pays the facility 50% of the $35,000, or $17,500?

What if the OON facility waives the patient’s co-payment, and waives the balance of the bill not paid by the insurance company? The patient is not upset, and the facility receives a larger payment than if they were contracted with the insurance companies. It is not unusual to see out-of-network reimbursement be as much as five times higher than contracted reimbursement rates. Insurance companies have filed litigation against out-of-network ambulatory surgery centers, attempting to recover a substantial portion of the OON fees on a number of theories, including that a) the waiver of the co-pay is fraudulent, and b) waiving the co-pay is illegal interference with the contract between the patient and the payor. (www.surgistrategies.com/articles/2008/12/2009-outlook-ambulatory-surgery-centers.aspx December 18, 2008).

In 2009 HealthNet of New Jersey sued Wayne (N.J.) Surgical Center, claiming that the center engaged in fraud when it waived patients’ coinsurance payments so they would use the facility. An Appellate Court rejected HealthNet’s claim, and sided with the surgery center (www.ama-assn.org/amednews/2009/12/07/gvsc1207.htm).

Will insurance companies eventually cease to pay higher levels to OON facilities? Will the government and courts move to outlaw this practice in some way? Perhaps, but for now the playing field includes OON surgery centers making healthy profits. And the increased income from owning surgery centers provides a powerful monetary incentive for surgeons to move as many cases as possible from hospitals into these surgery centers.

Lateral spread to multiple freestanding locations complicates anesthesia scheduling and manpower. The surgical schedule may require n anesthesiologists at 7:30 a.m. for certain days, n + 3 anesthesiologists for other days, and n – 3 anesthesiologists on still other days. If the group hires n + 3 fulltime anesthesia partners, then on certain days they may have 3 to 6 more anesthesiologists than they have rooms. No cases = no income for the day, which makes people unhappy. If the group hires n – 3 fulltime anesthesia partners, then on some days they may be 3 to 6 anesthesiologists short at 7:30 a.m. How does a group handle this problem? It helps to have flexibility, i.e. individuals whose job description is to be available 5 days a week but are guaranteed only to work 3 out of 5 days. It helps to have relationships with other anesthesia groups, so that when your group is short on manpower, the other group(s) may have extra anesthesiologists to lend for a day.

My advice: Be thankful for your free time those days when you’re finished at noon, and be thankful for copious income on the days when you’re working until 7 p.m. You’ll have plenty of both kinds of days.

Introducing …,  THE DOCTOR AND MR. DYLAN, Dr. Novak’s debut novel, a legal mystery. Publication date September 9, 2014 by Pegasus Books.

The first four chapters are available for free at Amazon. Read them and you’ll be hooked! To reach the Amazon webpage, click on the book image below:


Stanford professor Dr. Nico Antone leaves the wife he hates and the job he loves to return to Hibbing, Minnesota where he spent his childhood. He believes his son’s best chance to get accepted into a prestigious college is to graduate at the top of his class in this remote Midwestern town. His son becomes a small town hero and academic star, while Dr. Antone befriends Bobby Dylan, a deranged anesthetist who renamed and reinvented himself as a younger version of the iconic rock legend who grew up in Hibbing. An operating room death rocks their world, and Dr. Antone’s family and his relationship to Mr. Dylan are forever changed.

Equal parts legal thriller and medical thriller, The Doctor and Mr. Dylan examines the dark side of relationships between a doctor and his wife, a father and his son, and a man and his best friend. Set in a rural Northern Minnesota world reminiscent of the Coen brothers’ Fargo, The Doctor and Mr. Dylan details scenes of family crises, operating room mishaps, and courtroom confrontation, and concludes in a final twist that will leave readers questioning what is of value in the world we live in.


5.0 out of 5 stars The Doctor and Mr Dylan, March 3, 2015
prabha venugopal (chicago, il USA) – See all my reviews
Verified Purchase(What’s this?)
Gripping from the beginning to the end. Very well written, bringing to the forefront all the human emotions seen in an operating room spill over into real life. I cannot wait for Dr. Novak to wrote another book! As another physician in the same profession, my admiration for his book knows no limits.

Bang-Up Debut Novel, November 16, 2014

By Norm Goldman “Publisher & Editor of Bookpleasures”

This part legal and medical thriller is structured with a mixed bag of situations involving relationships, jealousy, evil, lies, courtroom drama, operating room mishaps as well as moments that engender conflicting and unexpected outcomes. Noteworthy is that as the suspense builds readers will become eager to uncover the truth involving a mishap concerning Nico and a surgical procedure that has unanticipated ramifications.

This is a bang-up debut from a writer who understands timing and is able to deliver hairpin turns, particularly involving the courtroom drama,that you would expect from a book of this genre.

TwinCities.com PIONEER PRESS Entertainment

by Mary Ann Grossman, Entertainment Editor, St. Paul Pioneer Press mgrossman@pioneerpress.com, January 4, 2015

“The Doctor & Mr. Dylan” by Rick Novak (Pegasus Books, $17.50)

Dr. Nico Antone doesn’t hide the fact he hates his wife, but he says he didn’t kill her during an operation. The authorities think otherwise and his trial is the riveting suspense in this novel that is part medical thriller, part legal thriller, part exploration of family relationships.

Nico is an anesthesiologist (as is the author) who leaves his wife, their plush life in California and his job at Stanford to move to his hometown of Hibbing so their son, Johnny, has a better chance of getting into a prestigious college. Johnny hates the idea of moving to a small, cold town, but he’s popular from the first day in school. Nico doesn’t do so well. He’s envied by Bobby, an anesthetist who’s jealous of the better-educated Nico. But it’s hard to take Bobby seriously, since he thinks he’s the young Bob Dylan and lives in the house where Bobby Zimmerman grew up. To complicate matters, Nico is attracted to the mother of the young woman his son is dating. When the two teens get in trouble, Nico’s furious, rich wife comes to Minnesota and needs an emergency operation that puts her on Nico’s operating table.

Novak grew up in Hibbing, where he worked in the iron ore mines and played on the U.S. Junior Men’s Curling championship teams of 1974 and ’75. After graduating from Carleton College, he earned a medical degree at the University of Chicago and spent 30-plus years at Stanford Hospital, where he was an associate professor of anesthesia and Deputy Chief of the Anesthesia Department. His courtroom scenes are based on his experiences as an expert witness.

The Physician’s Late-Night Reading List

Two Pritzker alums pen captivating tales

By Brooke E. O’Neill, University of Chicago Pritzker School of Medicine, editir, Medicine on the Midway Magazine

For most physicians, writing — patient notes, case histories, perhaps journal articles — is part of the job. But for anesthesiologist-novelist Rick Novak, MD’80, and neurosurgeon-memoirist Moris Senegor, MD’82, it’s a second career that consumes early morning hours long before they step into the OR.

Fans of John Grisham will find a kindred spirit in Novak, whose fast-paced medical thriller, The Doctor & Mr. Dylan (Pegasus Books, 2014), transports readers to rural Northern Minnesota, where an accomplished physician and a deranged anesthetist who thinks he’s rock legend Bob Dylan see their worlds collide in the most unexpected ways.

Delivering real-life twists and turns — and a love letter to the Bay Area — is Senegor’s Dogmeat: A Memoir of Love and Neurosurgery in San Francisco (Xlibris, 2014), a coming-of-age tale chronicling the author’s away rotation with renowned neurosurgeon Charles Wilson, MD, at the University of California, San Francisco. Brutally honest, it spares no details of a time Senegor, who also served as a resident under the University of Chicago’s famed neurosurgery chair Sean Mullan, MD, describes as “one of the biggest failures of my life.”

One a vividly imagined nail-biter, the other an intimate peek into the surgical suite, both books deliver an ample dose of intensity and drama.



The Doctor and Mr. Dylan (Pegasus Books, 2014) by Rick Novak, MD’80

“I thought it was a novel way of killing someone,” said Rick Novak, deputy chief of anesthesiology at Stanford University, describing the imagined hospital death that was the genesis of his dark thriller The Doctor & Mr. Dylan. A huge Bob Dylan fan — the rock icon was born in Novak’s hometown of Hibbing, Minnesota, where the story takes place — he then dreamed up a possible culprit: a psychotic anesthetist who thinks he’s Dylan.

From there, the words flowed. “I would write whenever I was with my laptop and had a free moment: in mornings, in evenings, in gaps between cases,” said Novak, who also blogs about anesthesia topics. “I don’t sleep much.”

After finishing the manuscript — one year to write, another to edit — came the challenge of finding a publisher. “In anesthesia, I’m an expert,” Novak said. “In the literary world, I’m an unknown.” After 207 responses of “no, thanks” or no answer at all, he landed an agent. Two months later, she informed him that Pegasus Books had bought his debut novel.

“I started crying,” Novak admits. “I have a third grader and at the time the big word the class was learning was ‘perseverance.’ That was it exactly.”

Dr. Joseph Andresen, Editor, Santa Clara County Medical Association Medical Bulletin, from the January/February 2015 issue:


This past month, Dr. Rick Novak handed me a hardbound copy of his debut novel The Doctor and Mr. Dylan. Rick and I go way back. It was my first week of residency at Stanford when we first met. A newcomer to the operating room, all the smells and sounds were foreign to me despite my previous three years in the hospital as an internal medicine resident. Rick, a soft spoken Minnesotan at heart, in his second year of residency, took me under his wing and guided me through those first few bewildering months, sharing his experience and wisdom freely.

Fast-forward 30 years later. Dr. Rick Novak, a novel and mystery author? This was new to me as I sat down and opened the first page of The Doctor and Mr. Dylan. I have to admit that I didn’t know what to expect. Few books highlight a physician/anesthesiologist as a protagonist, and few books feature a SCCMA member as a physician/author. However, a medical-mystery theme novel wasn’t at the top of my must read list. With my 50-hour workweek, living and breathing medicine, imagining more emotional stress and drama was the furthest thing from my mind. However, three days later, as I turned the last page, and read the last few words. “life is a series of choices. I stuck my forefinger into the crook of the steering wheel, spun it hard to the left and …” This completed my 72-hour journey of and free moments I had, completely immersed in this story of life’s disappointments, human imperfections, and simple joys.

Rick, I can’t wait for your next book. Bravo!

Hibbingite writes twisted medical tale

HIBBING — Readers who are looking for a whodunit that will keep them up all night are in for a treat.

Hibbing native Rick Novak recently released his first book “The Doctor and Mr. Dylan,” a fiction set in Hibbing that merges anesthesia complications, a tumultuous marriage and the legend of Bob Dylan.

“The dialogue is sometimes funny, and there are lots of plot twists,” he said.

Novak said the book will not only entertain readers, but teach them about anesthesiology, Dylanology, the stressful race for elite college admission, and life on the Iron Range.

“The book is very conversational and streamlined,” he said. “I try to write as one would tell a story out loud.”

Novak said “The Doctor and Mr. Dylan” took him three years to perfect. He is currently working on his second book.

5.0 out of 5 stars I Sense We Have Another F.Scott Fitzgerald Emerging on the Literary Scene, December 1, 2014
Deann Brady (Sunnyvale, CA USA) – See all my reviews
I found Rick Novak’s first novel, “The Doctor and Mr. Dylan,” a most exciting combination of biting sarcasm, mystery and daily activity spun with fresh new phrases that made me turn my ear back to listen to the literary cadence of his words again and again even though, on the other hand, I was anxious to turn the pages to see what would happen next. His brilliant handling of scenes is reminiscent of The Great Gatsby by F. Scott Fitzgerald. A compelling read!Deany Brady, author of “An Appalachian Childhood”


allan mishra

This review is from: The Doctor and Mr. Dylan (Kindle Edition)

Just finished Dr. Novak’s delightful novel. I sincerely enjoyed his honest take about the pressures and values that exist within California’s Silicon Valley. He also brought the North Country of Minnesota to life with memorable characters and a twisting, addictive plot. Buried beneath the fun and funny story is a deeper message about how to best care for your kids, your relationships and yourself. Very well written and highly recommended.

Learn more about Rick Novak’s fiction writing at rick novak.com by clicking on the picture below:



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