Emergency room practices have been targeted by private equity firms, largely because their ability to cheat patients through balance billing. Because people are not in a position to go to another ER, that might allow them to be covered by their insurance, they can charge, and overcharge largely at will.
Rather unsurprisingly, ER docs are whistle-blowing about the fraud that their PE owners are demanding:
A group of emergency physicians and consumer advocates in multiple states are pushing for stiffer enforcement of decades-old statutes that prohibit the ownership of medical practices by corporations not owned by licensed doctors.
Thirty-three states plus the District of Columbia have rules on their books against the so-called corporate practice of medicine. But over the years, critics say, companies have successfully sidestepped bans on owning medical practices by buying or establishing local staffing groups that are nominally owned by doctors and restricting the physicians’ authority so they have no direct control.
These laws and regulations, which started appearing nearly a century ago, were meant to fight the commercialization of medicine, maintain the independence and authority of physicians, and prioritize the doctor-patient relationship over the interests of investors and shareholders.
Those campaigning for stiffer enforcement of the laws say that physician-staffing firms owned by private equity investors are the most egregious offenders. Private equity-backed staffing companies manage a quarter of the nation’s emergency rooms, according to a Raleigh, North Carolina-based doctor who runs a job site for ER physicians. The two largest are Nashville, Tennessee-based Envision Healthcare, owned by investment giant KKR & Co., and Knoxville, Tennessee-based TeamHealth, owned by Blackstone.
Court filings in multiple states, including California, Missouri, Texas, and Tennessee, have called out Envision and TeamHealth for allegedly using doctor groups as straw men to sidestep corporate practice laws. But those filings have typically been in financial cases involving wrongful termination, breach of contract, and overbilling.
Now, physicians and consumer advocates around the country are anticipating a California lawsuit against Envision, scheduled to start in January 2024 in federal court. The plaintiff in the case, Milwaukee-based American Academy of Emergency Medicine Physician Group, alleges that Envision uses shell business structures to retain de facto ownership of ER staffing groups, and it is asking the court to declare them illegal.
“We’re not asking them to pay money, and we will not accept being paid to drop the case,” said David Millstein, lead attorney for the plaintiff. “We are simply asking the court to ban this practice model.”
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The corporate practice of medicine doctrine has “a very interesting and not a very flattering history,” said Barak Richman, a law professor at Duke University. “The medical profession was trying to assert its professional dominance that accrued a lot of benefits to itself in ways that were not terribly beneficial to patients or to the market.”
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Private equity-backed firms have been attracted to emergency rooms in recent years because ERs are profitable and because they have been able to charge inflated amounts for out-of-network care — at least until a federal law cracked down on surprise billing. Envision and TeamHealth prioritize profits, critics say, by maximizing revenue, cutting costs, and consolidating smaller practices into ever-larger groups — to the point of regional dominance.
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Proponents of private equity ownership say it has brought a lot of good to health care. Jamal Hagler, vice president of research at the American Investment Council, said private equity brings expertise to hospital systems, “whether it’s to hire new staff, grow and open up to new markets, integrate new technologies, or develop new technologies.”
But many physicians who have worked for private equity companies say their mission is not compatible with the best practice of medicine. They cite an emphasis on speed and high patient volume over safety; a preference for lesser-trained, cheaper medical providers; and treatment protocols unsuitable for certain patients.
Dr. Sean Jones, an emergency physician in Asheville, North Carolina, said his first full-time job was at a Florida hospital, where EmCare, a subsidiary of Envision, ran the emergency room. Jones said EmCare, in collaboration with the hospital’s owner, pushed doctors to meet performance goals related to wait times and treatments, which were not always good for patients.
What is not mentioned in this article is the explosion in upcoding associated with private equity. (The link also argues that PE investment is an indicator of market failure and corruption)
For the uninitiated, upcoding is when patients' condition is described in deceptive terms in order to allow for larger charges. Basically, it's fraud, and it is central to how PE gets its returns in the healthcare field.
We need to see senior executives being frog marched out of their offices in handcuffs.
I have increasingly come to believe that criminal prosecutions of people, as well as fines against companies, are required to reduce corruption.
Without personal criminal liability, nothing will change.
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