Yves here. We’ve written about the role of private equity in acquiring specialized physicians’ practices, such as emergency room practices, which hospitals have bizarrely outsourced. Private equity mavens Eileen Appelbaum and Rosemary Batt documented the connection between these purchases and the rise of the patient-gouging too politely referred to as “surprise billing” or “balance billing” From a recent Institute for New Economic Thinking post:
Surprise medical billing made headlines in 2019 as patients with health insurance found themselves liable for hundreds or even thousands of dollars in unforeseen medical bills. When patients with urgent medical problems go to an emergency room (ER) or are treated by specialty doctors at a hospital that is in their insurance network, they expect that the services they receive will be ‘in-network’ and covered by their insurance. But often a doctor not in their insurance network is under contract with the hospital and actually provides the care. When this happens, patients are stuck with unexpected and sometimes unreasonably high medical bills charged by these ‘out-of-network’ doctors. This typically occurs when the hospital has outsourced the ER or other specialized services to a professional staffing firm or a specialty doctors’ practice. This problem has exploded in recent years because hospitals are increasingly outsourcing these services to cut costs. And more and more patients are faced with surprise medical bills — adding substantially to the already impossible medical debt that working people face.
Hospital outsourcing of emergency, radiology, anesthesiology, and other departments has provided an opening for physician practices to operate these services as independent organizations. Initially, hospitals outsourced these services to small, local doctors’ groups. But over the past decade, private equity firms have become major players — buying out doctors’ practices and rolling them up into large corporate physician staffing firms that provide services to outsourced emergency rooms, anesthesiology and radiology departments, and other specialty units. By 2013, physician staffing firms owned by Blackstone Group and Kohlberg, Kravis Roberts & Co. (KKR) – among the largest PE firms in the country – cornered 30 percent of this market. Since then, private equity ownership of these services has continued to grow. Private equity firms also own two of the three largest emergency ambulance and air transport services – another major source of surprise medical billing…..
Surprise medical billing is exacerbating the already serious problem of medical debt in this country, which is a leading cause of bankruptcy for American families. And surprise billing is growing rapidly. Forty percent of Americans surveyed by the Kaufman Family Foundation in April, 2019, reported receiving an unexpected medical bill; and 20 percent of those surveyed said it was due to out-of-network charges – or surprise billing. A study by health researchers at Stanford University, for example, examined fees charged to patients with private insurance who were treated by the emergency department of a hospital. They reviewed 13.6 million trips to the ER that occurred over the period 2010 to 2016. About a third (32.3 percent) of these trips in 2010 resulted in a surprise medical bill. But by 2016, that figure had increased to 42.8 percent. That is, more than 4 in 10 trips to the ER ended with patients getting a surprise medical bill. For in-patient stays, surprise billing rose from 26 percent to 42 percent, and the average costs per patient also jumped from $804 to $2,040. At this rate of increase, the estimated percent of hospital visits resulting in a surprise bill would be 48 percent in 2019 – or almost one half. The study also found that in 2016, 86% of ER visits and nearly 82% of hospital admissions incurred surprise ambulance service bills…
Private equity firms have played a critical role in consolidating physicians’ practices into large national staffing firms with substantial bargaining power vis-à-vis hospitals and insurance companies. They have also bought up other emergency providers, such as ambulance and medical transport services. They grow by buying up many small specialty practices and ‘rolling them up’ into umbrella organizations that serve healthcare systems across the United States. Mergers of large physician staffing firms to create national powerhouses have also occurred. As these companies grow in scale and scope and become the major providers of outsourced services, they have gained greater market power in their negotiations with both hospitals and insurance companies: hospitals with whom they contract to provide services and insurance companies who are responsible for paying the doctors’ bills.
This is profiteering at the expense of health. Predatory is too kind a word. This is as evil as the Sacklers creating opioid addicts. Individuals will be saddled with ruinous debt, racked with stress on top of their ailments. They may wind up declaring bankruptcy, or as the video below that Lambert featured in yesterday’s Water Cooler, wind up further jeopardizing their health by scrimping on care. Needless to say, horror stories like these will lead many to skip a visit to the ER, which can be a fatal or crippling decision.
Sounds from the @berniesanders medical debt town hall, pt. 2:
“We were in the hospital when the child was critically ill and in Intensive Care and the collection agencies came in to us. They had to call security on me because I lost my mind.”
(Watch the audience reaction) pic.twitter.com/FZEh0NprmX
— Cara Korte (@CaraKorte) September 24, 2019
Roy Poses fills in another piece of this story: how private equity is funding dark money political groups and getting its owned physicians groups to front for them in fighting legislation that would outlaw surprise billing. Note that Appelbaum and Batt also documented the role of the firm EmCare and TeamHealth, as you can see here in gory detail. The Kaiser Health News story that Poses quotes perversely fails to credit Appelbaum and Batt.
By Roy Poses, MD, Clinical Associate Professor of Medicine at Brown University, and the President of FIRM – the Foundation for Integrity and Responsibility in Medicine. Originally published at Health Care Renewal
Background: Mysterious Advocacy of Surprise Medical Bills
The issue of surprise medical bills has gotten a lot of public attention in the last year or so. Surprise medical bills are consequences of the complex US system for financing health care through private, usually commercial insurance. Insurance companies typically have networks of hospitals, physicians, health care facilities etc. Patients who receive care from “in-network” physicians or facilities typically pay lower out of pocket costs, such as co-pays and deductibles. Surprise bills are usually generated when a patient goes to an in-network facility, like a hospital, but then receives care from some out of network entity or person at the facility, and hence incurs higher out of pocket costs. In the last year, the US congress has struggled with what to do about surprise bills, which have become notorious.
One odd aspect of this struggle has been the identity of advocates who oppose most proposed solutions for the problem, that is, who de facto appear to support surprise medical bills. Some of these advocates appear to be physicians. On one hand, as Axios reportedbriefly in October, 2018, there are those with obvious reasons to allow surprise billing to continue, such as emergency physicians. The article noted
Two weeks after a handful of senators introduced legislation to curtail surprise medical bills, the American College of Emergency Physicians hired new lobbyists to handle the issue.
Axios further explained:
Emergency doctors obviously want their seat at the table, because they stand to lose a lot of money if their ability to do balance billing vanishes or becomes limited.
Of course, the new lobbying effort might make the emergency physician group look bad, since it seemed to be emphasizing its financial interests over those of patients, who have to pay the unexpected out of pocket charges:
At least the ACEP was somewhat open about what they were doing.
However, more recently, more mysterious advocates for surprise bills appeared. For example, Bloomberg reportedin August, 2019:
A shadowy group has spent more than $13 million since July advertising in states with vulnerable senators to oppose legislation that would rein in medical bills that take patients by surprise.
The campaign by a group calling itself Doctor Patient Unity, playing out on television, radio, and on social media in more than 20 states, is helping muddy the congressional debate over how to combat surprise medical bills and could make it harder to pass legislation this year, congressional aides familiar with the issue said in interviews, speaking on condition of anonymity.
The ad buys represent the most-expensive campaign on any health-related topic Congress has taken on this year, according to data from Advertising Analytics and Federal Communications Commission filings.
The name of the wealthy group buying advocacy advertising implies it represents doctors, but it was not clear who was really behind it. Thus it appears to be our newest example of dark moneyin health care.
Who is ultimately paying for these ads is shrouded in secrecy. The television ads are known as ‘issue ads’ and therefore don’t require Federal Election Commission disclosure.
The ads are all being bought either by Del Cielo Media of Alexandria, Va., or its parent company, Smart Media Group, also of Alexandria, according to FCC filings. Both companies didn’t return repeated messages seeking comment.
Del Cielo has been linked to Republican campaigns. The group bought ads for political action committees opposing Democratic candidates such as Phil Bredesen, the former Tennessee governor who lost a Senate bid to Republican Marsha Blackburn in 2018, according to FCC filings. Del Cielo got more than $1.2 million from a political action committee favoring President Donald Trump, according to filings with the Federal Election Commission.
Doctor Patient Unity was formed as a corporation in Virginia by a limited liability company with the same address as the firm Holtzman Vogel Josefiak Torchinsky, according to state business filings. The law firm provides ‘strategic counsel and compliance advice’ to entities involved in political and policy affairs, according to its website.
Here on Health Care Renewal, we worry about threats to physicians’ core values. Physicians swear to make the care of individual patients their first responsibility. Since caring for patients involves caring for whole patients, deliberately pushing for methods to subject patients to surprise bills which can cause anxiety, financial instability, and probably discourage access to future care seems to be an example of physicians violating their core values. Physicians who do so should be called out. However, at least it is possible to call out identifiable physician groups defending surprise billing. When mystery groups with deep pockets do so, the threat may be harder to counter.
The first step to address it would be to figure out who was behind Doctor Patient Unity. As usual, the key is to start by asking the question cui bono? Who benefits?
Private Equity Firms Own Physician-Staffing Companies Which Benefit from Surprise Billing
The answer turns out to be private equity firms. On September 11, Kaiser Health News reported,
Often led by doctors with the veneer of noble concern for patients, physician-staffing firms — third-party companies that employ doctors and assign them out to health care facilities — have opposed efforts to limit the practice known as balance billing.They claim such bans would rob doctors of their leverage in negotiating, drive down their payments and push them out of insurance networks.
In the past eight years, in such fields as emergency medicine and anesthesia, investors have bought and now operate many large physician-staffing companies. And key to their highly profitable business strategy is to not participate in insurance networks, allowing them to send surprise bills and charge patients a price they set — with few limitations.
So it may not be that physicians in general support surprise bills. Instead, it seems to be that some corporate physicians, that is, physicians employed by for-profit corporations, do so. Moreover, these physicians are not employed by for-profit hospitals, but by physician-staffing companies, entities with which most patients, and even some physicians are likely to be unfamiliar.
Furthermore, these physician staffing firms are often owned by financial firms,
‘We’ve started to realize it’s not us versus the hospitals or the doctors, it’s us versus the hedge funds,’ said James Gelfand, senior vice president of health policy at ERIC, a group that represents large employers.
More precisely, it may be “us versus private equity.”
The two largest staffing firms, EmCare and TeamHealth, together make up about 30% of the physician-staffing market.
That’s where private equity comes in. A private equity firm buys companies and passes on the profits they squeeze out of them to the firm’s investors. Private equity deals in health care have doubled in the past 10 years. TeamHealth is owned by Blackstone, a private equity firm. Envision and EmCare are owned by KKR, another private equity firm.
Private equity firms are focused on making as much money as possible in the short-term. And they have no allegiance to physicians’ core values. In particular,
Research from 2017 shows that when EmCare entered a market, out-of-network billing rates went up between 81 and 90 percentage points. When TeamHealth began working with a hospital, its rates increased by 33 percentage points.
‘These physician-staffing companies are benefiting tremendously from the ability to bill out-of-network,’ said Zack Cooper, an associate professor of public health at Yale, who has studied physician-staffing firms and balance billing. ‘It’s a small but profitable sliver of the health care system that these firms are using to make pretty significant amounts of money.’
Cooper said the business models are built on the ability to get profits from balance billing.
‘Private equity firms are buying up physician practices that allow them to bill out-of-network, cloaking themselves in the halo that physicians generally receiveand then actively watering down any legislation that would both protect patients but affect their bottom line,’ Cooper said.
So while some physicians may financially benefit from surprise billings, employers of such physicians may benefit even more, and now private equity firms are positioned to benefit a lot.
Private Equity Firms Funding Stealth Advocacy Campaign for Surprise Billing with Dark Money
And the plot thickens. Since private equity now seems to be the main beneficiary of surprise billing, it is no longer surprising that they have been running a stealth advocacy campaign to support it.
On September 13, the New York Times reportedon who funds Doctor Patient Unity.
in late July, a mysterious group called Doctor Patient Unity showed up. It poured vast sums of money — now more than $28 million — into ads opposing the legislation, without disclosing its staff or its funders.
Trying to guess who was behind the ads became something of a parlor game in some Beltway circles.
Now, the mystery is solved. The two largest financial backers of Doctor Patient Unity are TeamHealth and Envision Healthcare, private-equity-backed companies that own physician practices and staff emergency roomsaround the country, according to Greg Blair, a spokesman for the group.
It took some effort to discover this.
Like all so-called dark money political action groups, Doctor Patient Unity is not legally required to reveal the names of its supporters and, in fact, appears to have worked hard to obscure its identity.
The bread crumbs were scant. Filings by the group to the Federal Communications Commission for purposes of advertising listed the name of a treasurer who works for a firm that often fills such roles for Republican political groups. The group’s corporate filing in Virginia lists an agent who is common to more than 150 other political action groups. Neither the treasurer, the named partners in her firm, the advertising firm or the lawyer associated with the corporate entity responded to calls or emails. An email to the address on the group’s bare-bones website went unanswered for weeks until the group’s statement on Friday.
Representatives of both companies confirmed Friday that they had funded the group….
Note that Doctor Patient Unity has used a number of the social media tools often used for various propaganda and disinformation.
Doctor Patient Unity has also spent hundreds of thousands of dollars on Facebook and Google advertising, and has been sending direct mail to voters in dozens of congressional districts. In some cases, the group describes the legislation as the ‘first step toward socialists’ Medicare-for-all dream.’
And they clearly use the current language of ideological insults.
Whether any of the people behind Doctor Patient Unity were actually doctors, particularly doctors who were not full time employees of corporations owned by private equity, is unclear. The examples of the ads run by Doctor Patient Unity in the NYT article did not seem informed by the viewpoint of health care professionals.
In one ad, an ambulance crew arrives with a patient, only to find the hospital dark and empty.
in heavy rotation in early August, featured a woman standing in front of a blank background urging voters to call their senators to stop a practice she calls “government rate setting.” She warned the policy could affect patients’ access to doctors in an emergency.
However, anyone seeing the ads without knowing who was paying for them might assume that they represent the viewpoints of doctors in general.
By the way, in an almost off-hand manner, the Kaiser Health News article adds a little explanation of how advocacy efforts around billing by one prominent medical society could be tied to private equity:
Even the groups that appear to represent independent doctors are tied to private equity and staffing firms. Out of the Middle consists of trade organizations for specialty doctors, like the American College of Emergency Physicians (ACEP) and the American Society of Anesthesiologists and many others. It’s mostly run by ACEP, whose immediate past president, Dr. Rebecca Parker, was also a senior vice president at Envision.
We thus see the latest version of a conflict of interest affecting the leadership of a medical society.
We have long been concerned about how health care has been increasingly commercialized, as hospitals and other “provider” organizations get bought out by for-profit corporations, and as physicians are increasingly employed by such corporations to provide care to individual patients, becoming corporate physicians.
Even more concerning is the intervention of private equity. We first discussed the perils of private equity takeovers of hospitals here in 2010, and of physicians providing direct patient care as employees of corporations owned by private equity herein 2011. The private equity business model seems particularly unsuitable for organizations which provide patient care, as we discussedin some detail in 2012.
For a quick modern summary of why it is bad to have private equity involved in direct patient care, see Merrill Goozner writing in Modern Healthcare, September 5, 2019,
The private equity business model in healthcare parallels other industries: Use highly leveraged private capital to roll up a number of small firms into one entity, with the private equity firm providing collective management. In addition to hefty fees for arranging the transaction (generally 1% to 2% of the purchase price), the private equity firm typically demands a 20% return on its investment after paying interest on the debt.
After three to seven years, assuming all goes well in achieving the promised efficiencies, the private equity firm and its junior partners (who are the specialty physicians in this latest wave of takeovers) earn a windfall by taking the company public or flipping itto another set of private equity investors. If things don’t work out as planned, the firm cuts its losses and declares bankruptcy (most of its capital will have been recouped through the 20% annual returns).
The management company has two paths to achieve its financial targets. It can either reduce costs sharply or look for ways to increase revenue.
Clearly the focus is not on the quality of the firm’s products or services, and in this case, not on providing good quality, accessible, affordable patient care. As Goozner stated,
Anyone who doubts private equity takeovers can financially harm patients and subvert cost control should take a closer look at the balance-billing fiasco. Most of the ‘out of network’ services that lead to large balance bills emanate from the nation’s emergency departments, which in many areas of the country have been taken over by private equity-owned firms.
So during my medical career we have gone from physicians practicing as individual professionals or in small professional groups, to physicians employed by non-profit organizations, to physicians employed by publicly traded for-profit corporations, to physicians employed by corporations owned by private equity. Each new group of employers seems less likely than the last to uphold physicians’ core values, and more likely to put short-term revenue ahead of patients, and ahead of good quality, affordable, accessible care.
Now private equity has upped the ante further by hiding behind its physician employees’ white coats while promoting practices that increase revenue by harming patients.
We all need to look behind the spin, propaganda, and disinformation to learn cui bono, who benefits from our current dysfunctional health care system. Physicians in particular need to speak up for patients, and shrink from all efforts to use them as useful idiots in support of the plutocrats running the system.