By Rachel Bluth and Emmarie Huetteman Kaiser Health News September
11, 2019
As
proposals to ban surprise medical bills move through Congress and state
legislatures with rare bipartisan support, physician groups have emerged as the
loudest opponents.
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.
Opponents
have been waging well-financed campaigns. Slick TV ads and congressional
lobbyists seek to stop legislation that had widespread support from
voters. Nearly 40% of patients said they
were “very worried” about surprise medical bills, which
generally arise when an insured individual inadvertently receives care from an
out-of-network provider.
But as
lobbyists purporting to represent doctors and hospitals fight the proposals, it
has become increasingly clear that the force behind the multimillion-dollar
crusade is not only medical professionals, but also investors in private equity
and venture capital firms.
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.
“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.
“They
have money to burn,” said a Democratic congressional aide with knowledge of the
lobbying efforts. “They’re in take-the-bill-down mode.”
Private
equity firms and the staffing companies they own have a lot to lose, too. While
doctors largely once worked for hospitals or had individual contracts, many
hospitals now rely on these huge staffing businesses to provide doctors for
various departments. Companies like Envision Physician Services and TeamHealth
provide doctors to dozens, sometimes hundreds of hospitals, including BJC HealthCare facilities in the St. Louis area.
Private equity firms back these ever-growing outsourced staffing companies.
Because
patients have no effective way to protect themselves from unexpected medical
bills, even knowledgeable, proactive people with comprehensive insurance can
find themselves whisked away to an out-of-network hospital in an emergency or
treated by an out-of-network anesthesiologist at the in-network hospital they
selected.
Several
lawmakers have adopted the issue, one seemingly ready-made for campaign season:
In fighting surprise bills, they are attacking a practice both reviled by the
public and easy to explain.
What’s
harder to explain is where the money on the other side of the campaign comes
from. Coalitions like Physicians for Fair Coverage and dark-money groups with
innocuous names like Doctor Patient Unity have flooded the airwaves with ads
urging people to call their lawmakers and voice opposition to ending surprise
bills. And those lawmakers are overwhelmingly senators facing difficult
reelection fights next year, who might be hesitant to vote for change —
especially if it means more expensive ad campaigns aimed at taking them down.
Private equity’s role
To
understand the power and size of private equity in the U.S. health care system,
one must first understand physician-staffing firms.
Increasingly,
hospitals have turned to third-party companies to fill their facilities with
doctors. Among driving factors: physician shortages, a bigger insured
population because of the Affordable Care Act and an aging population, according to research from
the investment firm Harris Williams & Co.
In some
areas, doctors have few options but to contract with a staffing service, which
hires them out and helps with the billing and other administrative headaches
that occupy much of a doctor’s time. Staffing companies often have
profit-sharing agreements with hospitals, so some of the money from billing
patients is passed back to the hospitals.
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.
With
affiliates in every state, these privately owned, profit-driven companies staff
emergency rooms, own dialysis facilities and operate physician practices. 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.
A study
by the Kaiser Family Foundation found that 1 in 6 Americans with insurance were
surprised by a medical bill after treatment at a hospital in 2017.
That is
no coincidence: In many states, balance billing — when a provider charges a
patient the difference between their fee and what their insurance company paid
— is legal, so physician-staffing services have little incentive to contract with
insurance companies and provide in-network doctors.
“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
receive and then actively watering down any legislation that would both protect
patients but affect their bottom line,” Cooper said.
The
staffing firm Envision disputed this assessment of its business model. An
emailed statement said more than 90% of its business comes from in-network
agreements and that the company continues “actively advocating for a federal
solution to surprise medical bills.”
Alternatives
The two
possible solutions on the table in congressional legislation are arbitration
and benchmarking.
Arbitration
sends the insurers and health care providers through an independent review to determine
a fair price in the event of a balance bill.
Under
benchmarking, out-of-network physician charges are paid by the patient’s health
plan based on an average of what other in-network doctors in the area are paid.
Money is being spent on all sides of the debate, but for the physicians and
private equity firms, it’s weighted most heavily on the side of arbitration.
Assorted
groups have organized themselves into different coalitions and mega-groups to
pool resources for lobbying and ads. On the side of benchmarking, there is the
Coalition Against Surprise Medical Billing, made up of employers and insurers
like Blue Cross Blue Shield, the Association of Health Insurance Plans and
ERIC, which represents large employers.
On the
arbitration side, there is Out of the Middle, Physicians for Fair Coverage,
SOAR and Doctor Patient Unity, to name a few. Ostensibly, these are composed of
doctor and hospital groups.
“It’s
important that federal legislation to end surprise billing also incentivizes
all providers and insurers to negotiate in good faith in order to increase the
number of in-network providers and ensure patients’ continued access to
high-quality medical care,” added Megan Taylor, a spokeswoman for Physicians
for Fair Coverage.
Yet
these groups are dominated by private equity and hedge-fund-backed
organizations. Physicians for Fair Coverage is made up of ApolloMD (a staffing
firm owned in part by the investment firm ValorBridge), Radiology Partners (a staffing
firm owned in part by the investment firm New Enterprise Associates) and a trio of
staffing firms called US Acute Care Solutions, US Radiology Specialists and US
Anesthesia partners (all partly owned by the investment firm Welsh, Carson, Anderson and Stowe).
Among
the groups listed as lobbying on surprise bills are hospital groups like Christus Health (which
uses EmCare) and Wellstar Health Systems (which
uses ApolloMD). In
addition, HCA, a large hospital
chain that has had a joint venture with EmCare, has also been active on these
issues.
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.
Spending
on lobbying around this issue has been generous, according to disclosures from
the Center for Responsive Politics. The staffing firm Mednax spent
$180,000 on lobbying the House and Senate. TeamHealth and TeamHealth Inc. together
spent $100,000. Physicians for Fair Coverage spent
$145,000. US Physician Partners,
an “informal lobbying group” that never lobbied before 2019, spent $130,000.
“There’s
no way we can match them,” said Gelfand, from ERIC. “We’re entering this debate
knowing we’re being horrifically outspent.”
Kaiser
Health News is a national health policy news service. It is an
editorially independent program of the Henry J. Kaiser Family Foundation which
is not affiliated with Kaiser Permanente.
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