Katie Porter didn’t go to the closest hospital when, in the course of her 2018 marketing campaign for election to Congress, she started struggling debilitating ache in her stomach.

“I knew sufficient to decide on to go to an in-network emergency room when my appendix burst,” mentioned Porter. In agony, she insisted on being taken to a hospital that was lined by her medical health insurance, regardless that it was additional away.

“However my surgeon was out of community,” Porter added. Quickly afterwards, she obtained a requirement for about $3,000. “Enclosed with the invoice have been directions on how you can enchantment my denial of protection, as a result of he’d seen this occur earlier than.”

Porter had learnt the laborious means that her hospital, like many others in America, didn’t make use of the medical doctors who work on its wards.

It’s a realisation that has dawned on Wall Avenue, too — inspiring what’s arguably the non-public fairness trade’s most controversial try and seize a slice of the 18 per cent of GDP that the US spends on healthcare.

Emergency room medical doctors cope with 130mn circumstances in a typical yr, offering life-saving care to everybody from gunshot victims to stroke victims, whereas risking publicity to infectious illness in what is without doubt one of the highest-stakes jobs in American hospitals.

Their reward is a wave of medical malpractice lawsuits, countless fights with insurance coverage firms, and even the chance that their sufferers might not have the ability to pay in any respect.

None of that has deterred Wall Avenue. Some non-public fairness corporations have centered on actual property, shopping for hospitals or pressing care centres. Others goal to earn a living shopping for up the businesses that make use of the medical doctors who work in lots of US hospitals. 

In Texas alone, three firms make use of physicians that workers about one-quarter of the state’s 384 emergency rooms, a Monetary Occasions assessment of job postings and regulatory information has discovered. That sample is repeated throughout the nation; a single firm, TeamHealth, reported in 2017 that it offered emergency staffing to 17 per cent of the hospitals in its goal market.

All three of these firms are actually owned by non-public fairness. TeamHealth offered itself to Blackstone for $6.1bn in 2017, at about the identical time that its smaller rival American Doctor Companions (APP) was taken over by Brown Brothers Harriman. The largest doctor staffing firm, Envision, was acquired by KKR for $9.9bn the next yr.

Critics say the result’s an more and more concentrated market through which a handful of Wall Avenue-backed firms have sweeping powers to manage how emergency drugs is practised and paid for. The trade’s defenders counter that it has little option to however to bulk up or face damage by the hands of an much more concentrated insurance coverage trade.


Antitrust enforcers in Washington are more and more receptive to the argument that non-public fairness cash is distorting healthcare. The Federal Commerce Fee, whose chair Lina Khan has vowed to take a “muscular” strategy to policing non-public fairness offers which have “life-and-death” penalties, hosted a listening session to probe the implications of healthcare mergers earlier this yr.

Federal Trade Commission chair Lina Khan
Federal Commerce Fee chair Lina Khan has vowed to take a “muscular” strategy to policing non-public fairness offers © Al Drago/Bloomberg

A sequence of lawsuits filed up to now two years by staff, medical doctors’ teams and insurance coverage firms sketch an image of these penalties, alleging that among the largest firms have tampered with medical requirements to chop prices or increase payments, or in some circumstances engaged in systematic fraud.

Such monetary disputes, along with a possible regulatory crackdown, threaten not solely non-public fairness’s earnings, however the monetary stability of a life-saving trade that’s now saddled with billions of {dollars} of debt.

“I name it a monopolisation,” mentioned a Texas physician who has labored for 2 of the three largest non-public equity-backed staffing firms, and laments the choice of some medics to promote the companies they’ve constructed. “It’s like our colleagues are promoting the longer term technology of drugs.”

The takeover

For the medical doctors at Texoma Medical Heart, in Denison, Texas, the primary signal of what a takeover by APP may imply for his or her trauma division was a message from their boss that arrived shortly earlier than 10pm one night time in 2019.

“Retention letters have been despatched out,” the message mentioned, referring to a contract that supplied to pay $30,000 if the medical doctors signed away their proper to work for a competing employer. “Keep in mind you’ll not be eligible for finish of yr bonus if you don’t signal and return.” 

There are compelling causes for hospitals to outsource emergency doctor staffing. Some are not looking for the executive overhead of organising rotas or negotiating with insurers. Others function in states the place for-profit hospitals are barred from using medical doctors to practise drugs, a measure that’s supposed to stop the revenue motive from intruding on therapy selections.

“Staffing patterns, hiring-and-firing protocols, setting the costs, what’s the affected person going to be billed — these are all presupposed to be managed by physicians, in response to the legislation in states like California,” mentioned Robert McNamara, chair of the division of emergency drugs at Temple College in Philadelphia.

Texoma Medical Center in Denison
Medical doctors at Texoma Medical Heart rebelled in opposition to their non-public fairness takeover © Google

However placing native medical doctors’ teams in command of working emergency rooms has turned many into enterprise house owners and executives now not centered purely on affected person care.

In 2002, contemporary out of his medical residency in Michigan, Chris Newton joined an organization known as Emergency Physicians Medical Group, which ran the emergency room at St Joseph’s Hospital in Ann Arbor. “I actually didn’t know what EPMG did,” Newton says.

Twelve years later, he was chief government of a enterprise using 500 medical doctors throughout 35 emergency departments, and had employed an funding banker to determine whether or not they need to promote to a much bigger rival or to a personal fairness agency.

“We’d grown, we’d constructed our infrastructure, however we would have liked to be larger,” mentioned Newton. Many executives imagine that emergency medics have turn out to be significantly susceptible to insurers making an attempt to squeeze payouts as a result of they’re required by legislation to deal with all-comers.

In 2016, Newton offered the physician’s group he had joined as a younger medic to Envision, the largest supplier of staffing for hospital emergency rooms. Two years later, KKR purchased the enlarged group, making Newton some of the senior executives at an organization that hoped, underneath non-public fairness possession, it might have the monetary heft to face as much as the largest insurers.

The backlash

For a private equity industry that has made billions of {dollars} and created formidable empires by assembling automotive washes, dentists’ workplaces, and native companies of each different conceivable form into effectively run nationwide chains, a “roll up” of hospital emergency rooms appeared like a sound plan.

However Wall Avenue had not reckoned on the backlash. Two years after her election, Porter, a Democrat, joined a bipartisan majority in Congress that handed the No Surprises Act, which bans medical suppliers from billing sufferers for prices which were rejected by their insurance coverage firms.

Katie Porter
Katie Porter joined a bipartisan majority in Congress that handed the No Surprises Act, © Kyle Grillot/Reuters

Envision and Blackstone-owned TeamHealth each campaigned in opposition to an early model of the legislation, which they argued would have enabled huge insurance coverage firms to set charges unilaterally. TeamHealth says it has lengthy eschewed so-called shock billing as a matter of coverage, and Envision ended the follow after a brand new chief government, Jim Rechtin, joined in 2020.

With sufferers now protected from shock payments, Rechtin mentioned, insurers are free to press the negotiating benefit created by a 1986 legislation that requires hospitals to deal with emergency circumstances no matter potential to pay. “A subset of well being plans started to say, in impact, ‘Hey, if it’s important to see my sufferers, no matter whether or not I pay you, why ought to I pay you?’.”

Insurers, nevertheless, declare that medical doctors’ teams exploit the absence of an upfront negotiation to cost unreasonable costs for emergency care.

The stand-off has spawned an increasing authorized battle that casts an unflattering mild on insurance coverage firms and doctor staffing teams alike.

America’s largest well being insurer, UnitedHealthcare, has filed lawsuits in opposition to Envision and TeamHealth, alleging that each firms drastically overcharged for routine encounters by submitting payments indicating that sufferers would have risked loss of life or everlasting impairment until they’d obtained speedy, advanced care.

In a single case cited in a lawsuit filed in Tennessee final yr, TeamHealth allegedly demanded $1,712 for treating a 23-year-old man who walked right into a hospital at midnight complaining of epigastric ache after consuming a chilli canine. (Court docket paperwork state that the affected person was given an antacid and despatched house.)

All instructed, UnitedHealthcare alleges fraud in about 60 per cent of the highest-cost medical payments submitted by the 2 non-public equity-owned firms; the insurer says it has made $100mn in overpayments to TeamHealth alone.

Comparable allegations have appeared in testimony from medical doctors who’ve labored in non-public equity-run emergency rooms. Caleb Hernandez, a doctor who labored at numerous hospitals in Colorado, claimed in a lawsuit that he had been required to falsify information to indicate that he had participated within the care of sufferers who have been truly handled by less-qualified workers, in order that TeamHealth might declare reimbursement at a better fee. The case was settled; phrases haven’t been disclosed.

However TeamHealth and Envision argue that they’re the actual victims of a long-running marketing campaign by UnitedHealthcare to keep away from paying respectable medical payments. Their arguments have met with some success. Final yr a Nevada jury ordered UnitedHealthcare to pay a TeamHealth subsidiary $60mn in compensation and punitive damages linked to at least one such declare.

TeamHealth says such episodes show that it “has the sources and scale to battle again in opposition to large insurance coverage firms which might be exploiting their enormous measurement to slash funds to medical doctors”. UnitedHealthcare says essential proof was withheld from the jury, and is interesting.

“I don’t assume anyone’s a saint right here,” mentioned Mark Miller, who advocates for healthcare reform at Arnold Ventures, a philanthropic fund arrange by billionaire vitality dealer John Arnold.

“It’s true that the insurers interact in claims denial, fundamental problem, and every kind of different actions that from a doctor’s perspective may very well be very unfair,” he mentioned. “However consolidation is inherent to the non-public fairness enterprise mannequin, and one enormous final result of consolidation is costs go up.”

The PE mannequin of emergency drugs

The medical doctors at Texoma Medical Heart didn’t perceive how non-public fairness was going to vary the way in which they labored till six months after the takeover.

“They got here in, saying that nothing would change,” says one Texas physician at an emergency division that was acquired by APP. “They didn’t do something for six months, after which they put the mannequin to work.”

That mannequin is spelt out in a presentation given by APP executives as they sought a money infusion of $580mn, a duplicate of which has been seen by the FT.

“Any potential unfavourable impression ensuing from the No Surprises Act” could be repaired, the presentation assured potential lenders, by chopping physician wages, linking earnings to “productiveness”, changing medical doctors with much less certified personnel, and lowering staffing.

APP staffs at the very least a dozen emergency rooms within the Houston space, in response to job commercials revealed on the corporate’s web site. Medics within the metropolis are suing to extricate themselves from non-compete agreements much like the one introduced to medical doctors at Texoma, contending that APP’s efforts to chop prices and enhance earnings ended up blighting the emergency rooms with infighting and mismanagement.

One Houston physician is accused of diverting efficiency funds that have been attributable to his colleagues by billing insurance coverage firms for extra hours than he truly labored, in response to a criticism filed in Harris county in opposition to a number of APP subsidiaries.

One other allegedly instructed colleagues to work whereas unwell, showing to avoid Covid protocols by speaking “his ‘4 Ms’: Motrin [ibuprofen], masks, man-up, should not take a look at”, the criticism provides.

The APP subsidiaries named within the lawsuit have denied the allegations. APP and Brown Brothers Harriman declined to remark.

Escalating fights over physician pay and dealing circumstances might partly replicate an trade hit by rising prices, more durable reimbursement negotiations, and a scarcity of sufferers as the chance of an infection made many individuals cautious of setting foot inside a hospital.

APP’s effort to boost new debt finally failed, forcing the corporate to barter a restructuring. After a prolonged negotiation, Envision this yr used an advanced authorized manoeuvre to current its collectors with a alternative between accepting a haircut on its debt or being pushed to the underside of the precedence queue for compensation. A downgrade from ranking company Moody’s in October pushed TeamHealth deeper into junk territory.

Late final yr, the medics at Texoma plotted a revolt. Unwilling to embrace company administration that they felt worsened affected person care, but reluctant to threat a expensive lawsuit, they wrote a letter to the hospital’s chief government, asking him to assist them take again management of their emergency room.

“The acquisition felt extra like a hostile takeover and had a devastating impression not solely on our morale however in affected person care and high quality metrics as nicely,” mentioned the letter, signed by 5 medical doctors final December, and seen by the FT.

The revolt bore fruit. Texoma mentioned in an announcement that it “now not contracted with APP for ER doctor providers.” APP’s removing paved the way in which for the medical doctors to arrange their very own staffing firm on the hospital.

Such outcomes are uncommon. Based on APP’s presentation to lenders, issued in November 2021, just one contract termination had occurred within the firm’s historical past.

“We have been in a position to pull it off,” one of many medical doctors mentioned. “The spirit is again. It’s not about how a lot cash they will take from you, it’s about taking good care of sufferers.”


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