Wall Street Is Pressing ER Docs To Fleece Patients

Private equity firms have spent hundreds of millions of dollars convincing emergency room doctors and patients that they are all on the same team, fighting the greed of evil insurance companies. But in a remarkable “saying the quiet part out loud” moment, the major professional organization representing emergency physicians just admitted that private equity greed may be leaving the ER doctors vulnerable to criminal fraud charges.

The admission came in a document the board of the American College of Emergency Physicians (ACEP) circulated to its roughly 400-member council in advance of its annual conference, which began earlier this week in Boston. Robert McNamara, a Temple University medical school professor who has been working for decades to galvanize ER doctors in opposition to the “corporate practice of medicine,” had proposed a resolution that would essentially force all ER staffing companies seeking to do business with ACEP to periodically furnish their physicians with data on the services and procedures the company had billed for under their license numbers.

Buried in the middle of the otherwise mundane memo on past resolutions, the board addressed McNamara’s proposal. Unsurprisingly, the Board expressed extreme reluctance to adopting the proposal, noting that four separate attorneys it had consulted believed there was “substantial risk to implementing the resolution as written.” The ACEP brass had previously cited the (dubious) threat that forcing transparency could somehow invite an antitrust lawsuit, but this time they provided a new and eyebrow-raising concern.

“ACEP engaged outside counsel to advise on whether securing regular reporting of billing in a physician's name could inadvertently subject that physician to potential liability under the False Claims Act [emphasis added], since provision of this information could now leave them considered to be ‘knowing,’” they wrote.

In other words: emergency room doctors are better off not knowing what their private equity overlords are billing under their license numbers, because they are less likely to go to jail for Medicare fraud if they didn’t actually know they were committing it. This admission is especially eye-opening coming from ACEP, an organization that has evolved over the past several decades into a willing mouthpiece for the private equity industry that controls most of the biggest ER staffing firms and has pushed the aggressive billing practices for which they have become notorious.

Private equity-owned ER staffing firms have been frequently sued by whistleblowers on their medical staff. Last year, the Washington state doctor Ming Lin sued Blackstone-owned Team Health for removing him from the schedule after he posted on Facebook criticizing the company’s unwillingness to appropriate sufficient funds for face masks and proper infectious disease protocols at the beginning of the pandemic.

And last month, Envision Healthcare, which is owned by the private equity firm KKR & Co and is widely viewed as the staffing company that invented surprise billing, was forced to pay a $26-million jury award to a physician it had terminated for claiming that the company’s understaffing of a busy Kansas ER violated the Emergency Medical Treatment and Labor Act (EMTALA), a 1986 bill that requires hospitals to keep physicians on hand to “stabilize” patients regardless of their ability to pay.

But few of the whistleblower lawsuits have alleged systemic fraudulent overbilling, because most physicians who work for the firms have no idea what is being billed under their licenses, though they can theoretically obtain information on their Medicare billings from the Centers for Medicare & Medicaid Services, the federal agency in charge of the national health care programs.

“If emergency physicians saw what was being billed in their name they would be shocked,” McNamara says. “We know that these companies are regularly charging nine times the Medicare reimbursement rate, and we know we aren’t making that kind of money, but we don’t know what’s actually being charged in our names,.”

“Physicians Have No Idea”

ACEP was founded in 1968 as an international organization of emergency physicians. But according to McNamara, the group has been working since at least 1980 to entrench the nation’s emergency rooms as massive cash cows for enterprising profiteers.

That’s the year Leonard Riggs, the Dallas-based founder of what is now Envision Healthcare, took the helm at ACEP. By 1982, the group had dropped its founding ethical guidelines, including its prohibition on kickbacks or fee-splitting, the illegal practice of referring a patient for treatment  in exchange for a cut of the fees.

The 1986 implementation of EMTALA, which required hospitals to keep emergency rooms staffed with doctors willing to treat patients regardless of their ability to pay but crucially appropriated no funding for the mandate, was a huge boon to health care companies like Riggs’ EmCare, which was renamed Envision Healthcare Holdings under the ownership of the private equity firm Clayton, Dubilier & Rice in 2013. That’s because these operations boasted they could staff ERs around the clock more cheaply than hospitals could do on their own. By the early nineties, EmCare’s business moves had allowed it to score a major investment from the health care-focused private equity firm Welsh, Carson, Anderson & Stowe.

In the years that followed, as Wall Street showered funds on new models of health care profiteering, ACEP became increasingly linked to private equity.

In 2016, former ACEP president Robert Williams sold his ER practice to Shumacher Clinical Partners, an ER staffing firm backed by the Canadian private equity firm Onex, which also owned EmCare during the Bush Administration. That same year, another former ACEP president, Greg Henry, helped sell his practice Emergency Physicians Medical Group to EmCare for $120 million. Two years later, ACEP elected as its new president John Rogers — who at the time worked for Blackstone’s TeamHealth.

Since then, ACEP’s ties to the private equity industry have expanded. Rebecca Parker, who all but shrugged off surprise billing as “fake news” during her tenure as ACEP president in a 2016 New York Times story on the issue, was named chief medical affairs officer of Envision Physician Services in 2018. Former ACEP board member and Texas affiliate president Gregory Byrne — who “owns” hundreds of EmCare subsidiaries in at least 20 states in what appears to be a scheme to circumvent corporate practice of medicine laws — as well as longtime ACEP board member and immediate past president William Jacquis are currently both Envision Healthcare executives. And the organization’s current board includes the lead lobbyist for US Acute Care Solutions, an ER staffing firm that recently went “independent” by buying out Welsh Carson Anderson & Stowe’s stake in the company with a loan from another private equity firm, Apollo Global Management.

Thanks to its alliance with private equity, ACEP has grown ever richer and more powerful. Its annual revenue regularly tops $45 million, not including the seven figure budget of its affiliated ER resident society.

At the same time, ACEP has become a mouthpiece for private equity talking points, mounting a relentless lobbying campaign to thwart meaningful surprise billing legislation after it became a hot button issue in 2018 and pushing for pandemic-related  bailouts for the same private equity-owned surprise billing mills that slashed physician hours in spring 2020.

After Congress barred private equity portfolio companies from accessing the Paycheck Protection Program created to help small businesses through the spring 2020 COVID-19 cash crunch, then-ACEP president Jacquis wrote a letter to then HHS Secretary Alex Azar on behalf of ACEP’s 38,000 members requesting an immediate $3.6 billion bailout to compensate for flagging ER volumes during the lockdowns. Jacquis did not disclose in the letter his employment at Envision, or that the staffing firm was in the process of hiring bankruptcy advisers to cope with its own self-imposed staggering debt load, as well as ease the financial hit of its private equity owners stripping Envision’s lucrative ambulatory surgery subsidiary out of the parent company.

McNamara says ACEP’s rank and file have been slow to grasp the corrupting influence of private equity on their profession. That’s because according to him, ER doctors are “less profit oriented and more social justice concerned” than those in other specialties, which he says “exposed us to being taken advantage of.”

Private equity has also invested heavily in promoting a narrative in which greedy insurance companies force doctors to go out of network merely to recoup the cost of caring for patients, and are now promoting government rate-setting as a way to juice their profits.”Blackstone and KKR, for example, plowed $75 million into a dark money group called Doctor Patient Unity that promoted this narrative on a series of dramatic commercials during the 2020 election cycle. (ACEP itself filmed a more amateurish parody video towing this same line in 2016.)

McNamara encourages people to consult executive compensation figures for both insurance companies and private equity firms before they determine which industry has the monopoly on greed. “Obviously both sides are greedy, but KKR has four executives making more than $100 million a year, and [Team Health parent Blackstone founder] Steve Schwarzman made more than $600 million last year while he was cutting doctor pay,” he points out. During that same time period, United Health CEO David Wichmann made $42 million.

“What we should really be getting angry about is the fact that those same insurance companies we demonize are actually subsidizing the expansion of private equity controlled medicine, by giving companies like Team Health and Envision far higher reimbursement rates than independent practices,” says McNamara.

Indeed, a seminal research paper on surprise ER billing found that hospitals that outsourced ERs services to Envision saw their charges for the same procedures immediately double, and that private insurers pay ER doctors a far higher average multiple of Medicare rates than their counterparts in virtually every other medical specialty.

“Physicians have no idea the insurance companies are paying them so much,” explains McNamara, “because they don’t see any of that money.”

Turning Around The Titanic

But matters have slowly been changing. In 1993, enough doctors had grown disgusted by the corporatization of emergency rooms that they founded an alternative to ACEP, the American Academy of Emergency Medicine.

And over the past two years, the pandemic laid bare the barbarism of for-profit health care to doctors who might otherwise avoid politics. At the same time, many physicians had their job security threatened when companies like Envision and TeamHealth, which carry enormous debt loads from years of serial private equity ownership, slashed their hours and even laid off doctors. For the first time in McNamara’s career, he says many newly graduated emergency medicine residents this year couldn’t find jobs, because private equity is increasingly replacing physicians across the medical landscape with cheaper labor.

Now, McNamara is part of Take Medicine Back, a campaign founded by a 35-year-old Chicago ER physician named Mitchell Li who hopes to use the furor over surprise billing to force private equity out of health care.

In a Powerpoint he delivered to the Take Medicine Back conference September, McNamara showed an internal document circulated to client hospitals by the KKR-owned Envision Healthcare that advises clients that between a quarter and 35 percent of ER visits could be handled by an employee who earns an average of 66 percent less than a board-certified emergency physician. As a result, bigger ERs now often “single covered,” meaning they only have a single doctor on duty at a time, and smaller ERs are often run by nurse practitioners or physician assistants being supervised remotely by a doctor.

Both Drs. McNamara and Li believe the widespread replacement of doctors with cheaper employees will finally bring the profession around on the evil of private equity.

The average 2020 medical school student graduated with $207,000 in debt, and for the vast majority of these students, their medical licenses are the most valuable assets they own. But a private Facebook group for ER doctors that Li helps moderate is full of the anxious testimonials of doctors who fear losing their licenses over something in the daily mountain of paperwork on which they are required to sign off related to the endless string of patients treated by a nurse or physician assistant under their titular (and often Zoom-based) supervision.

Anxiety over such risks has become so pressing that ACEP adopted new guidelines last year advising members that they could not be forced to sign off on the charts of patients they had never seen. But McNamara says such guidelines are hollow, because no due process exists for doctors who are taken off the schedule by ER staffing agencies in retaliation. Furthermore, he says, ACEP avoided any mention whatsoever of the underlying driver behind the practice: reimbursement rates are higher for treatment provided by physicians than physician assistants, but by getting physicians to sign the paperwork of patients treated by lower-cost employees, their employers can systematically “up-code” their reimbursement requests.

Had ACEP adopted McNamara’s data-sharing resolution at its recent conference,the scam would have been laid bare. While that didn’t happen, McNamara also ran as a dark-horse candidate for the ACEP board, as did a slightly less confrontational private equity critic named Henry Pitzele. Both candidates lost, but in a small show of dissent, the Virginia state delegation tweeted that it had voted for both McNamara and Pitzele: “We want Virginia state EPs to know that we heard your call for change.”

Then on Tuesday, the Take Medicine Back movement learned of an even better development: Abbey Smiley, an ER doctor who had criticized private equity in the past and appeared to support the overall mission of the reformers, won a tight race to be the next president of the Emergency Medicine Residents’ Association, an ACEP affiliate that acts as membership gateway to the flagship organization.

“We knew heading into this that reforming ACEP would be like turning around the Titanic,” Li said. “But the younger generation is waking up to these realities and rejecting the unbridled greed and corruption that are poisoning our profession.”

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