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ED doctors call private equity staffing practices illegal and seek to ban them
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 departments, according to a Raleigh, N.C.–based doctor who runs a job site for ED physicians. The two largest are Nashville, Tenn.–based Envision Healthcare, owned by investment giant KKR & Co., and Knoxville, Tenn.–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 ED 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.”
‘Possibility to reverberate throughout the country’
The physician group believes a victory would lead to a prohibition of the practice across California – and not just in ERs, but for other staff provided by Envision and TeamHealth, including in anesthesiology and hospital medicine. The California Medical Association supports the lawsuit, saying it “will shape the boundaries of California’s prohibition on the corporate practice of medicine.”
The plaintiff – along with many doctors, nurses, and consumer advocates, as well as some lawmakers – hopes that success in the case will spur regulators and prosecutors in other states to take corporate medicine prohibitions more seriously. “Any decision anywhere in the country that says the corporate ownership of a medical practice is illegal has the possibility to reverberate throughout the country, absolutely – and I hope that it would,” said Julie Mayfield, a state senator in North Carolina.
But the push to reinvigorate laws restricting the corporate practice of medicine has plenty of skeptics, who view it as an effort to return to a golden era in medicine that is long gone or may never have existed to begin with. The genie is out of the bottle, they say, noting that the profit motive has penetrated every corner of health care and that nearly 70% of physicians in the United States are now employed by corporations and hospitals.
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.”
The California case involves Placentia-Linda Hospital in Orange County, where the plaintiff physician group lost its ED management contract to Envision. The complaint alleges that Envision uses the same business model at numerous hospitals around the state.
“Envision exercises profound and pervasive direct and indirect control and/or influence over the medical practice, making decisions which bear directly and indirectly on the practice of medicine, rendering physicians as mere employees, and diminishing physician independence and freedom from commercial interests,” according to the complaint.
Envision said the company is compliant with state laws and that its operating structure is common in the health care industry. “Legal challenges to that structure have proved meritless,” Envision wrote in an email. It added that “care decisions have and always will be between clinicians and patients.”
TeamHealth, an indirect target in the case, said its “world-class operating team” provides management services that “allow clinicians to focus on the practice of medicine and patient care through a structure commonly utilized by hospitals, health systems, and other providers across the country.”
State rules vary widely
State laws and regulations governing the corporate practice of medicine vary widely on multiple factors, including whether there are exceptions for nonprofit organizations, how much of doctors’ revenue outside management firms can keep, who can own the equipment, and how violations are punished. New York, Texas, and California are considered to have among the toughest restrictions, while Florida and 16 other states have none.
Kirk Ogrosky, a partner at the law firm Goodwin Procter, said this kind of management structure predates the arrival of private equity in the industry. “I would be surprised if a company that is interested in investing in this space screwed up the formation documents; it would shock me,” Mr. Ogrosky said.
Private equity–backed firms have been attracted to EDs in recent years because they 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.
Envision and TeamHealth are privately owned, which makes it difficult to find reliable data on their finances and the extent of their market penetration.
Leon Adelman, MD, cofounder and CEO of Ivy Clinicians, a Raleigh, N.C.–based startup job site for emergency physicians, has spent 18 months piecing together data and found that private equity–backed staffing firms run 25% of the nation’s EDs. TeamHealth and Envision have the two largest shares, with 8.6% and 8.3%, respectively, Dr. Adelman said.
Other estimates put private equity’s penetration of ERs at closer to 40%.
Doctors push for investigations
So far, efforts by emergency physicians and others to challenge private equity staffing firms over their alleged violations have yielded frustrating results.
An advocacy group called Take Medicine Back, formed last year by a handful of ED physicians, sent a letter in July to North Carolina Attorney General Josh Stein, asking him to investigate violations of the ban on the corporate practice of medicine. And because Mr. Stein holds a senior position at the National Association of Attorneys General, the letter also asked him to take the lead in persuading his fellow AGs to “launch a multi-state investigation into the widespread lack of enforcement” of corporate practice of medicine laws.
The group’s leader, Mitchell Li, MD, said he was initially disappointed by the response he received from Mr. Stein’s office, which promised to review his request, saying it raised complex legal issues about the corporate practice of medicine in the state. But Dr. Li is now more hopeful, since he has secured a January appointment with officials in Mr. Stein’s office.
Robert McNamara, MD, a cofounder of Dr. Li’s group and chair of emergency medicine at Temple University’s Lewis Katz School of Medicine, drafted complaints to the Texas Medical Board, along with Houston physician David Hoyer, MD, asking the board to intervene against two doctors accused of fronting for professional entities controlled by Envision and TeamHealth. In both cases, the board declined to intervene.
Dr. McNamara, who serves as the chief medical officer of the physicians’ group in the California Envision case, also filed a complaint with Pennsylvania Attorney General Josh Shapiro, alleging that a group called Emergency Care Services of Pennsylvania PC, which was trying to contract with ED physicians of the Crozer Keystone Health System, was wholly owned by TeamHealth and serving as a shell to avoid scrutiny.
A senior official in Mr. Shapiro’s office responded, saying the complaint had been referred to two state agencies, but Dr. McNamara said he has heard nothing back in more than 3 years.
Differing views on private equity’s role
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.
Sean Jones, MD, an emergency physician in Asheville, N.C., said his first full-time job was at a Florida hospital, where EmCare, a subsidiary of Envision, ran the ED. Dr. 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.
For example, if a patient came in with abnormally high heart and respiratory rates – signs of sepsis – doctors were expected to give them large amounts of fluids and antibiotics within an hour, Dr. Jones said. But those symptoms could also be caused by a panic attack or heart failure.
“You don’t want to give a patient with heart failure 2 or 3 liters of fluid, and I would get emails saying, ‘You didn’t do this,’ ” he said. “Well, no, I didn’t, because the reason they couldn’t breathe was they had too much fluid in their lungs.”
Envision said the company’s 25,000 clinicians, “like all clinicians, exercise their independent judgment to provide quality, compassionate, clinically appropriate care.”
Dr. Jones felt otherwise. “We don’t need some MBAs telling us what to do,” he said.
This story was produced by KHN, which publishes California Healthline, an editorially independent service of the California Health Care Foundation. Kaiser Health News is a nonprofit national health policy news service. It is an editorially independent program of the Henry J. Kaiser Family Foundation that is not affiliated with Kaiser Permanente.
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 departments, according to a Raleigh, N.C.–based doctor who runs a job site for ED physicians. The two largest are Nashville, Tenn.–based Envision Healthcare, owned by investment giant KKR & Co., and Knoxville, Tenn.–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 ED 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.”
‘Possibility to reverberate throughout the country’
The physician group believes a victory would lead to a prohibition of the practice across California – and not just in ERs, but for other staff provided by Envision and TeamHealth, including in anesthesiology and hospital medicine. The California Medical Association supports the lawsuit, saying it “will shape the boundaries of California’s prohibition on the corporate practice of medicine.”
The plaintiff – along with many doctors, nurses, and consumer advocates, as well as some lawmakers – hopes that success in the case will spur regulators and prosecutors in other states to take corporate medicine prohibitions more seriously. “Any decision anywhere in the country that says the corporate ownership of a medical practice is illegal has the possibility to reverberate throughout the country, absolutely – and I hope that it would,” said Julie Mayfield, a state senator in North Carolina.
But the push to reinvigorate laws restricting the corporate practice of medicine has plenty of skeptics, who view it as an effort to return to a golden era in medicine that is long gone or may never have existed to begin with. The genie is out of the bottle, they say, noting that the profit motive has penetrated every corner of health care and that nearly 70% of physicians in the United States are now employed by corporations and hospitals.
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.”
The California case involves Placentia-Linda Hospital in Orange County, where the plaintiff physician group lost its ED management contract to Envision. The complaint alleges that Envision uses the same business model at numerous hospitals around the state.
“Envision exercises profound and pervasive direct and indirect control and/or influence over the medical practice, making decisions which bear directly and indirectly on the practice of medicine, rendering physicians as mere employees, and diminishing physician independence and freedom from commercial interests,” according to the complaint.
Envision said the company is compliant with state laws and that its operating structure is common in the health care industry. “Legal challenges to that structure have proved meritless,” Envision wrote in an email. It added that “care decisions have and always will be between clinicians and patients.”
TeamHealth, an indirect target in the case, said its “world-class operating team” provides management services that “allow clinicians to focus on the practice of medicine and patient care through a structure commonly utilized by hospitals, health systems, and other providers across the country.”
State rules vary widely
State laws and regulations governing the corporate practice of medicine vary widely on multiple factors, including whether there are exceptions for nonprofit organizations, how much of doctors’ revenue outside management firms can keep, who can own the equipment, and how violations are punished. New York, Texas, and California are considered to have among the toughest restrictions, while Florida and 16 other states have none.
Kirk Ogrosky, a partner at the law firm Goodwin Procter, said this kind of management structure predates the arrival of private equity in the industry. “I would be surprised if a company that is interested in investing in this space screwed up the formation documents; it would shock me,” Mr. Ogrosky said.
Private equity–backed firms have been attracted to EDs in recent years because they 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.
Envision and TeamHealth are privately owned, which makes it difficult to find reliable data on their finances and the extent of their market penetration.
Leon Adelman, MD, cofounder and CEO of Ivy Clinicians, a Raleigh, N.C.–based startup job site for emergency physicians, has spent 18 months piecing together data and found that private equity–backed staffing firms run 25% of the nation’s EDs. TeamHealth and Envision have the two largest shares, with 8.6% and 8.3%, respectively, Dr. Adelman said.
Other estimates put private equity’s penetration of ERs at closer to 40%.
Doctors push for investigations
So far, efforts by emergency physicians and others to challenge private equity staffing firms over their alleged violations have yielded frustrating results.
An advocacy group called Take Medicine Back, formed last year by a handful of ED physicians, sent a letter in July to North Carolina Attorney General Josh Stein, asking him to investigate violations of the ban on the corporate practice of medicine. And because Mr. Stein holds a senior position at the National Association of Attorneys General, the letter also asked him to take the lead in persuading his fellow AGs to “launch a multi-state investigation into the widespread lack of enforcement” of corporate practice of medicine laws.
The group’s leader, Mitchell Li, MD, said he was initially disappointed by the response he received from Mr. Stein’s office, which promised to review his request, saying it raised complex legal issues about the corporate practice of medicine in the state. But Dr. Li is now more hopeful, since he has secured a January appointment with officials in Mr. Stein’s office.
Robert McNamara, MD, a cofounder of Dr. Li’s group and chair of emergency medicine at Temple University’s Lewis Katz School of Medicine, drafted complaints to the Texas Medical Board, along with Houston physician David Hoyer, MD, asking the board to intervene against two doctors accused of fronting for professional entities controlled by Envision and TeamHealth. In both cases, the board declined to intervene.
Dr. McNamara, who serves as the chief medical officer of the physicians’ group in the California Envision case, also filed a complaint with Pennsylvania Attorney General Josh Shapiro, alleging that a group called Emergency Care Services of Pennsylvania PC, which was trying to contract with ED physicians of the Crozer Keystone Health System, was wholly owned by TeamHealth and serving as a shell to avoid scrutiny.
A senior official in Mr. Shapiro’s office responded, saying the complaint had been referred to two state agencies, but Dr. McNamara said he has heard nothing back in more than 3 years.
Differing views on private equity’s role
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.
Sean Jones, MD, an emergency physician in Asheville, N.C., said his first full-time job was at a Florida hospital, where EmCare, a subsidiary of Envision, ran the ED. Dr. 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.
For example, if a patient came in with abnormally high heart and respiratory rates – signs of sepsis – doctors were expected to give them large amounts of fluids and antibiotics within an hour, Dr. Jones said. But those symptoms could also be caused by a panic attack or heart failure.
“You don’t want to give a patient with heart failure 2 or 3 liters of fluid, and I would get emails saying, ‘You didn’t do this,’ ” he said. “Well, no, I didn’t, because the reason they couldn’t breathe was they had too much fluid in their lungs.”
Envision said the company’s 25,000 clinicians, “like all clinicians, exercise their independent judgment to provide quality, compassionate, clinically appropriate care.”
Dr. Jones felt otherwise. “We don’t need some MBAs telling us what to do,” he said.
This story was produced by KHN, which publishes California Healthline, an editorially independent service of the California Health Care Foundation. Kaiser Health News is a nonprofit national health policy news service. It is an editorially independent program of the Henry J. Kaiser Family Foundation that is not affiliated with Kaiser Permanente.
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 departments, according to a Raleigh, N.C.–based doctor who runs a job site for ED physicians. The two largest are Nashville, Tenn.–based Envision Healthcare, owned by investment giant KKR & Co., and Knoxville, Tenn.–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 ED 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.”
‘Possibility to reverberate throughout the country’
The physician group believes a victory would lead to a prohibition of the practice across California – and not just in ERs, but for other staff provided by Envision and TeamHealth, including in anesthesiology and hospital medicine. The California Medical Association supports the lawsuit, saying it “will shape the boundaries of California’s prohibition on the corporate practice of medicine.”
The plaintiff – along with many doctors, nurses, and consumer advocates, as well as some lawmakers – hopes that success in the case will spur regulators and prosecutors in other states to take corporate medicine prohibitions more seriously. “Any decision anywhere in the country that says the corporate ownership of a medical practice is illegal has the possibility to reverberate throughout the country, absolutely – and I hope that it would,” said Julie Mayfield, a state senator in North Carolina.
But the push to reinvigorate laws restricting the corporate practice of medicine has plenty of skeptics, who view it as an effort to return to a golden era in medicine that is long gone or may never have existed to begin with. The genie is out of the bottle, they say, noting that the profit motive has penetrated every corner of health care and that nearly 70% of physicians in the United States are now employed by corporations and hospitals.
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.”
The California case involves Placentia-Linda Hospital in Orange County, where the plaintiff physician group lost its ED management contract to Envision. The complaint alleges that Envision uses the same business model at numerous hospitals around the state.
“Envision exercises profound and pervasive direct and indirect control and/or influence over the medical practice, making decisions which bear directly and indirectly on the practice of medicine, rendering physicians as mere employees, and diminishing physician independence and freedom from commercial interests,” according to the complaint.
Envision said the company is compliant with state laws and that its operating structure is common in the health care industry. “Legal challenges to that structure have proved meritless,” Envision wrote in an email. It added that “care decisions have and always will be between clinicians and patients.”
TeamHealth, an indirect target in the case, said its “world-class operating team” provides management services that “allow clinicians to focus on the practice of medicine and patient care through a structure commonly utilized by hospitals, health systems, and other providers across the country.”
State rules vary widely
State laws and regulations governing the corporate practice of medicine vary widely on multiple factors, including whether there are exceptions for nonprofit organizations, how much of doctors’ revenue outside management firms can keep, who can own the equipment, and how violations are punished. New York, Texas, and California are considered to have among the toughest restrictions, while Florida and 16 other states have none.
Kirk Ogrosky, a partner at the law firm Goodwin Procter, said this kind of management structure predates the arrival of private equity in the industry. “I would be surprised if a company that is interested in investing in this space screwed up the formation documents; it would shock me,” Mr. Ogrosky said.
Private equity–backed firms have been attracted to EDs in recent years because they 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.
Envision and TeamHealth are privately owned, which makes it difficult to find reliable data on their finances and the extent of their market penetration.
Leon Adelman, MD, cofounder and CEO of Ivy Clinicians, a Raleigh, N.C.–based startup job site for emergency physicians, has spent 18 months piecing together data and found that private equity–backed staffing firms run 25% of the nation’s EDs. TeamHealth and Envision have the two largest shares, with 8.6% and 8.3%, respectively, Dr. Adelman said.
Other estimates put private equity’s penetration of ERs at closer to 40%.
Doctors push for investigations
So far, efforts by emergency physicians and others to challenge private equity staffing firms over their alleged violations have yielded frustrating results.
An advocacy group called Take Medicine Back, formed last year by a handful of ED physicians, sent a letter in July to North Carolina Attorney General Josh Stein, asking him to investigate violations of the ban on the corporate practice of medicine. And because Mr. Stein holds a senior position at the National Association of Attorneys General, the letter also asked him to take the lead in persuading his fellow AGs to “launch a multi-state investigation into the widespread lack of enforcement” of corporate practice of medicine laws.
The group’s leader, Mitchell Li, MD, said he was initially disappointed by the response he received from Mr. Stein’s office, which promised to review his request, saying it raised complex legal issues about the corporate practice of medicine in the state. But Dr. Li is now more hopeful, since he has secured a January appointment with officials in Mr. Stein’s office.
Robert McNamara, MD, a cofounder of Dr. Li’s group and chair of emergency medicine at Temple University’s Lewis Katz School of Medicine, drafted complaints to the Texas Medical Board, along with Houston physician David Hoyer, MD, asking the board to intervene against two doctors accused of fronting for professional entities controlled by Envision and TeamHealth. In both cases, the board declined to intervene.
Dr. McNamara, who serves as the chief medical officer of the physicians’ group in the California Envision case, also filed a complaint with Pennsylvania Attorney General Josh Shapiro, alleging that a group called Emergency Care Services of Pennsylvania PC, which was trying to contract with ED physicians of the Crozer Keystone Health System, was wholly owned by TeamHealth and serving as a shell to avoid scrutiny.
A senior official in Mr. Shapiro’s office responded, saying the complaint had been referred to two state agencies, but Dr. McNamara said he has heard nothing back in more than 3 years.
Differing views on private equity’s role
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.
Sean Jones, MD, an emergency physician in Asheville, N.C., said his first full-time job was at a Florida hospital, where EmCare, a subsidiary of Envision, ran the ED. Dr. 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.
For example, if a patient came in with abnormally high heart and respiratory rates – signs of sepsis – doctors were expected to give them large amounts of fluids and antibiotics within an hour, Dr. Jones said. But those symptoms could also be caused by a panic attack or heart failure.
“You don’t want to give a patient with heart failure 2 or 3 liters of fluid, and I would get emails saying, ‘You didn’t do this,’ ” he said. “Well, no, I didn’t, because the reason they couldn’t breathe was they had too much fluid in their lungs.”
Envision said the company’s 25,000 clinicians, “like all clinicians, exercise their independent judgment to provide quality, compassionate, clinically appropriate care.”
Dr. Jones felt otherwise. “We don’t need some MBAs telling us what to do,” he said.
This story was produced by KHN, which publishes California Healthline, an editorially independent service of the California Health Care Foundation. Kaiser Health News is a nonprofit national health policy news service. It is an editorially independent program of the Henry J. Kaiser Family Foundation that is not affiliated with Kaiser Permanente.
Pandemic hampers reopening of joint replacement gold mine
Dr. Ira Weintraub, a recently retired orthopedic surgeon who now works at a medical billing consultancy, saw a hip replacement bill for over $400,000 earlier this year.
“The patient stayed in the hospital 17 days, which is only 17 times normal. The bill got paid,” mused Weintraub, chief medical officer of Portland, Oregon-based WellRithms, which helps self-funded employers and workers’ compensation insurers make sense of large, complex medical bills and ensure they pay the fair amount.
Charges like that go a long way toward explaining why hospitals are eager to restore joint replacements to pre-COVID levels as quickly as possible – an eagerness tempered only by safety concerns amid a resurgence of the coronavirus in some regions of the country. Revenue losses at hospitals and outpatient surgery centers may have exceeded $5 billion from canceled knee and hip replacements alone during a roughly two-month hiatus on elective procedures earlier this year.
The cost of joint replacement surgery varies widely – though, on average, it is in the tens, not hundreds, of thousands of dollars. Still, given the high and rapidly growing volume, it’s easy to see why joint replacement operations have become a vital chunk of revenue at most U.S. hospitals.
The rate of knee and hip replacements more than doubled from 2000 to 2015, according to inpatient discharge data from the Agency for Healthcare Research and Quality. And that growth is likely to continue: Knee replacements are expected to triple between now and 2040, with hip replacements not far behind, according to projections published last year in the Journal of Rheumatology.
Joint procedures are usually not emergencies, and they were among the first to be scrubbed or delayed when hospitals froze elective surgeries in March – and again in July in some areas plagued by renewed COVID outbreaks.
“Without orthopedic volumes returning to something near their pre-pandemic levels, it will make it difficult for health systems to get back to anywhere near break-even from a bottom-line perspective,” said Stephen Thome, a principal in health care consulting at Grant Thornton, an advisory, audit and tax firm.
It’s impossible to know exactly how much knee and hip replacements are worth to hospitals, because no definitive data on total volume or price exists.
But using published estimates of volume, extrapolating average commercial payments from published Medicare rates based on a study, and making an educated guess of patient coinsurance, Thome helped KHN arrive at an annual market value for American hospitals and surgery centers of between $15.5 billion and $21.5 billion for knee replacements alone.
That suggests a revenue loss of $1.3 billion to $1.8 billion per month for the period the surgeries were shut down. These figures include ambulatory surgery centers not owned by hospitals, which also suspended most operations in late March, all of April and into May.
If you add hip replacements, which account for about half the volume of knees and are paid at similar rates, the total annual value rises to a range of $23 billion to $32 billion, with monthly revenue losses from $1.9 billion to $2.7 billion.
The American Hospital Association projects total revenue lost at U.S. hospitals will reach $323 billion by year’s end, not counting additional losses from surgeries canceled during the current coronavirus spike. That amount is partially offset by $69 billion in federal relief dollars hospitals have received so far, according to the association. The California Hospital Association puts the net revenue loss for hospitals in that state at about $10.5 billion, said spokesperson Jan Emerson-Shea.
Hospitals resumed joint replacement surgeries in early to mid-May, with the timing and ramp-up speed varying by region and hospital. Some hospitals restored volume quickly; others took a more cautious route and continue to lose revenue. Still others have had to shut down again.
At the NYU Langone Orthopedic Hospital in New York City, “people are starting to come in and you see the operating rooms full again,” said Dr. Claudette Lajam, chief orthopedic safety officer.
At St. Jude Medical Center in Fullerton, California, where the coronavirus is raging, inpatient joint replacements resumed in the second or third week of May – cautiously at first, but volume is “very close to pre-pandemic levels at this point,” said Dr. Kevin Khajavi, chairman of the hospital’s orthopedic surgery department. However, “we are constantly monitoring the situation to determine if we have to scale back once again,” he said.
In large swaths of Texas, elective surgeries were once again suspended in July because of the COVID-19 resurgence. The same is true at many hospitals in Florida, Alabama, South Carolina and Nevada.
The Mayo Clinic in Phoenix suspended nonemergency joint replacement surgeries in early July. It resumed outpatient replacement procedures the week of July 27, but still has not resumed nonemergency inpatient procedures, said Dr. Mark Spangehl, an orthopedic surgeon there. In terms of medical urgency, joint replacements are “at the bottom of the totem pole,” Spangehl said.
In terms of cash flow, however, joint replacements are decidedly not at the bottom of the totem pole. They have become a cash cow as the number of patients undergoing them has skyrocketed in recent decades.
The volume is being driven by an aging population, an epidemic of obesity and a significant rise in the number of younger people replacing joints worn out by years of sports and exercise.
It’s also being driven by the cash. Once only done in hospitals, the operations are now increasingly performed at ambulatory surgery centers – especially on younger, healthier patients who don’t require hospitalization.
The surgery centers are often physician-owned, but private equity groups such as Bain Capital and KKR & Co. have taken an interest in them, drawn by their high growth potential, robust financial returns and ability to offer competitive prices.
“[G]enerally the savings should be very good – but I do see a lot of outlier surgery centers where they are charging exorbitant amounts of money – $100,000 wouldn’t be too much,” said WellRithm’s Weintraub, who co-owned such a surgery center in Portland.
Fear of catching the coronavirus in a hospital is reinforcing the outpatient trend. Matthew Davis, a 58-year-old resident of Washington, was scheduled for a hip replacement on March 30 but got cold feet because of COVID-19, and canceled just before all elective surgeries were halted. When it came time to reschedule in June, he overcame his reservations in large part because the surgeon planned to perform the procedure at a free-standing surgery center.
“That was key to me – avoiding an overnight hospital stay to minimize my exposure,” Davis said. “These joint replacements are almost industrial-scale. They are cranking out joint replacements 9 to 5. I went in at 6:30 a.m. and I was walking out the door at 11:30.”
Acutely aware of the financial benefits, hospitals and surgery clinics have been marketing joint replacements for years, competing for coveted rankings and running ads that show healthy aging people, all smiles, engaged in vigorous activity.
However, a 2014 study concluded that one-third of knee replacements were not warranted, mainly because the symptoms of the patients were not severe enough to justify the procedures.
“The whole marketing of health care is so manipulative to the consuming public,” said Lisa McGiffert, a longtime consumer advocate and co-founder of the Patient Safety Action Network. “People might be encouraged to get a knee replacement, when in reality something less invasive could have improved their condition.”
McGiffert recounted a conversation with an orthopedic surgeon in Washington state who told her about a patient who requested a knee replacement, even though he had not tried any lower-impact treatments to fix the problem. “I asked the surgeon, ‘You didn’t do it, did you?’ And he said, ‘Of course I did. He would just have gone to somebody else.’ ”
This Kaiser Health News story first published on California Healthline, a service of the California Health Care Foundation.
Dr. Ira Weintraub, a recently retired orthopedic surgeon who now works at a medical billing consultancy, saw a hip replacement bill for over $400,000 earlier this year.
“The patient stayed in the hospital 17 days, which is only 17 times normal. The bill got paid,” mused Weintraub, chief medical officer of Portland, Oregon-based WellRithms, which helps self-funded employers and workers’ compensation insurers make sense of large, complex medical bills and ensure they pay the fair amount.
Charges like that go a long way toward explaining why hospitals are eager to restore joint replacements to pre-COVID levels as quickly as possible – an eagerness tempered only by safety concerns amid a resurgence of the coronavirus in some regions of the country. Revenue losses at hospitals and outpatient surgery centers may have exceeded $5 billion from canceled knee and hip replacements alone during a roughly two-month hiatus on elective procedures earlier this year.
The cost of joint replacement surgery varies widely – though, on average, it is in the tens, not hundreds, of thousands of dollars. Still, given the high and rapidly growing volume, it’s easy to see why joint replacement operations have become a vital chunk of revenue at most U.S. hospitals.
The rate of knee and hip replacements more than doubled from 2000 to 2015, according to inpatient discharge data from the Agency for Healthcare Research and Quality. And that growth is likely to continue: Knee replacements are expected to triple between now and 2040, with hip replacements not far behind, according to projections published last year in the Journal of Rheumatology.
Joint procedures are usually not emergencies, and they were among the first to be scrubbed or delayed when hospitals froze elective surgeries in March – and again in July in some areas plagued by renewed COVID outbreaks.
“Without orthopedic volumes returning to something near their pre-pandemic levels, it will make it difficult for health systems to get back to anywhere near break-even from a bottom-line perspective,” said Stephen Thome, a principal in health care consulting at Grant Thornton, an advisory, audit and tax firm.
It’s impossible to know exactly how much knee and hip replacements are worth to hospitals, because no definitive data on total volume or price exists.
But using published estimates of volume, extrapolating average commercial payments from published Medicare rates based on a study, and making an educated guess of patient coinsurance, Thome helped KHN arrive at an annual market value for American hospitals and surgery centers of between $15.5 billion and $21.5 billion for knee replacements alone.
That suggests a revenue loss of $1.3 billion to $1.8 billion per month for the period the surgeries were shut down. These figures include ambulatory surgery centers not owned by hospitals, which also suspended most operations in late March, all of April and into May.
If you add hip replacements, which account for about half the volume of knees and are paid at similar rates, the total annual value rises to a range of $23 billion to $32 billion, with monthly revenue losses from $1.9 billion to $2.7 billion.
The American Hospital Association projects total revenue lost at U.S. hospitals will reach $323 billion by year’s end, not counting additional losses from surgeries canceled during the current coronavirus spike. That amount is partially offset by $69 billion in federal relief dollars hospitals have received so far, according to the association. The California Hospital Association puts the net revenue loss for hospitals in that state at about $10.5 billion, said spokesperson Jan Emerson-Shea.
Hospitals resumed joint replacement surgeries in early to mid-May, with the timing and ramp-up speed varying by region and hospital. Some hospitals restored volume quickly; others took a more cautious route and continue to lose revenue. Still others have had to shut down again.
At the NYU Langone Orthopedic Hospital in New York City, “people are starting to come in and you see the operating rooms full again,” said Dr. Claudette Lajam, chief orthopedic safety officer.
At St. Jude Medical Center in Fullerton, California, where the coronavirus is raging, inpatient joint replacements resumed in the second or third week of May – cautiously at first, but volume is “very close to pre-pandemic levels at this point,” said Dr. Kevin Khajavi, chairman of the hospital’s orthopedic surgery department. However, “we are constantly monitoring the situation to determine if we have to scale back once again,” he said.
In large swaths of Texas, elective surgeries were once again suspended in July because of the COVID-19 resurgence. The same is true at many hospitals in Florida, Alabama, South Carolina and Nevada.
The Mayo Clinic in Phoenix suspended nonemergency joint replacement surgeries in early July. It resumed outpatient replacement procedures the week of July 27, but still has not resumed nonemergency inpatient procedures, said Dr. Mark Spangehl, an orthopedic surgeon there. In terms of medical urgency, joint replacements are “at the bottom of the totem pole,” Spangehl said.
In terms of cash flow, however, joint replacements are decidedly not at the bottom of the totem pole. They have become a cash cow as the number of patients undergoing them has skyrocketed in recent decades.
The volume is being driven by an aging population, an epidemic of obesity and a significant rise in the number of younger people replacing joints worn out by years of sports and exercise.
It’s also being driven by the cash. Once only done in hospitals, the operations are now increasingly performed at ambulatory surgery centers – especially on younger, healthier patients who don’t require hospitalization.
The surgery centers are often physician-owned, but private equity groups such as Bain Capital and KKR & Co. have taken an interest in them, drawn by their high growth potential, robust financial returns and ability to offer competitive prices.
“[G]enerally the savings should be very good – but I do see a lot of outlier surgery centers where they are charging exorbitant amounts of money – $100,000 wouldn’t be too much,” said WellRithm’s Weintraub, who co-owned such a surgery center in Portland.
Fear of catching the coronavirus in a hospital is reinforcing the outpatient trend. Matthew Davis, a 58-year-old resident of Washington, was scheduled for a hip replacement on March 30 but got cold feet because of COVID-19, and canceled just before all elective surgeries were halted. When it came time to reschedule in June, he overcame his reservations in large part because the surgeon planned to perform the procedure at a free-standing surgery center.
“That was key to me – avoiding an overnight hospital stay to minimize my exposure,” Davis said. “These joint replacements are almost industrial-scale. They are cranking out joint replacements 9 to 5. I went in at 6:30 a.m. and I was walking out the door at 11:30.”
Acutely aware of the financial benefits, hospitals and surgery clinics have been marketing joint replacements for years, competing for coveted rankings and running ads that show healthy aging people, all smiles, engaged in vigorous activity.
However, a 2014 study concluded that one-third of knee replacements were not warranted, mainly because the symptoms of the patients were not severe enough to justify the procedures.
“The whole marketing of health care is so manipulative to the consuming public,” said Lisa McGiffert, a longtime consumer advocate and co-founder of the Patient Safety Action Network. “People might be encouraged to get a knee replacement, when in reality something less invasive could have improved their condition.”
McGiffert recounted a conversation with an orthopedic surgeon in Washington state who told her about a patient who requested a knee replacement, even though he had not tried any lower-impact treatments to fix the problem. “I asked the surgeon, ‘You didn’t do it, did you?’ And he said, ‘Of course I did. He would just have gone to somebody else.’ ”
This Kaiser Health News story first published on California Healthline, a service of the California Health Care Foundation.
Dr. Ira Weintraub, a recently retired orthopedic surgeon who now works at a medical billing consultancy, saw a hip replacement bill for over $400,000 earlier this year.
“The patient stayed in the hospital 17 days, which is only 17 times normal. The bill got paid,” mused Weintraub, chief medical officer of Portland, Oregon-based WellRithms, which helps self-funded employers and workers’ compensation insurers make sense of large, complex medical bills and ensure they pay the fair amount.
Charges like that go a long way toward explaining why hospitals are eager to restore joint replacements to pre-COVID levels as quickly as possible – an eagerness tempered only by safety concerns amid a resurgence of the coronavirus in some regions of the country. Revenue losses at hospitals and outpatient surgery centers may have exceeded $5 billion from canceled knee and hip replacements alone during a roughly two-month hiatus on elective procedures earlier this year.
The cost of joint replacement surgery varies widely – though, on average, it is in the tens, not hundreds, of thousands of dollars. Still, given the high and rapidly growing volume, it’s easy to see why joint replacement operations have become a vital chunk of revenue at most U.S. hospitals.
The rate of knee and hip replacements more than doubled from 2000 to 2015, according to inpatient discharge data from the Agency for Healthcare Research and Quality. And that growth is likely to continue: Knee replacements are expected to triple between now and 2040, with hip replacements not far behind, according to projections published last year in the Journal of Rheumatology.
Joint procedures are usually not emergencies, and they were among the first to be scrubbed or delayed when hospitals froze elective surgeries in March – and again in July in some areas plagued by renewed COVID outbreaks.
“Without orthopedic volumes returning to something near their pre-pandemic levels, it will make it difficult for health systems to get back to anywhere near break-even from a bottom-line perspective,” said Stephen Thome, a principal in health care consulting at Grant Thornton, an advisory, audit and tax firm.
It’s impossible to know exactly how much knee and hip replacements are worth to hospitals, because no definitive data on total volume or price exists.
But using published estimates of volume, extrapolating average commercial payments from published Medicare rates based on a study, and making an educated guess of patient coinsurance, Thome helped KHN arrive at an annual market value for American hospitals and surgery centers of between $15.5 billion and $21.5 billion for knee replacements alone.
That suggests a revenue loss of $1.3 billion to $1.8 billion per month for the period the surgeries were shut down. These figures include ambulatory surgery centers not owned by hospitals, which also suspended most operations in late March, all of April and into May.
If you add hip replacements, which account for about half the volume of knees and are paid at similar rates, the total annual value rises to a range of $23 billion to $32 billion, with monthly revenue losses from $1.9 billion to $2.7 billion.
The American Hospital Association projects total revenue lost at U.S. hospitals will reach $323 billion by year’s end, not counting additional losses from surgeries canceled during the current coronavirus spike. That amount is partially offset by $69 billion in federal relief dollars hospitals have received so far, according to the association. The California Hospital Association puts the net revenue loss for hospitals in that state at about $10.5 billion, said spokesperson Jan Emerson-Shea.
Hospitals resumed joint replacement surgeries in early to mid-May, with the timing and ramp-up speed varying by region and hospital. Some hospitals restored volume quickly; others took a more cautious route and continue to lose revenue. Still others have had to shut down again.
At the NYU Langone Orthopedic Hospital in New York City, “people are starting to come in and you see the operating rooms full again,” said Dr. Claudette Lajam, chief orthopedic safety officer.
At St. Jude Medical Center in Fullerton, California, where the coronavirus is raging, inpatient joint replacements resumed in the second or third week of May – cautiously at first, but volume is “very close to pre-pandemic levels at this point,” said Dr. Kevin Khajavi, chairman of the hospital’s orthopedic surgery department. However, “we are constantly monitoring the situation to determine if we have to scale back once again,” he said.
In large swaths of Texas, elective surgeries were once again suspended in July because of the COVID-19 resurgence. The same is true at many hospitals in Florida, Alabama, South Carolina and Nevada.
The Mayo Clinic in Phoenix suspended nonemergency joint replacement surgeries in early July. It resumed outpatient replacement procedures the week of July 27, but still has not resumed nonemergency inpatient procedures, said Dr. Mark Spangehl, an orthopedic surgeon there. In terms of medical urgency, joint replacements are “at the bottom of the totem pole,” Spangehl said.
In terms of cash flow, however, joint replacements are decidedly not at the bottom of the totem pole. They have become a cash cow as the number of patients undergoing them has skyrocketed in recent decades.
The volume is being driven by an aging population, an epidemic of obesity and a significant rise in the number of younger people replacing joints worn out by years of sports and exercise.
It’s also being driven by the cash. Once only done in hospitals, the operations are now increasingly performed at ambulatory surgery centers – especially on younger, healthier patients who don’t require hospitalization.
The surgery centers are often physician-owned, but private equity groups such as Bain Capital and KKR & Co. have taken an interest in them, drawn by their high growth potential, robust financial returns and ability to offer competitive prices.
“[G]enerally the savings should be very good – but I do see a lot of outlier surgery centers where they are charging exorbitant amounts of money – $100,000 wouldn’t be too much,” said WellRithm’s Weintraub, who co-owned such a surgery center in Portland.
Fear of catching the coronavirus in a hospital is reinforcing the outpatient trend. Matthew Davis, a 58-year-old resident of Washington, was scheduled for a hip replacement on March 30 but got cold feet because of COVID-19, and canceled just before all elective surgeries were halted. When it came time to reschedule in June, he overcame his reservations in large part because the surgeon planned to perform the procedure at a free-standing surgery center.
“That was key to me – avoiding an overnight hospital stay to minimize my exposure,” Davis said. “These joint replacements are almost industrial-scale. They are cranking out joint replacements 9 to 5. I went in at 6:30 a.m. and I was walking out the door at 11:30.”
Acutely aware of the financial benefits, hospitals and surgery clinics have been marketing joint replacements for years, competing for coveted rankings and running ads that show healthy aging people, all smiles, engaged in vigorous activity.
However, a 2014 study concluded that one-third of knee replacements were not warranted, mainly because the symptoms of the patients were not severe enough to justify the procedures.
“The whole marketing of health care is so manipulative to the consuming public,” said Lisa McGiffert, a longtime consumer advocate and co-founder of the Patient Safety Action Network. “People might be encouraged to get a knee replacement, when in reality something less invasive could have improved their condition.”
McGiffert recounted a conversation with an orthopedic surgeon in Washington state who told her about a patient who requested a knee replacement, even though he had not tried any lower-impact treatments to fix the problem. “I asked the surgeon, ‘You didn’t do it, did you?’ And he said, ‘Of course I did. He would just have gone to somebody else.’ ”
This Kaiser Health News story first published on California Healthline, a service of the California Health Care Foundation.