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.