For private equity, dropping ED docs is a “simple equation”
Private equity companies pool money from wealthy investors to buy their way into various industries, often slashing spending and seeking to flip businesses in 3 to 7 years. While this business model is a proven moneymaker on Wall Street, it raises concerns in health care, where critics worry the pressure to turn big profits will influence life-or-death decisions that were once left solely to medical professionals.
Nearly $1 trillion in private equity funds have gone into almost 8,000 health care transactions over the past decade, according to industry tracker PitchBook, including buying into medical staffing companies that many hospitals hire to manage their emergency departments.
Two firms dominate the ED staffing industry: TeamHealth, bought by private equity firm Blackstone in 2016, and Envision Healthcare, bought by KKR in 2018. Trying to undercut these staffing giants is American Physician Partners, a rapidly expanding company that runs EDs in at least 17 states and is 50% owned by private equity firm BBH Capital Partners.
These staffing companies have been among the most aggressive in replacing doctors to cut costs, said Robert McNamara, MD, a founder of the American Academy of Emergency Medicine and chair of emergency medicine at Temple University, Philadelphia.
“It’s a relatively simple equation,” Dr. McNamara said. “Their No. 1 expense is the board-certified emergency physician. So they are going to want to keep that expense as low as possible.”
Not everyone sees the trend of private equity in ED staffing in a negative light. Jennifer Orozco, president of the American Academy of Physician Associates, which represents physician assistants, said even if the change – to use more nonphysician providers – is driven by the staffing firms’ desire to make more money, patients are still well served by a team approach that includes nurse practitioners and physician assistants.
“Though I see that shift, it’s not about profits at the end of the day,” Ms. Orozco said. “It’s about the patient.”
The “shift” is nearly invisible to patients because hospitals rarely promote branding from their ED staffing firms and there is little public documentation of private equity investments.
Arthur Smolensky, MD, a Tennessee emergency medicine specialist attempting to measure private equity’s intrusion into EDs, said his review of hospital job postings and employment contracts in 14 major metropolitan areas found that 43% of ED patients were seen in EDs staffed by companies with nonphysician owners, nearly all of whom are private equity investors.
Dr. Smolensky hopes to publish his full study, expanding to 55 metro areas, later this year. But this research will merely quantify what many doctors already know: The ED has changed. Demoralized by an increased focus on profit, and wary of a looming surplus of emergency medicine residents because there are fewer jobs to fill, many experienced doctors are leaving the ED on their own, he said.
“Most of us didn’t go into medicine to supervise an army of people that are not as well trained as we are,” Dr. Smolensky said. “We want to take care of patients.”