Eileen Appelbaum
The Hill, May 16, 2019
The Hill, May 16, 2019
Surprise medical bills are in
the news almost daily. Last Thursday, the White House called for legislation to protect patients
from getting surprise doctor bills when they are rushed to the emergency room
and receive care from doctors not covered by insurance at an in-network
hospital.
The financial burden on
patients can be substantial — these doctor charges can amount to hundreds or
even thousands of dollars.
What’s behind this explosion
of outrageous charges and surprise medical bills? Physicians’ groups, it turns
out, can opt out of a contract with insurers even if the hospital has such a
contract. The doctors are then free to charge patients, who desperately need
care, however much they want.
This has made physicians’
practices in specialties such as emergency care, neonatal intensive care and
anesthesiology attractive takeover targets for private equity firms.
As health reporter Bob Herman observed, acquisition of
these health services “exemplifies private equity firms' appetite for buying
health care providers that wield a lot of market power.”
Emergency rooms, neonatal
intensive care units and anesthesiologists’ practices do not operate like an
ordinary marketplace. Physicians’ practices in these specialties do not need to
worry that they will lose patients because their prices are too high.
Patients can go to a hospital
in their network, but if they have an emergency, have a baby in the neonatal
intensive care unit or have surgery scheduled with an in-network surgeon, they
are stuck with the out-of-network doctors the hospital has outsourced these
services to.
This stands in stark contrast
to other health-care providers, such as primary-care physicians, who will lose
patients if they are not in insurers’ networks.
It’s not only patients that
are victimized by unscrupulous physicians’ groups. These doctors’ groups are
able to coerce health insurance companies into agreeing to pay them very high
fees in order to have them in their networks.
They do this by threatening to
charge high out-of-network bills to the insurers’ covered patients if they
don’t go along with these demands. High payments to these unethical doctors
raise hospitals’ costs and everyone’s insurance premiums.
That’s what happened when
private equity-owned physician staffing firms took over hospital emergency
rooms.
A 2018 study by Yale health economists looked at what
happened when the two largest emergency room outsourcing companies — EmCare and
TeamHealth — took over hospital ERs. They found:
“…that after EmCare took over
the management of emergency services at hospitals with previously low
out-of-network rates, they raised out-of-network rates by over 81 percentage
points. In addition, the firm raised its charges by 96 percent relative to the
charges billed by the physician groups they succeeded."
TeamHealth used the threat of
sending high out-of-network bills to the insurance company’s covered patients
to gain high fees as in-network doctors. The researchers found:
“…in most instances, several
months after going out-of-network, TeamHealth physicians rejoined the network
and received in-network payment rates that were 68 percent higher than previous
in-network rates.”
What the Yale study failed to
note, however, is that EmCare has been in and out of PE hands since 2005 and is
currently owned by KKR. Blackstone is the once and current owner of TeamHealth,
having held it from 2005 to 2009 before buying it again in 2016.
Private equity has shaped how
these companies do business. In the health-care settings where they operate,
market forces do not constrain the raw pursuit of profit. People desperate for
care are in no position to reject over-priced medical services or shop for
in-network doctors.
Private equity firms are
attracted by this opportunity to reap above-market returns for themselves and
their investors.
Patients hate surprise medical
bills, but they are very profitable for the private equity owners of companies
like EmCare (now called Envision) and TeamHealth. Fixing this problem may be
more difficult than the White House imagines.
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