Private equity firms overwhelm federal dispute process

Four private equity firms have dominated a dispute resolution process meant to resolve out of network payment disputes between payers and healthcare providers. The number of claims filed by only these firms has far exceeded initial expectations for the entire program.

Enacted in late 2020, the No Surprises Act protects consumers against out-of-network balance billing and established a process — known as the independent dispute resolution (IDR) process — to resolve certain out-of-network payment disputes between providers, facilities, and health plans. The law also requires the health, treasury, and labor departments to release data on disputes in the IDR process.[1]

In early 2023, PESP reported that initial data from the IDR process revealed private equity-backed companies to be among the top initiating parties in the Independent Dispute Resolution process. In the program’s first six months, four PE-owned companies accounted for more than 40% of all disputes. Two additional PE-owned companies accounted for more than half of all air ambulance disputes.[2]

Recently released CMS data covering the first half of 2023 reveal that private equity firms have overwhelmed the IDR process.

The highest numbers of disputes were separately initiated by four companies, all of which are owned by private equity firms. Together they initiated 191,785 disputes, representing 70% of the 274,432 total claims (excluding air ambulances) filed in the first half of 2023.[3]

Blackstone’s TeamHealth[4] initiated the highest number of IDR claims in the first half of 2023, representing 30% of claims (81,747 total). Onex-owned SCP Health[5] initiated one of every five claims (55,356). Radiology Partners — owned by Heritage Group[6] and Whistler Capital Partners[7] — made 30,433 claims (11%). KKR’s Envision Healthcare, which declared bankruptcy in May, initiated 24,249 claims (9%) in the first six months of 2023.[8]

After the private equity-owned companies, the next most frequent filer was HCA Healthcare. The company initiated 7,045 IDR claims in the first half of 2023 (3%).

TeamHealth and Envision were both subject to media scrutiny for their surprise billing practices prior to enactment of the No Surprises Act. The companies also put tens of millions of dollars into an advocacy group lobbying legislators to oppose the law’s passage.[9]

Envision exited bankruptcy in October 2023 after filing for Chapter 11 protection in May. The company included the No Surprises Act among the reasons for its filing.[10]PESP has published a case study highlighting Envision’s use of surprise billing and efforts to oppose regulation.

In separate data for air ambulances, private equity-owned companies initiated 9,642 IDR claims in 2023’s first six months. This represents 67% of the total 14,378 air ambulance billing disputes initiated in the first half of 2023.

Almost half of air ambulance IDR claims were initiated by KKR-owned Global Medical Response. In May 2023, Moody’s Investors Service downgraded Global Medical Response’s credit from B3 to Caa2 (i.e., speculative grade).[11] In October, Bloomberg reported that KKR had kicked off talks to amend and extend more than $4 billion of the company’s debt.[12]

American Securities-owned Air Methods was second on the list, making 2,453 (17%) air ambulance IDR claims in the first half of 2023. In December 2023, Air Methods exited bankruptcy two months after filing for Chapter 11 protection.[13] According to AIN, reports had surfaced that the No Surprises Act led to reduced company revenues by more than 50%.[14]

GreyLion-owned Quick Med Claims[15] was also among the top claimants, initiating 155 (1%) of air ambulance IDR claims. Quick Med Claims has published a set of company case studies on its website, including air ambulance companies that have transitioned billing and reimbursement processes to Quick Med.[16]

Private equity-owned companies have overwhelmed the independent dispute resolution process as due dates for their debt come closer. Global Medical Response, TeamHealth, and Radiology Partners have multi-billion dollar debts coming due over the next two years.[17]

The IDR process has been favorable towards these companies. Providers, facilities, or air ambulances have prevailed in 77% of payment determinations, according to a report accompanying the recent IDR data release. In 82% of payment determinations the prevailing offer was higher than the qualifying payment amount[18] (i.e., the median in-network rate for a service in a geographic region[19]).

The number of claims has far exceeded initial federal estimates that there would be 17,333 IDR claims per year.[20] According to a December 2023 GAO report titled “Roll Out of Independent Dispute Resolution Process for Out-of-Network Claims Has Been Challenging,” IDR entities report dispute backlogs, as well as long delays in the determination and payment process.[21]

In order to understand the issue in full — and resolve it — deeper examination and possible revisions to the IDR process may be worth pursuing. Data on its implementation suggest that private equity-owned companies have continued to do business based on a model that exploits out-of-network payments.

The burdens of this private equity model have fallen in different ways onto regulators and patients, as outsize resources go towards resolving payment disputes from primarily PE-backed companies. The unimaginable scale (i.e., exceeding official estimates) of claims strongly implies a need for more tailored solutions to resolve what is an ongoing problem.

[1] Centers for Medicare & Medicaid Services. “Payment Disputes between Providers and Health Plans.” Accessed February 21, 2024. https://www.cms.gov/nosurprises/help-resolve-payment-disputes/payment-disputes-between-providers-and-health-plans.

[2] Mary Bugbee. “No Surprises Here: PE Takes Center Stage in the No Surprises IDR Process.” Private Equity Stakeholder Project, January 11, 2023. https://pestakeholder.org/news/no-surprises-here-pe-at-center-of-surprise-billing-controversy/.

[3] Centers for Medicare & Medicaid Services. “Independent Dispute Resolution Reports.” Accessed February 21, 2024. https://www.cms.gov/nosurprises/policies-and-resources/Reports.

[4] Blackstone. “TeamHealth to Be Acquired by The Blackstone Group,” October 12, 2005. https://www.blackstone.com/news/press/teamhealth-to-be-acquired-by-the-blackstone-group/.

[5] Onex. “SCP Health.” Accessed February 22, 2024. https://www.onex.com/portfolio/OP-OpCo-SCPHealth.

[6] Heritage Group | Healthcare Investment Partners. “Portfolio.” Accessed February 22, 2024. https://heritagegroupusa.com/portfolio/.

[7] Whistler Capital Partners. “Portfolio.” Accessed February 22, 2024. https://www.whistlercapital.com/portfolio.

[8] The company will no longer be private equity-owned once it emerges from bankruptcy. See Hannah Herner. “Envision Emerges from Bankruptcy Split in Two.” Nashville Post, November 6, 2023. https://www.nashvillepost.com/business/health_care/envision-emerges-from-bankruptcy-split-in-two/article_8188705e-7ce2-11ee-aed3-f74bbb45ccf4.html.

[9] Isaac Arnsdorf. “Medical Staffing Companies Cut Doctors’ Pay While Spending Millions on Political Ads.” ProPublica, April 20, 2020. https://www.propublica.org/article/medical-staffing-companies-cut-doctors-pay-while-spending-millions-on-political-ads.

[10] Emily Olsen. “Envision Healthcare Emerges from Bankruptcy Restructuring.” Healthcare Dive, November 7, 2023. https://www.healthcaredive.com/news/envision-healthcare-emerges-bankruptcy-restructuring-names-interim-ceo/699006/.

[11] Moody’s Investors Service. “Moody’s Downgrades Global Medical Response’s CFR to Caa2, Outlook Remains Negative,” May 23, 2023. https://www.moodys.com/research/Moodys-downgrades-Global-Medical-Responses-CFR-to-Caa2-outlook-remains-Rating-Action–PR_476993.

[12] Reshmi Basu. “KKR-Backed Global Medical Response Begins Outreach for Loan Deal.” Bloomberg Law, October 23, 2023. https://news.bloomberglaw.com/bankruptcy-law/kkr-backed-global-medical-response-begins-outreach-for-loan-deal.

[13] Sriparna Roy. “Air Methods Exits Bankruptcy with $1.7 Billion Less Debt.” Reuters, December 28, 2023. https://www.reuters.com/markets/deals/air-methods-exits-bankruptcy-with-17-billion-less-debt-2023-12-28/.

[14] Mark Huber. “Is Air Methods Bankruptcy a Warning?” Aviation International News, December 1, 2023. https://www.ainonline.com/aviation-news/business-aviation/2023-12-01/air-ambulances-fly-through-economic-turbulence.

[15] GreyLion. “Investments.” Accessed February 22, 2024. https://www.greylion.com/investments/.

[16] Quick Med Claims, LLC. “Case Studies.” Accessed February 22, 2024. https://www.quickmedclaims.com/case-studies/.

[17] Jill R Shah, Amelia Pollard, and Lauren Coleman-Lochner. “Rising Bankruptcies Haunt Firms Hit by Surprise Medical Bill Ban.” Bloomberg.com, November 13, 2023. https://www.bloomberg.com/news/articles/2023-11-13/rising-bankruptcies-haunt-firms-hit-by-surprise-medical-bill-ban.

[18] Centers for Medicare & Medicaid Services. “Supplemental Background on Federal Independent Dispute Resolution Public Use Files,” February 15, 2024. https://www.cms.gov/files/document/federal-idr-supplemental-background-2023-q1-2023-q2.pdf, p. 3-4.

[19] Erin Lindsey Duffy, Adam Biener, Christopher Garmon, and Erin E. Trish. “Comparison of Estimated No Surprises Act Qualifying Payment Amounts and Payments to In-Network and Out-of-Network Emergency Medicine Professionals.” JAMA Health Forum 3, no. 9 (September 16, 2022): e223085. https://doi.org/10.1001/jamahealthforum.2022.3085.

[20] Tina Reed. “Medical Bills Heading to Dispute Resolution Far More Often than Anticipated.” Axios, December 30, 2022. https://www.axios.com/2022/12/30/medical-bills-heading-to-dispute-resolution-far-more-often-than-anticipated.

[21] Government Accountability Office. “Roll Out of Independent Dispute Resolution Process for Out-of-Network Claims Has Been Challenging,” December 2023. https://www.gao.gov/assets/d24106335.pdf, p. 21.