Recent KHN article highlights another profit-seeking tactic in emergency rooms used by private equity-backed companies

In recent years, private equity-owned physician staffing companies Envision Healthcare (KKR) and TeamHealth (Blackstone) have attracted public scrutiny for the profits they generated from surprise medical bills. Surprise medical bills arise when patients go to a seemingly in-network provider for emergency care only to learn after-the-fact that they were treated by out-of-network clinicians. These out-of-network bills can be devastatingly high for many individuals.[1]

Ultimately, and despite a dark money campaign funded by private equity-backed companies,[2] surprise billing drew enough scrutiny from various stakeholder groups to result in federal legislation to limit the practice. This legislation, dubbed the No Surprises Act, went into effect in January 2022.[3]

However, surprise billing isn’t the only way that private equity-owned physician staffing companies have cut costs and increased profits.

KHN recently published an article highlighting another profit-seeking tactic used by some private equity-backed emergency physician staffing groups: replacing board-certified emergency physicians with nurse practitioners and physician assistants, also known as “mid-level practitioners.” Physician salaries on average or more than twice the salaries that mid-level practitioners make, so using fewer physicians and more MLPs can lead to higher earnings for emergency room staffing companies.[4]

Some research has indicated that reducing the use of doctors and increasing reliance on MLPs can result in higher costs of care, increased lengths of stay, and greater likelihood of readmission to the hospital with 30 days.[5] However, as the KHN coverage points out, there is not enough evidence at this time to demonstrate that increased reliance on MLPs in emergency rooms definitively results in worse patient outcomes.[6]

KHN’s article features American Physician Partners, which KHN reports is 50% owned by BBH Capital Partners and is growing to become a competitor to Envision Healthcare and TeamHealth. KHN and NPR obtained a confidential company document from APP that explicitly outlines APP’s strategies of employing fewer doctors overall and shifting from doctors to MLPs to increase earnings through nearly $6 million in cost-savings.[7]

KHN also cited a 2017 presentation from Envision Healthcare that detailed a similar strategy as APP:

“For example, Envision once encouraged ERs to employ ‘the least expensive resource’ and treat up to 35% of patients with midlevel practitioners, according to a 2017 PowerPoint presentation. The presentation drew scorn on social media and disappeared from Envision’s website.

Envision declined a request for a phone interview. In a written statement to KHN, spokesperson Aliese Polk said the company does not direct its physician leaders on how to care for patients and called the presentation a ‘concept guide’ that does not represent current views.”[8]

The cost-cutting strategy of employing fewer doctors in emergency rooms aligns with other well-documented strategies used by private equity-owned healthcare companies to cut costs and grow outsized profits. These include:

• Understaffing
• Use of unlicensed staff
• Skimping on medical supplies and equipment
• Not maintaining facilities[9]

Read KHN’s: “Doctors are Disappearing from Emergency Rooms as Hospitals Look to Cut Costs.”

[1] Bugbee, Mary. “Envision Healthcare: A Private Equity Case Study.” Private Equity Stakeholder Project, December 2022. https://pestakeholder.org/wp-content/uploads/2022/12/Envision_CaseStudy_Final_Dec2022.pdf.

[2] Roubein, Rachel. “Health Groups Backed Dark Money Campaign to Sink ‘surprise’ Billing Fix.” POLITICO, September 13, 2019. https://www.politico.com/story/2019/09/13/health-groups-dark-money-hospital-bills-legislation-1495697.

[3] Bugbee, Mary. “Envision Healthcare: A Private Equity Case Study.” Private Equity Stakeholder Project, December 2022. https://pestakeholder.org/wp-content/uploads/2022/12/Envision_CaseStudy_Final_Dec2022.pdf.

[4] Kelman, Brett, and Blake Farmer. “Doctors Are Disappearing From Emergency Rooms as Hospitals Look to Cut Costs.” Kaiser Health News, February 13, 2023. https://khn.org/news/article/doctors-are-disappearing-from-emergency-rooms-as-hospitals-look-to-cut-costs/.

[5] David Chan and Yiqun Chen, “The Productivity of Professions: Evidence from the Emergency Department” (Cambridge, MA: National Bureau of Economic Research, October 2022), https://doi.org/10.3386/w30608. ; Eric W. Christensen et al., “Association of State Share of Nonphysician Practitioners With Diagnostic Imaging Ordering Among Emergency Department Visits for Medicare Beneficiaries,” JAMA Network Open 5, no. 11 (November 10, 2022): e2241297, https://doi.org/10.1001/jamanetworkopen.2022.41297.

[6] Kelman, Brett, and Blake Farmer. “Doctors Are Disappearing From Emergency Rooms as Hospitals Look to Cut Costs.” Kaiser Health News, February 13, 2023. https://khn.org/news/article/doctors-are-disappearing-from-emergency-rooms-as-hospitals-look-to-cut-costs/.

[7] Pgs. 18, 30, and 38; Rutledge, John, Bob Newport, Tony Briningstool, and Andy McQueen. “American Physician Partners Lender Presentation – Public Side.” November 2021; Kelman, Brett, and Blake Farmer. “Doctors Are Disappearing From Emergency Rooms as Hospitals Look to Cut Costs.” Kaiser Health News, February 13, 2023. https://khn.org/news/article/doctors-are-disappearing-from-emergency-rooms-as-hospitals-look-to-cut-costs/.

[8] Kelman, Brett, and Blake Farmer. “Doctors Are Disappearing From Emergency Rooms as Hospitals Look to Cut Costs.” Kaiser Health News, February 13, 2023. https://khn.org/news/article/doctors-are-disappearing-from-emergency-rooms-as-hospitals-look-to-cut-costs/.

[9] See the following reports from PESP for more information: “Understaffed, Unlicensed, and Untrained: Behavioral Health Under Private Equity;” “The Kids Are Not Alright: How Private Equity Profits Off of Behavioral Health Services for Vulnerable and At-Risk Youth; “How Private Equity Raided Safety Net Hospitals and Left Communities Holding the Bag;” and “Envision Healthcare: A Private Equity Case Study.”