Is Private Equity a Dangerous Employer?

This story is one in a series examining the impact of health care ownership trends on the practice of physicians. Click here for the main article on employment trends and here for a sidebar on how physicians find ways to maintain their autonomy in an increasingly corporate environment.

About 4 months after emergency physician Jessica (a pseudonym used for fear of reprisal from her employer) joined a Michigan hospital in 2014, the department’s staffing group was acquired by TeamHealth, a recruiting company backed by the giant. of Blackstone private equity.

Since Emergency Medicine Specialists (EMS) – who bill themselves as one of Michigan’s oldest emergency physician groups – were acquired by TeamHealth, “it’s been pretty much a disaster,” he said. Jessica said. MedPage today.

Over the past 10 years, private equity firms like Blackstone and KKR – which acquired physician recruiting group Envision Healthcare in 2018 – have amassed billions in revenue by investing in recruiting firms like TeamHealth. Envision and TeamHealth alone represent 30% of the national emergency specialist outsourcing market.

Emergency medicine is not the only target. There have been similar trends among other commonly outsourced specialties such as radiology and anesthesiology. While the past decade has seen increased private equity interest in consolidating hospitals, nursing homes and home care services, there have also been takeovers of smaller private practices in specialties like dermatology, ophthalmology, urology and orthopedics.

In 2019, for example, nearly 200 dermatology practices were acquired by privately funded management groups, according to a study published in JAMA Dermatology. Procedural-heavy practices that require expensive technology, such as dermatology, are ripe for private equity buyouts.

Overall, current research shows that estimated annual transaction values ​​for privately funded health care acquisitions have grown from around $ 42 billion in 2010 to nearly $ 120 billion in 2019 – and they predict that this rate will only accelerate in the years to come. Besides KKR and Blackstone, other private equity firms that have entered the healthcare industry include Apollo Global Management and The Carlyle Group.

However, the question of whether the private equity model is “right” for health systems and practices is a subject of heated debate. Advocates of the strategy argue that private equity investing can fortify small practices and jump-start struggling healthcare companies. Opponents argue that the model’s reliance on risk, debt and its prioritization of short-term benefits does not fit into the healthcare landscape. Instead, it erodes the relationship between physicians and their patients and, more importantly, results in higher costs and lower quality of care for patients.

Impact on emergency medicine

For Jessica, TeamHealth’s acquisition of EMS has resulted in a steady decline in the number of physicians on emergency department (ED) staff, coupled with significant reductions in physician pay and resources.

Jessica and a group of her colleagues began holding secret meetings offsite to discuss these issues, eventually bringing them to the attention of hospital administration and TeamHealth management.

However, they felt that their concerns had never been sufficiently taken into account.

Mitchell Li, MD, an emergency physician in Chicago, completed his residency during the TeamHealth takeover (residents are employed by the hospital, not TeamHealth). Li, an emergency physician and founder of TakeEMBack – an organization that works to combat the private equity model in emergency care – felt his residency program was affected by TeamHealth’s involvement.

Having enough doctors to supervise residents has always been a problem in a certain area of ​​the emergency department, Li said. However, he maintains that the lack of meaningful supervision has only worsened in the last years of his life. residence, with the presence of TeamHealth.

“We mostly made medical decisions and performed procedures on our own, and that’s probably not ideal from a medical supervision and training standpoint,” Li said. MedPage today. “Now that sure kicks your ass and sets you up to do things on your own. You know, fireproof.”

After the 2014 transition, Li said the hospital and TeamHealth, following the statistics-based model provided with private equity funding, were primarily concerned with patient satisfaction scores and emergency department numbers. “Left unseen” (LWBS).

In order to avoid reporting a high number of people who left the emergency room unseen, resources and priorities have shifted, Li said. screening for patients waiting to see a doctor, and although many patients still had to wait hours after this initial check-up to be seen by a doctor, records will show the patient was seen immediately.

“It’s another rubber stamp,” Li said. “They saw them very quick to sort and sometimes just decompress the department.”

It can be helpful, he admitted, when a patient presents to the emergency room for something like a sinus infection.

Jessica and Rafael, another emergency doctor from the same emergency department who agreed to speak to MedPage Today under the promise of anonymity, attesting to the long hours that many patients in their emergency room have to wait to be seen by a doctor due to staffing issues. The practices that Li saw during his residency continued, they said.

Asked about the concerns of these doctors, a spokesperson for TeamHealth said MedPage today in an email that the company “regularly adjusts staffing levels to reflect the needs of patients in the facilities we serve, keeping levels above the expected number of patients.” Our clinicians do heroic work for their patients, and we are committed to supporting them with the resources they need to provide quality care every day. “

A generational divide

When it comes to private equity investments in healthcare and consolidation, there seems to be a somewhat generational difference of opinion. Whether they are recruiting firms or smaller specialist firms, there is a tendency for late-career physicians – who may be hoping to retire within the next two years – to sell or partner with a management company.

Tarang Patel, DO, a Phoenix-based radiologist, said MedPage today that young doctors are increasingly wary of private practice jobs.

“At the end of the day, there will be higher turnover on the pension side and not enough new blood to come,” he said.

A March 2020 study showed that out of 602 early-career radiologists surveyed, 86% believed businesses were harming radiology as a specialty and 83% preferred to join independent private practices. An overwhelming majority also said they were generally concerned that their future practices or practices will be bought off by a company.

Many dermatologists “have expressed a categorical refusal to work for privately funded dermatology groups,” said Sailesh Konda, MD, a Florida-based dermatologist. MedPage today. “Physician recruiters and independent practices are now advertising job vacancies as ‘non-private equity’ as a recruiting tool. “

This mistrust may be due in part to the number of reports that have emerged in recent years exposing the frequency of unnecessary but cost-effective procedures in areas like dermatology.

Yet groups run by private equity firms attract early-career physicians with large base salary offers and enrollment bonuses. For physicians emerging from years of training, who are potentially sitting on hundreds of thousands of dollars in debt, these contracts are tantalizing.

“These are great deals, but I’ve spoken to doctors who think if you scratch a little below the surface it’s not that appealing,” said Atul Gupta, PhD, assistant professor of economics. of health at the Wharton. School of the University of Pennsylvania.

While some initial offers may seem overwhelming, Konda said MedPage today, “Closer examination reveals below average bonus structures, administrative pressure to supervise extensor physicians with minimal financial gain and increased risk to the employed physician, and aggressive non-compete clauses.”

Konda added that during the COVID-19 pandemic, a number of privately run dermatology groups failed to honor their contracts at all. Some have asked their employed physicians to “sign contract amendments that reduced their wages for a period of time.”

Express concerns about the growth of private equity investments

Doctors working for privately funded groups who speak out against their employers’ practices run the risk of being fired without a full investigation, sources said. In March 2020, Ming Lin, MD, an emergency physician employed by TeamHealth, was immediately fired for using social media to voice his grievances with COVID protocols at the hospital where he worked.

Robert McNamara, MD, president of emergency medicine at Temple University, said at a press briefing featuring Lin last month that privately funded employers are not shy about laying off doctors.

“Emergency physicians can be fired at short notice without the possibility of contesting claims,” as recruiting companies risk losing their contracts if they disturb the administration of the hospital, he said.

Organizing a group of doctors, Jessica said, is key to taking action against a giant like TeamHealth. But convincing doctors to join her coalition presented its own challenges, she said.

“Doctors are pretty risk averse people,” she said. “To really bring everyone into an organization and speak with one voice, it took us over a year to do it.”

Now, however, there are nearly 50 doctors in Jessica’s hospital system who oppose TeamHealth.

“We actually said ‘no it’s all of us’,” she said. “We represent a whole group.”

Yet it remains to be seen whether these voices will be heard as private equity firms continue to target healthcare assets.

Last updated on October 14, 2021

  • Kara Grant joined the Enterprise & Investigative Reporting team at MedPage Today in February 2021. She covers psychiatry, mental health and medical education. To follow