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Private equity in the medical-industrial complex

June 26, 2020

Topics: Quote of the Day

By Isaac Arnsdorf
ProPublica, June 12, 2020

In 2017, TeamHealth, the nation’s largest staffing firm for ER doctors, sued a small insurance company in Texas over a few million dollars of disputed bills.

Over 2 1/2 years of litigation, the case has provided a rare look inside TeamHealth’s own operations at a time when the company, owned by private-equity giant Blackstone, is under scrutiny for soaking patients with surprise medical bills and cutting doctors’ pay amid the coronavirus pandemic.

Hundreds of pages of tax returns, depositions and other filings in state court in Houston show how TeamHealth marks up medical bills in order to boost profits for investors.

TeamHealth declined to provide an interview with any of its executives. In a statement for this story, the company says it’s fighting for doctors against insurance companies that are trying to underpay: “We work hard to negotiate with insurance companies on behalf of patients even as they unilaterally cancel contracts and attempt to drive physician compensation downward.”

But the Texas court records contradict TeamHealth’s claims that the point of its aggressive pricing is to protect doctors’ pay. In fact, none of the additional money that TeamHealth wrings out of a bill goes back to the doctor who treated the patient.

Instead, the court records show, all the profit goes to TeamHealth.

“These companies put a white coat on and cloak themselves in the goodwill we rightly have toward medical professionals, but in practice, they behave like almost any other private equity-backed firm: Their desire is to make profit,” said Zack Cooper, a Yale professor of health policy and economics who has researched TeamHealth’s billing practices and isn’t involved in the Texas lawsuit.

“In the market for emergency medicine, where patients can’t choose where they go in advance of care, there’s a real opportunity to take advantage of patients, and I think we’re seeing that that’s almost precisely what TeamHealth is doing, and it’s wildly lucrative for the firm itself and its private equity investors.”

Most ER doctors aren’t employees of the hospital where they work. Historically they belonged to doctors’ practice groups. In recent years, wealthy private investors have bought out those practice groups and consolidated them into massive nationwide staffing firms like TeamHealth and its largest competitor, KKR-owned Envision Healthcare.



By Don McCanne, M.D.

Arnold Relman warned us decades ago about the medical-industrial complex. It just gets worse. The behavior of these emergency department staffing firms is just what you would expect from the private equity firms that own them, as described in this ProPublica report, and why should we expect anything different?

Supporters of single payer Medicare for All realize that the financing would be more effective in including everyone, efficient, equitable, and affordable for each of us, but that was based on the traditional model of health care with patient-centric professional relationships. Now the primary players are the capitalists exemplified by the private equity firms and the giant insurers of Wall Street. The health care professionals are now mere pawns in the games played by the medical-industrial complex, and the patients and their payers are there for the milking.

It is not too late to change to an ethical, egalitarian financing system based on social solidarity, but, boy is it going to be tough to drive off the weasels that have taken over financial control of much of the delivery system.

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About the Commentator, Don McCanne

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Don McCanne is a retired family practitioner who dedicated the 2nd phase of his career to speaking and writing extensively on single payer and related issues. He served as Physicians for a National Health Program president in 2002 and 2003, then as Senior Health Policy Fellow. For two decades, Don wrote "Quote of the Day", a daily health policy update which inspired HJM.

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