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A new case in California, the American Medical Association Physician Group v. Vision Healthcare, aims to address the core of the illegal way private equity groups publicly own and operate medical practices, mainly by owning companies that provide outsourced medical practices to hospitals, such as emergency rooms Doctors, residents and specialists in obstetrics and gynecology. Gretchen Morgenson made the lawsuit public, and we have embedded it at the end of this article. It is very clear and well written.
Surprisingly, it took so long for private equity to blatantly abuse the ban on companies and non-professionals from practicing medicine before being dragged to court. For some time, California prosecutors have been studying how to challenge it, but were blocked by the difficulty of finding a doctor willing to serve as the main plaintiff. What’s even more surprising is that the two giants in this field, KKR’s Envision Healthcare (which targets this lawsuit) and Blackstone’s TeamHealth, have successfully carried out abuses such as “surprise billing” to the point that they have been It is the focus of Congress. Hearings and current legislation. To understand the scale, Envision Healthcare has signed contracts with 540 health organizations in 45 states.
We have previously written about the illegal behavior of private equity to practice medicine without a license. Take Dr. Ming Lin as an example. He was fired after being reported to TeamHealth in Blackstone for improper care of the coronavirus.We write in our Our March 2020 post The media’s report on Blackstone was shocking because they failed to link Dr. Lin’s hospital and St. Joseph’s Medical Center with the true power of TeamHealth, even after the report claimed that it was TeamHealth that lowered Dr. Lin’s axe! As we added:
However, the anger at Dr. Lin’s abuse largely ignores the question of how TeamHealth can legally provide hospital services without obtaining permission. Several groups protested against Dr. Lin’s resignation, and the American Association of Emergency Medicine is directly concerned about this issue. Position statement from its website (Emphasis ours):
According to public statements, TeamHealth and PeaceHealth St. Joseph Medical Center have terminated Dr. Ming Lin’s work. If this is the case, AAEM condemns TeamHealth and PeaceHealth St. Joseph Medical Center for firing Dr. Ming Lin, an emergency doctor, who made it public because of concerns about the safety of hospital staff and patients during this pandemic. Advocating the health of others is the basic duty of a doctor. As a member of the medical staff, Dr. Lin has the right to enjoy full due process and fair hearings among the medical staff’s colleagues. TeamHealth is a non-professional company under the private equity firm Blackstone Group. According to Washington State law, this company should not be Dr. Lin’s employer. Their participation in this termination is not only unforgivable, but may not be allowed. We call on the Attorney General of Western Australia and the State Medical Council to investigate this situation.
Needless to say, those smart private equity lawyers try to make it suspicious by keeping doctor-owned companies in the legal structure, and in some (many?) jurisdictions, the illegal practice of allowing unlicensed organizations to provide medical services Doubtful. The small problem is that they are straws, without any substance or authority. Eileen Appelbaum explained via email:
The structure of TeamHealth is a managed service organization (MSO), which does not “own” the practice of providing services to doctors. Each practice is “owned” by doctors or committees of doctors who establish medical standards for the practice. Sometimes (not sure if this is the case with TeamHealth), a doctor is the owner of up to 60 doctors’ practice records.
In this case, the question of what it means to “own” is a bit tricky. Rosemary Batt and I paid me to participate in a webinar organized by a well-respected source of healthcare data and information, where private equity professionals experienced in getting a doctor’s practice are instructing newbies on how to structure it. They were actually snickering because they explained how doctors who basically sold their practices to PE-owned companies like TeamHealth were relieved by the doctors who “owned” and operated these practices.
Of course, this transaction requires them to sell all their assets—buildings, equipment, supplies, accounts receivable—to a TeamHealth organization. So, if the clinic does not have assets that can be sold, moved, used as loan collateral, etc., what does it mean that the doctor owns the clinic?
I’ve come and I can almost guarantee that the lack of ownership of assets is reflected in the service agreement, which deprives the nominal owner of any right to speak. This may be very public, or it can be achieved that Blackstone and TeamHealth require a bean counter by letting the fake doctor owner of a specific entity have no role in operational decision-making and only participate in policy decision-making through a committee.
Back to the current post. The details of this lawsuit were submitted by the same American Academy of Emergency Medicine, confirming that Appelbaum’s intelligence and our speculation are correct.
The document shows that organizational relationships and contractual restrictions on doctors differ in many ways from California’s strong prohibitions against non-doctors practicing or owning doctors. Note that most states have similar strong regulations. It also details the typical legal structure of the hospital practice operated by Envision Healthcare. The focus here is on an emergency room team that demonstrates the methods used systematically throughout Envision Healthcare.
The lawsuit revolves around the replacement of the appropriate team of doctors that Envision Healthcare provides emergency room services at Placentia Linda Hospital. The non-profit organization American Medical Association physician team provides billing and other administrative services to the ER team.
The series of misconduct described in this short document is impressive. Envision Healthcare has a straw as MD responsible for each group of doctors. He does not have a California license and does not live in California. This is the same person, questioning how much he has done in addition to the rental license. Non-doctors have almost signed and archived all important company documents. It is said that MD-straw has very limited rights to its shares (he cannot transfer shares, pay dividends to himself, etc.), which means that his ownership is actually a legal fiction. The rights of doctors who join these practices are also restricted, including their ability to exercise clinical judgment. They are subject to various guidelines and restrictions established by non-MDs.
Then there is financial fraud. Doctors in these practices must agree to let Envision Healthcare charge based on their license number. The lawsuit claims that Envision Healthcare overstated these expenses and kept the excess, which is an illegal share of medical expenses with non-doctors (and Medicare/Medicaid patients’ medical insurance and Medicaid fraud…I think these lawyers also filed a lawsuit) They also provide rebates to the hospital in the form of a sweetheart deal with the anesthesia team.
This case is likely to blow up the entire field of illegal behavior in the United States, because, as detailed in this case, the efforts of private equity groups to comply with the law have not even reached the level of being a fig leaf.
Please read the file in its entirety. As Morganson wrote:
The lawsuit alleges that when Envision took over the emergency services of Placentia Hospital, it controlled the group of doctors by acquiring a medical group and then creating a separate legal entity. The lawsuit alleges that this is Envision’s business model, and the entity is managed and operated by people employed by or affiliated with Envision.
The lawsuit states: “The medical director of the doctor entity is appointed, and the choice is made by Envision.” “The decision is not made by the medical director.”
The lawsuit alleges that the private equity-owned Vision provides hospitals with remuneration in exchange for contracts, shutting out “legally operating medical groups,” such as the medical group that cooperates with AAEM.
The lawsuit alleges that Envision’s control of doctors in its acquired practices is “profound and universal.” For example, Envision decides how many doctors to hire, which doctors to hire, their salary and work schedule, and also sets other employment conditions, staffing levels, and the number of patient visits. The lawsuit alleges that Envision controls coding decisions and charges patients and/or insurance companies for such services without having to inform doctors of the fees already charged.
Needless to say, there are not many hospital groups in many parts of the country. Therefore, a doctor who is dissatisfied with the way Envision Health runs the emergency room is at risk of being fired or harassed, just like in a hospital far away from home, the worst time can be imagined… This is what TeamHealth told Lin. What the doctor did after he was banned, it generously offered him another position…As we have pointed out, since commuting is more difficult, this is equivalent to downgrading.
So through popcorn. This should be interesting.
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