When Patients Are At Their Most Vulnerable, Private Equity Firms See “Opportunity to Reap Above-Market Returns”

Jul 23, 2019 | Blog Post, Private Equity

In an op-ed for The Hill, co-director of the Center for Economic and Policy Research Eileen Appelbaum highlights the explosion of private equity-backed provider firms that see profit opportunities when patients are at their most vulnerable.

“Private equity has shaped how these companies do business,” Appelbaum noted. “In the health-care settings where they operate, market forces do not constrain the raw pursuit of profit. People desperate for care are in no position to reject over-priced medical services or shop for in-network doctors.”

Not surprisingly, out-of-network providers are pushing for arbitration and other reforms that would allow them to continue to demand exorbitant costs for their services. To protect patients, lawmakers must reject any attempt to include arbitration as part of a legislative solution to surprise billing. Any such provision is a private equity handout at the expense of patients. Highlights from Applebaum’s op-ed are below:

  • “It’s not only patients that are victimized by unscrupulous physicians’ groups.  These doctors’ groups are able to coerce health insurance companies into agreeing to pay them very high fees in order to have them in their networks. They do this by threatening to charge high out-of-network bills to the insurers’ covered patients if they don’t go along with these demands. High payments to these unethical doctors raise hospitals’ costs and everyone’s insurance premiums.” 
  • “A 2018 study by Yale health economists looked at what happened when thetwo largest emergency room outsourcing companies — EmCare and TeamHealth — took over hospital ERs. They found…that after EmCare took over the management of emergency services at hospitals with previously low out-of-network rates, they raised out-of-network rates by over 81 percentage points. In addition, the firm raised its charges by 96 percent relative to the charges billed by the physician groups they succeeded.”
  • “TeamHealth used the threat of sending high out-of-network bills to theinsurance company’s covered patients to gain high fees as in-network doctors. The researchers found:
    • ‘…in most instances, several months after going out-of-network, TeamHealth physicians rejoined the network and received in-network payment rates that were 68 percent higher than previous in-network rates.’”
  • “What the Yale study failed to note, however, is that EmCare has been in and out of PE hands since 2005 and is currently owned by KKR. Blackstone is the once and current owner of TeamHealth, having held it from 2005 to 2009 before buying it again in 2016.”
  • “Private equity has shaped how these companies do business. In the health-care settings where they operate, market forces do not constrain the raw pursuit of profit.”
  • “People desperate for care are in no position to reject over-priced medicalservices or shop for in-network doctors. Private equity firms are attracted by this opportunity to reap above-market returns for themselves and their investors.”
  • “Patients hate surprise medical bills, but they are very profitable for the private equity owners of companies like EmCare (now called Envision) and TeamHealth.”

To view the full op-ed, click here.