Below is an excerpt from the Financial Times.
Sonji Wilkes from Englewood, Colorado, had taken care to ensure her health insurance was up to date in preparation for her baby’s arrival. Tom was born with severe haemophilia and had to be transferred for specialist care after he suffered heavy bleeding.
Ms Wilkes later received a $50,000 bill because the hospital had subcontracted the neonatal intensive care unit to a third-party provider that was not covered by her insurance provider. She refused to pay. Her debt was later dismissed as part of a class-action lawsuit but not before her credit rating was ruined.
“I would never have thought to check if the neonatal intensive care unit, which was just 50 steps from the room where I gave birth, was in-network [covered by my insurance policy],” said Ms Wilkes during testimony in June to a US House of Representatives committee.
Millions of other families in America have also received large “surprise” medical bills for thousands of dollars when they believed their treatment costs were fully covered by a health insurance policy.
Debate over the issue of surprise bills stretch back to the 1980s but mounting public anger has prompted US lawmakers to launch an investigation. The focus of public ire and politicians’ scrutiny is turning to the private equity owners of US healthcare companies that provide emergency medical services.
Blackstone and KKR, two of the world’s largest private equity managers, were asked to provide detailed information about every healthcare company they have ever owned along with documents about their relationships with medical insurance providers to the committee by September 30 this year.
Welsh, Carson, Anderson & Stowe, a New York-based private equity manager that has invested in 85 healthcare companies over its 40-year history, also received a request for the same detailed information.
All three managers were invited to provide a briefing behind closed doors by October 7 to the investigation that is jointly led by Frank Pallone, a Democrat representing New Jersey, and Greg Walden, a Republican representing Oregon.
“We are concerned about the increasing role that private equity firms appear to be playing in physician staffing in our nation’s hospitals, and the potential impact these [private equity] firms are having on our rising healthcare costs,” said the two representatives.
Healthcare costs accounted for 17.1 per cent of US gross domestic product in 2017, the highest share among leading industrial nations, according to the OECD.
The scrutiny by the committee shines an unflattering spotlight on private equity managers that have already developed a reputation for using large amounts of debt and high fees to enrich their top executives.
Blackstone owns TeamHealth, a company that employs more than 20,000 physicians and clinicians and generated revenues of $4.7bn last year by providing a wide range of medical services to hospitals and other healthcare providers.
Envision, which was acquired in 2018 for $9.9bn by KKR in one of the biggest buyouts since the financial crisis, employs more than 69,000 workers. Envision generated revenues of about $8.3bn in 2018 with the majority of its earnings derived from providing physician staffing services to hospitals.
Many US hospitals choose to outsource the running of their emergency rooms to specialised third-party companies that hire and oversee doctors and take care of billing.
Envision and TeamHealth are two dominant players in this sector. Doctors and other healthcare professionals working for Envision and TeamHealth participate in about 28m emergency department cases annually.
Emergency rooms act as the front doors for hospitals and demand for their services has risen significantly.
A study by Stanford University found that the prevalence of surprise billing has increased from about a third of visits to emergency rooms in 2010 to almost 43 per cent in 2016. Surprise bills for inpatient admissions rose from 26 per cent to 42 per cent over the same period.
The bill for an outsourced doctor is generally significantly higher than if the same service is provided by a physician where the cost is covered by an insurance policy.
Claire McAndrew, director of campaigns and partnerships at Families USA, an association representing consumers, said patients have “no real way of understanding the financial trap” which they have walked into.
“Surprise bills are a particularly egregious heath care cost as they are unpredictable for families and they occur despite every effort consumers make to avoid them,” said Ms McAndrew.
Both Envision and TeamHealth also increase charges when they enter into contracts to manage emergency department services, either directly or by agreeing new rates with insurance companies, according to an analysis by Yale University.
Eileen Appelbaum, senior economist at the Center for Economic and Policy Research, Washington, DC-based think-tank, said the business model of private equity managers was geared to driving up the costs of patient care.
“Emergency medical practices are a perfect buyout target for private equity managers because demand does not decline when prices go up,” said Ms Appelbaum.
Ambulance services owned by private equity managers are another problematic area.
An analysis by the US government accountability office found that 69 per cent of about 20,700 air ambulance transports in 2017 resulted in additional bills for privately insured patients. Rarely were these additional bills less than $10,000.
“Demand for air transport has grown considerably because many rural hospitals have closed, leading to far longer distances for access to emergency care,” said Ms Appelbaum.
Intensive lobbying is now under way. Private equity managers have backed Physicians for Fair Coverage, a lobby group that is calling for the establishment of an independent dispute resolution process to settle contentious medical bills.
Both Blackstone and KKR say that surprise medical billing can be ended by using independent arbitration panels to determine how much should be paid by a patient and their insurance company.
“This approach would further raise healthcare costs for consumers,” warns Ms Appelbaum.