Envision headquarters in Nashville, Tenn. (Photo by Tennessee Lookout)
This article was first published by KHN?(Kaiser Health News).
A group of emergency physicians and consumer advocates in multiple states are pushing for
stiffer enforcement of decades-old statutes that prohibit the ownership of medical practices by
corporations not owned by licensed doctors.
Thirty-three states plus the District of Columbia have rules on their books against the so-called
corporate practice of medicine. But over the years, critics say, companies have successfully
sidestepped bans on owning medical practices by buying or establishing local staffing groups
that are nominally owned by doctors and restricting the physicians’ authority so they have no
direct control.
These laws and regulations, which started appearing nearly a century ago, were meant to fight
the commercialization of medicine, maintain the independence and authority of physicians, and
prioritize the doctor-patient relationship over the interests of investors and shareholders.
Those campaigning for stiffer enforcement of the laws say that physician-staffing firms owned
by private equity investors are the most egregious offenders. Private equity-backed staffing
companies manage a quarter of the nation’s emergency rooms, according to one Raleigh, N.
C.-based doctor who runs a job site for ER physicians. The two largest are Nashville-based
Envision Healthcare, owned by investment giant KKR & Co., and Knoxville-based TeamHealth,
owned by Blackstone.
Court filings in multiple states, including California, Missouri, Texas and Tennessee, have called
out Envision and TeamHealth for allegedly using doctor groups as straw men to sidestep
corporate practice laws. But those filings have typically been in financial cases involving
wrongful termination, breach of contract and overbilling.
Now, physicians and consumer advocates around the country are anticipating a California
lawsuit against Envision, scheduled to start in January 2024 in federal court. The plaintiff in the
case, Milwaukee-based American Academy of Emergency Medicine Physician Group, alleges
that Envision uses shell business structures to retain de facto ownership of ER staffing groups,
and it is asking the court to declare them illegal.
“We’re not asking them to pay money, and we will not accept being paid to drop the case,” said
David Millstein, lead attorney for the plaintiff. “We are simply asking the court to ban this
practice model.”
The physician group believes a victory would lead to a prohibition of the practice across
California — and not just in ERs, but for other staff provided by Envision and TeamHealth,
including in anesthesiology and hospital medicine. The California Medical Association supports
the lawsuit, saying it “will shape the boundaries of California’s prohibition on the corporate
practice of medicine.”
The plaintiff — along with many doctors, nurses and consumer advocates, as well as some
lawmakers — hopes that success in the case will spur regulators and prosecutors in other states
to take corporate medicine prohibitions more seriously. “Any decision anywhere in the country
that says the corporate ownership of a medical practice is illegal has the possibility to
reverberate throughout the country, absolutely — and I hope that it would,” said Julie
Mayfield, a state senator in North Carolina.
But the push to reinvigorate laws restricting the corporate practice of medicine has plenty of
skeptics, who view it as an effort to return to a golden era in medicine that is long gone or may
never have existed to begin with. The genie is out of the bottle, they say, noting that the profit
motive has penetrated every corner of health care and that nearly 70% of physicians in the U.S.
are now employed by corporations and hospitals.
The corporate practice of medicine doctrine has “a very interesting and not a very flattering
history,” said Barak Richman, a law professor at Duke University. “The medical profession was
trying to assert its professional dominance that accrued a lot of benefits to itself in ways that
were not terribly beneficial to patients or to the market.”
The California case involves Placentia-Linda Hospital in northern Orange County, where the
plaintiff physician group lost its ER management contract to Envision. The complaint alleges
that Envision uses the same business model at numerous hospitals around the state.
“Envision exercises profound and pervasive direct and indirect control and/or influence over
the medical practice, making decisions which bear directly and indirectly on the practice of
medicine, rendering physicians as mere employees, and diminishing physician independence
and freedom from commercial interests,” according to the complaint.
Envision said the company is compliant with state laws and that its operating structure is
common in the health care industry. “Legal challenges to that structure have proved meritless,”
Envision wrote in an email. It added that “care decisions have and always will be between
clinicians and patients.”
TeamHealth, an indirect target in the case, said its “world-class operating team” provides
management services that “allow clinicians to focus on the practice of medicine and patient
care through a structure commonly utilized by hospitals, health systems, and other providers
across the country.”
State laws and regulations governing the corporate practice of medicine vary widely on multiple
factors, including whether there are exceptions for nonprofit organizations, how much of
doctors’ revenue outside management firms can keep, who can own the equipment, and how
violations are punished. New York, Texas and California are considered to have among the
toughest restrictions, while Florida and 16 other states have none.
Kirk Ogrosky, a partner at the law firm Goodwin Procter, said this kind of management
structure predates the arrival of private equity in the industry. “I would be surprised if a
company that is interested in investing in this space screwed up the formation documents; it
would shock me,” Ogrosky said.
Private equity-backed firms have been attracted to emergency rooms in recent years because
ERs are profitable and because they have been able to charge inflated amounts for out-of-
network care — at least until a federal law cracked down on surprise billing.
Envision and?TeamHealth prioritize profits, critics say, by maximizing revenue, cutting costs and
consolidating smaller practices into ever-larger groups — to the point of regional dominance.
Envision and TeamHealth are privately owned, which makes it difficult to find reliable data on
their finances and the extent of their market penetration.
Dr. Leon Adelman, co-founder and CEO of Ivy Clinicians, a Raleigh-based startup job site for
emergency physicians, has spent 18 months piecing together data and found that private
equity-backed staffing firms run 25% of the nation’s emergency rooms. TeamHealth and
Envision have the two largest shares, with 8.6% and 8.3%, respectively, Adelman said.
Other estimates put private equity’s penetration of ERs at closer to 40%.
KHN?(Kaiser Health News) is a national newsroom that produces in-depth journalism about health issues. Together with Policy Analysis and Polling, KHN is one of the three major operating programs?at?KFF (Kaiser Family Foundation). KFF is an endowed nonprofit organization providing information on health issues to the nation.
]]>