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In Pursuit of Profit

Part 3: As Purveyors of Surprise Medical Billing, Private Equity Has Fought Lawmakers’ Attempts to Protect Patients

Private equity has aggressively worked to limit patient protections against surprise medical billing, one of its most egregious money-making tactics. As legislation languishes amid a pandemic, expensive surprise medical bills keep rolling in.

Michael Friedrich contributed to this report.

In the weeks before the novel coronavirus began to upend normal life in the United States, Congress was locked in debate about the best ways to end an expensive problem harming families across the country: surprise medical billing. But as the pandemic has stretched on, legislation to protect patients has languished and the threat of surprise medical billing has become more detrimental.

Surprise medical billing is a predatory practice that occurs when patients receive unexpected and often expensive bills from hospitals and physicians who are not in their insurance network. This most commonly occurs among health care providers patients cannot choose, such as anesthesiologists, assistant surgeons, ambulances, and labs. Surprise medical billing affected one out of every 10 adults in a single year — and is actually a business tactic embraced by a small group of providers who are most often owned by private equity groups seeking to maximize profit.

Although lawmakers from both sides of the aisle agree that patients should be protected from surprise medical bills, there has been disagreement on how best to handle payment for out-of-network services between insurers and providers. This conflict has been nurtured by private equity-backed providers who have aggressively lobbied Congress to weaken the reform, if not kill it outright — spending more than $53 million on an advertising blitz through an organization called Doctor Patient Unity and providing large donations to influential lawmakers.

At first, the campaign seemed to shift the tide on surprise billing, but soon, the group’s identity was revealed and private equity once again came under scrutiny for trying to protect its use of surprise medical billing in an effort to extract maximum profit from patients.

$53M

Amount spent on an advertising blitz through an organization called Doctor Patient Unity to kill surprise billing reform.

Still, despite private equity’s efforts, lawmakers advanced several bipartisan bills through Congressional committees late last year and early 2020 – generating optimism that surprise medical billing might come to an end, once and for all.

However, as lawmakers began negotiating a compromise among the committees, the pandemic struck, the U.S. went into lockdown and Congressional attention turned to relief packages aimed at stemming the pain of a national health and economic crisis and unprecedented unemployment.

Private Equity and Surprise Medical Billing: A Business Model

As private equity has become more invested in the health care sector, firms have used surprise medical billing as a business strategy to exploit pain points in the health care system and maximize profit, according to research by Zack Cooper of Yale University and noted private equity experts, Eileen Appelbaum, and Rosemary Batt.

Their research identified private equity-backed emergency medicine providers — TeamHealth, owned by Blackstone, and EmCare, owned by KKR — as two of the actors behind the practice.

The model typically works like this: A private equity-backed health care provider contracts with a hospital to provide care — in the case of TeamHealth and EmCare, doctors that staff emergency rooms. Often, these firms contract with hospitals that are in-network — but choose to keep their employed providers out-of-network to levy more expensive medical bills against patients and turn bigger profits.

Everyone’s health care premiums — for both employers and patients — are higher, even if one hasn’t received a surprise bill.

Cooper and colleagues found EmCare, a division of Envision, often immediately moved out-of-network when contracting with hospitals — while also raising charges by 96 percent relative to the charges billed by the physician groups they succeeded. Alternatively, TeamHealth’s out-of-network billing rate was lower — but Cooper discovered that the company used the threat of taking their business out-of-network to extract higher in-network payments.

As a result, patients may seek care at an emergency room in their insurance plan network but discover after the fact that the doctor they saw was an employee of a private equity-backed staffing firm, and not in their insurance network. That patient is then on the hook for the entirety of the bill not covered by the insurer’s payment, leaving the patient to fend for themselves and at risk for financial detriment. This scenario happens across different practice areas when patients can’t choose the provider they see — these types of providers often include anesthesiologists, assistant surgeons, and ambulances, among others.

Because these providers and private equity firms often have more market power, they are able to charge rates far in excess of those negotiated by insurers for in-network providers. As a result, these types of providers are also charging egregious rates for their services out-of-network, with some providers charging more than 800% of Medicare for their services.

Video

How Surprise Billing Works

Surprise medical billing is a threat to patients amid dual health and economic crises. In this video, we explore the problem and the bipartisan support for a solution to end surprise bills.


Surprise Billing and COVID-19

As the pandemic stretches on, the need for surprise medical billing protections has become more urgent than before. More than 6 million people in the U.S. have been diagnosed with coronavirus, hundreds of thousands of individuals have been hospitalized, and 189,000+ individuals have died. At the same time, Americans are facing greater economic uncertainty and may be using the health care system in different ways — such as seeking care at urgent care facilities or freestanding emergency rooms where providers might be out-of-network.

Only federal legislation can protect all commercially insured individuals across all types of plans from surprise medical billing. Several states have surprise medical billing protections for the insured lives they have the authority to cover. Other states have issued emergency actions to protect people from financially devastating surprise medical bills in response to the pandemic — but limitations still remain.

Meanwhile, private equity companies have sought federal relief dollars aimed at helping doctors and hospitals weather COVID-19 and have accepted large sums of interest-free loans from Medicare, all while continuing to engage in tactics to maximize their bottom lines, including laying off providers and cutting their salaries and their hours. While private equity’s lobbying against surprise billing protections has slowed during the pandemic, the groups remain opposed to most of the existing legislative compromises on surprise medical billing and have threatened to once again ramp up their fight against proposed solutions.

The Long-Term Impacts of Surprise Billing

Despite limited legislative and Administrative protections against surprise bills and the high costs of COVID-19 testing and treatment, people across the United States have continued to report receiving out-of-network, surprise bills resulting from excessive charges..

There’s another problem too. Surprise medical billing drives up health care costs and spending — with Cooper and colleagues finding that it has inflated health insurance premiums by more than 3 percent, roughly a $40 billion increase in annual health care costs. In other words, everyone’s health care premiums — for both employers and patients — are higher, even if one hasn’t received a surprise bill.

These implications for premiums result in lower wages and ultimately less money in Americans’ pocketbooks — a particularly troubling scenario during a time of economic crisis. Congressional proposals to end surprise billing would help limit these effects, resulting in billions of dollars in savings that would slow premium growth.

“Congress has a chance to offer full protection to American consumers and families from surprise medical billing — and action on their part is overdue,” said Mark Miller, Executive Vice President of Health Care at Arnold Ventures. “They can act now and close this loophole that has been exploited by private equity — that saddles families with debt and raises the cost of health care for everyone.”