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September 19, 2019

Counterattack

Well, well, well.  Isn’t this an interesting turn of events?

As you know, Congress is pretty bent on passing some form of serious legislation this term regarding surprise medical bills.  While the issue has thorny complications for physicians, hospitals and payers on the ground, both sides of the aisle like the ‘easy-to-tell’ story for the voting public…

Ms. Jones needs to go to the ER, the hospital is in-network for her health insurance but the myriad of physicians who see her are not and she receives exorbitant bills from each of them.  Patients are put in the middle of this fight and that is wrong (serious look straight at the TV camera here) and something must be done about it!  We have pitchforks and torches and are coming to save the day.

Unsurprisingly, there has been strong lobbying campaign on behalf of providers to defeat these bills.  One of the most visible PR efforts to date is from an organization called Doctor Patient Unity, which has reportedly spent $30M to date on attack ads.

So far, so normal, right?

Well, last week the NY Times reported that the dark money behind Doctor Patient Unity came from a couple of large private-equity firms: Blackstone and KKR.

Are the PE firms just investing their capital to help educate the American people on the virtues of allowing the market to solve these problems?

Really? A public service announcement?

You see, Blackstone (Team Health) and KKR (Envision Health) happen to own two of the largest physician staffing companies in the country.  And a lot of their physicians provide services to ER patients, either directly as ER physicians or indirectly as radiologists, anesthesiologists or the like.

Which means their investments have a large stake in this surprise billing issue.

Which means it is worth passing the hat among the gang to fund a lobbying effort.

Now, the counterpunch.

Congress just opened an investigation into whether these PE-backed staffing companies are driving up costs to pad their bottom lines, first through using their leverage to negotiate higher in-network rates with the payers, and then by staying out-of-network where they can and charging even more.  Letters went to the CEOs of these two firms, as well as Welsh, Carson, Anderson & Stowe, another major player in this arena, asking lots of questions.

Besides wanting to know about revenue breakdowns and all that (PE firms are notoriously guarded on all things financial), they want to know what role the PE firms are playing in negotiating with payers.  This is sneaky angle because the equity funds generally don’t own the practice, but the management service organization that operates the practice (and were all the profits end up).  Here’s betting that the real squeeze comes if Congress can open some doubt that the investors inappropriately crossed over the ‘corporate practice of medicine’ laws (if you don’t know these, it is complex and a big deal).

This could get very interesting.

Tim Coan
Tim Coan

CEO and founder

Tim Coan, ALN’s CEO, writes an insightful and witty blog weekly about a variety of topics relevant to independent physician practices.