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ANNOUNCER

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today on physicians taking back medicine, a brand new study adds to concerns about the impact of private equity in health care. Research published in the Annals of Internal Medicine found that when hospitals are acquired by private equity firms, patient death rates in emergency departments go up by as much as 13% compared to similar hospitals. This isn't the first time that research has raised alarm bells about private equity Previous studies have demonstrated that patients receiving care at hospitals owned by private equity firms experience more bloodstream and surgical site infections and fall more often. And a systematic review published in 2023 found that private equity ownership was consistently associated with increases in costs for patients and payers with mixed to harmful impacts on quality. Today I'm joined by two physicians to discuss their experiences with the negative impact of private equity in health care, and their work to take medicine back.

1:22
My name is Marco Fernandez. I'm full time practicing anesthesiologist. I'm the president of Midwest anesthesia partners with the largest independent group in Illinois. And I'm also the president of the Association for independent medicine and one of the founders for the Coalition for patient centered care.

1:41
Dr Marco Fernandez told me that he became directly aware of the negative impact of private equity when his group's hospital contracts were terminated and replaced by private equity backed companies.

1:54
I had been president of Midwest anesthesia partners for about a year, and within a two week period, we lost two hospital contracts, one to Team health and one to another staffing company called North Star, both private equity backed the one we lost to Team health. We just showed up to a meeting with the CEO, and we thought it was a quality metrics meeting, and they said they were going in a different direction, and our new partners are next door. I was pretty confused, because there was already bad blood with the negotiations. The hospital really didn't want to negotiate with us, and they had been kicking the can down the road for several months. They had been doing this backdoor deal with Team health, but they made a miscalculation, since during the negotiation, they were giving us monthly extensions, so we didn't have a 90 day out or 120 day out. They gave us notice 10 days before the end of August, and team health took over October 1, so there was no coverage for the month of September, it ended up in the hospital shutting down its operating rooms, so there was an uproar in the community. There were several town hall meetings. Everyone was really upset. From there, I went to my state specialty society and I explained to them what happened, and they sympathized, but they said, politically, there's that much we can do, but they were very supportive, and they gave me a route to address this with the American Society of Anesthesiologists. So at the next national conference, I happened to be in the elevator with the CEO of the ASA. I explained to him what my story was, and he said, Come to the town hall meeting in morning, and you can tell your story there. So I did. I stood by the microphone, waiting for the opportunity, and I told the executive panel what happened. There was no negotiation, there was no request for proposal. We couldn't bid for our jobs. Our contract was done. And that didn't sit well with me, and I think it didn't sell well with a lot of folks, because I got a standing ovation, and when I walked out, several people followed me out, and right around the same time, I was already talking to Robert McNamara, can take medicine back. So they kind of took me under their wing and tell me about private equity, because I really didn't understand what it was or how they operated, and they educated me and helped us build our Association.

4:32
Dr Robert McNamara is a big name when it comes to the impact of private equity in health care. He's been speaking out about his concerns for decades, and was recently interviewed for NBC News in an analysis about the increased number of emergency department deaths in hospitals owned by private equity. Here's Dr McNamara from a podcast he did with me in 2021 explaining the role of private equity in emergency medicine.

5:00
These are companies where investors put money in. They have a group of managers that look for opportunities where in a five to seven year period, the investors can get back, you know, a 15 to 20% return on investment. In the meantime, those running the private equity firms are making money for themselves, getting healthy salaries. And the trouble is, they come into an industry, and they create practices to make money that can have negative effects, that can shut down hospitals. They do what they can. It's to profit, right? Their goal is to profit. When you know the goal for healthcare is to take care of the patient. If you look at the arc of Emergency Medicine. It started with great intentions, a moral imperative, to deliver care to poor, the uninsured, to people that were arriving in emergency departments. But there were kind of two pathways. One, you had the docs at the big hospitals, the academicians that were really focused on creating specialty to serve the needs of the patients, the poor, the uninsured. And then along the other side, you had the entrepreneurs were realizing, hey, we can make a lot of money off emergency medicine, and then that's morphed over time, and now we have a situation where private equity is dominant. You know, many, many emergency departments you walk into, and private equity owns it, and the danger to the patients is they determine who sees you. Private Equity says, What's the business decision here? Is it going to be a board certified doctor, or is it going to be, you know, a non physician practitioner, you know, how can I get away with the cheapest model?

6:34
Replacing and cutting staff may be one of the reasons for the higher death rates found in emergency departments owned by private equity backed hospitals. According to the annals and Internal Medicine study, after hospitals were acquired by private equity, the number of full time employees fell by an average of 11.6% compared with similar non private equity facilities and further salary expenditures in emergency departments and intensive care units declined by 18% and 16% respectively. Here's Dr Marco Fernandez to explain more about how these private equity staffing cuts affected him, both professionally and personally.

7:21
For my specialty, I'm a non proceduralist. I'm not a surgeon, and I think non proceduralist, they treat differently than proceduralists, so they squeeze and sell us like emergency medicine and anesthesia, but they buy and build other practices, like surgeons, cardiologists, by the ancillary services. So they want to come in and they try to consolidate. That's how they control things. Once they get the consolidation, then I use the word exploit, then they try to figure out how to re engineer whatever practice you have to try to maximize and extract profits, they raise prices. And then after they do that, then they start cutting expenses and and a lot of it has to do with cutting staff, replacing physicians with non physicians. The most expensive staff is, is physicians. But I think across the board, you cut where you can, and then you try to extract whatever profit you can, and then doing whatever you need to do with the back office in terms of upgrading your technology, they call it to be innovative, but I think it's just finding better ways to monetize the investment. And then the third thing they do is try to figure out their exit strategy. At what point are they going to sell the practice? So they're trying to increase the value of it as much as they can for that second bite of the apple. But with this economic downturn, there's not always that second bite. Whenever you cut staff and you increase the patient to nurse ratios, your quality is going to go down. You know, I experienced private equity on the professional level, but I also experienced a little bit personal level. My mom passed away, and she had inoperable liver cancer, and she was taken care of at my hospital, and I was pretty confident. I felt reassured knowing she was going to be well taken care of, but I was mistaken. She had great care from the physicians. They were all my friends, but the nursing care was horrible, and it wasn't the competency, it was just there wasn't enough nurses and each level of care, it just, I was disappointed at one thing I didn't want her to do is suffer, and she suffered significantly. She ended up passing away and a hospice center within the hospital, but it was a separate entity, and one night, we actually had someone pop in and lie about giving her a med. Gave her the wrong med. I addressed it with the leadership of the hospital and. Unit, and they said it was an agency person. It wasn't even a hospice nurse. Someone just came in just to fill a shift. Really didn't care about what they were doing. And then later I find out that it was private equity owned. Couldn't I can't blame the staff. It's the system. It's just there's not enough nurses to take care of patients when you cut and cut and cut, and we're the ones that are suffering. We're all patients on the other side of this, and unless something drastically changes, it's going to continue to get worse. You're 100% right.

10:32
And this article that talks about the mortality rate in the ER references a 2021 study that found 11% higher mortality rates in nursing homes owned by private equity. And I know that they have seen something similar in hospice facilities as well, and it always just comes down to cutting staff.

10:52
It doesn't only happen in private equity owned but I know that they're much more aggressive because they're in for for a very short period they want to flip their investment, and that's one of the things that they don't understand. A lot of these administrators make these decisions to change their loyal serving group. A lot of times, they don't take into consideration the relationships that have been built over over time, and they bring in these organizations, the group gets upset, and there's an exodus, and that's where the problem is. Once you have an exodus, then the program collapses. Everything's disrupted, and now the hospital's spending a lot more money than they would have if they had just kept the original group, which is what happened with us when we left? 37 anesthesiologists left the hospital. Four stayed. But then what? What they would have paid us in a year? They lost in a quarter, and they're still not fully staffed. And this is a year and a half later, and this is happening everywhere.

11:57
So it's very penny wise and pound foolish, as they say, and very short sighted. So maybe it's time for the pendulum to swing. I think there's a lot more attention being given to this problem. We're starting to see it in the media. I give a lot of credit to that, to the work that you and your colleagues have been doing to raise awareness about this. You're also working with legislators in Oregon on their corporate practice of medicine law, yes, and then also working with attorney generals in what role is that? To enforce laws against corporate practice of medicine,

12:34
mostly to address the issues in their state and see if they have a corporate practice of medicine doctrine, see how we can help them strengthen it. Every state is in a different stage. Some folks are new to this. They don't know too much about private equity, so there's trying to get educated. And in other states, they basically want more support from physicians to try to figure out how to best close loopholes that private equity is taking advantage of.

13:03
You heard Dr Fernandez mention the term corporate practice of medicine. This is a legal term in which a non physician owns and operates a medical facility, and it's outlawed in many states, but not all. Some observers have noted that even in states with prohibitions on corporate practice of medicine, enforcement has been lax, and companies come up with workarounds, like hiring a physician in name only to be the face of the company, while non physician managers are actually the ones making corporate decisions. Here's Dr Robert McNamara from our 2021 podcast on private equity.

13:41
In most states, there exists laws to say businesses can't employ physicians. The same thing exists for lawyers. You don't want the business interest between the patient and the doctor. You don't want the business interest between the lawyer and the client. Yet in medicine, these have not been enforced. They have scams to get around them. I think we're starting to wake up to this, with what's going down, and with private equity being more aggressive, people starting to say, Wait, why? Why is that? You know, Wall Street company determining staffing levels here. So it's an opportunity for anyone listening, for the public, for doctors themselves, to step back and say, Why do we have private equity involved in medicine.

14:23
Dr Robert McNamara and Dr Marco Fernandez have been working both within organized medicine and through grassroots efforts to raise awareness about the impact of private equity in health care. Dr Fernandez says that this is one of the biggest challenges even many physicians don't understand the complexities of healthcare payment models.

14:45
We really need to partner with our patients, and we need to educate patients as to what's going on. And from a physician standpoint, we need to really break down the silos and work together and educate ourselves on what's going on. One of the rabbit holes I went down when I experienced this is just learning about how our economy works. Because I think that really underscores how these monopolies and these private equity firms, how they operate, and unless you understand that, it's really hard to form a strategy if you have a better understanding of the economic model we live in that empowers these monopolies, then we can better address it.

15:30
Dr Fernandez makes an important point about being siloed as physicians, for example, as a family physician, I know very little about how my colleagues in hospital based fields are paid for their work, and so dr Fernandez explains more about his field of anesthesiology.

15:47
I control nothing. We get paid whatever these insurance companies want to pay out in anesthesia. Back in 1992 CMS had decided we were to get a certain Medicare array based off of commercial insurance. Most physicians, as I understand, get 80% from Medicare based on commercial payout rates. We get 30. So that's significantly lower. And over time, our Medicare population is rising, so we're getting more and more Medicare payments which is significantly lower than commercial payer. So for instance, if I get paid per unit plus time. So if one of my units from a commercial payer is $50 Medicare is going to reimburse me for for that same case, $20 for the unit which is significantly lower, that made it so on top of their cuts that they've been doing recently in the last five years, that that really put a hole in our income. And so it just made it impossible, and it didn't affect other specialties as much as it did anesthesia. Since the 90s, we call it the 30% problem. Our national society has been trying to figure this out for 30 years. We've been going year after year to Congress to try to fix it. Nothing's changed.

17:14
Wow, I guess I never would have thought that anesthesiologists would have gotten such a raw deal. I mean, do the surgeons do much better? Are they also in that same boat?

17:26
No, I think it's only anesthesia. This was a a miscalculation in 1992 or 1993 which was never fixed. So they took into account the cost upfront of anesthesia, but then they didn't take into account the time that we spend in the operating room so that we get paid a fraction of what what commercial payers normally pay us.

17:47
So the only way that you can basically afford to get a decent salary is for your services to be subsidized by the hospital. And how is the hospital able to do that? Where do they get the money from,

18:01
I'm assuming that it's got to come from another service or I mean, I have no idea. In our group, when I was working at our hospital, we were very proud that we were one of the few groups that were still standing that had not asked the hospital for money. We built a culture based on just trust and respect. We were not money chasers and and we got to a point where people started to leave our group, and our group was imploding. And at that point, over 90% of the groups in the country were getting some kind of subsidy. And so we went to the hospital for money, and we're like, this is what fair market value is. And if you want our group to to continue providing service. Here we're going to need some assistance, because people are leaving. And here you have the major rise of locums workers everywhere. They're getting paid a pretty penny, no call, no weekends. So it makes it very attractive for people just to go somewhere else. And so it got to a point where it wasn't tenable, and so they they terminated our grid, but we were able to pivot. The majority of us stayed together, and we created a pseudo locums group. We don't charge high prices. We do not want to price gouge anyone. We just want to build relationships with the surgeons that we already were working with in the hospital. They have surgical centers, so we just pivoted to their centers, and we have long term contracts with them, and then we provide 20% of our work is locums work at hospitals. So it's not sustainable. Whatever is going on right now in terms of getting a subsidy is not sustainable. What's the strategy?

19:39
How do we take this back? Because we know that the private equity groups go into the hospital. Hospitals and they promise all sorts of things, that they're going to save money and whatnot, and that sounds, I'm sure, very tempting to these CEOs, right?

19:52
So the majority of at least in anesthesia, we can't survive without some kind of financial help. They've cut reimbursements so much. That being independent is no longer viable with some kind of financial assistance, and we were getting somebody cities from the hospital and incomes private equity, we're like, Well, you don't have to pay us as much of a subsidy. And we'll give you efficiencies, we'll give you quality, we'll give you all that, and it's always a baby switch. Our organization is just trying to figure out what's going on with your market, and then, even if that's an option to be independent, because in some markets, there's one or two players, and they're already for profit organizations. So it's really hard to figure out how to be independent. We're trying to just leverage ourselves, figure out how can we come together and and figure out best practices and also economies of scale. So it's not so much try to get higher rates or whatever, but it's just try to just protect what we have, and then try to figure out, how do we best protect our patients? Because private equity, their fiduciary responsibility is to their limited partners. It is not to physicians, it is not to healthcare. And we're just trying to educate folks. If you're going to go into a contractual agreement with private equity, you really have to know what you're getting yourself into. And a lot of folks really don't. The majority of the time, it's not even them making the decision. You have a small group of senior partners who are close to retirement, they want their golden parachute, they'll sell out the group that saw their partners just for money, and they don't really care what happens to the rest of the group or their patients at that point,

21:29
you know, Marco, I think about that, and I ask myself, like, how would I feel if somebody came up to me with a big old chunk of money? And I want to say that I'd have the integrity to say no, but boy, I can imagine how tempting and how difficult that must be to walk away from

21:47
Yes, and I think that has changed. I think it's changed after the pandemic. I don't think there were multiples being offered anymore. I know an orthopedic surgeon, and she lived through that. She just left her group a few months ago, so now she doesn't have a job, but she's standing up and speaking out about her experience. They gave her one year's worth of pay, so it wasn't, you know, multiple years up front and she said, and slowly over time, it started to erode her practice, and it became unbearable because they had to meet quotas. They only had 10 minutes per patient, then they had to jump through 10 hoops just to do anything administratively. So they had no control anymore.

22:28
I asked Dr Robert McNamara what strategies he thinks are needed to change the system.

22:33
Well, it's to try to get all physician organizations to take back medicine, but it's really, it's got to collectively come from organized medicine. The American Academy has filed four times against corporate groups. You know, the aaem is the smaller of the groups. I think we've successfully proven that you can do something. Of course, we filed suit four times. We've been defending doctors left and right. Get fired. We've been writing the hospital administrators. You know, don't replace the physician dome group with a corporation. This will be a problem, advocating trying to take em back and other specialties just as bad as we are now. I think we started, and then, you know, they morphed down into radiology, anesthesia, private equities in the urology Gi. It's it's just becoming rampant because they say, Hey, we made a lot of money on emergency medicine.

23:28
Dr Marco Fernandez says that it's going to take much more than just organized medicine.

23:33
I can appreciate, you know, the AMA and what they're doing, and my specialty society, but I think they're dealing with the symptoms, and they're not really addressing the causes, and that's what we're trying to do with all this corporate consolidation and what is happening with private equity. I think physicians can have more of an impact. We have more power than we think it's just a matter of making the right connections. So I've been finding like minded folks ortho forum, the largest organization for independent orthopedic surgeons. They've been around for over 25 years, and they started to see issues with private equity, and they wanted to see if we would partner with them to create this coalition for patient centered care. And we decided that we would try to tackle these issues at the state level instead of the federal level. So recently, we've been setting up meetings with Attorney General's Offices in different states. We had been working very closely with folks in Oregon, with folks in California. And more recently, we talked to the folks in Connecticut. We're trying to educate, build partnerships. Our goal has been to try to just coalesce efforts across organizations. And last week, I was in DC, I happened to be invited by the American Economic liberties project. They had an anti monopoly Summit, and. Now I was honored to be one of three physicians that represented healthcare at this event. And let me tell you, it was a star studded event in terms of politicians. Cory Booker was there, Jayapal was there, Pat Ryan was there, a video message from Elizabeth Warren, and then we had leads from National Union organizations, so we kind of covered every sector of the economy, and so I'm just trying to get out there, and my mission is just to try to circle the wagons, because I think that as physicians, there is no better advocate or activist in terms of trying to change healthcare.

25:40
This is exactly what I'm trying to get at with the podcast, how physicians have to take action, and we go to our organized medicine groups, we go to our societies. Sometimes we also have to take matters into our own hands and find like minded individuals and come up with innovative and creative strategies to attack these problems on many angles.

26:03
I just want folks to invest in the future of medicine, and we'll we'll be on the front lines, representing as many patients as we can and as many physicians as we can. And I know physicians are burnt out, and they don't have time or energy to deal with a lot of it, but some of us do, and we're willing to continue to go to Capitol Hill. We just want people to be tuned in to what we're doing, and hopefully just spread their word on social media. I think that's the easiest thing for people to do, is they see a story, post it, and then we'll try to amplify these messages wherever we can.

26:41
I do think that advocacy is a solution to burnout, because when you're not doing anything, you just feel more hopeless and more discouraged. And when you start learning about things that other people are doing and meet people like you and hear their stories. It is very galvanizing. It's very motivating. Like, whenever I go to any type of like take medicine back, or physicians for patient protection, or my State Medical Society meetings, you know, I come away feeling a lot more hopeful and a lot more energized, just feeling like we're doing something. And I think that getting more involved, even though sometimes people say, Well, you know, it's too late. It's futile. I don't believe that. And I think if you have that kind of attitude, that's just a recipe for, you know, really going into a very negative emotional state, I mean, even way worse than burnout. So I think if you care about your profession, you care about your patients, and I know you do, then the solution is to get more involved in any way that you can.

27:46
I think you hit the nail on the head in terms of attitude and mindset. That's one of the things that I learned early on, is is to have a more open mindset. And because we can't do this alone, we really need to partner with folks, and you have to be open to new things, and then to opportunities. I muscle my way into so many different kinds of meetings, and no one thinks I can, but I show up, and then you make new connections, and then from there, I mean one person at a time, just continue talking to folks and and we can turn this around. It's just going to take some work.

28:27
Showing up is the key. I have been the president of my County Medical Society, and the way that happened was I just showed up to a meeting. I showed up to another meeting, and then they said, Hey, you're showing up to things. Do you want to be on the board? And I said, Yeah. And I showed up to the board meetings. And then after a year, they said, Oh, guess what? You've been here for a year now you're going to get to be the secretary, and then next year you'll be the treasurer, and then next and then eventually I was the president. And it all just started from showing up. And that's a power that we all have. It does take time and energy, but I think it's really well worth it, because, again, that's really the antidote to burnout.

29:08
Yes, I completely agree. Thanks

29:11
so much for listening to physicians taking back medicine. A new podcast by medical economics. I'm your host, Dr Rebecca Bernard, bringing you stories of day to day physicians just like you who are fighting to improve the health care system. Thanks so much for listening, and we'll see you on the next episode. You you.