Congress probes PE firms’ role in surprise medical billing

Congress has set its sights on private equity firms potentially profiting from surprise medical billing (also known as “balance billing”).

House Committee on Energy & Commerce Chairman Frank Pallone (D-NJ) and ranking member Greg Walden (R-OR) sent letters this week to PE firms that own or have owned physician staffing companies. KKR, Blackstone and Welsh, Carson, Anderson & Stowe received the six-page letter from the congressmen, which questioned their role in surprise billing.

The letter specifically mentions Blackstone’s TeamHealth, which provides outsourced services including emergency medicine and anesthesiology. It also pointed to EmCare, which KKR acquired through its $9.9 billion buy of Envision Healthcare in 2018.

The letter to Welsh Carson does not detail why the New York firm, a major healthcare investor, caught the Congressmen’s attention. (WCAS currently backs Concentra, which provides occupational health and urgent care services, and long-term care provider Kindred Healthcare, PitchBook said.)

The Congressmen, in the Sept. 16 letters, gave detailed examples of consumers receiving unexpected large bills for medical procedures. “Surprise billing has devastated the finances of households across America and this practice is increasing at an alarming rate,” Pallone and Walden said. They pointed to Sonji Wilkes, who made sure before she gave birth to her son that her hospital was covered by her insurance plan. Her son required emergency care in the hospital’s neonatal intensive care unit right after birth. Wilkes did not know that the hospital had subcontracted the NICU to a third-party provider that “wasn’t part of any insurance company’s network,” the letter said. Wilkes ended up receiving a $50,000 surprise bill for her son’s stay in the NICU, the congressmen said.

“Evidence indicates that these physician staffing firms charge significantly higher in-network rates than their counterparts, thereby driving reimbursement upwards as they enter into staffing arrangements with hospitals,” Pallone and Walden said in the letters. “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 firms are having on our rising health care costs.”

The congressmen asked the PE firms that owned “at least one physician staffing company” to provide information by Sept. 30 that will help them better understand the impact PE ownership has on surprise billing, the revenue generated by surprise billing and current incentives behind negotiations between providers and insurers.

The PE firms were asked to provide detailed information. This includes listing every physician staffing company they own or have ever owned, as well as their ownership interest in each and the annualized return the firms made on each investment for each year they owned the staffing firm. The House Committee also wants a briefing with the PE firms no later than Oct. 7, the letter said.

A mysterious group

The congressional probe comes as legislation to stop surprise billing has come under a media assault. Earlier this year, Pallone and Walden launched a bill to stop surprise billing. The No Surprises Act, H.R. 3630, appeared to have much support. The Senate Health and House Energy and Commerce Committees have each passed versions of the policy, Politico said. Even President Donald Trump called for an end to surprise medical bills.

But H.R. 3630 experienced intense lobbying from corporate and investor-owned physician staffing firms, which led to an arbitration amendment from Rep. Paul Ruiz (D-CA) and Phil Roe (R-TN), Modern Healthcare reported. The amendment allows doctors to appeal to an independent arbiter to collect additional money for certain out-of-network treatment, Modern Healthcare said in July. Some consider the amendment a giveaway to PE interests that would have an adverse effect on patients, employers and taxpayers, the story said.

The bill in July also came under an negative ad blitz from a mysterious group, Doctor Patient Unity, that opposed the legislation. The New York Times reported last week that TeamHealth and Envision were the two largest financial backers behind Doctor Patient Unity that have poured “vast sums”—more than $28 million—into ads opposing H.R. 3630. The ads do not reference surprise billing but instead warn of “government rate setting” that could harm patients, the NYT said. See an ad from Doctor Patient Unity here. 

A TeamHealth spokesperson confirmed Thursday that it is one of the companies behind Doctor Patient Unity. TeamHealth will continue to fight an insurance industry proposal that uses “government rate setting as a vehicle to increase their profits at the expense of potential hospital closures and doctor shortages in underserved communities,” a statement said.

Blackstone said its TeamHealth portfolio company has a long-standing policy against balance billing its patients. The company “fully supports legislation to end surprise medical bills through an approach called independent arbitration that has proven successful in New York and Texas…We look forward to responding to this letter and outlining the company’s approach.”

KKR, in a statement Thursday, said it received the Committee’s letter and looks forward to assisting the Committee in its inquiry. “Envision supports taking patients out of the middle and ending surprise medical billing,” the statement said.

Envision said it advocates an independent dispute resolution process that removes patients from the middle and ends surprise medical bills. “Protecting patients’ access to quality care is a shared responsibility, but insurers continue to shift costs onto patients through high deductible health plans, coverage denials and narrow networks that exclude physicians,” the company said. “We are doing our part. It’s time insurers are held accountable.”

Gregory G. Lau, general partner for Welsh, Carson, Anderson & Stowe, said WCAS is cooperating with the House Committee on Energy and Commerce on their request for information. “WCAS and the companies in which we have invested strongly support a bi-partisan legislative solution to ensure that patients are protected from surprise billing,” Lau said in a statement.

Action Item: See Congress’s letters to KKR, to Blackstone and to Welsh Carson here.