Firing of Whistleblowing Emergency Room Doctor Ming Lin By Blackstone-Owned TeamHealth Demonstrates Outsized Role of Private Equity in Hospital Staffing

It wasn’t all that long ago that the House Financial Services Committee held hearing on private equity that turned out to be a damp squib, despite a key witness, Eileen Appelbaum, describing one of the industry’s predatory practices that hurt ordinary consumers on a mass basis, that of surprise billing. That came about because hospitals have shockingly outsourced many of their practices, in particular emergency room doctors, to private-equity owned companies like Blackstone’s TeamHealth and KKR’s EmCare.

Is it any surprise that going to the emergency room early on to try to get tested resulted in $3000 and up bills?

But even worse, the private equity titans care more about their image than patient care. Not that should come as any surprise.

Many of you have likely already heard of the scandal of the firing of St. Joseph Medical Center emergency room doctor, Ming Lin, for criticizing the hospital for failing to take measure to protect patients and fellow medical professionals from unnecessary coronavirus risks. Even though the press dutifully reported that it was TeamHealth that lowered the axe on Dr. Lin, they didn’t connect TeamHealth to the power behind the scenes, private equity fund manager Blackstone.1

For instance, from the Seattle Times’ account:

An emergency room physician who publicly decried what he called a lack of protective measures against the novel coronavirus at his workplace, PeaceHealth St. Joseph Medical Center, has been fired.

Ming Lin, who has worked at the hospital for 17 years and became a local cause célèbre for his pleas for more safety equipment and more urgent measures to protect staff, was informed of his termination as he was preparing for a shift at the hospital Friday afternoon, he said.

“I got a message that said, ‘Your shift has been covered,’” Lin told The Seattle Times. He phoned his supervisor and was told, “You’ve been terminated.” Lin said he was told he would be contacted by human resources staff from his employer, TeamHealth, a national firm that contracts with PeaceHealth’s emergency department….

A spokesperson for PeaceHealth St. Joseph confirmed that Lin had been fired but said the hospital had no comment because Lin wasn’t a PeaceHealth employee….

Specifically, Lin had written that PeaceHealth St. Joseph refused to screen all patients outside the hospital, rather than in an often-crowded emergency room waiting area where the virus could easily spread. Two emergency department workers, who both asked not to be named for fear of reprisals, told The Times they shared Lin’s concerns about the possible spread of infection because of that practice.

Lin and other doctors have also persistently complained about the availability of testing approved by PeaceHealth, even as testing capacity ramps up in Washington state.

Notice that the Seattle Times has not changed this text despite TeamHealth attempting the ridiculous dodge that it hasn’t fired Dr. Lin after the story went viral. That means the Seattle Times stands by its reporting. The News Tribune didn’t buy it either, per its headline Bellingham ER doctor who criticized hospital’s coronavirus measures says he was fired versus the detail further in the piece, where TeamHealth backpedaled by pretending it might find a job for Dr. Lin somewhere else:

The Seattle Times reported Saturday that Lin, who has worked at the hospital for 17 years and earlier this month posted a letter he sent to PeaceHealth asking for more safety equipment and better protection for staff against COVID-19, was informed he was terminated as he prepared for a shift Friday afternoon, March 27.

But a spokesperson for TeamHealth said in an emailed statement to The Herald Saturday that Lin has not been fired.

“Dr. Lin has not been terminated by TeamHealth and we are committed to engaging with him to try to find a path forward,” the statement said. “Now more than ever, we need every available doctor, and we will work with Dr. Lin to find the right location for him.”

Lin scoffed at the notion he hadn’t been fired in an interview with the Associated Press, and said he expected the company might offer him work at a different hospital in the area, but that he’s not interested.

And even if this weren’t a partial reversal, who does TeamHealth think it is kidding? Assigning someone to a location that’s a much longer commute from where they once worked is a demotion.

However, the furor over the mistreatment of Dr. Lin did largely manage to skip over the question of how TeamHealth is even legally in the position to effectively provide hospital services when they are not licensed to do so. Several groups protested Dr. Lin’s ouster and one, the American Academy of Emergency Medicine, focused squarely on this issue. From a position statement on its website (emphasis ours):

According to public statements, TeamHealth and PeaceHealth St. Joseph Medical Center have terminated Dr. Ming Lin. If this is so, AAEM condemns TeamHealth and PeaceHealth St. Joseph Medical Center for terminating Dr. Ming Lin an emergency physician who went public with his concerns over the safety of the hospital staff and his patients in this pandemic. It is an essential duty of a physician to advocate for the health of others. Dr. Lin, as a member of the medical staff, is entitled to full due process and a fair hearing from his peers on the medical staff. TeamHealth, a lay corporation owned by the private equity company the Blackstone Group, should not be the employer of Dr. Lin according to the laws of the state of Washington. Their hand in this termination is not only inexcusable but likely impermissible. We call on the WA state Attorney General and the State Board of Medicine to investigate this circumstance.

Needless to say, those clever private equity lawyers have tried to make the dubious and in some (many?) jurisdictions, illegal practices of having a non-licensed organization provide medical services work by keeping doctors-owned companies in the legal structure. The wee problem is that they are straws, devoid of any substance and authority. Eileen Appelbaum explained by e-mail:

TeamHealth is structured as a Management Services Organization (MSO) that doesn’t ‘own’ the doctors’ practices it provides services to. Each practice is ‘owned’ by a doctor or committee of doctors that establishes medical standards for the practice. Sometimes (not sure if this is true of TeamHealth), a single doctor is the owner of record for as many as 60 doctor practices.

The question of what ‘own” means in this context is a bit tricky. Rosemary Batt and I paid money for me to sit in on a webinar organized by a well-respected source of data and information on health care where private equity people experienced in acquiring doctor practices were instructing newbies in how to structure it. They practically snickered as the explained how the doctors that essentially sold their practices to a PE-owned company like TeamHealth were reassured by the fact that it would be doctors that ‘owned’ and ran the practices.

Of course, the deal required them to sell all their assets – building, equipment, supplies, receivables – to the TeamHealth-type organization. So, what does it mean that the doctors own the practice if the practice has no assets that can be sold, moved, used as collateral for a loan, etc.?

Yves here. I can pretty much guarantee that the lack of substance of ownership on the asset side is reflected by a services agreement that strips the nominal owners of any say. This could be pretty overt, or or it could be achieved by having the doctor sham-owners of a particular entity have no role in operating decisions and participate only in policy decisions via a committee where TeamHealth appointed other MDs that were guaranteed to vote the way Blackstone and TeamHealth bean-counters wanted.

Appelbaum was dubious that Washington State could win a suit, even if the attorney general were to take up the case. I’m not as negative, provided the attorney general understands what he is up against and it prepared to get the operating contracts in discovery as well as document actual decision processes to show that the legal structure is a con, that the contracts vitiate the control of the nominal owners and the behaviors confirm that.

But that charitably assumes any public official is willing to take on private equity. So far, finding one has been the modern analogue to Diogenes’ search for an honest man.

_____

1 If you believe that TeamHealth has meaningful independence, I have a bridge I’d like to sell you.

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25 comments

  1. divadab

    Peace Health is a Catholic Church-owned Hospital and so we should expect more humanity and Christ-centered behavior, right? Well think again – several years ago Peace Health got rid of the Nuns and their hierarchy in any management or direction of the organization, and corporatized its management. It bought out and closed the competition (Bellingham used to have two hospitals and two emergency rooms – now only one exists) and is an effective monopoly in Whatcom County. Now that they have bought out the neighboring Skagit County’s hospital, they now have an effective two, or perhaps three-county monopoly (with the exception of the VA hospital in Mount Vernon).

    They have set the table for the profiteers in private equity and we now see what this has wrought – Blackstone owns the emergency room physician organization and is busily profiteering on this cozy monopoly arrangement on the backs of the injured and ill, who have NO CHOICE and must accept whatever greedy overpricing the filthy profiteers demand.

    The only peaceful solution to this looting is MEDICARE FOR ALL. Go BERNIE. The other alternative is the guillotine, and I can think of few more deserving than the scum that run Blackstone.

    Reply
    1. flora

      Yes. And the recent bailouts allow more consolidation… on steroids. From a WolfStreet post about last week’s bailout provisions:

      These SPVs [Special Purpose Vehicles] involve the Fed in nearly every major US financial market. That’s not all: by providing low/no cost financing to large corporations, asset managers, distressed debt vultures ventures, and private equiteers, our Federal Reserve has fast-tracked the hoovering up consolidation of American business into the hands of the few, the wealthy and the powerful. – my emphasis

      https://wolfstreet.com/2020/03/29/corruption-in-the-time-of-coronavirus-fed-treasury-corporate/

      Reply
    2. a different chris

      >The other alternative is the guillotine

      Why do you say “alternative”? Can’t we have both? :D

      Reply
    3. Anne Marie Morse

      There was only one emergency room in Bellingham, at St. Luke’s Hospital, until shortly before St. Joseph’s took over St. Luke’s. The only hospital in Mount Vernon is not owned by PeaceHealth, while the hospital in nearby Sedro-Woolley is. There is a third hospital in Skagit County, in Anacortes, which is not owned by PeaceHealth. There is no VA hospital in Mount Vernon, just a VA clinic that’s pretty limited. I’m not a big fan of PeaceHealth, but I am offended by several inaccuracies, most of which are very easy to check.

      Reply
  2. Mr. Magoo

    I would like to see someone on the Sanders campaign considering gathering these people up, supporting them economically if possible/necessary, and get them out front communicating these issues to people. The current crisis is going to make us all ripe for cherry-picking $$$$ out of our pockets by PE.

    I was always of the opinion that if Sanders had prioritized his policies, focusing on M4A, he would have found wider acceptance.

    Reply
    1. Arizona Slim

      Agreed!

      IMHO, Sanders’ 2019-20 speeches sounded like a laundry list. If he had stuck to one issue as his centerpiece, say, M4A, he’d be a lot further ahead.

      I also think he should have kept his friendship with Biden OUT of his public appearances. As in, he shouldn’t have mentioned it on stage or in any other place with microphones.

      Reply
  3. ObjectiveFunction

    The reptile brain says the Seattle tattooed crowd ought to go full WTO on their ass, and that would seem symbolically fitting. But the owners would probably prefer an insurance payout to providing care and paying staff.

    The mob really needs to pierce the veil and unravel the bankruptcy remotes. Vanagon trip to Greenwich? (wait, I guess it’s Southampton now. Or maybe Bermuda).

    Busting Up a Starbucks

    The dogs will howl
    And yank the leash
    From tree to tree
    From each to each

    Does the man who makes the shoes own you, clown? You can’t
    Even pry the name plate off, now can you? Fix it
    With your tiny fist there– James
    Van Der Beek and them sisters from Sister, Sister…

    This bitter drink
    Has made you drunk
    The thoughts you think
    Become unthunk

    Reply
  4. Kiers

    Blackstone’s Stephen Schwarzman was personally present in Trumpfuhrer’s personal inauguration both, in January 2017 in DC, glad handing members of Trump family, hot chocolate etc . Nasty.

    Reply
  5. Paul D

    Now would be a good time to ban private equity from certain industries like medicine and healthcare, news, food production, insurance . . . pretty much everything. Private equity always acts in the worst possible way and contrary to any notion of the public good.

    Reply
    1. Kris Alman

      Agreed! PEs are vultures. My dad (who has since died) was in a large, for-profit chain SNF in CO. SavaSeniorCare. Their legal costs must be huge since the lawsuits never seem end. And yet, it seems no judge will touch them. That’s what happened with our class action lawsuit over a decade ago.

      At that time, SavaSenior Care was among the top for-profit 10 nursing home chains in the nation–though I don’t think PEs are involved. However, 4 of those top 10 were owned by PE’s.

      HCR ManorCare was the largest of the 10. Carlyle Group purchased them in 2007. Then in 2010 (according to Wikipedia), HCR ManorCare entered into a sale-leaseback transaction whereby the company sold off 338 post-acute, skilled nursing and assisted living facilities for US $6.1 billion. HCP Inc. (now Healthpeak Properties and trading under the ticker “PEAK”), a CA based REIT, owns these assets, which are still operated by HCR ManorCare.

      In 2018, HCR ManorCare filed for bankruptcy protection and agreed to be taken over by its landlord, Quality Care Properties. In July 2018, Quality Care Properties was acquired by a joint venture between Welltower and ProMedica. Welltower is a REIT that is ranked 609th on the Fortune 1000 in 2016 and is a component of the S&P 500. By acquiring ManorCare, ProMedica established itself as one of the 15 largest nonprofit U.S. health systems, with more than $7 billion in annual revenue on a pro forma basis.

      In 2018, ProMedica also formed a joint partnership with Sonic Healthcare USA called ProMedica Pathology Laboratories. Sonic Healthcare USA receives funding from Venture Capital and Private Equity firms.

      You see Sonic Healthcare is an international company.

      A recent headline: Could Coronavirus Benefit Sonic Healthcare?
      Approximately 80% of SHL’s revenue is earned through government-funded healthcare. In terms of operations, approximately 85% of revenue is derived from pathology laboratories. Following the recent acquisition of Aurora Diagnostics – one of the leading providers of anatomical pathology services in the US – the US division is now become the largest division in the group, accounting for 27% of group revenue.

      REITS, with the real estate and assets owned by a separate company is rather clever financial engineering–especially when a “nonprofit” like Promedica is involved..

      REITS have allowed nursing homes to shift profits to the REITS and further reduce their corporate taxes. REITS also reduce the likelihood of nursing homes being the subject of litigation because the assets are separated.

      Sabra Health Care REIT (Nasdaq: SBRA) Inc. is one of those predatory companies.

      In December 2018, Sabra Health Care REIT filed a lawsuit seeking control over 38 properties operated by Senior Care Centers, which entered Chapter 11 bankruptcy protection earlier this month.

      In a settlement March 2019, Sabra would receive $9.5 million from the bankrupt operator. Sabra would also be owed $6.2 million in rent accrued after Senior Care Centers filed for Chapter 11 bankruptcy protection back in December.

      Apparently REIT Stocks aren’t doing so well with Covid. Issaquah Nursing Home & Rehab Center, a long-term care facility in Washington owned by Sabra Health Care REIT, had a couple of the early deaths in WA. But they will surely rebound as we will surely forgive and forget the handling of Covid by all health care institutions.

      Private equity and REITs predict doom for anyone employed or receiving care in these SNFs, Rehab Centers and Assisted Living Facilities.

      Reply
      1. Michael McKaskle

        The “non-profit” operator shoveling cash flow to the “owner” of the assets is everywhere. Our local care home ecology is dominated by a minnow in the field, Brius, if they have not sold out yet. They plead poverty to staff and clients and got a bunch of emergency state funding a while ago but have contracts for outrageously expensive supplies and rent with businesses owned by their sponsors. Legal nonprofithood, like all forms of corporate personhood, is so abused and gamed by the wealthy I do not think it should exist at all if not reformable. If you need a tax deduction to support something perhaps it is not so important…
        From 2016 https://www.northcoastjournal.com/humboldt/dear-shlomo/Content?oid=4236055

        Reply
  6. Mark H

    Appelbaum was dubious that Washington State could win a suit, even if the attorney general were to take up the case.

    Washington Attorney General Bob Ferguson is the right AG for this suit. He’s very pro-consumer, likes to pursue big public-interest suits, and isn’t afraid to lose. I’d be surprised if he doesn’t take on this suit if it has any merit legally.

    Reply
    1. flora

      States pay a large part of Medicaid medical bills. It’s in states’ financial and community interest to stop this PE predatory pricing and PE destruction of local medical decision making. How does firing an ER doc during a pandemic improve medical care in that community? rhetorical question.

      Reply
    2. Yves Smith Post author

      I think you are missing Appelbaum’s point.

      PE firms hire the best lawyers money can buy. That means they structure their affairs carefully and also are very effective opponents in court.

      Specifically, this was the legal theory advocated by AAEM: ” TeamHealth, a lay corporation owned by the private equity company the Blackstone Group, should not be the employer of Dr. Lin according to the laws of the state of Washington.”

      As Appelbaum pointed out, the deals are structured so that legally, doctors are the owners. They have contracted with TeamHealth for various management services.

      So you would need to do quite a lot of discovery to prove the legal structure was a sham.

      Reply
  7. Colonel Smithers

    Thank you, Yves. It’s not just the US. You won’t be surprised to hear that the UK is as bad. It’s not just health, but social services, too.

    To give an idea of profiteering:

    Children in care cost local authorities between £500 to £5000 weekly. About a tenth of that goes to the individual(s) caring for the minors. The rest is collected by the intermediary, often an investment firm.

    Individuals who want to adopt or become carers must have a medical. A medical costs about £75, but the firm managing the medical practice collects £350.

    The firms are expanding into Spain, so watch out down there.

    In health care, much of the policy making and day to day management is delegated to current and former McKinsey staffers, vide the Treasury number two, Charles Roxburgh, and junior health minister, Helen Whately. The CEO of the NHS is Johnson’s friend from Balliol and former United Health lobbyist Simon Stevens.

    Reply
  8. flora

    Thanks very much for this post. According to a recent paper, outsourced PE owned companies provide at least 30% of ER docs, and are responsible for most of the egregious surprise billings patients receive.

    Interest in private equity’s role in healthcare exploded in 2019 when investigations revealed that two large private equity owned staffing firms—with a 30 percent share of the market for outsourced emergency room doctors—were at the heart of the surprise medical billing crisis. Patients who thought their insurance would cover their ER visit found instead that, in outsourced ER rooms, doctors could charge out-of-network rates, leaving patients with huge medical bills. Congressional debate over legislation to curb these abuses stalemated in early 2020 as private equity firms poured millions to lobby Congress to adopt watered-down legislation that would not substantially alter out-of-network rates.[ii]

    https://www.ineteconomics.org/perspectives/blog/private-equity-buyouts-in-healthcare-who-wins-who-loses

    About the 2 large PE owned staffing groups, the PE owners are Kohlberg, Kravis Roberts & Co. (KKR), and Blackstone Group:

    By 2013, physician staffing firms owned by Blackstone Group and Kohlberg, Kravis Roberts & Co. (KKR) – among the largest PE firms in the country – cornered 30 percent of this market. Since then, private equity ownership of these services has continued to grow. Private equity firms also own two of the three largest emergency ambulance and air transport services – another major source of surprise medical billing.

    https://www.ineteconomics.org/perspectives/blog/private-equity-and-surprise-medical-billing

    When the Dem house killed the surprise billing legislation, who was it that lobbied hardest against the bill? PE? Is it any surprise medical bills keep going up and up, or that health care centers choices are fewer? A woman who tried to get tested for the corona virus ended up with a $34,000.00 medical bill. $34k bill. Now I know why there’s so much unchecked price gouging in medicine. Hint: It’s not coming from the doctors.

    Reply
  9. David in Santa Cruz

    Thanks for this reporting.

    Toward the end of my 32 years as a prosecutor (in 2015) I became involved in the investigation of the illegal “corporate practice of medicine” through private equity bait-and-switch/extortion operations in the provision of health care and associated services. When I uncovered several “smoking guns” my so-called “progressive Democrat” DA ordered my investigation shut down. I found a way to quietly retire at the end of that year. I think that Prof Applebaum is correct about the massive political payola that these blood-suckers can bring to bear on regulators. Joe Bite-me — in the unlikely event he actually beats Trump — is their cat’s-paw.

    As for me, it’s out of the frying pan and into …drawing a precarious CalPERS pension and moving to the three-county area “served” by Peace Health Whatcom/Skagit/San Juan Washington. The Vampire Squid seems to follow me everywhere.

    Reply
  10. Skip Intro

    Rep. Pramila Jayapal of WA might also be in a position to raise the profile of this, and help keep the WA AG focused.

    Reply
  11. Mary L Isaacson

    All of this is shocking to me. I had no idea of the hidden corporate control of the healthcare industry. The layers of complexity about who owns whom, the constant changing of names and entities, without the public being informed is frightening. This should be known and revealed to the country in the clearest possible terms.
    Now would the right time. These private equity firms need to be shamed so that members of Congress are forced to deal with this ASAP and before the next election.

    Reply
  12. Marcia Leister

    I live in Bellingham and have been aware of the privatized nature of St. Joe’s for several years and from different incidents— bringing in a private lab company, Quest, and the labor incident forcing a segment of workers to either accept lower wages or quit.
    How can Peacehealth St.. Joe’s call itself a nonprofit?

    Reply

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