What Happens When Private Equity Takes Over an Emergency Room

One in four ERs are now staffed by private equity-based firms. The waits are longer, the bills are higher, and ER doctors are being replaced by contractors.

By Brooke Shuman, More Perfect Union

Dr. Michelle Wiener got into emergency medicine because she has, in her words, “the attention of a goldfish.” 

“We’re at our best when it’s the most chaotic because that’s how we thrive,” said Wiener, who has worked in the emergency department of Ascension St. John in Detroit since 2015.

Despite her love of the high-stakes work, Dr. Wiener has seen her hospital deteriorate over the last nine years. She described performing CPR on a patient stuck in the waiting room after 15 hours unattended and wheeling patients through an overcrowded hospital herself because there weren’t enough transporters and nurses on staff. 

Even though Dr. Wiener works at Ascension, she and her colleagues are employed by TeamHealth, a physician staffing firm that contracts with emergency departments. And TeamHealth is owned by Blackstone, the world’s largest private equity fund. 

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Dr. Wiener noticed changes at Ascension almost immediately after TeamHealth’s takeover. The company replaced her staffing agency just weeks after she started the job. “None of the doctors knew that the contract had been sold until the day that they had taken over,” she recalled. “It was almost like being bought and sold like cattle.” 

Soon after, the time patients spent in the waiting room increased, sometimes by as much as 15 hours. Dr. Wiener said the number of patients she had to see on her shifts doubled, and that TeamHealth slowly replaced experienced physicians with physician assistants and residents right out of medical school. 

“It seems kind of crazy that when your life is on the line you go to the ER and you're taken care of by the person with the least amount of experience,” she told More Perfect Union.

TeamHealth is what’s known as a contract management group (CMG). If you’re a doctor in primary care, you can open up your own practice. Emergency physicians are different; they need to work with a hospital. So historically they would form democratic groups that functioned like a cooperative and contracted with hospitals. Doctors would share the decision-making and the profits. 

In the 1970s, a few physicians’ groups abandoned the democratic model and started trying to make the group into a business. They benefited from changes in how the Federal Trade Commission (FTC) and Supreme Court approached healthcare management and antitrust cases. A new school of thought took over that emphasized free-market competition at the federal level, while at the state level, lawmakers weakened enforcement of the corporate practice of medicine (CPOM) doctrine, a Gilded Age-era prohibition on corporations practicing medicine or hiring physicians that had been codified into law in 33 states. 

Physicians’ groups started charging fees to hospitals for service and essentially commodified their colleagues. The physicians no longer had shared equity and decision-making; rather, they worked for one or two doctors who had ownership. That’s the contract management group. 

In the 1990s and 2000s, these groups consolidated and expanded, and leadership slowly became ex-physicians and business executives, not working doctors. This model, now leaner and more profitable, became attractive to private equity. Today, 25 percent of emergency departments are staffed by PE-backed CMGs. 

One of these doctor-executives was Lynn Massingale, the founder of TeamHealth. TeamHealth started, they like to say, in a closet in the lobby of the emergency department in 1979, and grew to be one of the biggest physician staffing agencies in the country. TeamHealth now staffs nearly 500 emergency departments across the U.S., or 8.6% of the country’s ERs, and is the largest company of its kind. 

When a private equity-backed CMG takes over an emergency room, physicians like Dr. Wiener report caring for more patients and spending less time with those patients—and patients start seeing unexpectedly high bills. A lawsuit filed against TeamHealth last year in North Carolina, for example, claimed TeamHealth pushed unnecessary tests and defrauded state and federal Medicare. 

Blackstone acquired TeamHealth with a $6.1 billion leveraged buyout in 2016, after previously buying and taking the company public in 2009. Private equity runs on a model of purchasing companies that are profitable but stable—also known as mature companies—using debt that they then saddle onto the company itself. They promise more efficiency for the business, and profits for their own shareholders. 

Firms like Blackstone and KKR saw an opportunity in our patchwork healthcare system for cost-cutting and consolidation. One other factor that “makes healthcare a compelling investment,” as Bain Capital put it in 2018, is that the United States has an aging population. 

In the last four years alone, private equity invested more than $470 billion in healthcare.

A 2020 study found that PE-backed CMGs were routinely pairing patients with out-of-network physicians and then sticking them with inflated bills. Another study from Stanford showed that 42 percent of emergency room visits in 2016 came with a surprise out-of-network bill. Patients would visit a hospital knowing it was in their network, but then receive a bill for an out-of-network physician, sometimes in the thousands or tens of thousands of dollars. 

After more of these egregious and unexpected bills fueled outrage, Congress passed the No Surprises Act in 2022, capping how much providers could charge out-of-network patients. Publicly, TeamHealth supported the No Surprises Act, but then secretly backed a dark money PAC with its KKR-owned competitor Envision to oppose the legislation and spent $75 million on ads calling the act “government rate-setting.”

For now, patients are protected, but that’s left the CMGs battling in court with major insurance companies over who is going to actually cover the bills. Since the law was passed, Envision filed for Chapter 11 bankruptcy, and TeamHealth has been labeled at risk by the credit rating agency Fitch. Economist Eileen Appelbaum wrote last year that Envision and TeamHealth had lost their “secret sauce” of gouging patients. 

The American Academy of Emergency Medicine (AAEM), the more anti-corporate of the two major emergency physician associations, is currently suing TeamHealth and Envision under state-level corporate practice of medicine doctrine, and is calling for a federal version of the doctrine. 

Dr. Mitchell Li, a member of AAEM and founder of the emergency physician advocacy group Take Medicine Back, says CPOM laws set a standard of care that safeguarded physicians from the pressures of the market.    

“The feeling was that physicians' medical decisions should not be influenced by an external corporate interest looking to profit off of their work,” Dr. Li told More Perfect Union. “This is pretty intuitive, but today nearly three-quarters of physicians are employed by corporate entities.”  

While the lawsuits against TeamHealth and Envision are pending, physicians are taking other actions now to fight the private equity takeover.

In 2020, amid the COVID-19 pandemic, Dr. Wiener started talking to her colleagues about the changes at Ascension St. John. Three years later, the emergency physicians, physician assistants and nurse practitioners employed with TeamHealth announced they were unionizing. 

A lifelong Republican, Wiener never expected to lead a union drive. “When the only Republican in the group says, ‘I think it's time to unionize, we've run out of options,” she recalled with a laugh, “everybody just kind of said, ‘Okay, I guess we're there!’” 

Opponents of private equity control over healthcare also have allies in the federal government. The FTC, the Department of Justice, and the Department of Health and Human Services (HHS) launched a joint inquiry earlier this month into the increasing dominance of private equity in our healthcare system. (You can submit a public comment on the issue until May 6.)  

During a March 5 virtual workshop titled Private Capital, Public Impact, FTC Chair Lina Khan described the testimonials they had already heard from nurses and physicians throughout the country. Private equity has a “flip and strip” approach at hospitals, Khan said, and workers reported increased hours, cuts in staff, and unpaid contracts for crucial medical supplies. 

“A common theme across comments,” Khan added, “is that growing financialization in the healthcare industry can force medical professionals to subordinate their medical judgment to corporate decision-makers and profit motives at the expense of patient health.” 

Private equity has shown to have a short lifespan in healthcare—in other parts of the healthcare sector, firms have bought companies and sold them within three to seven years. TeamHealth currently has at least $714 million in maturing debt. If they are also at risk of bankruptcy, what will happen to the 16,000 healthcare providers and 3,300 emergency rooms that TeamHealth controls now? 

Earlier this month was Match Day, when tens of thousands of recent medical school graduates compete for residency placement. After a dramatic increase in the number of vacancies in emergency medicine last year, more than 95 percent of positions are now filled, though that's still down from pre-pandemic levels. Still, Dr. Wiener worries about the future. 

“When I applied to do emergency medicine, it was one of the most competitive specialties,” she told More Perfect Union. “And now medical students see what it's like and they are just like, ‘I'm out, I don't wanna do this. I'll become a dermatologist, I'll remove moles for the rest of my life… We’re losing a lot of good people.” 

But thousands of physicians like Dr. Wiener still want to enter the field and treat patients in crisis. It may take state and federal intervention at these profit-driven hospitals to get these physicians to stay.

“We have this kind of sacred relationship with patients and we take an oath to take care of patients,” says Dr. Wiener. “And I think that that really is at odds with the goals of a corporation.”