A Call for Change in Healthcare Governance

Over the past 30-40 years many healthcare organizations have gradually shifted from a charitable, not-for-profit organization to a not-for-profit in name only business. Accompanying this shift, has been a shift in hospital governance away from a benevolent organization directed by charitable organizations such as religious organizations to businessman focused on revenue and profits. Of course, this does not mean that not-for-profit organizations are for loss. Small or modest profits are necessary to continue to operate.

Accompanying this change in organizational goals from a charitable to a more business focus, has been changes in the hospital board of directors or trustees (1). The mission of a publicly traded corporation is to return economic value to their shareholders and is the primary fiduciary focus of that board. On the other hand, the mission of a not-for-profit, 501c, charitable healthcare system is to provide health services improving the well-being of the community.

The board of directors or trustees of a not-for-profit organization theoretically must be primarily focused on the fulfillment of the charitable mission, not on generating profit for its own sake. Not-for-profit boards tend to be larger. In the 1980s the average size of a not-for-profit hospital board was well over 25, but is declining. By 2023 the average size was around 13 (1). At least 51% of the members of a not-for-profit charitable board must meet the Internal Revenue Service (IRS) definition of independence. This means that these board members must be independent of direct economic relationships with the organization and not have direct family members who work for the organization. This is one way that the IRS tries to ensure that the board is loyal to the charitable mission of the organization.

In the 1980’s new board members were often elected by the board and usually received no or minimal compensation (2). However, today board members are often “nominated” by the administration of the hospital and often receive compensation which can be substantial (2). For example, the 14 board members of Banner Health receive in excess of $95,000/year (3). In addition, hospital CEOs were usually ex officio non-voting board members. Again, using Banner Health as an example, the CEO is a full board member (4). Board composition has also changed. In the past there was often ample physicians and nurses providing medical guidance to the board. Today their numbers have dwindled. Banner has  only 2 physicians on its 14-member board (an internist/emergency room and a family physician). Nursing is not represented.

The role of the chief of staff (COS) has also changed. In the past COSs were usually members of the medical faculty who served one or two years on a part-time basis. They were compensated but that was largely to offset their loss of income as a physician. Now COSs are often full-time serving at the pleasure of the hospital CEO and/or board. They are no longer the doctors’ representative to the hospital administration but rather the hospital administration’s representative to the doctors (5). The concept that the COS can work in a “kumbaya” relationship with hospital administrators is a naive remanent from a bygone era. Although a good working relationship may exist in some healthcare organizations, increasingly the relationship is adversarial.

Physician practice has also changed. In the past physicians were often self-employed independents who practiced within the confines of the hospital or clinic. Now 77% of physicians are employed, a dramatic increase from 26% only 10 years ago (6). The reason most often cited has been declining reimbursement (7). Although cost containment is often cited as a reason for the decline, Medicare physician pay has plummeted by 26% when adjusted for inflation over the past 20 years while hospital reimbursement has surged by 70% (7). The decline in reimbursement has prompted many doctors to abandon independent practice for hospital or corporate employment (7). Some have equated increasing physician employment for decreasing access and quality of care (7).

It seems unlikely that without a change in governance any meaningful change in the businessmen’s stranglehold of medicine with its poor care, high prices and administrative overcompensation will be forthcoming. One simple improvement is election of the COS by an independent medical staff rather than appointment by a hospital director or board.

A second, also simple change is that independent doctors, nurses and technicians need to have their representation increased on the board of directors of the hospital or healthcare organization. They should be elected by the hospital staff and not appointed by the CEO. Rather than just requiring 51% of board members be independent, at least 51% of boards should have doctors, nurses or technicians who practice at the hospital or healthcare organization but are independent. This ensures adequate medical expertise including local knowledge about the operation of the organization.

Changes described above to the COS and board of directors should be required by the Joint Commission, Centers for Medicare and Medicaid, the state department of health and possibly the IRS. These changes could go a long way to resolving the intrusion in medicine by businessmen interested more in their own gain and not the charitable healthcare mission of a 501c hospital or healthcare organization.

References

1. Wagner SE. A Taxonomy of Health Care Boards. Trustee Insights. American Hospital Association. September, 2023. Available at: https://trustees.aha.org/system/files/media/file/2023/09/TI_0923_orlikoff_interview_3.pdf (accessed 6/14/2024).
2. Blodgett MS, Melconian LJ,  Peterson JH. Evolving Corporate Governance Standards for Healthcare Nonprofits: Is Board of Director Compensation a Breach of Fiduciary Duty. Brooklyn Journal of Corporate Financial & Commercial Law. 2013;7(2): 444-474. Available at: https://brooklynworks.brooklaw.edu/cgi/viewcontent.cgi?article=1046&context=bjcfcl (accessed 6/14/2024).
3. ProPublica. Nonprofit Explorer. December 2022 Tax Filing. Available at: https://projects.propublica.org/nonprofits/organizations/450233470 (accessed 6/14/24).
4. Board of Directors. Banner Health. Available at: https://www.bannerhealth.com/about/leadership/board-of-directors (accessed 6/14/24).
5. Robbins RA. The Potential Dangers of Quality Assurance, Physician Credentialing and Solutions for Their Improvement. Southwest J Pulm Crit Care Sleep. 2022;25(4):52-58. [CrossRef]
6. Physicians Advocacy Institute. Updated Report: Hospital and Corporate Acquisition of Physician Practices and Physician Employment 2019-2023. April 2024. Available at: https://www.physiciansadvocacyinstitute.org/Portals/0/assets/docs/PAI-Research/PAI-Avalere%20Physician%20Employment%20Trends%20Study%202019-2023%20Final.pdf?ver=uGHF46u1GSeZgYXMKFyYvw%3d%3d (accessed 6/16/24).
7. G Grossi. Dr David Eagle: CMS Reimbursement Cuts Encourage Trend of Independent Physician Exodus. American Journal of Managed Care. Feb 12, 2024. Available at: https://www.ajmc.com/view/dr-david-eagle-cms-reimbursement-cuts-encourage-trend-of-independent-physician-exodus (accessed 6/16/24).

Cite as: Robbins RA. A Call for Change in Healthcare Governance. Southwest J Pulm Crit Care Sleep. 2024;28(6):91-93. doi: https://doi.org/10.13175/swjpccs028-24 PDF

The Decline in Professional Organization Growth Has Accompanied the Decline of Physician Influence on Healthcare

There is little doubt that most professional organizations are experiencing a failure to grow. For example, in the early 1950’s, about 75% of US physicians were American Medical Association (AMA) members (1). That percentage has steadily decreased over the years. In 2019 there were only 132,133 practicing physicians or about 12.1% of physicians who are AMA members (2). According to Kevin Campbell (2) there are many reasons for this decline including:

• The AMA touts itself as speaking for all of us (physicians) -- but rarely listens to any of us -- they work to fill their own pockets with dollars from big pharma and government.
• The AMA tends to have a narrow-minded political view and works to stifle any dissenting opinions (in an effort to continue to align with the government agencies that line the pockets of AMA executives with taxpayer money).
• The AMA has collaborated with the government to expand irrelevant and unfair payment codes (the hated CPT codes and ICD 10) -- this has significantly contributed to the disparity in pay for different specialties.
• The AMA has spent more (of dues paying member money) than almost any other company on lobbying in the last 20 years -- to a tune of $347 million -- only the U.S. Chamber of Commerce and the National Association of Realtors have spent more.
• The AMA receives nearly twice as much money from the U.S. government as it does from membership dues, and has since the Clinton Administration when the AMA signed on to support price controls for physician services -- in exchange for Washington leaving it to the AMA to decide how the shrinking pot of money for physician payments would be divided up between medical specialties. (Yes, this is all about how the self-serving AMA determines CPT codes.) In 2010 alone, the AMA made 72 million in royalties and credentialing products sold to the U.S. government.

The AMA’s “woes” are typical of many membership-based medical organizations that exist to fulfill a mission. Many professional organizations can be faulted for behavior similar to the AMA’s, particularly ignoring physician members and lining their own pockets at the expense of their members and the patients they serve. However, regardless of size, achieving a mission often comes down to one thing-growth. In a report published by Wild Apricot (3) in 2020, surveyors found 68% of organizations had difficulty growing their organization in 2019 — 11% of those shrunk, and 25% experienced no growth. The remaining 32% grew only 1-5%. 

Not surprisingly, declining membership is associated with declining political clout. At one time AMA approval was critical in moving any healthcare proposal forward through Congress. Now it is at best an afterthought. The present “pay to play” attitude in Congress likely accounts for some of their declining influence. If an organization represents only a small fraction of the electorate, their influence is small.

The decline in professional organization clout can, at least in part, explain many of the onerous tasks that physicians and other healthcare workers must perform. For example, medical notes have become overly long and largely useless (4). Often the point of the note is difficult, if not impossible, to find. These clerical tasks may increase reimbursement but do not appear to contribute to better care or outcomes.

Therefore, combatting membership decline becomes important in improving medicine. Millennials and generation Z are not as likely to join organized groups as their predecessors (4,5). Additionally, not every recruitment strategy may work for a specific association or needs. Therefore, understanding the reasons behind a specific organization’s member churn can help indicate a path to explore. Retaining existing members is low-hanging fruit. It is more cost-effective to keep current members happy than it is to attract new ones. Canceling an unused membership doesn’t require a second thought, so targeting existing members with engagement campaigns showing them how to maximize their membership is important. Declining membership is not a dire situation, but it is a reason to innovate. Organizations should rethink how to engage existing members without neglecting younger audiences.

Richard A. Robbins MD

Editor, SWJPCCS

References

1. Collier R. American Medical Association membership woes continue. CMAJ. 2011 Aug 9;183(11):E713-4. [CrossRef] [PubMed]
2. Campbell K. Don't Believe AMA's Hype, Membership Still Declining. MedPage Today. June 19, 2019. Available at: https://www.medpagetoday.com/opinion/campbells-scoop/80583 (accessed 5/3/24).
3. Wild Apricot. 3 Ways to Grow Your Membership Org. 2020. Available at: https://resources.wildapricot.com/2020-membership-growth-report (accessed 5/3/24).
4. Sax PE. How Did Our Medical Notes Become So Useless? NEJM Journal Watch. January 2, 2019. Available at: https://blogs.jwatch.org/hiv-id-observations/index.php/how-did-our-medical-notes-become-so-useless/2019/01/02/ (accessed 5/3/24).
5. Fry R. Millennials Are the Largest Generation in the U.S. Labor Force. Pew Research Center. 2018. Available at: https://www.pewresearch.org/short-reads/2018/04/11/millennials-largest-generation-us-labor-force/ (accessed 5/3/24).
6. World Economic Forum. Chart: How Gen Z Employment Levels Compare in OECD Countries. 2021. Available at: https://www.weforum.org/agenda/2021/03/gen-z-unemployment-chart-global-comparisons/ (accessed 5/3/24).

Cite as: Robbins RA. The Decline in Professional Organization Growth Has Accompanied the Decline of Physician Influence on Healthcare. Southwest J Pulm Crit Care Sleep. 2024;28(5):72-73. doi: https://doi.org/10.13175/swjpccs022-24 PDF

Hospitals, Aviation and Business

Boeing’s recent troubles remind us that in many ways, healthcare is like aviation:

1. They are both highly technical endeavors, guided by highly educated and trained personnel such as physicians and pilots.
2. Even small mistakes can be devastating.
3. Operating margins (operating income/revenue) are very low.
4. Both are led by businessmen not trained in the industry.
5. Some have put profit ahead of safety.

The cockpit of the typical airliner or the multitude of instruments in the typical intensive care unit demonstrates that aviation and medicine are both highly technical. Airline pilots have a minimum of 1,500 hours of flight time. This includes time spent obtaining a private pilot’s license, commercial license, instrument rating, multiengine rating, and airline transport pilot (ATP) certificate. Pilots often have additional in type ratings for turboprop or jet engines. Many have spent time as flight instructors and normally have at least 5 years of experience. A pilot must be over the age of 23 and be able to pass a 1st class medical exam. The military also trains pilots and brings them along faster, usually requiring some time commitment for the training they receive. In addition, they have recurring requirements to train in simulators to practice emergency procedures or when they begin flying new aircraft.

Physicians have four years of medical school after college. After medical school they become residents, a term from the past when the young physician resided in the hospitals. Residency lasts 3-5 years and is often followed by additional training called fellowship. For example, the typical cardiologist spends 3 years in an internal medicine resident, then an additional 3 years as a cardiology fellow. After fellowship, additional training may occur. For example, in cardiology this could be in interventional cardiology, nuclear cardiology, electrophysiology, etc. which are 1-2 years in length. In many cases additional time is spent doing research to become competitive for grants. Many have PhD’s and some have administrative or business degrees such as master of public health (MPH) or business (MBA). Like pilots, recertification is required. Nurses and physician’s assistants are also highly educated. Some have PhD’s and many have master’s degrees. Like physicians, administrative or business degrees are becoming increasingly common. 

Small mistakes can be devastating. Overshooting or undershooting a runway leading to a crash can kill not only the pilot but passengers on board. Poor handling of an emergency such as an engine failure, a door plug dislodging in flight or poor programming of the complex flight computers, such as occurred with the Boeing 737 Max, can be lethal. Similarly, mistakes in care for a sick patient can be deadly. The popular literature is rife with reports of physicians or nurses overlooking a laboratory or x-ray abnormality, giving the wrong medication, falls, or the wrong surgery on the wrong patient.

Although the high education and need for care are well appreciated, what is not so well known is that profit margins are narrow for both aviation and medicine.  Airlines are expected to have a 2.7% net profit margin in 2024 which is a slight improvement from the 2.6% in 2023 (1). Boeing’s net profit margin as of September 30, 2023 was -2.86%. (2). Hospitals began 2023 with a median operating margin of -0.9% and currently have a margin of -10.6% to 11.1% (3). For the three months ending Sept 30, the Mayo Clinic (Rochester, MN) had a relatively healthy 6.7% profit margin. In contrast, Banner Health was only 1.5%. Hospitals and health systems are estimated to finally break even after several years of losses secondary to the COVID-19 pandemic and higher than expected contract labor costs. The recent median margin data show that essentially half of hospitals and health systems are still operating at a financial loss, with many more just barely covering their costs (3). This means little to no discretionary money. Hospital executives who receive high compensation packages can consume much of this discretionary money. Many would argue that it could be better spent on patient care. 

Both aviation and hospitals are usually led by businessmen. This was not always so. Early airlines and hospitals were usually led by pilots and doctors. Only in the past 50 years have businessmen become involved. The rationale has nearly always been financial. Early aviators cared a great deal about demonstrating that aviation was safe. For example, Boeing Aircraft, founded in 1916 by William Boeing, was considered first and foremost an engineering firm where production of reliable aircraft was most important (4). The emphasis on quality and safety spawned the quote, “If it isn’t Boeing, we aren’t going”. In 1997 Boeing merged with its longtime rival McDonnell Douglas. The new CEO of the merged companies from McDonnell Douglas, Harry Stonecipher, brought a different attitude to the merged companies.

Figure 1. Harry Stonecipher. CEO of Boeing 2001-2, 2003-5.

Stonecipher said, “When people say I changed the culture of Boeing, that was the intent, so that it’s run like a business rather than a great engineering firm. It is a great engineering firm but people invest in a company because they want to make money” (5).  The company became fixated on stock market value and lost sight of the core value of manufacturing reliable, safe airplanes. Boeing is now reaping the decline in quality that was sown by Stonecipher years ago. The Federal Aviation Administration (FAA) which is supposed to  oversee airplane manufactures has also apparently become slack, allowing Boeing to have major declines in quality (6).

In hospitals we have seen a similar progression. Doctors or nurses were replaced as hospital heads in the later part of the twentieth century by businessmen who often did not understand, and in some instances did not care to understand, the core value of quality patient care. Recently, private equity firms have been acquiring hospitals or portions of hospitals such as emergency rooms or radiology practices. Data on the quality of care has been scant but there have been a multitude of complaints from doctors and nurses. Now, a recent systematic review that included 55 studies from 8 countries concluded that not only has private equity ownership increased over time across many health care sectors, but it has also been linked with higher costs to patients or payers (7). Although results for the 27 studies that looked at health care quality were mixed, the researchers found evidence that private equity ownership was tied to worse quality in 21 (7). This suggests a poorer quality of care. The lack of oversight by a variety of healthcare organizations such as the Joint Commission, Centers for Medicare and Medicaid Services (CMS), state departments of health, etc. may be following the FAA example in becoming lax at their jobs.

Hospitals and aviation companies do have one major difference. Hospitals are generally not-for-profit entities that should operate for the public good. Profit is secondary which does not mean that losses can be long tolerated. Aviation companies are for-profit entities where revenue is primary. However, as demonstrated by Boeing, quality is still very important. As more hospitals are acquired by private equity companies, many remain concerned that quality will suffer for the sake of profit. Perhaps in 20 years we will be shaking our heads and lamenting about the decline in the quality of US healthcare the way many are viewing Boeing today.

Richard A. Robbins MD

Editor, SWJPCCS

References

1. https://www.iata.org/en/pressroom/2023-releases/2023-12-06-01/#:~:text=Airline%20industry%20net%20profits%20are,2.6%25%20net%20profit%20margin)
2. Boeing Profit Margin 2010-2023. Macrotrends. Available at: https://www.macrotrends.net/stocks/charts/BA/boeing/profit-margins#:~:text=Current%20and%20historical%20gross%20margin,%2C%202023%20is%20%2D2.86%25 (accessed 2/9/24).
3. Condon A, Ashley M. From -10.6% to 11.1%: 34 systems ranked by operating margins. Becker’s Hospital Review. December 29, 2023. Available at: https://www.beckershospitalreview.com/finance/from-10-6-to-11-1-34-systems-ranked-by-operating-margins.html (accessed 2/9/24).
4. Boeing. Wikipedia. Available at: https://en.wikipedia.org/wiki/Boeing (accessed 2/9/24).
5. Surowiecki J. What’s Gone Wrong at Boeing. The Atlantic. January 15, 2024. Available at:  https://www.theatlantic.com/ideas/archive/2024/01/boeing-737-max-corporate-culture/677120/ (accessed 2/9/24).
6. Rose J. The FAA is tightening oversight of Boeing and will audit production of the 737 Max 9. January 12, 2024. NPR. Available at: https://www.npr.org/2024/01/12/1224444590/boeing-faa-737-max-9-alaska-airlines-door-plug (accessed 2/9/24).
7. Harris E. Private Equity Ownership in Health Care Linked to Higher Costs, Worse Quality. JAMA. 2023 Aug 22;330(8):685-686. [CrossRef] [PubMed]

Cite as: Robbins RA. Hospitals, Aviation and Business. Southwest J Pulm Crit Care Sleep. 2024;28:20-23. doi: https://doi.org/10.13175/swjpccs009-24 PDF

Healthcare Labor Unions-Has the Time Come?

Labor unions in America look like they are making a comeback. Employees at  Starbucks stores, Amazon warehouses, Trader Joe's, and REI, grad students, Uber and Lyft drivers and employees at the Medieval Times have voted to unionize. Hollywood actors and writers, the United Auto Workers, and Kaiser Permanente employees have been on strike (1). Headline writers began declaring things like, "Employees everywhere are organizing" and that the United States was seeing a "union boom” (2). In September, the White House asserted "Organized labor appears to be having a moment" (2). However, the Bureau of Labor Statistics recently released its union data for 2022 and the data shows that the share of American workers in a union has continued to decline (2). Last year, the union membership rate fell by 0.2 percentage points to 10.1% — the lowest on record.

Despite an increase in union efforts since the pandemic, healthcare workers — particularly doctors — have been slow to join unions. Doctors Council bills itself as the largest physician union in the country with 3500 members according to Joe Crane, national organizing director. However, Crane estimated that only about 3% of US physicians are currently union members. A minority of advanced practice registered nurses (APRNs) (9%) report union membership, according to Medscape's APRN compensation report last year. In a rare alliance, more than 500 physicians, NPs, and PAs at Allina Health primary care and urgent care clinics in Minneapolis, Minnesota, recently filed a petition with the National Labor Relations Board to hold a union election. If successful, the Allina group will join the Doctors Council SEIU, Local 10MD. The Allina healthcare providers share concerns about their working conditions, such as understaffing and inadequate resources, limited decision-making authority, and health systems valuing productivity and profit over patient care.

The economist, Suresh Naidu, and his colleagues have found influential evidence showing that unions played a critical role in boosting wages for American workers and reducing income inequality in the early-to-mid 20th century (3). However, "American labor law just puts an enormous barrier in the way of workers joining a union," Naidu says. "So you need to convince 50% plus one of your coworkers to join a union if you want a union.” That alone can entail a difficult and time-intensive campaign process. Our labor laws make it relatively easy for employers to short-circuit organizing efforts (3). Even when some of their tactics are technically illegal, companies are given wide latitude to thwart unionizing with minimal legal sanctions (3). Union organizers are forced to strategize and organize outside their workplace and figure out how to convince coworkers to join the fight without getting penalized or fired.

The obstacles to forming a union have only grown in recent decades. Around 27 states have passed "Right to Work" laws, which make forming a union more difficult in states with those laws and provide a refuge for companies looking to escape unions in states without those laws (2). Globalization has given companies the option to close-up shop and move overseas. Automation has given companies the option to replace workers with machines. Deregulation has increased industry competition and weakened unions' ability to extract concessions from monopolistic companies. Various changes to labor law, by the U.S. Congress, by state legislatures, and by the federal courts, have made it harder for unions to grow and thrive. Corporations now spend millions and millions on highly paid consultants, developing effective tactics to suppress unionizing efforts and pressure their workers into submission. Once workers form a union, it now takes an average of 465 days for the union to sign a contract with their employer.

Doctors, nurses and healthcare workers tend to underestimate their potential to influence healthcare. If doctors formed a union, many of my colleagues, myself included, would be opposed to an all-out strike since this would likely harm patients. However, the present healthcare system depends on the flow of paperwork with business interests relying on doctors and nurses to generate. Refusing to fill out billing sheets, discharge patients, participate in non-patient care hospital activities are just some of the ways doctors and nurses could impact the system without denying care to patients. A recent strike against Kaiser drove a settlement in 3 days with an increase in wages and an agreement to improve staffing levels (1). The threat of another pandemic and the need for healthcare workers to care for these patients despite chronic understaffing, leaves management backed into a corner.

Under these pressures and given the attitude of many doctors and nurses that they are healthcare professionals, not blue-collar workers, it is not surprising that the majority of doctors and nurses are not unionized. However, among my own social group of retired physicians the reluctance to join unions may be waning. One of my most conservative colleagues put it this way, “What choice do we have? Doctors have lost control of medicine and business interests have exploited their control over medicine to take advantage of us and our patients.” Many healthcare workers felt betrayed after the recent COVID-19 pandemic (5). They sacrificed much but received no rewards or even thanks for their sacrifices. Regardless, complaining about the situation is unlikely to change anything. Business interests are unlikely to relinquish control since they are making money, in some cases huge amounts of money. Unions may be one way to reverse the “hyperfinancialization” of medicine and return to a not-for-profit service for patients.

Richard A. Robbins MD

Editor, SWJPCCS

References

1. Selena Simmons-Duffin S. After historic strike, Kaiser Permanente workers win 21% raise over 4 years. NPR. October 14, 2023. Available at: https://www.npr.org/sections/health-shots/2023/10/13/1205788228/kaiser-permanente-strike-contract-deal-reached (accessed 10/23/23).
2. Rosalsky G. You may have heard of the 'union boom.' The numbers tell a different story. NPR. February 28, 2023. Available at: https://www.npr.org/sections/money/2023/02/28/1159663461/you-may-have-heard-of-the-union-boom-the-numbers-tell-a-different-story#:~:text=Headline%20writers%20began%20declaring%20things,its%20union%20data%20for%202022. (accessed 9/30/23).
3. Farber HS, Herbst D, Kuzimenko I, Naidu S. Unions and Inequality over the Twentieth Century: New Evidence from Survey Data. The Quarterly Journal of Economics. 2021; 136 (3):1325–1385. [CrossRef]
4. Associated Press. Kaiser Permanente Reaches a Tentative Deal with Health Care Worker Unions After a Recent Strike. October 13, 2023. Available at: https://apnews.com/article/kaiser-permanente-health-care-workers-strike-411aa1f084c19725f29ff87766e99704 (accessed 10/14/23).
5. Griffin M, Hamilton P, Harness O, Credland N, McMurray R. ‘Running Towards the Bullets’: Moral Injury in Critical Care Nursing in the COVID-19 Pandemic. J Manag Inq. 2023 Jun 26:10564926231182566. [CrossRef] [PubMed]

Cite as: Robbins RA. Healthcare Labor Unions-Has the Time Come? Southwest J Pulm Crit Care Sleep. 2023;27(5):59-61. doi: https://doi.org/10.13175/swjpccs047-23 PDF 

Who Should Control Healthcare?

The American Academy of Emergency Medicine (AAEM) is urging stiffer enforcement of decades-old statutes that prohibit the ownership of medical practices by corporations not owned by licensed doctors (1). These century-old laws and regulations were meant to fight the commercialization of medicine, maintain the independence of physicians, and prioritize the doctor-patient relationship over the interests of investors and shareholders (2). Thirty-three states (click to see list of states that prohibit corporate ownership) plus the District of Columbia have rules on their books against the so-called corporate practice of medicine. In Arizona ownership by nonprofit entities is permitted, however as most of us know, nonprofit healthcare organizations are nonprofit in name only. Furthermore, over the years, companies have successfully sidestepped bans on owning medical practices by buying or establishing local staffing groups that are nominally owned by doctors and restricting the physicians so they have no direct control.

Those campaigning for stiffer enforcement of the laws say that physician-staffing firms owned by private equity investors are the guiltiest offenders. Private equity-backed staffing companies manage a quarter of the nation’s emergency rooms (2). The two largest are Nashville-based Envision Healthcare, owned by investment giant KKR & Co., and Knoxville-based TeamHealth, owned by Blackstone. Court filings in multiple states, including California, Missouri, Texas, and Tennessee, have called out Envision and TeamHealth for allegedly using doctor groups as straw men to sidestep corporate practice laws (2).

Physicians and consumer advocates around the country are anticipating a California lawsuit against Envision. The trial is scheduled to start in January 2024 in Federal court. The case involves Placentia-Linda Hospital in northern Orange County, where the plaintiff physician group lost its ER management contract to Envision. The complaint  by Milwaukee-based American Academy of Emergency Medicine Physician Group alleges that Envision uses the same business model at numerous hospitals around the Nation. Furthermore, the complaint alleges that Envision uses shell business structures to retain de facto ownership of ER staffing groups, and it is asking the court to declare them illegal. “We’re not asking them to pay money, and we will not accept being paid to drop the case,” said David Millstein, lead attorney for the plaintiff. “We are simply asking the court to ban this practice model.” Although Envision filed for Chapter 11 bankruptcy, AAEM has vowed to pursue the lawsuit (3,4).

The plaintiff — along with many doctors, nurses and consumer advocates, as well as some lawmakers — hopes that success in the case will spur regulators and prosecutors in other states to take corporate medicine prohibitions more seriously. The corporate practice of medicine has “a very interesting and not a very flattering history” said Barak Richman, a law professor at Duke University (2). This is a gross understatement in my opinion. The physicians, nurses, and technicians are not responsible for poorer care at higher prices that we now see. Businessmen are responsible by squeezing caregivers and patients for every penny, a practice some call “hyperfinancialization”(5). It is not surprising charging as much as possible while delivering minimal care has evolved. Businessmen in healthcare maximize profits in these situations, especially when they can avoid any responsibility for the healthcare delivered. Rather, a system of “quality assurance” has evolved which is more concerned with controlling caregivers than quality (6).

If not businessmen, then who should control healthcare? Doctors are alleged to be poor businessmen. If by this it is meant that physicians are more likely to try and deliver the best healthcare at the best price rather than bill the maximum for minimal care, I would hope most of physicians would plead guilty. Most physicians are concerned about delivering quality healthcare at reasonable prices. I suspect that the rumor that doctors are poor businessmen was started by business interests for their own financial gratification.

Not all doctors are qualified to lead healthcare. Some are straw managers which will do whatever their business supervisors tell them to do. Physician leaders practicing medical administration should be held to the same high standards that doctors are held in care of patients. Therefore, some degree of local control must be kept. Those of us who advocate for better healthcare can hope the courts enforce existing laws where applicable. We also need to take action in supporting each other for the good of medicine and the health of our patients. However, we also need to do a better job policing ourselves. Those ordering unnecessary or questionable diagnostic testing or treatments need to be called out. If successful, the Envision Case could prompt legislators, regulators and prosecutors in other states to focus attention on clinical practice of medicine prohibitions in their own states and take up arms against potential violations or reinvigorate prohibitions of clinical practice with new legislation and/or regulation.

Richard A. Robbins MD

Editor, SWJPCCS

References

1. American Academy of Emergency Medicine. Emergency Medicine and the Physician Practice Management Industry: History, Overview, and Current Problems. Available at: https://www.aaem.org/publications/key-issues/corporate-practice/emergency-medicine-and-the-physician-practice-management-industry-history-overview-and-current-problems/ (accessed 8/23/23).
2. Wolfson B. ER Doctors Call Private Equity Staffing Practices Illegal, Seek to Ban Them. Kaiser Health News. December 22, 2022. Available at: https://www.virginiamercury.com/author/kaiser-health-news/ (accessed 8/23/23).
3. Condon A, Thomas N. From private equity to bankruptcy: Envision's last 5 years. May 18, 2023. Available at: https://www.beckershospitalreview.com/finance/from-private-equity-to-bankruptcy-envisions-last-5-years.html (accessed 8/23/23).
4. Holland & Knight Law. Federal Bankruptcy Court Stays Envision Healthcare Litigation in California. August 3, 2023. Available at: https://www.hklaw.com/en/insights/publications/2023/08/federal-bankruptcy-court-stays-envision-healthcare-litigation (accessed 8/23/23).
5. Robbins RA. Who are the medically poor and who will care for them? Southwest J Pulm Crit Care. 2019;19(6):158-62. [CrossRef]
6. Robbins RA. The Potential Dangers of Quality Assurance, Physician Credentialing and Solutions for Their Improvement. Southwest J Pulm Crit Care Sleep. 2022;25(4):52-58. [CrossRef]

Cite as: Robbins RA. Who Should Control Healthcare? Southwest J Pulm Crit Care Sleep. 2023;27(3):33-35. doi: https://doi.org/10.13175/swjpccs039-23 PDF