An FTC Lawsuit & A Congressional Hearing Show USACS’ Vulnerability

Also: APP hoses doctors more, shrinking primary care physicians, the CPOM mirage, EmPATH, & United Healthcare for All.

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Lina Khan and the Federal Trade Commission issued a bombshell lawsuit against US Anesthesia Partners (USAP) and its founding private equity owner - Welsh, Carson, Anderson & Stowe (Welsh Carson) - on 9/21/2023. The FTC alleges that USAP and Welsh Carson “engaged in a three-part strategy to consolidate and monopolize the anesthesiology market in Texas. First, they executed a roll-up scheme, systematically buying up nearly every large anesthesia practice in Texas to create a single dominant provider with the power to demand higher prices. Second, USAP and Welsh Carson further drove up anesthesia prices through price-setting agreements with remaining independent practices. Third, USAP sidelined a significant competitor by striking a deal to keep it out of USAP’s territory.”

Welsh, Carson, Anderson & Stowe is the same private equity company that funded the creation of US Acute Care Solutions in 2015 (three years after Welsh Carson created USAP), along with the EM group Emergency Medicine Physicians (EMP). The same WCAS partner - Brian Regan - was in charge of both the USAP and USACS deals. On USACS’ formation, Regan wrote, “EMP really fits all of our criteria for a partner.” 

In its 106-page suit, the FTC explains: “Welsh Carson entered the emergency medicine market and engaged in a similar roll-up strategy to the one it deployed with USAP… a similar strategy to consolidate the market.” The suit quotes Brian Regan that Welsh Carson’s strategy is “to build a platform with national scale by consolidating practices with high market share in a few key markets.”

Like USAP, US Acute Care Solutions has acquired many emergency medicine contracts within lucrative geographic regions such as the DC suburbs and Denver. USACS currently staffs 296 EDs. Unlike American Physician Partners, Brian Regan’s plan was not to go out of network with insurers and send large bills directly to patients. Instead, the Welsh Carson strategy was to increase in-network payment rates. 

The FTC lawsuit details how the “roll-up” & “tuck-in” consolidation strategy led to higher payment from insurers in the anesthesiology market. “Insurers prefer to have anesthesia groups in network—especially those that practice at in-network hospitals. Otherwise, their members may be treated by out-of-network anesthesiologists, who will charge much more. Certain ASO [self-insured employer] clients pay a significant portion of these bills, which can result in their dissatisfaction. And historically, out-of-network anesthesiologists billed patients directly. These ‘surprise bills’ can upset patients—who mistakenly assume that because they went to an in-network hospital, they saw an in-network anesthesiologist—and result in them complaining to their hospitals or employers. Insurers can thus be pressured to return out-of-network anesthesia providers to their network by as many as four parties: patients, hospitals, existing ASO clients (who may take their business elsewhere), and potential ASO clients (who may keep their business elsewhere).”

As a Welsh Carson analyst explained to a potential lender, “if a payor refuses to give us the pricing that we’re looking for, then the threat of us going out-of-network would be more painful on the payor than it would be on us. . . . [W]hen we cover every major hospital in the market, it doesn’t really have much of an impact on us. All the while, the payor would be responsible for reimbursing at out-of-network rates which are substantially higher than what we see on an in-network basis.”

Welsh Carson’s strategy worked. “Blue Cross reported that USAP ‘[a]ccounted for . . . 69% of cases and 83% of cost in Houston’ and that it ‘leverag[ed] market share’ into a reimbursement rate more than double that of other Houston anesthesiologists.” Also, “United reported that it reimbursed USAP at rates 95% higher than its in-network median for Texas and 65% higher than the Houston average, which was calculated including USAP.” Welsh Carson extracted $350 million in dividends from USAP between 2012 and 2020.

The No Surprises Act, which passed the US Congress on December 21, 2020, outlaws out-of-network balance billing of patients. Without the threat of billing patients out of network, Welsh Carson’s consolidation-based negotiation strategy lost much of its leverage in the emergency medicine market. Per the NSA, the arbitration for out-of-network acute care billing is based on the following six factors: a) the QPA (“median of the contracted rates recognized by the plan for the same or similar item or service that is provided by a provider in the same or similar specialty and provided in the same geographic region in which the item or service under dispute was furnished, increased by inflation”), b) the level of training of the physician or other health professional, c) the acuity of the person receiving the health service, d) the provider's market share, e) the quality and outcome measures of the provider, f) The complexity of furnishing the service.

As John Maynard Keynes said, “When the facts change, I change my mind - what do you do, sir?” It is no surprise that two months after the NSA’s passage, Welsh, Carson, Anderson & Stowe sold its stake in US Acute Care Solutions to USACS’ physicians in February 2021. The transaction left USACS with at least $725 million in debt. 

Last week’s US House of Representatives Ways & Means Committee hearing about the No Surprises Act showed how insurers use the NSA to depress reimbursement rates for geographically consolidated emergency medicine groups like USACS.

Seth Bleier, MD, Vice President of Finance for Wake Emergency Physicians (WEPPA), testified that “soon after the No Surprises Act became law, his practice and others in the area received a letter from one insurer demanding significant cuts to contracted rates. If they refused, the insurer threatened to force the practices out of network. While WEPPA ultimately kept that contract, two other payers terminated contracts with his practice.”

WEPPA’s positioning in Raleigh and Wake County (North Carolina’s wealthiest county) is comparable to USACS’ in Denver, Northern Virginia, and other affluent communities. WEPPA staffs six out of Wake County’s nine emergency departments. 

Per Fierce Healthcare: “Rep. Richard Neal, D-Massachusetts, the committee’s ranking member, was adamant that federal agencies had undermined ‘one of the greatest consumer protection reforms in our country’s history.’ 

Much of the ‘disappointment’ has come from how the agencies had chosen to hinge the IDR process on the qualifying payment amount (QPA)—a focal point in industry debate that the courts agreed tilted in the favor of payers—rather than following the path laid out in the bill, he said. ‘When drafting the law, we worked to ensure fairness involved in the payment disputes and we carefully specified factors that should be considered during the independent dispute resolution process,’ he said. ‘As written, this law carefully avoids any one single factor unduly influencing the dispute resolution process. Despite this consideration, the Final Rule for the No Surprises Act strays from the law as written in favor of an alternate approach that overwhelmingly favors one factor instead of the more balanced consideration this committee and Congress fully intended.’”

If insurers continue the playbook used against WEPPA, payments to consolidated emergency medicine practices in affluent areas would decrease - and US Acute Care Solutions' solvency will be tested. And if USACS’ revenues drop, how will that impact the company’s largest expense - physician compensation? 

EM Practice

American Physician Partners (finally) declared bankruptcy. APP shut down operations seven weeks before declaring bankruptcy. Per APP’s disclosures, the company’s employee headcount decreased from 2,546 to 27 between July 31 and September 19, many of which were emergency physicians. Bankruptcy laws give liquidation priority to employees, including independent contractors. Obtaining payment as an ex-employee is difficult - and nearly impossible for ex-independent contractors. Physicians are also suing APP to get their malpractice covered. APP has delivered a MasterClass on how to hose doctors in bankruptcy.

Dr. Chris Kang, ACEP President, sent a detailed letter to the Federal Trade Commission and Department of Justice regarding their draft merger guideline updates. From the letter: “We are pleased that the Agencies are actively modernizing enforcement of the antitrust laws regarding mergers, and, in doing so, recognize that the current guidelines for assessing mergers may underemphasize or neglect the labor market effects and non-price elements of competition like innovation, quality, potential competition, or any trend toward concentration. Thus, we support the Agencies’ guidelines in identifying potentially illegal mergers, especially those that assess the indirect and direct implications on the labor market.”

A sharply worded critique of current EM working conditions in EM News: “Is Hallway Medicine Right for You? A fellowship in this subspecialty is not for everyone; there's usually crying involved.”

Analysis of the 2023 Emergency Medicine Residency Match, from Annals & Academic Life in EM: “Six variables were associated with unfilled positions: 1) unfilled positions in the 2022 Match; 2) smaller program size; 3) location in the Mid Atlantic, 4) prior AOA accreditation; 5) location in the East North Central; 6) and corporate ownership structure.”

House of Medicine

BMJ study about the United States’ PA and NP workforce: “The proportion of visits delivered by nurse practitioners and physician assistants in the USA is increasing rapidly and now accounts for a quarter of all healthcare visits.”

24% of residents feel fairly compensated. How is that number not 0%? 

Sound Physicians’ new CEO, Jeff Alter, previously was an executive with UnitedHealth, Anthem Blue Cross, and Summit Health.  

Washington Post: “The shrinking number of primary-care physicians is reaching a tipping point.”

New England Journal: “A Doctrine in Name Only — Strengthening Prohibitions against the Corporate Practice of Medicine”

Hospitals & Health Systems

Maryland has the longest ED lengths of stay of any US state. CMS plans to expand Maryland’s hospital payment model to eight more states over the next decade. What could possibly go wrong?

How EmPATH units can improve acute mental healthcare. 

Nursing & Allied Health

Approximately 70,000 of Kaiser Permanente’s nursing assistants, housekeepers, phlebotomists, and medical assistants voted to authorize a strike. 

The Dispo

Dr. Glaucomflecken: United Healthcare For All (satire)

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