EM Employer Debt Matters When the Tide Goes Out
An analysis of large emergency medicine employers’ debt loads
Corporate debt can help companies grow, but can also lead to their downfall. As Warren Buffet said, “You never know who's swimming naked until the tide goes out.”
The mostly unspoken deal between large, indebted emergency medicine practices and their emergency physician employees:
Emergency physicians get paid at similar or better rates than they would if a local physician group staffed their ED.
The staffing company increases patient collection rates sufficiently to cover clinician salaries while paying the company’s debts and compensating the company’s owners.
Before the No Surprises Act (2022), EM employers used the option of going out of network with health insurers and sending bills to patients to fulfill the bargain. Since patients rarely know ED prices before receiving emergency care and insurers cannot easily influence which emergency department their customers visit, large employers held significant pricing power over their insured patients. If an EM employer raised prices, insurance companies faced the choice of covering their customers’ emergency care at increased rates or going out of network with the emergency medicine employer. Either way, the employer collected at increasing rates.
For example, 27% of American Physician Partners’ 2021 revenue was from out-of-network billing compared to 16% in-network. (p. 22) Less than two years after out-of-network billing was banned, American Physician Partners declared bankruptcy.
The No Surprises Act limits large emergency medicine employers’ leverage. Sending bills directly to ED patients is no longer legal. Not agreeing to a negotiated rate with an insurer leads to arbitration. The core benchmark for arbitrators is the “Qualifying Payment Amount (QPA),” defined as “the median contracted rate on January 31, 2019, for the same or similar item or service, increased for inflation.” Only one of the five other factors arbitrators can apply relates to the practice’s market share.
Without being able to increase reimbursement rates to significantly above average, the bargain between large, indebted employers and their emergency physician employees is at risk of breaking down. If clinical revenues move toward the average, how will companies with significant non-clinical expenses, such as debts and extra fees to private equity owners, survive?
Let’s explore how much debt each of the large emergency medicine employers holds, in order of number of EM contracts held. A few caveats:
None of the large emergency medicine employers is publicly listed, limiting visibility into their finances.
This analysis' corporate debt information is sourced from bond rating agencies’ publications (Standard & Poor's Global Ratings, Moody's, and Fitch Ratings).
Envision’s finances are in flux due to their recent bankruptcy, so Envision is omitted from this analysis.
To see the underlying data, click here. Sources are listed as comments in the relevant spreadsheet fields.
TeamHealth
Debt (loans and/or bonds): $2,114,000,000
Average interest rate: 11.09%
Number of clinicians: 15,000
Debt per clinician: $140,933
Interest payment per clinician per year: $15,635
US Acute Care Solutions
Debt (loans and/or bonds): $1,436,000,000
Average interest rate: 8.42%
Number of clinicians: 6,000
Debt per clinician: $239,333
Interest payment per clinician per year: $20,146
SCP Health (formerly Schumacher Clinical Partners)
Debt (loans and/or bonds): $530,000,000
Average interest rate: 10.33%
Number of clinicians: 7,500
Debt per clinician: $70,667
Interest payment per clinician per year: $7,300
Vituity, ApolloMD, Concord Medical Group, Integrative Emergency Services, and Permanente Medical Group
Debt: none that I can identify
Sound Physicians
Debt (loans and/or bonds): $1,035,000,000
Average interest rate: 9.25%
Number of clinicians: 4,000
Debt per clinician: $258,750
Interest payment per clinician per year: $23,932
Sources: 2023-12-31 Debt of EM Groups
Unless highly leveraged emergency medicine employers such as TeamHealth, US Acute Care Solutions, and Sound Physicians find new revenue sources, decrease physician compensation, or increase the ratio of PAs and nurse practitioners to physicians, those companies will likely have a financially challenging 2024. The tide is going out.
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Calling this relationship an "unspoken deal" belies the reality that the vast majority of the physicians working for large CMGs had no say in the matter. To suggest their end of the deal is fair ignores the fact that predating PE's involvement in EM the CMGs and many other groups which later sold out to PE were based on an exploitative model where the senior physician owners were already skimming off 20+%. This was known far and wide but ignored by ACEP (see articles from Hellstern, Simon, Bresler, et al in the 1980s). Maintenance of pay levels under a new master doesn't change the original sin of exploitation. PE has certainly stepped up the abuses as you mention by more readily replacing us with NPPs, forced supervision of same, metric burdens and protecting the contract at the cost of physician careers (see Ming Lin). The whole embrace of PE has tarnished EM in the eyes of Congress and the public. It was a Faustian bargain that benefited the few at the cost of many including our patients.