Blackstone Equity Firm Pursued Poor Over Medical Bills
Reprinted with permission from ProPublica.
MEMPHIS, Tenn. — After nine visits to the emergency room at Baptist Memorial Hospital in 2016 and 2017, Jennifer Brooks began receiving bills from an entity she’d never heard of, Southeastern Emergency Physicians.
Unsure what the bills were for, Brooks, a stay-at-home mother, said she ignored them until they were sent to collections. She made payment arrangements, but when she was late, she said the collection agency demanded $500, which she didn’t have.
In December, Southeastern sued her for more than $8,500 in unpaid bills — a third of what her husband makes per year as a cook.
The case against Brooks is one of more than 4,800 lawsuits Southeastern has filed against patients in Shelby County General Sessions Court since 2017. In the first six months of this year, Southeastern filed more lawsuits than local hospitals Methodist Le Bonheur Healthcare, Baptist and Regional One combined.
Lawsuits against poor patients over unpaid medical debts have received widespread media attention over the past few years. In almost all cases, the plaintiff has been a hospital system, often a nonprofit.
What sets the practices of Southeastern, and its parent, TeamHealth, apart is that it is a physician staffing firm that contracts with the doctors who treat patients in four of Baptist’s emergency rooms around the region. Physicians historically have avoided suing patients en masse, instead choosing to send unpaid bills to collections or writing them off as bad debt.
TeamHealth is owned by the Blackstone Group, a private equity firm. In 2017, Blackstone acquired TeamHealth and its subsidiary Southeastern in a $6.1 billion deal. It was just one in a growing number of large private equity investments in health care in the last decade.
“There is this tension between being a health care provider and doing what’s best for their care … and being a profit-maximizing firm that aggressively goes after patients,” said Brian Shearer, legal director for Justice Catalyst Law, a New York-based social justice nonprofit, though he added that he wasn’t aware of any lawsuits by providers like Southeastern.
TeamHealth initially defended the lawsuits in an interview with MLK50 and ProPublica, saying they reserved legal action only for patients who’d made no attempt to pay.
But late last week, faced with additional questions by the news organizations, the company reversed course, issuing a statement saying it would no longer sue patients and wouldn’t pursue the lawsuits it has already filed. “It’s difficult to ensure that only patients with a strong ability to pay are ultimately impacted, so we’ve decided to eliminate it,” a TeamHealth spokesman said.
TeamHealth also had policies in place that made it difficult for patients to access charity care, a form of financial assistance for low-income patients. Two former TeamHealth employees told MLK50 and ProPublica that they were instructed not to mention the term charity care when patients called with questions about their bills.
After the company was asked about this, TeamHealth president and chief executive officer Leif Murphy announced a new discount policy for patients without insurance.
“Effective December 1, 2019, we are implementing discount policies for our uninsured population to reduce the cost of care by as much 90 percent, and up to 100 percent when necessary. We will proactively include eligibility criteria in our invoices to help promote participation rather than force patients to seek assistance,” Murphy wrote in a letter to employees.
TeamHealth’s abandonment of its lawsuits, as well as the implementation of a new financial assistance policy, marks the second time in five months that a major health care entity in Memphis has overhauled its practices amid questions from MLK50 and ProPublica. In July, Methodist, a nonprofit faith-based hospital system, announced it would curtail its lawsuits over unpaid debt against poor patients. It has since zeroed out the balances owed by more than 5,100 patients and reduced bills for more than 2,200 others, according to a hospital spokesperson.
TeamHealth declined to talk about the suits involving patients interviewed for this story, even though the patients gave the company permission to do so.
Mark Rukavina, business development manager at Community Catalyst’s Center for Consumer Engagement in Health Innovation, a national advocacy organization, said nonprofit hospitals shouldn’t work with physicians groups that aggressively pursue patients for medical debts.
“They could say, ‘If you’re going to provide services in our hospital, you’re going to comply with our financial assistance policy,’” Rukavina said.
The lawsuit from Southeastern was just a small part of Brooks’ debt, but learning that TeamHealth won’t pursue her case was good news, she said. Plus, she now has TennCare, the state’s version of Medicaid, which she hopes will spare her from other large medical bills.
She and her husband still “go from paycheck to paycheck,” she said, and with $60,000 in student loans and thousands more in credit card debt, she thinks bankruptcy – or a winning lottery ticket – is the most likely path out.
“It definitely helps though, that you’re not having that [doctor’s bill] hanging over your head,” she said.
From A Closet To National Leader
TeamHealth’s roots in Tennessee stretch back 40 years, to when emergency medicine was recognized as a specialty.
In 1979, a small group of ER doctors in Knoxville, Tennessee, landed contracts to operate two emergency rooms, including at the University of Tennessee Medical Center in Knoxville, where administrators allowed them to use a closet as their office, according to a company video. It was a step up from their makeshift workspace at Mrs. Winner’s, a fast-food restaurant.
Southeastern’s initial strategy was to focus on hospitals within a two-hour drive of Knoxville, said co-founder Dr. Lynn Massingale in the video. But his ambition to be the nation’s biggest staffing firm led him to expand that radius to a two-hour plane ride, he said in an interview posted on TeamHealth’s website, and, gradually, across the country.
Hospitals “needed reliable, 24-7 physician coverage in their emergency departments, but no one was ultimately responsible for making sure the shifts were covered,” wrote co-founder Dr. Randal Dabbs in a 2018 column in an industry publication.
Southeastern would take on that responsibility. “Our goals have never included conquest, but instead, true collaboration and servant leadership,” Dabbs wrote.
In 1994, Southeastern merged with three other doctors groups to become TeamHealth. It had 200 ER physicians at 27 hospitals in four states, according to a Modern Healthcare article published that year.
“They provided great care in our emergency room, and because they provided great care, they continued to grow,” said Baptist Memorial Health Care’s president and chief executive officer Jason Little, who in 2003 signed the TeamHealth contract for Baptist Collierville’s emergency department.
Private Equity’s Rise in Health Care
With $554 billion in assets under management, the Blackstone Group is one of the world’s largest private equity firms.
Increasingly, health care is an attractive target for private equity, thanks to an aging population and a rise in chronic disease. The growth is highest in specialties where the need for a long-standing doctor-patient relationship is low, such as emergency medicine, anesthesia and care provided to patients when they are hospitalized (a medical specialty known as hospitalists).
The 2017 acquisition was Blackstone’s second investment in TeamHealth, after buying it in 2005, taking it public in 2009 and then selling its interest four years later.
Proponents of private equity argue that its profit-driven mission helps keep afloat sectors that serve the public good. At least 150 public pension funds invest in private equity, including Blackstone, with higher annual returns than other types of investments, according to a recent report produced by an industry lobbying firm.
But critics such as Eileen Appelbaum, co-director of the nonprofit Center for Economic and Policy Research, a left-leaning think tank based in Washington, D.C., lament its growing influence in health care.
“Private equity firms buy small competitors to add on to an initial acquisition, building national powerhouses without any antitrust supervision,” Appelbaum testified at a congressional committee hearing last week about private equity. She cited TeamHealth and its competitor Envision Healthcare as prime examples of how this practice harms consumers. “They use surprise medical bills, or the threat of such bills, to get much higher payments than other doctors receive, driving up health care costs.”
A New York Times investigationin 2016 found that after private equity firms took over ambulance companies, some response times slowed and billing practices became more aggressive. Soon after, the companies went bankrupt — leaving gaps in emergency response across the northeast. Citing that report, Rep. Maxine Waters, D-Calif., the chairwoman of the House Financial Services Committee, raised concerns in the hearing last week about private equity firms managing public services including health care.
In 2017, the year Blackstone acquired TeamHealth, the disclosed value of private equity health care deals exceeded $42 billion — the highest level since 2007 — according to a market research report. The following year, the private equity firm KKR acquired Envision, which operates Emcare, another physician staffing firm, for $9.9 billion.
TeamHealth estimated that the market for emergency medicine was $12 billion, according to its filing with the U.S. Securities and Exchange Commission. It claimed a 17 percent share of that market, which in 2016 accounted for 57 percent of its revenue.
Appelbaum, like other experts interviewed for this story, had not heard of instances in which private equity-backed doctors groups sued patients.
In separate interviews before TeamHealth said it would stop suing patients, officials at TeamHealth and Baptist said Blackstone’s acquisition had no effect on collection efforts.
“Yes, we were acquired by Blackstone in 2017,” said Joe Carman, TeamHealth’s chief administrative officer. “But we have not had any change in practice as it relates to pursuing patients and legal strategies in that time.”
Baptist’s Little agreed. “We’ve not seen any changes,” he said.
But the lawsuits show something began to change about the same time.
From Zero To Hundreds Of Lawsuits
In 2011, Southeastern did not appear as a plaintiff in any lawsuit filed in Shelby County General Session Court. In 2013, there were just over 100 suits filed by Southeastern, and the next year, more than 600.
Both Little and Carman speculated that increased volumes of patients treated at Baptist’s emergency departments were partially to blame.
However, such an explanation is not borne out by the data.
Between fiscal 2016 and 2018, the number of visits to three of the ERs staffed by Southeastern doctors — Baptist Memphis, the suburban Baptist Collierville and Baptist DeSoto in Southaven, Mississippi, just over the state line — grew by 12 percent , according to figures provided by Baptist. But the number of Southeastern lawsuits grew by 132 percent — from 798 to 1,855 — from calendar year 2016 to 2018, according to Shelby County General Sessions Court records.
One of the defendants is Laurie Kimbrough, 62, who went to Baptist Memphis in March 2017 complaining of flu symptoms.
When the bill arrived, she tried to make payment plans with Baptist but said the representative she talked to wouldn’t agree to a payment she could afford.
The bill went to collections and this March, Baptist sued her for nearly $1,300, not including court costs and attorney’s fees.
By that time, she’d lost her job and had started a small lawn care business. When the weather is good, she manages to make a few hundred dollars per week, if the lawn mower and blower don’t need repairs.
Family friends gave her money to pay off the Baptist bill, but three weeks after Baptist sued her, she was sued by Southeastern.
Even though she owed around $400, Kimbrough said she didn’t have it. When a longtime friend learned she’d have to pay interest on the relatively small bill, he gave her the money and refused to let her pay him back.
Health care expenses have an oversized impact in Tennessee, where 1 in 4 residents has a medical debt on their credit report, the 10th highest rate in the nation, according to a report this year by the Sycamore Institute, a nonpartisan think tank.
Memphis is the second-poorest large metropolitan area in the United States, so the impact is even more acute here. Inside the city limits, more than a quarter of residents live below the poverty line, according to the most recent census figures. More than 40 percent of workers in the city earn less than $15 an hour, according to one economic development report.
Kimbrough’s current insurance plan covers just three primary care doctor visits per year, which she’s already used. She doesn’t have the $60 copay to see a neurologist for her ongoing leg pain, much less any other diagnostic tests the doctor might order.
In February 2018, Kimbrough went to Baptist’s emergency room again with flu symptoms. The bill was over $1,300, but she was able to negotiate the hospital down from the $100 per month payment it initially demanded.
“I said I’ll come up with the $55 a month, even if it means I have to eat Vienna sausages 7 days a week,” Kimbrough said.
Court records show that on Nov. 4, Southeastern sued Kimbrough again. She has yet to be served with the lawsuit.
Charity Care Elusive by Design?
Baptist, which started in 1912 with a single 150-bed hospital, is a faith-based institution whose mission is “in keeping with the three-fold ministry of Christ — Healing, Preaching and Teaching.” It now has 22 hospitals, dotted mostly in rural communities in eastern Arkansas, West Tennessee and Mississippi.
“If it weren’t for Baptist and our mission,” Little said, “there wouldn’t be hospitals in a number of communities around the three-state region that we serve.”
At Baptist, insured patients receive a partial discount for bills over $5,000 for a single visit, regardless of income. Uninsured patients with a household income less than 200 percent of the federal poverty guidelines are eligible for a 100 percent discount on hospital charges. Even patients making 400 percent of the federal poverty guidelines — or just over $85,000 for a family of three — would be eligible for an 80 percent discount.
Baptist prefers that all doctors groups that operate in its facilities apply the hospital’s financial assistance policy to patients, but Little said he couldn’t discuss whether the hospital’s contract with TeamHealth requires it to do so. TeamHealth did not respond to a request from Baptist to provide the system permission to discuss the contract, Little said.
In an interview before TeamHealth changed its policy, Carman said the company’s internal policy is to match Baptist’s charity care discount if a patient submits written proof of the financial assistance Baptist provided.
However, TeamHealth’s billing statements haven’t mentioned charity care. And the firm is not on Baptist’s list of providers that participate in the hospital’s financial assistance program.
In interviews, two former TeamHealth call center agents said they were instructed not to mention charity care unless patients did so first.
Between 2017 and 2018, Sharon Lovingood was one of about 100 employees fielding patients’ calls from a single-story TeamHealth office in Knoxville. “We were the first person they talked to for any issues,” she said. When she worked in the U.S. Department of Education’s student loan division between 2012 and 2017, managers encouraged her and her colleagues to find solutions for those who called in.
But not at TeamHealth.
“A lot of times, a patient would call in and say, ‘Hey, can you give us a discount?’ But we had to say, ‘No, I can’t do that,’ because we weren’t allowed to say, ‘Well, did you apply for charity care at the hospital?’” Lovingood said. “They didn’t want us doing that.”
She asked her supervisors why and said she was told that the hospitals and billing groups TeamHealth had contracts with didn’t want call center workers bringing it up. Lovingood said she left the job in February 2018 because she could not stomach the restrictions that stopped her from helping people. “I was miserable working there.”
Sherry Breitung, who worked as a national patient service representative in Knoxville from 2014 to 2018, also said she asked for an explanation about the policy but didn’t get one. One thing was clear, though: “We weren’t allowed to mention charity care to the patients.”
Since all of their calls were monitored and reviewed by supervisors, Breitung and Lovingood, who don’t know each other, each said they devised their own work arounds — such as asking patients, “Did the hospital help you?” But the four minutes allotted per phone call wasn’t enough to help patients understand their options, they said.
Carman, on the other hand, said he thought call center agents were instructed to bring up charity care. “We are attempting always to try to understand their circumstance, and we’re trying to understand charity care.”
After additional questions, TeamHealth CEO Murphy said in his letter to employees that effective Dec. 1, the company would begin including eligibility criteria for charity care in patients’ invoices to make it easier to find.
After a reporter asked Kimbrough if the ER doctors had offered her charity care, she called TeamHealth to inquire.
“I said, ‘I need to talk to someone in your charity division,’” Kimbrough recalled, “and they said ‘What?’”
She said she was put on hold and then transferred to another call center agent, who asked her if she wanted to set up a payment plan.
“I said, ‘I want to know if I can’t pay, if you have a charity division,’” Kimbrough said.
The representative then told her that if she’d gotten a charity care discount from Baptist, she could send proof to TeamHealth and they’d consider her for the same discount.
But Kimbrough is uneasy with the idea of getting financial assistance. “I feel like if I pursue charity, there’s somebody who won’t get it who needs it worse than me.”
“Some way it’ll all work out,” Kimbrough said. “If it doesn’t, I’m lucky that if I lost everything I could go and live with my mom.”
Hospitals are abdicating their responsibility to protect patients from financial harm when they hide behind firms to which they’ve outsourced services, said Michele Johnson, executive director of the Tennessee Justice Center, which advocates for expanded health care access.
“Particularly with hospitals that have a mission that is aligned with treating low-income folks with fairness … it’s unfortunate that they’re not having people who intersect with their patients follow that same charitable mission,” Johnson said.
Health care is a necessary and often unavoidable expense, Johnson said. “These are not designer jeans. These are not video games. This is a whole different thing.”
Questions Remain For Hospital, Patients
TeamHealth declined to answer questions about its timeline for dropping existing lawsuits or whether its decision will apply to lawsuits that have already resulted in judgments, saying in a statement, “TeamHealth will not file additional cases naming patients as defendants and will not appear in any pending case.”
After MLK50-ProPublica’s investigation into Methodist Le Bonheur Healthcare’s debt collection practices, the nonprofit hospital dropped hundreds of lawsuits for unpaid medical bills and expanded its financial assistance policy to cover families making up to 250 percent of the federal poverty guideline, which will cover more than half of Memphis-area households. It has not filed any lawsuits since July 3.
It’s unclear whether TeamHealth’s change will shift the responsibility of unpaid bills from patients to Baptist.
In his letter to employees, TeamHealth’s CEO pointed the finger at insurance companies, noting that the share of insured patients with deductibles of more than $1,000 has risen sharply over the last five years. (In most cases, patients must pay deductibles out of pocket before their insurance coverage kicks in.)
The typical contract with a physician staffing firm calls for the hospital to guarantee enough business to at least break even, Little said.
“If they can’t do that on their own billing and collection, then they, generally speaking, look to the hospital for a subsidy to make them whole,” Little said.
He said he hasn’t spoken with TeamHealth since its statement was issued but doesn’t anticipate any changes. “We have a contract and it’s in place.”
Little was cautiously optimistic about the end of TeamHealth’s lawsuits for unpaid ER doctors’ bills. “It sounds like it’s going to be a benefit for patients, so I’m anxious to study it,” he said.
Through a spokesperson, Blackstone said it was not involved in “these specific practices at the company, which we understand are quite common in the broader industry. However, we fully agreed with and support TeamHealth’s determination to discontinue it.”
TeamHealth’s decision comes just in time for Loretta Baxter, who went to court Friday to keep Southeastern from garnishing her paycheck.
Baxter, 33, didn’t have insurance when she visited a Baptist ER in 2017 for stomach pain and couldn’t afford the $1,111 doctor’s bill.
In April, Southeastern sued her, and on Thursday, her employer told her that it had received a garnishment attempt that could take up to 25 percent of her paycheck.
That would leave her with $250 less to cover her rent, car note, insurance and expenses for her three children. She makes about $11 an hour as a caregiver at a social service organization for people with disabilities.
Baxter left court with paperwork to take to her employer that would postpone the garnishment until a Dec. 2 hearing. “I try not to let things stress me out because stress can kill,” Baxter said at court.
When a reporter asked TeamHealth how its decision would impact patients like Baxter, TeamHealth said that the outside collection agency “is sending a release to remove the garnishment and will be working with the court system to process it as soon as possible.”