Are Physician Staffing Companies Killing the Patient Experience and Bottom Line?

Many Emergency departments in the US contract with a third party whose job it is to employ and manage physicians, handle the billing, as well as manage the full revenue cycle from beginning to end---including medical collections. The big players in the physician staffing space, after several years of mergers & acquisitions, are currently Schumaker, EmCare, TeamHealth and CEP America.

The problem

From a consumer perspective, the rub has been that the doctors supplied by these firms are independent contractors who bill out-of-network fees at the highest billing codes, and consumers are left with a balance bill that can be catastrophic. In other words, consumers can seek care at an in-network hospital and still be charged an out-of-network fee. Even when patients live in states with comprehensive balance billing legislation, they can still be surprised with a balance bill. This is because 40% of consumers are covered by employer-sponsored, self-funded insurance plans that are governed by ERISA, and not state law. So, these consumers remain responsible for the gap between what the health insurance company chooses to reimburse and what the doctor chooses to charge.

Detractors of physician staffing companies allege that their doctors purposefully stay out of network so they can balance bill, which is more profitable than signing on with an insurer and being in-network and settling for the fees that the insurer would force them to take.

From another angle, hospitals in general are not great at collecting revenue from Emergency Department patients. As a volume industry, emergency medicine relies on many lower-dollar collections to create a total profit. Hospitals, on the other hand, rely on big-ticket procedures by cardiac surgeons, orthopedists, neurosurgeons and the like. It stands to reason that a hospital is more likely to work harder to collect $20,000 for a single elective spinal procedure than to collect $400 for a single emergency department visit from a patient who may never pay.

In rural settings emergency departments are even more challenged to optimize their revenue cycles. Enter a large corporate ED staffing company with economy of scale. The hospital now doesn't have to worry about the high volume of small-dollar collections, and no longer has to take the loss on no-pays. They no longer have to pay benefits to their physicians, and they no longer have to pay the ED physicians’ salaries.

The question is whether, in the long-run, the physician staffing companies, their billing practices and their attendant bad PR are so detrimental to the patient experience that any benefits of contracting a physician staffing company are down the drain. This would be the case if  patients don’t return to the facility for future care, or don’t pay their bills as the result of a poorly handled, opaque and confusing balance billing issue.

EmCare’s cautionary tale

Envision’s EmCare has an especially problematic reputation for leaving patients with large, unexpected medical charges. Last year, a New York Times reporter wrote a scathing but well-documented article: “The Company Behind Many Surprise Emergency Room Bills.” That article pointed to a Yale study that analyzed data on millions of emergency room visits and and found “notable changes in patient care and billing patterns after EmCare entered a hospital.”

The Yale study noted that while EmCare is not the only physician staffing company with troubling metrics, “hospitals’ out-of-network billing rates increased by between 81 and 90 percentage points” after contracting with EmCare. The Yale researchers also determined that “after EmCare enters a hospital, patients are 43 percent more likely to have physician services coded using the most high intensity, high paying codes.” EmCare disputed these findings as inaccurate and based on incomplete and misleading data.

Both the Yale and NYT reports prompted a congressional investigation by US Senator Clare McCaskill, which insideARM covered last year. Most significantly, EmCare’s parent company is the main defendant in a class action suit filed by a growing list of institutional investors (including many pension funds). The plaintiffs in the case of Bettis v. Envision Healthcare Corporation et. al., have accused EmCare and its officers of insider trading, of knowing its business model was not sustainable and that its growth was not the result of providing efficiencies of scale, but instead, that EmCare relied on unethical balance billing, and engaged in other violations of SEC regulations. All told, EmCare and a growing list of co-defendants are facing eight counts of securities misconduct. Plaintiffs have demanded a jury trial.

The EmCare situation is still developing, and certainly its competitors are also under the microscope, bracing against press coverage that has been critical of the way they code procedures and balance bill, as well as their potentially detrimental effect on their  hospital partners’ brands. Even so, it’s unlikely that physician staffing companies, or the bills they have generated, are going anywhere. Somewhere out there are the collections agencies that have been, or will be, subcontracted to either collect the debts of these companies, or buy their uncollected debts outright. When these debts are in the process of recovery, will the brand of the original medical provider be protected? Will the patient experience of receiving a surprise balance bill without context, from a third-party, make the bill even harder to resolve?

insideARM perspective

Transparency in the revenue cycle can go a long way, especially in the collection of medical balance bills. It’s understandable that if people are seen for 10 minutes for strep throat in a local, in-network emergency department, they paid their co-pay or co-insurance, met their deductible and are then called on a balance bill by a Schumacher or a TeamHealth, there will be a trust problem to overcome between consumer and collections agent right at the outset.  

First, there is already the confusion and souring of the clinical experience from being balance billed. Second, if the emergency department staffing company is basically a secret operator during the clinical experience, and patients have no idea they’re being treated by an out-of-network employee of a third-party entity, this adds another layer of confusion that could be perceived by a consumer as deceptive. This too can unnecessarily complicate the collection of payment, erode a healthcare provider’s brand, and destroy the patient experience even if the actual clinical visit was great. It may even reduce the likelihood that a debt will ever be recovered.

More transparency would empower consumers with more information about the roles different entities play in their care. This could enable the momentum of a positive clinical encounter to extend into the financial aspects of the patient experience.

According to PWC’s Top Health Industry Issues of 2018, “Forty-nine percent of provider executives said revamping the patient experience is one of their organization’s top three priorities over the next five years. Many already have or are building the role of chief patient experience officer.” Hospital CFOs aren’t focused on improving the patient experience throughout the revenue cycle for nothing. Their data is showing them that informed, engaged and happy patients enjoy better clinical outcomes, comply with care instructions, and are more motivated to engage productively all the way through the revenue cycle. The standard operating procedures of physician staffing companies as they exist today will surely need to evolve if preserving a hospital’s brand promise and improving the patient experience are true strategic priorities tied to providers’ bottom lines.