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AAEM Sues TeamHealth Alleging Corporate Practice of Medicine

Scheck, Anne

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doi: 10.1097/01.EEM.0000296414.85488.38

    The American Academy of Emergency Medicine has filed suit to block the takeover of eight emergency medicine contracts in Texas by TeamHealth, a for-profit contract management company in Knoxville, TN. And, AAEM leaders say, the law is on their side in the Lone Star State.

    Under its Medical Practices Act, Texas places limits on how corporations of “laypersons” can hire licensed doctors. When a company comprised of laypersons employs licensed physicians to treat patients, and the corporation receives the fee, “the corporation is unlawfully engaged in the practice of medicine,” said Robert McNamara, MD, a past president of AAEM and a professor and the chairman of emergency medicine at Temple University School of Medicine in Philadelphia.


    The suit surfaces at a time when corporate governance in medicine is simultaneously undergoing intense scrutiny and newfound support as a means of possible health reform. This past June, the New York Times business section took a fairly comprehensive look at the cost-efficiency movement in health care, noting that “experts in health policy agree there is a real opportunity to curb health spending, which last year was the equivalent of $7,000 for every man, woman, and child in the country.” But such measures often benefit insurers or third parties, not physicians, the article asserted.

    Then, this past summer Onpoint, a publication of the Harvard Business Review, took issue with the assumption that financial incentives ensure better bottom lines. Awarding cash bonuses or high pay for meeting certain milestones often fails to increase performance, according to the article, because many professionals value “meaning in their lives,” not just money.

    Dr. McNamara said AAEM is not trying to battle corporate influence across the board, and recognizes the role of these companies that provide management assistance to physicians. “The issue we have is when a corporation is in control of the practice, and the physician must answer to the business interest,” he said.

    Test Case

    Texas case law, including a 1986 case specifically dealing with ED contracts, prohibits business control of a physician's practice of medicine, Dr. McNamara observed. “Many states have such laws,” added Tom Scaletta, MD, the immediate past president of AAEM. The suit in Texas could be the test case that launches others, he said.

    AAEM's optimism, in part, is based on the Texas case from more than a decade ago, in which an emergency physician contracted with a corporation formed by acquaintances, who purportedly used his license to acquire contracts for providing emergency medical care and staff to hospital emergency departments. The corporation collected the bulk of the profits, according to court documents, and this corporate strategy was seen as tantamount to practicing medicine without a license.

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    Figure. D:

    The recent AAEM lawsuit is based on the same premise, which was filed on behalf of Crystal Cassidy, MD, an emergency physician in the Memorial Hermann Health System. It alleges that the acquisition of her contract, as well as some of her emergency physician colleagues at the medical center, was unlawful because TeamHealth, owned by the Blackstone Group, is a for-profit corporation. The resulting situation, according to the AAEM suit, constitutes a business relationship in which medical doctors are governed by a corporation with an apparent financial stake in the outcomes of their decision-making.

    The Blackstone Group, a publicly traded corporation, has an inherent money-making aim for its shareholders, AAEM officials said. According to its suit, emergency medicine, specifically emergency physicians who practice in the ED, comprises a special group: the nation's health safety net. Physicians and their patients need to be protected against any outside entity that could influence care, Dr. McNamara said.

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    Figure. D:

    The AAEM suit contends that the health center involved, Memorial Hermann, is asking Dr. Cassidy and others to sign with an entity set up by TeamHealth, and the company is trying to “circumvent the prohibition against the corporate practice of medicine.”

    ‘Suit Without Merit’

    Tracy Young, the vice president of marketing for TeamHealth at its headquarters in Knoxville, TN, countered that TeamHealth does not engage in the practice of medicine. “As is the case with all of our affiliated medical groups and physicians, the emergency physicians at Memorial Hermann practice medicine without direction or control by TeamHealth, and the physicians make all patient care decisions based upon their own experience and judgment,” she said.

    Rather, “TeamHealth, including its subsidiaries, provides all of the typical administrative services for its affiliated medical groups,” such as billing, scheduling, compliance training, accounting, and reporting, and offers the affiliated medical groups and their physicians continuing medical education and information on best practices, she said.

    “We believe that the lawsuit is without merit, and has no sustainable basis in law or in fact,” Ms. Young said. Surveys in hospitals for which TeamHealth has provided services show high patient satisfaction scores and reduced waiting times under their emergency medicine staffing model, according to past analyses by the corporation.

    TeamHealth was not able to issue a response to specific allegations in the suit, but a legal reply that does just that will be filed soon, Ms. Young said.

    Dr. Scaletta said he is confident the action won't be construed as a restraint-of-trade issue, he said. The suit seeks only to enforce a law already in existence, protecting the legal rights of physicians and the best interests of their patients, he pointed out. Another lawsuit, filed a few years ago by a group of orthodontists, found that the corporation that employed them was practicing dentistry without a license.

    “We expect to win,” said Dr. Scaletta. “AAEM is holding the flag and going for a victory. We are not letting go, and we are not going to go away.”

    © 2007 Lippincott Williams & Wilkins, Inc.