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Special Report: AAEM's Protection for Democratic EM Groups

Sorelle, Ruth MPH

doi: 10.1097/01.EEM.0000481758.36387.01
Special Report
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Picture a cartoon of large fish eating smaller fish until there is only one left.

That is what is happening across the United States as large management firms are acquiring small independent emergency medicine groups, a phenomenon complicated by a recent addition to the mix: Private equity or investment banking firms giving those larger groups the boost that enables them to buy more and more.

Tennessee-based management firm AmSurg, for example, spent $2.35 billion in stock and cash to acquire Sheridan Healthcare, which manages physician services, including those of emergency physicians, in May 2014, marking the organization's branching out into anesthesiology, radiology, and emergency medicine. AmSurg also offered this past October $5.3 billion to buy TeamHealth, a major provider of physician services, to no avail.

Then, this past December, AmSurg — through Sheridan — acquired Premier Emergency Medicine Specialists, a Phoenix -based emergency physician group, a purchase recommended by Edgemont Capital Partners, LP, an investment banking firm.

This kind of consolidation continues to occur in emergency medicine across the country, leaving independent democratic emergency physician groups adrift in a sea of big businesses, according to the American Academy of Emergency Medicine (AAEM).

Robert McNamara, MD, a professor and the chairman of emergency medicine at the Lewis Katz School of Medicine at Temple University in Philadelphia, said he has spent the past few decades watching this with dismay. Now, AAEM, the group he helped found, is ready to move beyond advocacy, and is establishing the AAEM Physician Group based on the principles of the organization that stress group autonomy, fair pay, and transparency in financial transactions.

“There are limits to the effectiveness of advocacy at the local and national level,” Dr. McNamara said. “We've been involved in legal actions and writing letters to administrators.” But recent events in the marketplace spurred AAEM to establish an umbrella physician group that will allow small groups to continue with their current practices buttressed by the services usually provided by large management groups, said Dr. McNamara.

“Seeing physician-owned groups selling out was the tipping point,” he said. “The senior docs have sold out to the corporations and secured their futures and compromised the futures of graduating residents. To me, it's one of the most distressing things that has happened in emergency medicine. Doctors who have lived and breathed emergency medicine have turned around and said to the next generation, ‘While it was good for us, we are going to sell you out to the companies.’”

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EPs Burned Out

Pointing to a recent Medscape survey of satisfaction among physicians, Dr. McNamara said emergency physicians ranked second as the most dissatisfied and burned-out specialty. “Now we have the leadership of the specialty drifting back into corporate control,” he said.

Mark Reiter, MD, MBA, the current president of AAEM, said his group is developing the umbrella group because “it is difficult for emergency medicine practices to remain independent. This will help them better compete in the marketplace. The big players have large sales and marketing budgets that help them obtain new contracts, often at the expense of democratic groups. A one- or two-hospital group is at a competitive disadvantage. Large groups talk about economies of scale that make them more appealing to hospital executives.”

That ties into hospitals looking to consolidate because of the Affordable Care Act and other health care reform initiatives, he said. “We want to show that independent groups can be part of the bigger entity while maintaining their independence and the advantages of being a local independent democratic group. We think that local, independently owned and run groups are likely to understand and act in the best interests of the hospital and community. Independent groups are more likely to make decisions in the best interests of the emergency physicians that practice there and the patients they serve than a non-physician executive thousands of miles away,” Dr. Reiter said.

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Grow or Merge

Yet change is the standard in health care, said Jeff Swearingen, a founder and managing director of Edgemont Capital Partners, the health care investment banking firm that advised the Arizona-based Premier Emergency Medicine Specialists and the Ohio-based Premier Physician Services in their recent acquisitions by larger companies.

“The landscape is changing, with groups seeking to grow or merge with the thesis that scale is what matters in the current environment. When you see deals announced like Aetna acquiring Humana and Anthem acquiring Cigna, it's in part because they feel they're not big enough as stand-alone entities. Consolidation among managed care, hospital systems, and facility networks will create leverage. Unless physicians join together to combat that, they will be on the wrong end. Consolidation in emergency medicine was happening before the Affordable Care Act and has accelerated since,” said Mr. Swearingen.

He said recruiting is a huge challenge, with an increasing need for board certified emergency physicians. “Twenty years ago, a rural facility's bylaws did not call for board certified emergency medicine physicians, but now all those facilities require that credential. Emergency room volume increases one to three percent each year. More volume and more facilities demanding boarded ER docs create challenges for recruiting. Small groups don't have the capability for a full-time recruiting effort. A service consolidator does,” said Mr. Swearingen.

He said, though, operating on a larger scale in a region creates leverage with commercial players, and administrative needs contribute to that advantage. “IT systems and quality metrics are becoming more important as is the issue of readmissions.”

Dealing with these challenges requires more money to invest in infrastructure and systems, he said. “Access to capital allows groups to take risk and invest in infrastructure and programs like post-discharge calls to encourage patients to fill their scripts and see their primary care doctors. These initiatives generally require financial and administrative resources not available to the average group. Frankly, a lot of physicians feel their job is becoming dominated by nonclinical challenges that take focus away from providing great care to patients. No one goes to medical school to negotiate payer contracts or implement a new IT system,” Mr. Swearingen said.

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AAEM as Partner

Dr. McNamara said those kinds of frustrations are among the reasons that AAEM wants to establish a physician group. “If you are a participant, you must adhere to set of principles in the group's mission statement. Our group is founded on being in a group practice, fairness, transparency, and open books. We are partnering with Physician Staffing Resources, a management services organization that supports 70 different emergency medicine groups. They are the business partners. AAEM is the lead in this, and there will be an agreement signed between us and the practicing physicians. They can use our name to recruit,” he said.

Members appointed Dr. McNamara as the chief medical officer, and he said he will ensure that the members of the new group will meet the principles of practice, along with an oversight panel. They plan to market to physicians, hospitals, and existing groups that fit the requirement of the AAEM practice group. Dr. McNamara said AAEM wants to deliver “clout” and “the powers of a more nationally representative groups.”

“Larger groups come in with established back office services, marketing, and extensive negotiation experience, and say that they can handle non-patient care activities much better. We would allow our groups to counter that by being part of a group that is involved in many states and emergency departments and have the benefit of being physician-owned, he said.

“It's a simple concept. Look at what is going on with physician satisfaction and the amount that [management] groups are taking out of their pockets. Twenty percent could be going back to the physicians. Emergency physicians will want this. They have been through the mill with corporate groups. The public would want it after the 60 Minutes show that found patients being admitted who didn't have to be. Doctors use their independent judgment in this scenario. The physician-patient [relationship] is now being infringed upon,” he said.

Mr. Swearingen said he sees similar opportunities in merged and acquired physician groups. “Physicians want to be part of something bigger that provides services and lets them practice medicine, he said. Much depends on the dynamics of a transaction. “Consolidators pay large cash amounts for the groups, integrate all back office functions, and sometimes individual groups are absorbed into something larger. You should go into it with your eyes open. Clearly there are sacrifices in any business relationship.

Mr. Swearingen said consolidators make an effort to preserve the group culture,” and that Edgemont's clients are happy. “You always find people who, in hindsight, are negative about things or see one-half of the bargain that is struck,” he said.

Not all emergency physicians are or need to be part of a consolidated group, he added, noting that there are 40,000 to 45,000 practicing emergency physicians in the United States. “Even TeamHealth and EmCare do not have a major market share. Consolidating all practicing emergency physicians into one or two groups is still a long way off. Consolidation will continue to happen, but there's still room in the market for independent groups,” he said.

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Equity Buyouts

Dr. Reiter said he is concerned with private equity groups buying out physician practices, which leads to the firms rolling smaller groups together. “We see a lot of times after that happens that compensation is significantly decreased, staffing is tightened, and physicians must see more patients per hour. There is more reliance on midlevel providers and a lot less incentive to recruit for excellence. The most qualified physicians are considered a liability because they are more expensive,” he said, adding that that changes the focus to the bottom line instead of patients.

Drs. Reitman and McNamara said physicians should consider the AAEM Physician Group because it gives them a practice bound to the fairness principles of AAEM without loss of autonomy, which allows them to avoid the effects of feeling underrewarded for a demanding job. Physicians in the AAEM group will see what is paid in their name and understand how compensation is derived, and the group will recognize stressors in emergency medicine — shift work, stress, and aging, Dr. McNamara said.

Practices will be run locally and not strictly by the results of emergency department patient satisfaction surveys. The groups will not agree to termination without cause and will strive to restrain hospital administrative influence. Physicians will work for themselves, not a corporation or an individual. “You will not be sold out by the senior physicians,” he said.

Hospitals, Drs. McNamara and Reiter said, should contract with the AAEM Physician Group because emergency physicians who are part of it will be happier in a physician-owned group that establishes a long relationship with hospitals. The AAEM Physician Group structures do not allow for a group to be sold to a corporation. All physicians in such group will be board certified and they will see the benefit in a well-run emergency department because physicians own the groups. Physician ownership also avoids violating prohibitions against the corporate practice of medicine and fee-splitting with lay owners.

“There are numerous good, independent local physician-owned groups that exist and some sizeable ones that are acceptable with physician ownership. They are all at risk,” said Dr. McNamara.

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