Eight Houston area emergency physicians have filed suit against the Texas arm of American Physician Partners (APP), the debt-ridden contract management group that provides and sets the pay for doctors in most Houston Methodist Hospital emergency departments.
The decision to file suit came after what the physician-plaintiffs called fruitless attempts to negotiate corrections in how physicians are compensated by the group, said Prasanth Boyareddigari, MD, one of the emergency physicians who filed the suit. Some of the changes created by APP in tandem with acquiring the EP contracts lowered their pay, forced them to sign contracts with noncompete clauses, and raised questions about how their work was compensated, he said.
“I think it's definitely one of a number of signs that physicians are fed up with the current system,” said Robert McNamara, MD, a founder of the American Academy of Emergency Medicine, which was established in 1993 to promote fair and equitable practice environments for EPs. “It is definitely a trend that doctors are willing to fight back.”
The lawsuit maintains that emergency physicians were pressured to work when they had actual or possible COVID-19 infections that put other physicians, nursing staff, technicians, and patients at risk, said Dr. McNamara. “This suit is an example of why private equity should not be in private medicine,” he said.
Published reports have indicated that APP, which is owned in part by the private investment bank Brown Brothers Harriman, was seeking to be acquired by a private equity firm or other entity to raise funds to cover existing debt and fund acquisitions. (PE Hub. Jan. 8, 2020; https://bit.ly/38CLBXP.)
S&P Global Ratings said on Dec. 14, 2021, that APP had about $472 million in loans due at that time. (S&P Global Market Intelligence. https://bit.ly/3PqxTbf.) S&P cut its rating on the debt to CCC because of “the high risk of a near-term default,” according to Bloomberg, and then withdrew the rating after APP said it was pursuing alternative resolutions to its problems. (Jan. 19, 2022; https://bloom.bg/3PrCha4.) APP has more than 150 contracts in 18 states, according to its website. (Accessed May 24, 2022; https://bit.ly/APPWhoWeAre.)
Houston Methodist contracted with Emergigroup Physician Associates (EGPA) led by Jeremy Finkelstein, MD, in 2008, Dr. Boyareddigari said, and Dr. Finkelstein sold the company to APP in January 2019, and is now its executive medical director for Texas. The lawsuit said the doctors were told their contracts would remain the same except for a noncompete clause they had to sign to receive a $40,000 “transaction bonus.” The suit also noted that continued employment depended on signing a letter of agreement within 14 days over the end-of-year holidays.
“Things were status quo until COVID hit,” Dr. Boyareddigari said. The lawsuit said APP, instead of negotiating an amendment to the independent contractor physician agreement, unilaterally announced to physicians during a conference call on Apr. 2, 2020, that they would receive a 10 percent reduction in pay, with the possibility of deferred repayment if business volume returned.
“This is when we began really scrutinizing our contract,” said Dr. Boyareddigari. “We had always assumed we were being paid a certain way, as laid out in the contract, but when we looked into it, that turned out not to be the case.”
Dr. Finkelstein wrote in an email that was cited in the lawsuit that this was “more like a loan to the company, as opposed to simply cutting pay rates. A more palatable solution. I can make no certain promises that every dollar is eventually returned.” He said repayment would be spread over months and not repaid as a lump sum.
Dr. Boyareddigari said he and his colleagues discovered that they were not being paid based on productivity, as they thought. Instead, the suit stated, “APP knowingly restructured the RVU formula to place a ceiling on the doctors' productivity-based compensation pool” and “has been attempting to artificially inflate its books to appeal to investors and avoid insolvency by maintaining cash flow at the direct expense of the Doctors.”
APP's efforts to lower costs came at the physicians' expense because the CMG faced overwhelming debt, the plaintiffs said. A slide deck that the company publicly presented to potential investors last fall referenced the American College of Emergency Physicians' study, which found a projected surplus of EPs by 2030, said the “expected oversupply of ER docs will keep costs low.”
The APP slide deck also misrepresented the physician pay cuts to investors, saying “physicians and providers deferred compensation,” though the Texas plaintiffs said they weren't given a choice. APP called itself “well positioned as the industry's low cost provider,” and said it engaged in “[n]ear elimination of physician scribe usage in 2020, for which most of the cost reduction is expected to be permanent.”
Payroll and Collections
Carlos Castaneda, MD, another plaintiff, had questioned APP's billing practices because he had seen a drop in his reimbursement even though he was at his most productive, according to the suit. He said Brett Wachter, listed in the suit as the head of APP's payroll company at the time, told him that “payroll had nothing to do with collections” and that the monthly pay pool was determined by a set average hourly rate for the group with “scribe expenses ... removed and ... distributed by RVU.”
Mr. Wachter told Dr. Castaneda, according to the suit, that “the pool amount never goes up or down based on volume or payer mix” and that “this pool amount has not changed pre and post COVID and that this calculated amount is the same for all Methodist locations.”
The plaintiffs in the suit (Dr. Boyareddigari; Dr. Castaneda; Arik Bakshy, MD; Beau Briese, MD; Benjamin Godfrey, DO; Lauren Laroche, MD; Sonali Patel, MD; and Yen-Te Tu, MD) sued not just APPTexasED but also EGPA, Kirby Emergency Physicians, West Houston Emergency Physicians, San Jacinto Emergency Physicians, and Woodlands Emergency Physicians. EGPA contracts with 18 Houston Methodist facilities, including Houston Methodist Hospital-Texas Medical Center, Houston Methodist Baytown Hospital, Houston Methodist Clear Lake Hospital, and four other hospital EDs as well as 11 freestanding emergency care centers, all located in the Houston area, according to the filing.
“The lawsuit appears to be an internal dispute within this private physician practice that has nothing to do with Houston Methodist or the care we provide,” said Stefanie Asin, the public relations director for Houston Methodist. “We are not named as defendants. We are unaware of any ER doctor who came to work after testing positive for COVID-19.”
She said the hospital system's quarantine and isolation policy aligned with guidance from the Centers for Disease Control and Prevention, and that “employees and physicians are instructed to stay home from work if they test positive for COVID-19 for the required quarantine period. In fact, these employees were paid for the entirety of the quarantine period for most of the pandemic,” Ms. Asin said.
‘Failed to Pay’
APP, according to the lawsuit, failed to pay doctors as specified by their contracts in five ways:
- APP set “an elusive, noncontractual, moving target deadline for the doctors to submit Advanced Practice Clinician (‘APC’) charts,” and it refused to give doctors RVU credit for patients treated by nurse practitioners or physician assistants if the doctor did not meet the “manufactured deadline” to submit the charts. The suit said the deadline, set outside the contract, had a variable deadline from 24 hours to five days.
- APP did not always allow RVU credit to doctors even when they met the group's deadline for chart submission.
- APP did not give doctors RVU credit for patients who left against medical advice or eloped.
- APP deducted expenses for advanced practice clinicians and scribes from the doctors' productivity compensation pool even when those positions were not staffed.
- APP altered the RVU formula, capping the doctors' productivity-based compensation no matter how many patients they treated, the complexity of the treatment, and the amount of money the doctors made for APP.
“What they were doing was averaging the locations' RVUs,” Dr. Boyareddigari said. “Our volumes went up, but our paychecks did not.” If they saw a patient with an APC or reviewed the case with them later, they had to sign the chart within 48 hours or APP kept the overage, he said. “They were billing under our names and not paying us for it. They allowed us to keep the liability.”
The advanced practice clinicians were paid by APP, Dr. Boyareddigari said. “Despite our increasing workload, APP wanted to cut physician staffing hours. The physicians protested, as this was not in the best interest of the physicians or the patients, but APP management moved forward with cutting physician hours anyway,” he said.
More recently, the management firm cut physician hours again, despite increased patient volumes and doctors' protests that they were working harder than ever, Dr. Boyareddigari said. “These types of decisions are bad for physicians, and they are bad for patients,” he said.
Doctors were also not credited for patients who eloped or left against medical advice, according to the suit, even when doctors had assessed, treated, and charted those patients. Again, the doctors' pay pool suffered, the suit said.
Working with COVID
APP's COVID-19 protocol also discouraged testing and disregarded physician, staff, and patient safety when a doctor tested positive, according to the suit. One physician who had a fever and felt sick asked if she should be tested, and was told by the medical director in a text to “[m]ask up and come on in.” That doctor complied, but she was pressured a month later to work even though she had a condition that left her immunosuppressed. Dr. Boyareddigari said he was similarly pressed when he had COVID-19.
APP spokesperson Tracy Young said it was American Physician Partners' policy not to comment on pending litigation. “That being said, we would like to share with Emergency Medicine News and [its] readers that we have been in active dialogue with these physicians since they brought their concerns to our attention in late December,” she said. “We advised them at that time that their concerns do not reflect the facts known to APP and otherwise appear to be based on misinformation.
“Thus, we are disappointed these physicians—who represent a very small minority of the physicians APP partners with in the Houston area—have decided to move forward with this litigation,” she said. “We remain open to continuing our dialogue with these physicians outside of the litigation, which, again, APP believes to be without merit.”
A response filed by APP did not address the plaintiffs' individual complaints, but said the doctors' damages, if any, were caused by their own actions or omissions or by other people or entities, including the doctors themselves, for whom APP was not responsible. The contract management group also asked for the suit to be dismissed.
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Ms. SoRellehas been a medical and science writer for more than 40 years, previously at the University of Texas MD Anderson Cancer Center, The Houston Chronicle, and Baylor College of Medicine. She has received more than 60 awards, including the Texas Human Rights Foundation Award. She has been a contributor to EMN for more than 20 years.