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Blackstone, KKR draw ire from Congress over surprise medical bills

US Congress has turned its attention to three private equity firms after numerous reports of customers being hit with enormous healthcare bills.

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US Congress has turned its attention to three private equity firms after numerous reports of customers being hit with enormous healthcare bills.

On Monday, the US House Energy and Commerce Committee sent letters to KKR, Blackstone and Welsh, Carson, Anderson & Stowe announcing it has launched an investigation into the business practices that have led to surprise bills from third-party medical providers backed by the three private equity firms.

Reps. Frank Pallone Jr. (D-NJ) and Greg Walden (R-OR) authored a six-page letter taking aim at TeamHealth, a hospital staffing company that Blackstone purchased for roughly $6.1 billion in 2016. It also called out emergency department outsourcing company EmCare, which KKR acquired through its $9.9 billion take-private purchase of Envision Healthcare in October 2018.

KKR also owns Global Medical Response, a provider of medical transportation services that was created when the firm purchased American Medical Response and combined it with portfolio company Air Medical Group for some $2.4 billion in 2018. And WCAS currently backs occupational health and urgent-care chain Concentra along with long-term care provider Kindred Healthcare.

“Surprise billing has devastated the finances of households across America and this practice is increasing at an alarming rate,” the letter said. “Every day we hear stories about families who have endured financial and emotional devastation as a result of surprise bills ... Unfortunately, these stories are far too common. Research has found that around one in five emergency department visits and about nine percent of elective inpatient care at in-network facilities result in a surprise bill.”

Specifically, both representatives are demanding that the firms unveil a trove of financial information about their investments in physician staffing and emergency transportation companies, including the number of businesses they own in the sector, the terms of their investments and the annualized returns and revenue on those investments, as well as the firms’ roles in company management and negotiation with insurance companies.

Both TeamHealth and Envision Healthcare have often been at odds with insurance companies over alleged low payments for their doctors, per The New York Times. When the two sides can’t strike a deal, the companies opt to go out of network, ultimately leading to skyrocketing costs for patients that receive ER services or visit an ancillary doctor such as a radiologist, anesthesiologist or pathologist.

Surprise billing can also occur when a patient receives treatment at an in-network hospital, but, unbeknownst to them, that hospital has outsourced some of its services, which are often out of that patient’s network. Enter physician outsourcing companies such as TeamHealth and Envision Healthcare.

“We are concerned about the increasing role that private equity firms appear to be playing in physician staffing in our nation’s hospitals, and the potential impact these firms are having on our rising healthcare costs,” the letter said.

“Evidence indicates that these physician staffing companies charge significantly higher in-network rates than their counterparts, thereby driving reimbursement upwards as they enter into staffing arrangements with hospitals,” it added.

Both TeamHealth and Envision Healthcare have been lobbying hard against potential legislation in the US Senate and House of Representatives that would protect consumers from surprise fees, The New York Times revealed last Friday. The pushback has come under the guise of lobbying group Doctor Patient Unity, which has reportedly spent upward of $28 million on ads fighting the legislation. TeamHealth and Envision are the group’s biggest financial sponsors, again per The New York Times. On the flip side, an industry group representing the insurance industry—and dubbed Coalition Against Surprise Medical Billing—is said to have spent millions on ads supporting the legislation.

A representative from Blackstone said it supports a bill that would elect an independent arbitrator to settle a dispute between insurance companies and physician staffing companies. (Another proposal would give patients an in-network guarantee price should they visit a hospital in their network).

“Blackstone’s portfolio company TeamHealth fully supports legislation to end surprise medical bills through an approach called independent arbitration that has proven successful in New York and Texas,” a Blackstone representative said in a statement. “TeamHealth also has a long-standing policy against balance billing its patients.”

In the meantime, Congress has demanded a response from each PE firm by September 30 and asked for a briefing to discuss those responses by October 7.

“We look forward to responding to this letter and outlining the company’s approach,” the spokesman added.

There may be more controversy to come for PE-backed healthcare companies. The US healthcare industry is thriving, with the number of annual PE investments in the sector having nearly tripled over the past decade and increased annually every year since 2013, according to the PitchBook Platform.

Featured image via DNY59/iStock/Getty Images Plus.

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    Written by Adam Lewis
    Adam Lewis was a financial writer covering private equity for PitchBook. He covered dealmaking, company and investor news for the PitchBook newsletter and blogs about the intersection of private equity and politics. A graduate of the WSU’s Edward R. Murrow College of Communication, Adam was previously a sportswriter covering the Mariners and Seahawks.
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