October 21, 2019

Warren, Pocan, and Doggett Examine Role of Private Equity in Rise of Surprise Medical Billing

Physician Staffing and Emergency Transport Companies Contribute to Sharp Increases in Surprise Patient Bills

Both Sectors Have Experienced Recent Increases in Private Equity Investment

Text of Letters (PDF)

Washington, DC - United States Senator Elizabeth Warren (D-Mass.) and Representatives Mark Pocan (D-Wis.) and Lloyd Doggett (D-Texas) sent letters to five private equity firms -- KKR, Blackstone Group, American Securities, Enhanced Equity Funds, and Welsh, Carson, Anderson, & Stowe -- that have investments in physician staffing and emergency transport companies.  The letters highlight the role these companies play in patients receiving exorbitant surprise bills for out-of-network medical treatment and request information about the firms' management of those companies.

Surprise billing occurs when an individual goes to a hospital covered by their insurance plan, but receives medical services not covered by their plan or receives care from physicians who do not have contracts with their plan and, as a result, pays significantly higher costs. This problem is especially acute for patients seeking emergency care, because they are not able to proactively choose every specialist and other clinician treating them, do not have a choice in the ambulance transporting them, or assume any physician at their in-network hospital is covered by their insurance plan.

"We have concerns about the rapid spread and effect of private equity investment in many sectors of the economy - including the medical and healthcare industry," the lawmakers wrote in their letters to the firms. "We are particularly concerned about your firm's investment in physician staffing companies or emergency medical transportation service companies, both of which have contributed to the growing prevalence of out-of-network 'surprise billing.'"

Today, almost two-thirds of hospitals in the United States outsource emergency care services to private physician-staffing companies, many of which are owned by private equity firms. Research shows that once these physician-staffing companies receive a hospital contract, out-of-network billing rates and physician charges increase, "exposing patients to increased cost sharing and financial risk."  

Similarly, the emergency medical transportation service industry has experienced increased private equity investment and increased prices related to surprise out-of-network billing. While hospitals used to own and manage their own ambulance services, for-profit companies have taken over the industry in recent years, with two of the three largest emergency transport companies owned by private equity firms.

In July, Senator Warren and Representative Pocan, along with a number of Democratic colleagues, introduced the Stop Wall Street Looting Act, a comprehensive bill to bring greater responsibility to the private equity industry by holding private equity firms jointly liable for the debts of companies under their control and requiring greater transparency in private equity firms' practices.

In their letters, the lawmakers asked the private equity firms to provide the disclosure documents and information required by the Stop Wall Street Looting Act, and to explain their role in the consolidation of physician staffing firms and emergency transport companies and the associated growth of out-of-network surprise billing in those industries. The lawmakers asked the firms to respond by no later than October 30, 2019.

Senator Warren has been a vocal critic of private equity abuses throughout her time in the Senate and is fighting for reforms that protect students, workers, communities, and investors:

  • Senator Warren and Representatives Pocan and Alexandria Ocasio Cortez (D-N.Y.) recently wrote to five private equity firms that own companies providing support services to prisons, including health care, food service, and telephone services, highlighting how private equity firms deliver poor-quality food and services at exorbitant prices, making huge profits off of incarcerated people, their families, and taxpayers.
  • Senator Warren and Representative Pocan wrote to six private equity firms with current or recent holdings in for-profit colleges, highlighting private equity's destructive role in for-profit colleges, and asked the firms to provide information on their fees, returns, marketing, and other financial practices, as required under the Stop Wall Street Looting Act.
  • Senator Warren and Representative Dave Loebsack (D-Iowa) opened an investigation into private equity firms behind some of the country's largest manufactured housing communities to obtain information about their use of predatory practices to boost profits in the communities they own.
  • Senator Warren and Representative Ocasio-Cortez questioned Treasury Secretary Steven Mnuchin on his involvement in dubious financial engineering and other managerial decisions that enriched investment company executives while decimating Sears' long-term growth and sustainability -- ultimately resulting in Sears' bankruptcy and the loss of tens of thousands of jobs.
  • Senator Warren's requested answers from Vornado Realty Trust and five major hedge funds on their role in the liquidation of Toys "R" Us, which resulted in 30,000 workers losing their jobs without severance pay, after the company went into bankruptcy as the result of a leveraged buyout in 2005.
  • In June 2015, she was an original co-sponsor of the Carried Interest Fairness Act, legislation to close the carried interest loophole that allowed private equity fund managers to pay lower taxes. The legislation was re-introduced in March 2019 and is included in the Stop Wall Street Looting Act.