Background
The development of the specialty of Emergency Medicine was necessitated
by the tremendous increase in emergency department visits beginning
in the 1950s. With the centralization of ever impressive technology
in the hospital and the decline of physician home visits, patients
increasingly sought care in the emergency department. The onslaught
of patients created a need for physician coverage that many hospitals
had difficulty meeting. The need gave birth to physician staffing
companies as we entered the 1970s. The staffing companies soon moved
into the realm of emergency department contract ownership where they
not only supplied the physicians but had exclusive control to do so.
Coupled with this was control of the reimbursement paid for emergency
physician services. The staffing companies evolved from physician
owned entities into larger and more corporate-like firms culminating
in their move to Wall Street in the 1990s. Recently, the larger publicly
traded contract management companies have been in an active acquisition
mode buying up smaller contract groups and other emergency department
contracts.
There have been periodic voices over the years questioning the practices
of these contract management groups and in 1993 a new specialty society,
the American Academy of Emergency Medicine, emerged in large part
due to the perceived physician abuses of these groups. The issues
of concern included the siphoning of a large portion of the physician
professional fee for what was essentially a scheduling function, the
inability of the physician to see what was billed and paid on their
behalf, and onerous contract provisions such as non-compete clauses
and termination without cause. AAEM has examined the current state
of Emergency Medicine practice and believes much of it is suspect
under state corporate practice of medicine prohibitions. The California
Medical Association has joined with AAEM in fighting this issue related
to the Catholic Healthcare West system. Texas, with its clear prohibition
on the corporate practice of Emergency Medicine is a state where this
issue must be examined.
Texas and the Corporate Practice of Emergency Medicine
The state of Texas, ironically, occupies a central place in the corporate
practice of Emergency Medicine. Dallas is the home of EmCare, the
largest of the publicly traded Emergency Medicine contract management
groups. EmCare is currently owned by Laidlaw, Inc., which is traded
on Wall Street. An examination of the ledgers of EmCare reveals that
physician professional fees are going to laypeople including the corporate
executives and share holders. The 1996 EmCare Annual Report and the
Notice to the Shareholders of the 1997 Annual Meeting detailed the
following:
- A profit of $39.8 million on 140 emergency department contracts.
- The statement that over 90% of the revenue was from the physician
professional fees.
- Seven of the nine directors and top shareholders were laypeople.
EmCare is currently well entrenched in the state of Texas. Their
website, accessed on October 1, 1999, (www.emcare.org)
states EmCare holds 64 emergency department contracts in Texas. The
extent of this involvement in Texas further heightens the need to
examine this issue. Interestingly, in the aforementioned documents,
EmCare reassures its stockholders with the following quote:
"In certain states the Company's [EmCare's] services are provided
in conjunction with the professional associations and corporations
owned by Dr. Riggs or another representative of the Company who is
a physician (the "PAs"). Under this arrangement, a PA enters
into a management agreement with the hospital and engages physicians
to provide the necessary medical practice coverage. The Company then
provides the non-medical portion of the service under this arrangement
pursuant to a management agreement between a Company subsidiary and
the PA. For the fiscal year ended December 31, 1996, the PAs paid
approximately $33,211,000 to the Company's subsidiaries, which approximated
the excess of the PA's revenues over their expenses."
EmCare is not the only large Emergency Medicine contract management
company operational in the state of Texas. PhyAmerica (Formerly Coastal
and Sterling) and Team Health currently hold contracts in Texas. These
companies claim similar exclusions from the illegal corporate practice
of medicine based on the use of the professional association model.
The validity of these exclusions must be examined in Texas. Many of
EmCare's professional associations are in the name of the CEO, Leonard
Riggs, MD, who is a non-practicing physician and certainly does not
provide professional physician services at multiple Texas emergency
departments. Interestingly, the sham nature of the contract management
group PA structure was raised in a legal case, Dallas/Fort Worth
Medical Center vs. Aramark Corporation, in the district court
of Tarrant County, Texas (case no. 236-168680-97).
Regardless of the validity of the PA structure, the essential fact
remains that profits from Texas physician fees are being diverted
to lay executives and shareholders without the consent of the physician
who generates that fee. Individual physicians have brought other corporate
concerns to AAEM including their reluctance to participate in corporate
initiatives to increase profits. An example concern is the working
emergency physician being forced to cosign the chart of a physician
assistant without being provided the time for adequate oversight.
Corporate profiling of physician productivity and the attendant pressures
on test-ordering is a common practice of large contract groups.
