Docs Sue Envision Over Violation of Bans on Corporate Practice of Medicine

An emergency medicine physician group sued private equity-owned Envision Healthcare, alleging it violated laws that ban corporations from practicing medicine in California, according to the lawsuit complaint.

The American Academy of Emergency Medicine Physician Group (AAEM-PG), a unit of the AAEM that supports independent physician practices, claimed that Envision Healthcare violated laws banning the corporate practice of medicine when it took over an emergency department contract at Placentia-Linda Hospital, a facility owned by Tenet.

“Envision through itself and by the direct control of its controlled medical groups, kickbacks, restrictive covenants, and other practices alleged, violated California’s ban on the practice of medicine in violation,” AAEM-PG stated in the lawsuit.

The suit does not seek monetary damages. Instead, it is asking the court to stop Envision from operating the emergency department at Placentia-Linda Hospital and other facilities in California. Envision currently operates at least a dozen emergency departments in the state, according to the complaint.

Several states have corporate practice of medicine laws that aim to keep commercial interests out of the doctor-patient relationship. California law bans corporations or any other non-licensed individuals or entities from practicing medicine, assisting in the unlicensed practice of medicine, employing physicians, or owning physician practices.

AAEM-PG alleged that Envision, which is owned by private-equity giant KKR, interfered with clinical practice, offered remuneration to hospitals in exchange for emergency department contracts, and used restrictive covenants to limit physicians’ ability to practice their profession.

In response to an inquiry from MedPage Today, a spokesperson for Envision Healthcare stated that the company does not comment on pending litigation.

“This is the bottom line interfering with medical decision-making,” Robert McNamara, MD, chair of emergency medicine at Temple University and former president of AAEM, said in an interview. “There’s all kinds of implications associated with corporations making decisions for the bottom line that may not be in the best interest of patients. Those are the greatest concerns.”

Last August, a subsidiary of Envision Healthcare was awarded an exclusive emergency department contract by Placentia-Linda Hospital, which guaranteed its employees exclusive rights to treat patients at that location. Prior to the takeover, the hospital’s emergency department was run by an independent physician group, which contracted AAEM-PG to take care of administrative services.

The complaint states that Envision allocated remuneration to hospitals in exchange for exclusive emergency department contracts. In this case, the AAEM-PG alleged that Envision provided anesthesia services to a Tenet hospital without the hospital having to pay a subsidy for those services in exchange for the Placentia-Linda ED contract, adding that the organization believes this kickback scheme is one of Envision’s “standard methods of acquiring new contracts and maintaining existing ones.”

Additionally, the AAEM-PG claimed that Envision “exercises profound and pervasive” control over physicians’ practice of medicine. The corporation not only decides which and how many physicians will be hired, their work schedules, and their compensation — it also determines how many patients a provider takes on, medical charges, and clinical decisions, the AAEM-PG stated.

“Envision establishes and promulgates physician ‘best practices,’ ‘red rules,’ and ‘evidence-based pathways’ protocols which enumerate standards for treating patients and are a form of clinical oversight,” the group noted.

The AAEM-PG also alleged that Envision requires its physicians to sign restrictive covenants — agreements that prohibit the clinicians from forming a group to compete with Envision or from helping any other groups acquire the emergency room contracts that the company currently holds. Physicians’ mobility is also restrained for a 1-year period after their departure from Envision, barring them from working with groups who compete with Envision for contracts, the complaint noted.

“The provision has the effect of reducing competition in the business and trade of emergency department physician services, reducing the number of competitors for Emergency Services Contracts, limiting the supply of emergency physicians available to patients seeking emergency services, and causing increases in the price of such patient services by limiting the facilities where emergency physicians can practice,” AAEM-PG stated.

McNamara said the organization hopes the courts “take a hard look” at how this business is set up, and examine how the alleged violations impact patients.

“The essence of the corporate practice of medicine law is rooted in protecting the physician-patient relationship,” McNamara said. “That’s what we’re looking to get upheld here.