Envision Healthcare is one of the largest physician staffing firms in the country. It was taken private in a $5.5 billion deal in 2018. It sued insurer UnitedHealthcare for underpayment of emergency room services, recently winning a $91 million judgement.
Envision CEO Jim Rechtin alleges UnitedHealthcare routinely denied claims for commercial members who were among the sickest and sought care at an emergency room. Rechtin called UnitedHealth’s alleged practice “cold, callous and inhumane,” according to a statement released Friday announcing a lawsuit was filed in a Tennessee federal court.
UnitedHealthcare alleged Envision, one of the largest physician staffing firms in the U.S., has “systematically deceived” the insurer into overpaying through a practice known in the industry as “upcoding,” according to a lawsuit filed in a federal court in Tennessee on Friday.
Upcoding is a common practice that is hard to prove and harder to eradicate. Hospitals and doctors are reimbursed for treating patients using billing codes that denote the condition, and the severity of treatment. When treating a patient, there is room for some difference of opinion about the severity of a treatment, especially when higher codes pay better than less severe codes. Providers tend to error on the side of higher codes, while insurers tend to error on the side of less severe codes. Coding is somewhat subjective and UnitedHealthcare argues that Envision used that ambiguity to upcharge higher fees than warranted.
Envision has grown aggressively in the past few years and is heavily in debt. Critics claimed its business model is dependent on surprise medical bills. That is, not affiliating with networks and balance billing patients for fees higher than health plans reimburse. That type of business model was dealt a huge blow by the federal No Surprises Act that was passed in 2021 and went into effect in 2022.
According to the Wall Street Journal, Envision Healthcare is expected to file for bankruptcy, in an attempt to reorganize its debt and possibly shed some debt obligations. Contributing to its problems (besides its ongoing battle with UnitedHealthcare) is high labor costs. That is interesting considering emergency medicine has become a less popular residency program in recent years, partly due to large ER staffing firms holding the line on physician salaries.
Envision is now facing another legal battle. A physician’s group is suing it for violating the law against the corporate practice of medicine doctrine in California. Despite the bankruptcy filing, the physicians’ group is expected to seek to continue its suit.
“I anticipate that we would ask the bankruptcy judge to let our case proceed,” said David Millstein, an attorney representing the Milwaukee-based American Academy of Emergency Medicine Physician Group. “Among other things, Envision’s practices violate the law, are continuing, and need to be addressed.”
The emergency doctors’ lawsuit does not ask for monetary damages, so the Milwaukee group would presumably not have a financial claim against Envision. Instead, the doctors are seeking a declaration by the court that the company’s alleged use of shell business structures to retain de facto ownership of ER staffing groups is illegal. A trial in San Francisco had been scheduled to start next January, but the date has been pushed back.
The doctors believe that a victory in their case would lead to a ban on that business strategy across California — not just in ERs run by Envision but also by TeamHealth, another private equity-owned medical staffing firm, and in other medical services the two companies provide, including anesthesiology, hospital-based medicine, and gynecology.
California and about 32 other states have laws prohibiting the so-called corporate practice of medicine, where corporate entities are precluded from having control over how physicians practice. Some states have stronger prohibitions than others. If the California suit is successful, it could potentially lead to suits in other states. That could be yet another nail in the coffin of Envision and other staffing companies’ business model.