Physician-owned group or corporation: Pros, cons

The turnover of ED physician contracts at Methodist Hospital in St. Louis Park, MN, has brought into focus some of the major issues evolving in the competition between smaller, physician-owned ED groups and the larger corporate entities, such as EmCare, of Dallas; Team Health of Knoxville, TN; and Sterling Healthcare of Durham, NC. While some of those issues are philosophical, others are legal and may have significant implications for ED managers. And while those legal issues were, in this case, specific to Minnesota, the Milwaukee-based American Academy of Emergency Medicine (AAEM) asserts they also apply in many other states.

"Our belief is that EmCare, as a corporate entity, cannot legally own ED contracts in the state of Minnesota," says Robert McNamara, MD, FAAEM, professor and chairman of the department of emergency medicine at Temple University School of Medicine in Philadelphia.

McNamara, a past chairman of AAEM, was the association’s point person in a legal battle with Methodist Hospital over its replacement of local group Emergency Physicians Professional Association with EmCare.

This prohibition exists in Minnesota through case law, he says. "In Tennessee, Texas, and in other states, there is fairly strong supporting evidence for the prohibition of the practice of corporate medicine," McNamara explains. "It creates a conflict between business interests and patients’ interests."

"If someone could actually show me a specific case, I’d love to see it," responds Stephen Dresnick, MD, CEO of Sterling Healthcare. "It’s a specious argument; and frankly, it does not hold water." In states where there are prohibitions against corporations such as Sterling, the ownership control is held by professional corporations, and Dresnick’s group provides management services, he adds.

Be that as it may, the Minnesota case was not an isolated challenge by AAEM, McNamara notes. "One of the AAEM’s political agendas is to challenge the prohibited corporate practice of medicine," he says.

Such challenges could have a significant impact on the ED physicians employed by such entities, continues McNamara. "We informed the Minnesota physicians in a big meeting held in November 2004 that there were prohibitions on this and that physicians could be placing their licenses at risk by aiding and abetting [EmCare], and it could be viewed as a fee-splitting arrangement," he says.

McNamara advises all ED physicians against joining such groups: "If you’re looking to join such a group, according to everything we know about the practice of corporate medicine, you are putting yourself in danger." He suggests a visit to the AAEM web site for more information. (See resources, below.)

People are free to choose any model they want, Dresnick replies. "About 2,500 physicians work with us; and by and large, they are very happy," he says. "We can buy malpractice insurance at a significantly lower rate than a [smaller] group, we can provide billing at lower rate, and we have a lot more experience in negotiating hospital contracts."

Every emergency medicine practice model has its strengths and weaknesses, adds Lynn Massingale, MD, FACEP, chairman and CEO of Team Health in Knoxville, TN, which provides clinical outsourcing to more than 450 hospitals. "Physicians should research all alternatives when looking for a job to determine which one best meets their needs." In addition to some of the advantages noted by Dresnick, Massingale says, Team Health offers tail insurance — which many small groups can’t offer — and free CME through the Team Health Institute for Education and Patient Safety.

There’s another advantage for ED physicians who join corporate entities, Dresnick adds. "Physicians who work for us actually tend to make more money than they would if they were out on their own," he claims. "Just because you have an ownership interest in a small, democratic group doesn’t mean that’s where you’ll make the most money."

While not involved in the legal actions in Minnesota, the Irving, TX-based American College of Emergency Physicians (ACEP) takes a strong philosophical stance on the issue.

Robert E. Suter, DO, MHA, FACEP, president of ACEP, says, "To the extent that ACEP is concerned about how these things affect patients and emergency physicians, as well as how they impact the whole nursing staff, we feel very strongly the best situation is when you have an emergency physician’s group at the hospital that is controlled by the emergency physicians at that hospital and works in partnership with the hospital nurse and administrative staff to create the best environment for the patient."

While admittedly not the only possible model, "historically, the best way to go is to work with a group that is democratic in structure and in which the physicians have a vested ownership interest," Suter says. (In the corporate groups, the physicians are employees.) "In a survey of our members, this model was felt to be the best by 80% of our respondents." He acknowledges, however, that 14% of ACEP members do prefer to practice as corporate or hospital employees or subcontractors.

There are a substantial number of emergency physicians employed by hospitals — maybe 30%, notes McNamara. The rest are in groups, he says.

At Team Health, the average tenure of the emergency physicians exceeds nine years, Massingale says. "A recent anonymous survey of our emergency physicians indicates that 94% say they would recommend Team Health to a colleague, and 98% are either very satisfied or satisfied with their career in emergency medicine," he notes.

Whatever their merit or legal status, one thing is clear: There are a growing number of corporate groups. In fact, McNamara says, it is part of their nature as a corporation to grow. "They need to expand their market share," he explains. "They advertise in Modern Healthcare; they go to meetings of administrators and purchase exhibit booths."

Over the last 10 years, there has been a consolidation into two or three major players, McNamara says. "If you include the smaller regional corporations, I’d say up to half the EDs in the country now have some form of that model," he adds.

Source/Resource

For more on ED physician group options, contact:

  • Stephen Dresnick, MD, CEO, Sterling Healthcare, 100 Park Forty Plaza, Suite 500, Durham, NC 27713. Phone: (800) 476-4587.
  • Lynn Massingale, MD, FACEP, Chairman, CEO, Team Health, 1900 Winston Road, Knoxville, TN 37919. Phone: (800) 818-1498.
  • Robert McNamara, MD, FAAEM, Professor, Chairman, Department of Emergency Medicine, Temple University School of Medicine, Philadelphia. Phone: (215) 707-5030.

For more information about AAEM’s legal concerns concerning corporate ED entities, go to the AAEM Web site at www.aaem.org. Scroll down to "Breaking News" and click on "AAEM Files Suit against Methodist Hospital" and "The Corporate Practice of Medicine in Minnesota."