One of the nation’s biggest employers of emergency physicians is liquidating, in one of the more unruly sagas American medicine has experienced since the first wave of the pandemic.
The collapsing entity is American Physician Partners, a private equity–owned operator of about 135 hospital emergency rooms and hospital-owned “freestanding” ERs in 18 states, which was co-founded by a sitting Republican congressman. Until two weeks ago, the company was by all appearances relatively indistinguishable from the other deeply indebted, private equity–backed mega-practices that staff ERs with round-the-clock physicians and “midlevels” (physician assistants and nurse practitioners). Now it’s shutting down, effective Monday.
APP’s largest competitors have been drowning in debt for years. KKR-owned Envision Healthcare filed for bankruptcy protection in May with $7.7 billion in debt; Blackstone-owned TeamHealth has been mired for months in negotiations with creditors to restructure part of its $5 billion debt load. For years, the financial urgency had fostered an environment of institutionalized short-staffing throughout the ER business.
The only “tell” that there was anything different about APP, according to one of its longtime physicians, was its refusal to staff an extra doctor at a busy ER in affluent Fort Wayne, Indiana, where well-insured patients were regularly abandoning the hospital in the face of intolerable wait times. “I knew they were generating enough billing to be more generous with staffing,” says the doctor, who has worked for four different private equity–owned emergency medicine groups and asked for anonymity to discuss the industry. “So why are you seemingly so desperate for money? They were behaving like someone who has a gambling debt.”
And so the physician was less than shocked when, in early July, he received an email announcing that the company was being acquired by SCP Health, another emergency medicine mega-practice owned by the Canadian private equity firm Onex, which previously owned Envision. Private equity financed well over a thousand physician practice buyouts during the nine years between 2012 and 2021, including the half dozen or so buyouts that had created APP. Another day, another merger.
But the plot thickened on July 17, when the physician, and 2,500 other doctors and midlevels on APP’s payroll, received an email from the company’s top three remaining executives—notably not including the CEO or chief financial officer, who had resigned a few months and a few days earlier, respectively—informing them that the deal with SCP was off.
“While our management team, board, and advisors have worked tirelessly to explore all possible pathways, unfortunately, we no longer have the liquidity to continue operations,” the email said. The company, it continued, would be “transitioning our clients” to “other strategic emergency medicine companies or an insourced model with the respective hospitals or systems by July 31”—exactly two weeks later.
Private equity firms are notoriously adept at exploiting the bankruptcy code to dodge liabilities while holding on to ill-gotten gains.
The email directed employees to join one of two Zoom sessions if they had any questions. A Chicago-area APP physician named Kelly Wren attended one. “Mainly they were trying to reassure us that everything would be smooth and orderly and that we would all get paid,” she said. The three executives did not take a single question from any of the 650 physicians she counted on the call.
Dr. Wren assumed things would play out similarly to the four previous ownership transitions her ER practice had experienced during her 13-year tenure at Vista Medical Center, a safety-net hospital with a Level II trauma center in working-class Waukegan, Illinois. But what happened next was unlike anything any of the seven emergency physicians I interviewed had ever encountered, mostly because APP still hasn’t filed for bankruptcy protection.
Private equity firms are notoriously adept at exploiting the bankruptcy code to dodge liabilities while holding on to ill-gotten gains, screwing over both workers and patients in the process. And health care bankruptcies are typically standard and predictable affairs, wherein lenders agree to maintain payroll and other nonnegotiable obligations with the understanding that revenues typically lag expenses by three or four months, and relationships with licensed physicians and midlevels are a coveted asset to be preserved. “It’s a total mystery to me why they haven’t filed,” said Arthur Smolensky, a longtime emergency physician who runs an independent practice in Tennessee and was first to report, on the Facebook page of the corporate medicine watchdog group Take Medicine Back, that APP’s merger with SCP had fallen through.
Down in Tennessee, a group of international physicians had already begun to panic. “If you have a change of employer, a visa transfer needs to be filed by an attorney and the process takes about 1.5-2 weeks once [employees] have a signed contract with the new employer, [so] the two-week notice that APP gave is not enough time as is,” explained a Canadian physician in the state who says APP sponsored their work visa. Then last Wednesday, on their day off, the physician and their APP colleagues received a midday email from their hospital network, Community Health Systems, informing them that CHS would be their new employer “effective immediately.” That rendered the work visas of all the hospital’s international clinicians—nearly a third of its hospitalist staff—invalid.
“My colleague on a visa working that day asked to not be paid for that day because the headache it could create just isn’t worth it,” the physician said. “And it’s been a nightmare trying to fill the shifts because even the details of how we are getting paid for the month are murky.”
This week, some of APP’s physicians learned they might not be getting paid at all for the month of July, or even possibly June. On Monday, Take Medicine Back founder Mitch Li announced on the group’s Facebook page that he had heard multiple reports that APP physicians at Blount Memorial Hospital in Maryville, Tennessee, would not be getting paid for the month of July.
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Spokespeople for the hospital and TeamHealth, which is slated to take over the ER on August 1, refused to comment on the report, and an inquiry to APP itself was met with a boilerplate response pasted almost verbatim from the July 17 email, forwarded by the C Street Advisory Group, a New York crisis communications agency that has apparently been retained.
On Tuesday, doctors at Manatee Memorial Hospital in Bradenton, Florida, a for-profit community hospital operated by Pennsylvania’s Universal Health Services chain, received an email from hospital CEO Tom McDougal advising them that they likely wouldn’t be getting paid going back to June, either. “Despite reassurances as recent as yesterday, APP failed to distribute the scheduled payroll this morning for the work of our EM physicians and mid-levels for the month of June 2023,” the email read.
“I am frustrated, angry, disappointed, [and] fully dedicated to doing everything possible to protect everyone from the risks of similar events in the future,” McDougal continued, notably refraining from making any such assurance that doctors would be getting paid for the nearly two months they had already worked. A former APP physician told the Prospect that doctors at Florida’s Lakewood Ranch Medical Center, another UHS-owned hospital, had also been stiffed.
An emergency physician who works at Manatee along with a handful of other APP hospitals says the roughly $50,000 APP owes him is far less of an immediate concern than the loss of the company’s malpractice insurance, which would ordinarily have covered him. “APP may cease to exist July 31, but any patient I saw working there has at least a year or two to file a lawsuit,” the physician said, estimating that the cost of personally funding a type of retroactive liability insurance policy known colloquially as “tail coverage” could easily exceed $50,000. Guaranteed tail coverage is a standard fixture of virtually every emergency medicine practice employment contract, which generally require doctors to “supervise” (and assume liability for) large staffs of sometimes dubiously qualified midlevels, says Li.
But now that APP’s collapse has abrogated its physician contracts, some hospitals and mega-practices are exploiting mass tail coverage panic to induce doctors to sign contracts without negotiations. Li says he has heard from multiple physicians that TeamHealth, which is scheduled to assume the contract at Blount Memorial and at least a dozen other APP sites, is requiring doctors to sign a two-year contract as a condition of providing tail coverage. (Both TeamHealth and Blount Memorial declined to comment.)
Similarly on Monday morning, Dr. Wren received a text message from her old APP director informing her that the hospital’s new owner, American Healthcare Systems, Inc., was refusing to provide “nose” coverage—the director later clarified this as “tail”—to doctors who refused to sign a new contract with a group also founded by the hospital’s owner.
Going without “tail” is not an option for an emergency physician, especially at APP, which had slashed both physician and midlevel staffing to the bone at most of its sites. But Dr. Wren believed going to work for her hospital’s new owner presented a different kind of legal liability. The hospital had just appointed as emergency department director a nurse named Michelle Hintz, who just three years earlier had been indicted on seven felony counts of theft and unlawful use of a credit card for stealing more than $32,000 from the Winnebago County, Illinois, government and the credit card accounts of various deceased individuals while her husband served as coroner of the county, mainly to finance trips to attend their son’s hockey tournaments. Hintz recently got her criminal record expunged after performing community service, paying $32,817 restitution and giving a videotaped confession detailing her involvement in the scheme, for which her husband was sentenced to six months in jail.
Even more troublingly, a new supervisor at the hospital, who had introduced himself as “Dr. George,” had spent their first conversation castigating her for failing to admit more of the patients she had seen the day earlier. “We saw 144 patients yesterday and you only admitted 11 percent of them. That number needs to be 22 percent!” Wren says “Dr. George” told her during their first and only conversation. “When you hear a radio call that there is a chest pain coming in with a history of coronary artery disease [I want] the admission orders written before the lab results are back,” he added.
When Wren replied that she would not fraudulently admit someone who did not meet the standard criteria for admission, Dr. George retorted that the desired 22 percent admission rate “directly affects my salary and will eventually affect yours.” Wren was incredulous. “In my 24 years in this business no one has ever flat-out told me to admit patients unnecessarily,” she said.
(Attempts to determine the identity of “Doctor George” were inconclusive: Wren furnished text messages from six colleagues, including the hospital’s chief operating officer and ICU director, none of whom professed to know his surname; a message left with a hospital spokesperson was not returned.)
Now that APP’s collapse has abrogated its physician contracts, some hospitals and mega-practices are exploiting the panic to induce doctors to sign contracts without negotiations.
On the TMB Facebook page, physicians discussed a Fox Business interview with the president of the Southwest Airlines Pilots Association and brainstormed over how they might organize a symbolic show of solidarity, perhaps a “Day Without an ER” in the spirit of the Dia Sin Imigrantes that shut down much of the service economy in the weeks after Donald Trump’s inauguration in 2017.
And yet there are signs that resignation has already begun to set in. In Houston, where APP had generated nearly a third of its cash flows staffing 18 emergency rooms affiliated with the Houston Methodist system, the emergency medicine behemoth US Acute Care Solutions has agreed to cover both tail and payroll to doctors willing to sign a new employment contract within 48 hours. The Canton, Ohio–based USACS, which is renowned for paying its physicians as little as $21 an hour in base pay, is perhaps the most universally feared and loathed of all the emergency medicine groups; in online forums, doctors regularly refer to it as USUKS and founder and CEO Dominic Bagnoli as “D-Bag.”
Last week, a former APP doctor in Texas who recently co-founded a small independent group expressed dismay that his fellow physicians would simply “roll over” and sign contracts with USACS, which bills itself as “physician-owned” but is backed by the private equity giant Apollo Advisors. By this week, however, the same doctor had changed his tune in light of the chaos transpiring in other states.
At his own hospital, emancipating the ER from APP had been a drawn-out practice involving a formal bidding process, nearly a year of planning and negotiations, and no expectation that his independent group would have to cover APP’s liabilities. Now that APP was essentially vanishing overnight, smaller groups did not stand a chance, the doctor says. “No independent group is going to be able to come up with a $30 million line of credit in a matter of days,” he said, referencing his ballpark estimate of the costs associated with picking up the group’s payroll and tail coverage.
Smolensky and two Texas physicians described APP as a victim of its own unprofessional “frat house culture.” One of the company’s three co-founders, the Tennessee physician-turned-congressman Mark Green, withdrew his name from nomination for Army secretary in 2017 after media outlets unearthed footage of him engaging in (by today’s standards, quite tame) transphobia. Green has been removed from APP’s day-to-day operations for several years, though his 2022 financial disclosure report listed among his assets a loan to the company valued at between $5 million and $25 million; a message left with his D.C.-based congressional staff was not returned.
Green’s co-founder and veteran hospital executive John Rutledge had a track record of flipping rural hospitals for private equity firms, but Greg Keelen, a physician who led a successful coup to replace APP at a Texas hospital after the company instituted certain protocols physicians believed were jeopardizing patients’ lives, said Rutledge was far less competent at operations. Numerous APP physicians said the company was famous for alienating staff doctors, then offering travel doctors wages as high as $400 an hour to plug holes in low-revenue urgent care facilities.
Both Rutledge and chief medical officer Tony Briningstool, who played football at Michigan State in the late 1980s, “look like football players and came across like guys who would shake your hand with one hand and steal your wallet with the other,” says one physician; Smolensky quoted a former Envision executive as saying he “felt dirty just listening to them” after sitting in on an APP investor presentation.
One of Rutledge and Briningstool’s favored insiders, David Darrigan, rose through the ranks at the company despite a controversial side gig running two cafés that sell drinks spiked with the mood-altering herbs kratom and kava. Darrigan has since April been engaged in a legal battle with one of his cafe’s Florida-based franchisors, whom he accuses of deceiving and defrauding him; the franchisor alleges that Darrigan stole trade secrets. Darrigan’s attorney told the Prospect in an email that the franchisor, Kava Culture Franchise Group, "concealed" information "about the ingredients of the kava bar drinks" as well as "the legal landscape surrounding kratom" to induce him to enter into a franchise agreement.
Darrigan recently secured APP’s former contract staffing the Comanche County Memorial Hospital in Lawton, Oklahoma, for his own upstart ER practice, according to Smolensky, who says that a smattering of such “insider deals” have led some physicians to suspect the desire to discreetly award plum contracts to company “favorites” could be delaying APP’s bankruptcy filing. “At this point it’s pretty clearly deliberate,” Smolensky said of the delay.
According to a lawsuit filed last year by eight Houston Methodist doctors, when physicians attempted to call in sick during various COVID-19 surges, management instructed them to abide by the “4 Ms”: Motrin, Mask, Man Up, and Must Not Test. More concerningly, the lawsuit detailed what appeared to be a fairly unsophisticated scheme to plug the widening holes in APP’s balance sheet through arbitrary cuts to employee pay. In a document filed in the case the day after APP announced it would be shutting its doors, an expert witness retained from a major accounting firm estimated that during the five-year period from March 2018 to March 2023, APP had underpaid the eight physicians by a staggering $13.99 million.
The litigation is ongoing, though a call to APP’s attorney Robert Horton was not returned.
“There’s no doubt in my mind that [APP has] committed crimes,” said the Manatee hospital physician, who posted on TMB last night to inform his colleagues that APP had finally coughed up his June paycheck. “But I mean, this is the United States. It doesn’t matter. If no one went to jail over the financial crisis no one is going to jail over this. I’ll tell you, though: Never in a million years would I have imagined members of my profession talk about joining a union.
