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The American Telemedicine Association ballooned into an advocacy juggernaut during the pandemic, as the DEA relaxed rules requiring controlled substances to be prescribed in person.
It’s safe to say Ben Bowman did not set out to go to war with two of the largest five companies in America when the freshman Oregon state legislator introduced House Bill 4130, a technical, deep-in-the-weeds piece of legislation the 32-year-old politician describes as an attempt to “close loopholes” in the state medical board’s long-standing requirement that physician practices be controlled by licensed physicians.
Bowman is a consummate pragmatist, a “solutions seeker” in the words of his mentor, former Gov. John Kitzhaber. Bowman counts among his closest friends the conservative podcaster Marshall Kosloff, and last fall was named one of 19 “rising young leaders” by the neoliberal NewDEAL network, which boasts of having nurtured the careers of Stacey Abrams and Pete Buttigieg. And House Bill 4130 is a fairly moderate bill, which primarily bans or restricts a few arcane mechanisms private equity firms and other corporate owners use to sidestep so-called “corporate practice of medicine” (CPOM) prohibitions, provides practices an absurdly generous seven years to come into compliance with the law, and exempts altogether addiction rehab and telemedicine companies from its provisions.
But corporate backlash to HB 4130 has been swift and fierce. Both Amazon and UnitedHealth Group have retained lobbyists to oppose it, and the American Telemedicine Association, unmoved by Bowman’s agreement to leave telemedicine providers out of the bill, is currently parading on the front page of its website a four-page letter warning that the law could “disrupt access to care” for “stigmatized populations” by threatening a business model that had enabled “innovative technologies” to “access needed financing and develop new care delivery models.”
The law firm McDermott Will & Emery posted a critical analysis of the bill on Friday, written by three partners in three different offices—none of which is, perhaps predictably, anywhere near Oregon. And in an email obtained by the Prospect, one state legislator said doctors affiliated with two private equity-backed dermatology practices had been “emailing legislators all weekend” urging them to vote against the bill, in a last minute grassroots lobbying campaign apparently spearheaded by the CEO of United Derm Partners, a Tennessee-based rollup of dermatology practices backed by the private equity firm Frazier Partners. The Behavioral Health and Health Care committee is scheduled to vote today.
“I think what they’re concerned about is that we might hit a nerve,” said Kitzhaber, a physician who served as governor between 1995 and 2003 and again between 2011 and 2015 and has helped marshal support for the bill from the state’s major insurers, labor unions, and medical societies. “Because losing a clinic in Oregon isn’t going to hurt their business in the grand scheme of things, but what if other states try to follow our lead?”
Earlier this month, a contingent from Amazon called a Zoom meeting with Bowman and some of the lawyers involved in drafting the bill. An executive and medical doctor with Amazon’s One Medical primary care subsidiary named Andrew Diamond beamed in from an examination room somewhere to urge the legislators to rethink the legislation. “He shows up in his scrubs with his stethoscope around his neck, like he was right out of central casting,” laughed David Millstein, a California attorney who has successfully used that state’s CPOM statute to challenge many of the tactics private equity firms and other corporate entities use to sabotage physician-owned medical practices. “And he tells us, oh no, Amazon is so great because they take care of billing so we can have more time with our patients! Like billing can only be done if Amazon does it, as if doctors haven’t hired billing firms since time immemorial.”
In the world of corporate medicine, Diamond, who has spent his whole medical career at One Medical, is what is known as a “friendly” or “straw” doctor, a physician who lends his name and license number to corporations seeking to comply with regulations requiring medical practices to be owned by licensed physicians. His name appears on the articles of incorporation for Amazon-owned clinics in Oregon, Florida, Virginia, Connecticut, Ohio, and about a dozen other states. Separately, a Florida straw doctor in one of Millstein’s other recent cases had attached his name to more than 200 practices.
Deploying “friendly doctors” is a cornerstone of corporate medicine. In ongoing litigation in California with the private equity–owned emergency physician staffing rollup Envision Healthcare, which once hired a doctor named Greg Byrne to “own” some 300 of its practices, Millstein called the tactic a “systemic and pervasive violation of the law that will not be remedied by disciplining the individual physicians that serve as the straw men.” The judge denied Envision’s motion to dismiss in 2022, and the case, which was delayed by Envision’s bankruptcy last year, remains ongoing.
In Texas, judges have repeatedly voided contracts involving medical practices with “paper owners,” and one decision deemed the practice illegal under state law. With Millstein’s help, Bowman’s team wrote a provision in the Oregon bill explicitly banning physician-owners of medical practices from holding shares in management services organizations like One Medical, in whose parent company Diamond owned more than 300,000 shares when it filed for its initial public offering in 2020. And yet during their meeting with Diamond, Amazon’s most prolific straw doctor never mentioned the specific provision. “It was like he was talking to morons,” Millstein said of the meeting.
A “friendly” or “straw” doctor lends his name and license number to corporations seeking to comply with regulations requiring medical practices to be owned by licensed physicians.
CPOM bans have been on the books in most states since the early 20th century, when the medical establishment began adopting guardrails against some of the conflicts of interest then widespread within the profession, like the corporate employment of physicians to evaluate and “treat”—and invariably, prematurely send back to work—injured railroad and mine workers. In theory, these age-old laws should also ban the now-widespread phenomenon of private equity firms or health maintenance organizations buying up medical practices and pressuring their doctors (and increasingly, nurse practitioners and physician assistants) to perform unnecessary but profitable tests and procedures or withhold care that ownership deems insufficiently profitable. But in practice, as an Oregon medical school professor named Jane Zhu and two health law experts explained in a paper published last September in The New England Journal of Medicine, CPOM laws are widely flouted by companies that use loopholes, restrictive contracts, and other tricks to exercise de facto control of their doctors.
Bowman, an education policy wonk by trade, read the NEJM paper with interest: A graduate school acquaintance, Hayden Rooke-Ley, was one of its co-authors. While Bowman had limited expertise in health care policy, he knew private equity firms had funneled hundreds of billions of dollars into heath care institutions in recent years, and that union-friendly Oregon tended to be a late adopter of schemes to loot regulated industries. Bowman discussed the paper with Kitzhaber, who’d become a mentor after Bowman, then a school board member, sought out his endorsement for the state representative seat. Together they drafted another co-author of the NEJM paper, the Georgia State law professor Erin Fuse Brown, to start hammering out a few provisions that might introduce some teeth to the state’s virtually forgotten CPOM doctrine.
Kitzhaber had been scrutinizing corporate medicine since 1983, when the Roseburg community hospital at which he worked as an emergency physician sold out to corporate giant HCA, which subsequently spun off the facility into a debt-saddled rural chain called HealthTrust with the help of junk bond king Michael Milken. “They said they were going to remodel the hospital and do all these great things, and then about a year later this guy from Nashville shows up and says, your job is to maximize profit for the corporate office,” Kitzhaber said. The hospital ultimately shut down, and health care profiteering was relatively rare in the state, at least as Kitzhaber remembers it, until 2018, when a busy primary care clinic in Portland called GreenField Health sold out to Optum Health, the physician services arm of the mega-insurer UnitedHealth that now employs some 10 percent of the physicians in America.
Shortly after that, he says, the Providence hospital network granted its anesthesiology contract to Sound Physicians, a hospitalist mega-practice also controlled by UnitedHealth. “And suddenly Providence had to slash their surgery schedule, because Sound could not recruit enough anesthesiologists,” Kitzhaber recalled. Then a major coordinated care organization (CCO) in the state sold out to Centene, the $154 billion Medicaid managed-care insurer. A local journal calculated that Centene alone had siphoned $29 million out of the state just in 2022, defeating the purpose of the CCO model, which Kitzhaber says was designed to maximize “upstream” investment in the social determinants of care. It was time, he told Bowman, to act.
While Kitzhaber endorsed Bernie Sanders in 2016 and supports single-payer health care, he believes health care institutions can only do their jobs when they are small and enmeshed in their communities. “Health care is a local transaction, and we need to be asking ourselves the question, how do we maintain the integrity of local control? Why are these clinics vulnerable to corporate takeover in the first place?” A big part of the answer, he realized, was that no one enforced the laws on the books in most of the states in America that require medical practices to be owned by physicians licensed to practice medicine in those states.
And yet many of the business structures and practices adopted by corporate medicine have, like the use of straw doctors and the pretense that corporate medical practices merely act as “management services organizations” (MSOs) to physicians, been designed to deliberately sidestep CPOM bans. Banning those practices, Bowman hopes, will deter big-money takeovers of Oregon medical practices.
Together with a legislative staffer, Millstein put together a laundry list of mechanisms corporate health care giants use to control doctors, like rigid noncompete clauses, strict controls on the transfer of stock held by physicians, and other arrangements in which doctors “grant” MSOs, which are ostensibly providing a service to them, the right to set their schedules, bill their patients, and hire, fire, and discipline their colleagues without consulting them on those decisions. After discussing the bill with a lobbyist for a major Silicon Valley–backed telemedicine startup, he decided to exempt dedicated telemedicine providers from the law. “I think he naïvely felt they might drop their opposition to the bill,” said Kitzhaber.
Spoiler alert: They didn’t. The American Telemedicine Association ballooned into an advocacy juggernaut during the pandemic, as the Drug Enforcement Administration relaxed rules requiring controlled substances to be prescribed in person and Silicon Valley venture capitalists poured an astonishing $60 billion into “digital health” startups like the Adderall mill Cerebral. Even traditional corporate health care providers have discovered the glories of bringing more and more care online. Founded in 1993, the telemedicine lobby shop doubled its revenues between 2019 and 2022, and spun off a dedicated lobbying arm that often works in concert with a 501(c)6 founded by former Sen. Tom Daschle called the Alliance for Connected Care.
On its home page, where the letter opposing HB 4130 is prominently displayed, the American Telemedicine Association also touts funding from Walmart, HCA, UnitedHealth–owned Optum Health, Humana, and Lifepoint Health, a hospital chain owned by the private equity firm Apollo Global Management. Its newly elected board chairman Sree Chaguturu is the chief medical officer of CVS Health, and its policy council is helmed by a longtime Amazon lobbyist. A few years ago, the telemedicine industry’s foremost agenda item was maintaining the right to prescribe stimulants and sleeping pills over the internet; today, as intensive care units replace their physicians with teledocs and “hospital at home” is a phrase policy experts somehow say with a straight face, its core policy principles, which include maximizing reimbursement to achieve parity with services performed in person, “ensuring access to non-physician providers” (i.e., promoting the proliferating replacement of physicians with nurse practitioners), and defenestrating practices and regulations that involve patients or providers being “arbitrarily limit[ed] by geography,” comprise a broader agenda best summarized as the wholesale “unbundling” of the provision of health care from public spaces that can be inspected or monitored—or for that matter, unionized.
Seen in that context, it’s not as surprising that big corporations are treating Oregon’s bid to preserve what Kitzhaber calls “the integrity of local control” as an existential threat, even if their lobbyists have had trouble articulating what exactly it is they find objectionable about the bill, on which the House health care committee is scheduled to vote Monday.
“All the arguments we’ve heard against the bill have been really vague, like ‘unintended consequences’ and warning about discouraging innovation,” said one policy expert who has consulted on the legislation. Beyond that, the arguments against the bill share one coherent unifying trait, according to Kitzhaber: “It’s all coming from outside the state.”
