Physician staffing firm American Physician Partners (APP) will shutter at the end of the month, the second such staffing group to fall in recent months, according to reports.
APP will begin transitioning its contracts as of July 31, according to Bloomberg. It follows Envision Healthcare, which filed for bankruptcy in May, citing the No Surprises Act (NSA) as a contributor to its financial problems.
According to Bloomberg, APP had ongoing financial challenges, and its recent failure to strike a deal with physician staffing firm SCP Health contributed to the shutdown. In 2021, a $520 million refinancing deal fell through amid investor concerns about reimbursement issues also due largely to the NSA, according to the news outlet.
Adam Brown, MD, MBA, an emergency physician and business expert, said the “canary in the coal mine that we heard from Envision is starting to become a chorus of canaries.”
Brown said several factors are contributing to “massive market distortions in the healthcare services and provider industry,” including declines in physician reimbursement in part due to NSA but also because of government and private payors; and inflationary pressures including the increased costs of goods, services, and labor, as well as rising interest rates.
“The cost of doing business is going up and the revenue is going down,” Brown told MedPage Today.
Others have been quick to point out that both Envision and APP have substantial backing from private equity investors, charging that private equity’s model of taking on significant debt to acquire these groups makes it particularly vulnerable to the current economic environment.
Brown acknowledged that “the cost of that debt is rising. That puts greater pressure on a company, [compared with] other companies who don’t have as much debt.”
Mitchell Li, MD, an emergency physician who runs the physician advocacy group Take Medicine Back, believes private equity is a significant contributor to both companies’ fiscal challenges.
He noted that U.S. Acute Care Solutions (USACS), another staffing firm with ties to private equity, is already pouncing on APP’s contracts from at least one healthcare system, Houston Methodist.
Houston Methodist was set to transition its APP contracts to USACS on Wednesday, according to a letter from CEO Wayne Voss that was shared with MedPage Today.
Some doctors raised concerns that they had only 48 hours to review the USACS contract. A screen shot of an email from “USACS Contracting” shared with MedPage Today showed doctors were asked to “Please review and sign this letter to acknowledge your acceptance and agreement by no later than July 18 at 11:59 p.m. central time.”
Li said that any contracts former APP clinicians sign “should ensure meaningful due process rights, transparency in what is billed and collected in their names, and not include non-compete clauses.”
Neither Houston Methodist nor USACS returned a request for comment from MedPage Today.
Li said the dissolution of APP marks an opportunity for physicians to consider who they want to be employed by. While USACS touts the fact that it is a physician-owned group, Li said the group bought out another private equity partner in 2021 using a $470 million investment from the private equity firm Apollo.
“About one half of the board of directors of USACS are physicians, but not those practicing at the bedside. The other half are corporate actors,” Li told MedPage Today. “The practicing emergency physicians do not have control.”
He said APP doctors may be able to use the opportunity to create independent contract management groups, but tight turnarounds with new contracts may prevent that from happening.
Brown also cautioned that the “forces affecting the economics of providing healthcare are fairly similar whether you’re private equity-backed or not.”
If doctors are “focused on arguing about which model of healthcare ownership is a problem, we’re not focused on the bigger fundamental drivers that are a threat to the entire industry,” he said.
Based in Brentwood, Tennessee, APP employs more than 2,500 physicians and advanced practice clinicians — particularly within emergency and hospital medicine — and it works with more than 150 hospitals and health systems in 18 states, according to its website.
It is owned by private equity firm Brown Brothers Harriman & Co., along with member physicians and management. Envision is owned by private equity firm KKR.
The American College of Emergency Physicians tweeted that it is “deeply concerned about the announced closing of [APP] and the impact this disruption will have on thousands of emergency physicians, their families, patients, and communities.”