Rise of Private Equity Raises Ethical Conflicts in Emergency Medicine

By Stacey Kusterbeck

In emergency medicine, there are growing ethical concerns that the role of private equity firms is putting profits above patient care.^1,2 Emergency physicians are facing ethical conflicts because of the rise of private equity investment in emergency medicine and by the shift of nonprofit hospitals toward a for-profit operating mentality.³ “The duty to prioritize patient care above financial considerations is a hallmark of the specialty and is enshrined both in patients’ minds and the federal Emergency Medical Treatment and Labor Act law,” asserts Kenneth V. Iserson, MD, MBA, professor emeritus in the Department of Emergency Medicine at The University of Arizona in Tucson.

Private equity investment firms now own an increasing number of for-profit hospitals, healthcare facilities, and physician staffing agencies. “Their typical behavior is to maximize profits over a five- to seven-year investment period before liquidating these assets at a substantial gain. This outsized influence has raised ethical issues concerning proper patient care and the role of emergency physicians within the healthcare system,” says Iserson.

Private equity-backed staffing companies in anesthesia and emergency medicine gained notoriety for driving surprise billing — a practice where patients unexpectedly treated by an out-of-network provider are billed for the difference between the provider’s charge and what the insurer pays. “Yet, little is known about the evolution of private equity and publicly traded company investment in these specialties,” says Iserson.

Iserson and colleagues reviewed published datasets identifying the ownership structure of anesthesia and emergency medicine physician groups. Physician groups owned by private equity or publicly traded companies grew from 3.2% and 8.6%, respectively, of the national anesthesia and emergency medicine markets in 2009, to 18.8% and 22.0%, respectively, in 2019.⁴ The study findings illustrated the growing role of private equity and publicly traded companies.

“Their modus operandi is to prioritize financial goals over patient welfare, by implementing extreme cost-cutting measures and placing increased pressure on emergency physicians to meet untenable productivity standards,” warns Iserson. This short-term profit-driven approach does not align with the long-term goals of sustaining a robust, efficient healthcare system and providing patients with excellent emergency care, warns Iserson.

“Emergency physicians in nonprofit hospitals do not fare any better,” adds Iserson. Although these hospitals have an obligation to provide community service, including charity care, to maintain their Internal Revenue Service (IRS) tax-exempt (§501c3) status, they often fail to do so, operating more like for-profit hospitals. Of 2,425 nonprofit hospitals, 80% give less back to their communities than the hospitals receive in estimated tax breaks, according to an analysis conducted by the Lown Institute.⁵ “This gives them a financial advantage over for-profit, tax-paying hospitals,” says Iserson.

To navigate these ethical dilemmas, Iserson says that emergency physicians must uphold their ethical obligations, advocate for their patients, and contribute to the development of healthcare policies that prioritize patient well-being, justice, and autonomy over profit margins. “By maintaining their commitment to the highest standards of medical ethics, emergency physicians can continue to provide compassionate and quality care to their patients while navigating the ever-changing landscape of for-profit healthcare,” says Iserson.

Emergency physicians may feel torn between their professional obligation to prioritize patient well-being and pressure to adhere to cost-containment measures. “Open, transparent communication with hospital administrators is crucial to express concerns and advocate for the optimal allocation of resources — even when the resource is an emergency physician’s time with patients,” advises Iserson.

References

1. Morgensen G. Senate investigating whether ER care has been harmed by growing role of private-equity firms. Published April 1, 2024. https://www.nbcnews.com/health/health-care/senate-questions-private-equity-hospital-emergency-departments-peters-rcna145909
2. Derlet RW, McNamara RM, Tomaszewski C. Corporate control of emergency departments: Dangers from the growing monster. J Emerg Med. 2022;62(5):675-684.
3. Iserson KV, Paxton JH, Martin DR, Marcolini E. Emergency physicians’ ethical issues with hospital business models. J Emerg Med. 2024;67(1):e99-e104.
4. Adler L, Milhaupt C, Valdez S. Measuring private equity penetration and consolidation in emergency medicine and anesthesiology. Health Aff Sch. 2023;1(1):qxad008.
5. Lown Institute Hospital Index. Hospital community benefit spending: Improving transparency and accountability around standards for tax-exempt hospitals. Lown Institute Policy Brief. Published March 2024. https://lownhospitalsindex.org/wp-content/uploads/2024/03/lown-institute-fair-share-policy-brief-20240321.pdf