The Lever - Out Of The ER, Into The Street

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In January, when Jeff Chien told Allan Kamara that he thought he was going to be fired from the Santa Clara Valley Medical Center emergency department, where they worked, Kamara thought his colleague was being paranoid.

After all, as the ER’s medical director, Chien was a legend, someone about whom everybody spoke in reverential terms. Santa Clara Valley Medical Center in San Jose, California, often referred to as VMC, was the sort of place where violent assault at the hands of patients was a near-daily occurrence. Kamara, a nine-year ER nurse at the facility, had watched the 300-employee department chew up and spit out plenty of lackadaisical suburban doctors, and when he worked his first shift with Chien in 2016, he did not have high hopes. Twelve hours later, he was a believer.

“A multiple major trauma would come through the door, and you would be just mesmerized by the way he would conduct this… theater of organized care,” said Kamara. “When he delegates, because he mixes his delegation with utmost humility, even if you don’t want to do what he’s telling you to do, you will find yourself doing it with passion.”

But Chien’s fear turned out to be correct. On January 14, US Acute Care Solutions, the private equity-backed physician staffing monolith that had taken over the hospital’s ER contract last June, sacked everyone’s favorite boss — with a cruel twist. The Ohio-based contract management group, which emergency doctors refer to by the acronym USACS, fired Chien as medical director, but kept him on the schedule as a doctor. So Chien continued to show up to work because, as someone who had basically been fired for no apparent reason, he seemed scared not to.

Chien declined to comment for this story. But Kamara says the physician's treatment was just one of many ways USACS has wreaked havoc on the facility. “You need to understand, these are young doctors who are full of energy and dedication,” he said. “But the day after the first meeting with USACS… you have never seen such young, energetic doctors so disillusioned and demoralized.”

It’s why Kamara, who leads the Registered Nurses Professional Association, the labor union for county-employed nurses, helped VMC’s ER doctors do something no other physicians like them had ever attempted to do: organize.

The doctors, with Kamara’s help, wrote letters to hospital leadership and the board of supervisors detailing some of what they believe to be USACS’ worst abuses. They enlisted more than 200 VMC employees to sign a letter formally protesting the ouster of their boss. They showed up at county board of supervisor meetings, pushing to terminate its contract with the private equity group. And on January 25, they staged a “walkout” to protest the private equitization of their profession, waving signs saying “WE CAN’T TRUST USACS” and “WE NEED A STRONG TEAM.”

In response to an interview request, USACS sent a statement attributed to Chief Clinical Officer Matt Patlovany that noted, “USACS is proud to be a physician-owned leader in emergency medicine, hospitalist, critical care and observation services, aligning with health systems across the country — including in Santa Clara where we’re actively working to address certain concerns onsite with our team.”

So far, the physicians’ efforts at VMC have yielded limited returns — but they are symbolic of a sea change underway in how many doctors view their role in the country’s ever-more-voracious for-profit health care system. That’s especially true of doctors working in emergency medicine.

Not long ago, ER doctors prized their unique ability to ignore both politics and profits, and treat patients in order of the severity of their condition, regardless of their insurance status. But companies like USACS changed all that. Over the past decade, the percentage of ER doctors working for small independent practices has shrunk by more than half to just 20 percent, and the corporate consolidations have led physician wages to stagnate even as billing surged. Then came COVID-19, which caused an abrupt plunge in ER traffic that left many doctors temporarily downsized at the very moment their skills were needed most.

Across the country, many ER doctors are privately arriving at the same conclusion that inspired the USACS uprising: It’s no longer enough to help people by treating one ER patient at a time, when the real emergency appears to be unbridled corporate greed.

As one VMC doctor put it, “If we’re going to have health care for profit, and that’s not how I would design a health care system, but if this is the way it’s going to be, we need a union.”

“This Is The Public’s Hospital, And The Public Deserves To Know”

It is an almost universally acknowledged truth in 2022 that our health care heroes are not okay. COVID-19 unleashed a million forms of chaos on an already stressed collection of health facilities, whose leadership for the most part responded by telling workers to do more with less — and to keep quiet about it.

At the time of the USACS takeover of the physician contract for VMC’s emergency department last summer, Kamara had been preoccupied with his own campaign to convince local officials to move more aggressively to fill the hundreds of open nursing positions at VMC and its satellite locations, because the onslaught of back-to-back-to-back understaffed shifts had brought his members to their boiling point.

But he also knew he and his colleagues were relatively lucky to belong to the 17 percent of nurses who are in a labor union, working at one of the 18 percent of American hospitals that was still government-owned.

The doctors didn’t share those advantages, and after Dr. Chien’s semi-firing, Kamara came to the conclusion that the staff’s predicament was far more dire. USACS, he realized, was profiting from their misery.

Consulting payroll records, one doctor discovered the ER had treated almost 1,000 more patients in December 2021 than it had the year earlier, despite logging 50 fewer physician assistant shifts. This meant the doctors had handled a 20 percent surge in patients with a 40 percent reduction in assistants. The physicians said they had done so by trying to avoid going to the bathroom, staying hours after the technical end of their shifts, and begrudgingly making patients wait even longer before receiving care.

As a result, say VMC employees, patients who weren’t bleeding to death or having a stroke were having to wait all day to see someone. One physician reported laying awake at night wondering if they might have been able to salvage an appendage that required amputation, if only a doctor had been available sooner.

At the same time, wages were being cut so drastically that on certain shifts, physicians were making less per hour than the average nurse there, with none of the county benefits like generous pension funds that often kept nurses from bolting for cushier gigs.

USACS, Kamara and his colleagues learned, was getting paid a flat fee to staff the ER. That meant that every time the company let shifts go unfilled or cut doctors’ hourly pay, they were pocketing the difference.

Complicating matters, USACS had a reputation for blacklisting or attacking doctors who questioned safety standards or reported unsafe practices. And since the job market for ER docs was notoriously punishing, none of the physicians wanted to make an enemy of USACS.

So Kamara agreed to do it for them. He circulated a petition to reinstate Dr. Chien that won the signatures of 217 ER employees, and stacked his schedule with meetings with hospital administration and county commissioners to try to convince them to part ways with USACS.

VMC physicians, meanwhile, sent multiple emails to the hospital’s CEO and county supervisors detailing the numerous areas in which they had allegedly violated their contract or state law. According to the emails, that included paying physicians only $121 an hour for treating jail inmates, nearly $70 less than apparently specified in contract, as well as forcing VMC employees to sign non-compete agreements, even though such agreements are illegal in California.

Finally, Kamara convinced the doctors to plan the thing they had spent months wondering whether they could pull off: A staff “walkout” to protest cost cuts and corporate greed.

“Leading a union that is working for the public, there are times when you have to let the public know what is happening,” said Kamara, who emigrated from Sierra Leone in his early twenties. “This is the public’s hospital, and the public deserves to know why their loved ones are waiting 14 hours in the waiting room.”

Technically, it wasn’t a real walkout. Most doctors interviewed said they were not sure walking off the job would be legal. Fifteen years ago, a New York nursing home boss successfully convinced a district attorney to indict 10 nurses who had walked out in protest of short-staffing and pay cuts on charges of patient endangerment and conspiracy.

So on the day of the rally, none of the USACS-employed doctors who were working that day left the ER. Instead, two dozen nurses and support staffers walked out, along with a handful of physicians who were on their day off. They carried protest signs and spoke to a reporter from the San José Spotlight about the “chaos” that had accompanied Dr. Chien’s termination.

(Photo courtesy of Tran Nguyen of The San José Spotlight)

Not everyone appreciated the action. Shortly after the Spotlight reported on the walkout, Gillian Schmitz, the president of the American College of Emergency Physicians — a professional organization for ER doctors whose board includes two USACS executives — slammed the article in a private ER doctor Facebook group.

“Look at the sources when you read these ridiculous articles and please be smarter than some of our patients who are drinking their own urine because someone read it ‘cured’ COVID on social media,” wrote Schmitz.

In response to questions, Schmitz sent a statement to The Lever noting, “ACEP reached out to Santa Clara emergency physicians and USACS representatives to understand the situation and ascertain how we might lend support — we believe we have a responsibility to understand the full story of what our members are facing… In this case, both parties confirmed public reports on recent events contained inaccuracies. This incomplete picture can impede meaningful solutions.”

But on social media and subreddits, many ER doctors anonymously cheered on the rally. “Any time I see physicians standing up for themselves and playing hardball, I applaud it,” one commenter wrote. “Playing Mr. Nice Guy has done nothing but led to physicians ceding control of their profession to people who are happy to abuse, disvalue, ignore, and treat them like discardable, hourly help.”

“Keep 💩in on USACS they deserve it,” wrote another. “Literally the worst group/company to work for.”

The Rise Of USACS

The idea that emergency rooms might become cash cows for Wall Street seemed so improbable at one point that Tom Frist, the co-founder and CEO of the hospital behemoth HCA Healthcare, predicted the opposite.

In a 1987 appearance before the Senate Banking Committee to urge Congress to pass legislation reining in hostile takeovers, Frist warned that if “corporate raiders” — the 1980s term for private equity firms — bought out too many American hospitals, they were likely to shut down “vital but unprofitable services” like emergency rooms, burn units, and maternity wards.

Indeed, burn units and maternity wards have closed en masse amid private equity’s move into health care. The HCA hospital in San Jose, for example, abruptly shut its maternity ward at the start of the COVID-19 pandemic.

But ERs turned out to be much more profitable than anyone anticipated, especially after the company now known as Envision began sending insured patients inflated bills and threatening to destroy their credit if they did not pay. Such “surprise billing” turned ERs into big enough business for corporate raiders that the largest players in the specialty — TeamHealth, Envision, and Schumacher Clinical Partners — have been passed around among more than a dozen major private equity firms over the past two decades.

But over the past few years, these behemoths have been struggling. Their balance sheets already strained from multiple leveraged buyouts, the corporations found themselves decimated by pandemic lockdowns and legislation cracking down on surprise billing.

Enter USACS. Co-founded in 2015 by Dominic Bagnoli, the boss of an Ohio ER fiefdom, and Welsh, Carson, Anderson & Stowe — the same PE firm that had turned Envision into a cash cow in the early 1990s — USACS made slashing labor costs as central to its business model as price gouging. By deftly exploiting the surprise billing scandal, the company began carving out a brand as the workplace of choice of hip millennial docs and flooding the market in “cool” cities like Denver, Austin, and Charlotte.

Now, with the bigger corporations floundering, USACS suddenly faced far less competition in its quest to swallow smaller practices. By 2022, USACS had amassed 500 contracts in 30 states, putting its ER business in spitting distance of the industry leaders.

USACS has aggressively pitched itself as an ethical physician-owned “alternative” to private equity-controlled emergency medicine. In full-page ads and tweets brandishing the hashtag #OwnershipMatters, the company promoted itself as an anti-corporate institution “solely owned by our physicians and hospital partners.”

But the reality of USACS’ corporate structure is almost the inverse of what such marketing suggests.

While doctors may technically own USACS, the majority of its profits are controlled by the half-trillion dollar private equity firm Apollo Global Management. According to the USACS statement provided to The Lever, “Apollo is a supportive lender to USACS and in 2021 provided financing to enable our physician-led buyout, giving doctors full control of our business when our former capital partner sold their minority equity stake… Apollo is a supportive lender, but has no right to exert operational control at USACS.”

But that financing means that barring some miracle, Apollo likely controls the company’s destiny — since that capital came with what appear to be virtually impossible terms.

In several deals it called “a form of hybrid capital,” Apollo agreed to buy a total of $711 million in preferred USACS stock that would convert into something akin to high-yield debt in five years if management couldn’t come up with the funds to buy it back.

A USACS employee and shareholder told The Lever they have been repeatedly told by corporate representatives that the “interest rate” on Apollo’s investment is 10.5 percent. That means that every year, USACS needs to pay its investors at least $75 million in dividends, which is roughly half of what the Moody’s credit agency estimates the company earns every year. Those payments would likely be a lot easier to manage if USACS didn’t have an additional $725 million in old-fashioned debt, taking another $47 million or so in annual interest expenses out of its coffers.

It’s possible that USACS will pull off an earnings surprise: Its numbers were good enough in 2021 that USACS paid investors an $83 million dividend in the third quarter, according to Moody’s. But Moody’s, for one, described the terms of the Apollo deal as a veritable guarantee that USACS’ financial structure will experience a “material change” within the next five years — which is bond-lawyer-speak for, “physician owners are going to get wiped out.”

Such a wipe-out could be devastating. Former employees say USACS has made its “physician ownership” so central to its corporate identity that doctors were constantly peddled “opportunities” to buy shares. “You definitely feel like, if you want to advance, you buy stock,” said another USACS physician.

But it’s hard to see how that could possibly work out for “physician owners” when Apollo needs to buy back its shares, especially given the private equity firm’s checkered history of encouraging employees to invest in its debt-saddled portfolio companies, as it did with Ceva Logistics, a shipping firm it controlled between 2006 and 2019.

In 2019, a Bloomberg investigation revealed that Apollo representatives had pressured and in some cases required Ceva employees to invest in company stock, all while Apollo was secretly buying up the company’s junior debt at deep discounts in preparation for a bankruptcy filing that would ultimately wipe out the value of those employees’ shares. That litigation is still ongoing, but the underlying scenario could be eerily similar to what could await USACS if the company can’t come up with $711 million by 2026.

In the meantime, in order to maximize profits for its corporate owners, USACS has made a business out of pay cuts and staffing shortages, claim several people who have worked for the company.

Four former USACS doctors, who asked to remain anonymous for fear of retribution, say the company deliberately alienates more seasoned doctors. “Bagnoli understood way back that the way to expand your business quickly is to get young doctors and have lots of parties and barbecues,” said a 60-something physician who claims to have been blacklisted by the company for unknown reasons.

“They literally market the disposability of their doctors to hospitals as a kind of asset,” said another doctor. Added a third who quit his job shortly after the firm acquired his practice: “USACS is actually shooting for doctors to last six months at the job. I mean, that’s their goal: If you last six months, they’re happy.”

The Denver metro area, where USACS now has more than 20 contracts, has become infamous among ER doctors as the lowest-paying market in the country, several sources say. A labor lawyer recently posted an excerpt from a USACS physician employment contract in the region specifying a base pay of just $21 an hour. The ER job is located in a hospital in Wheat Ridge, Colorado, where the median price of a single-family home was $700,000 in March 2022.

“Just Go Back To The Old Way”

ERs like that at Santa Clara Valley Medical Center offered limited benefit to surprise billing mills like TeamHealth, Envision, and Schumacher Clinical Partners. The emergency room’s clientele of largely impoverished patients with complicated and unprofitable afflictions was harder to monetize; its Level One trauma center designation, burn center, and Stanford-affiliated teaching hospital too expensive to maintain.

But industry veterans suspect USACS was interested in the VMC contract, and intends to keep it, for the same reasons it pushed to conquer Denver.

“San Jose is a perfect market for USACS,” said the blacklisted former USACS doctor. “They will flood the market with younger docs trying to figure out how to pay off $500,000 or $600,000 in student debt, and the poor young docs will be just drowning in patients and staying late every night but they won’t have any choice but to keep doing it.”

Indeed, when asked about how seven of about forty VMC doctors had quit the San Jose hospital since USACS had assumed the contract, the company’s medical director told Med Page Today, “San Jose is an attractive place to live and Valley is an attractive place to work, [and] recruiting to this site is not a disproportionate challenge.”

And while the VMC physician uprising organized by Kamara was certainly a speed bump for the company, USACS has no dearth of experience fighting pissed-off doctors.

In 2017, the firm acquired the ER contract for Summa Health, a hospital system in Akron, Ohio, after hospital brass terminated its long-term previous contract with just four days’ notice. The resulting upheaval led to the exodus of more than 200 doctors, the loss of the hospital’s residency accreditation, a wrongful death lawsuit, and years of negative headlines. Yet USACS won the Summa Health battle decisively, even restoring its residency program in 2019.

The VMC saga has played out with far fewer repercussions thus far. A promised town hall meeting on February 9 during which hospital officials promised to hear the staff’s case against USACS was abruptly called off hours before it was supposed to start. And while Kamara says hospital CEO Paul Lorenz promised him in early February that the administration would immediately begin searching for a new ER operator, on February 8, VMC instead announced that the USACS contract had been extended for another 18 months, until June 2023.

But that doesn’t mean the larger physician movement against the corporatization of their profession isn’t yielding some victories.

Over the past few months, hundreds of doctors have flooded the Federal Trade Commission’s public comment system to complain about the radical cost cuts and relentless price-gouging they experienced after practices were acquired by corporate mega-practices like USACS.

Many of these physicians were steered to the site by Take Medicine Back (TMB), a shoestring advocacy group formed less than a year ago by an ER doctor that has since turned into a genuine physician labor movement, with a 3,600-member Facebook group, an unexpectedly popular TikTok presence, and a constant series of online lectures and strategy sessions in which doctors discuss ways to stop Wall Street’s conquest of medicine.

In recent online discussions, members of the group have discussed the merits of sharing contracts and pay stubs among employees, called on colleagues to refuse to work for volume-based bonus structures that reward physicians for taking on unsafe patient loads, and floated the idea of approaching Amazon Labor Union leader Chris Smalls, who helmed the recent historic labor victory at a Staten Island Amazon warehouse, and asking for advice on how to design a new kind of worker organization.

Even the notoriously pro-corporate professional organization American College of Emergency Physicians (ACEP) appears to be bending to the shifting tides. After a swarm of ER doctors submitted comments to the Federal Trade Commission (FTC) complaining about private equity’s impact on their industry, ACEP asked its members to submit their grievances to the group so it could “compile these anonymized responses into a letter that we will share with the FTC.” Last week,

Schmitz, ACEP’s president, told the FTC the results of its surveys “clearly demonstrated the negative first-hand impact of acquisitions on our workforce.”

But still, the forces these doctors are fighting are poised to become even more powerful.

A recent Bloomberg report said Apollo, USACS’s shadow owner, may be on the verge of buying the company’s biggest competitor, the debt-saddled Envision. A merger of the two companies would have a foothold in nearly a thousand hospitals and clinics, cementing Apollo — which also owns more than 80 acute care hospitals — as one of the single most formidable forces in American health care.

Such a prospect is intimidating —but it could be the impetus that ER physicians need to follow in the footsteps of their colleagues at VMC and work collectively for the future of their profession.

“It’s terrifying, but you know there’s one thing we could do that could end it tomorrow, and that’s if we all just quit,” said one USACS veteran. “We quit en masse and tell the hospitals they’ve gotta go back to the old way and hire us directly. It’s the simplest thing in the world, because these companies don’t actually do anything but merge with their competitors. Literally no one would suffer. Just go back to the old way, because it didn’t work perfectly, but it worked so much better than it does today.”

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