As EM physician groups gather for ACEP, a look at where emergency medicine is now, and where it’s headed
Greetings from San Francisco, home of the 2022 ACEP Scientific Assembly!
It’s the first real in-person assembly since COVID, and it is great to see colleagues, friends, and people you trained with in person. But a lot has changed in emergency medicine in the last few years!
In this edition, I thought I’d talk about where the industry is now, and where I think it’s headed. I’ll cover:
- The 3 different categories of EM physician groups
- What the growth in private equity-backed groups means for hospitals
- How the industry will adjust to new legislation in the No Surprises Act
- And finally, how new EM physicians should think about their careers right now
And, as usual, if you are a hospital or health system leader who is interested in making a change to improve their emergency medicine services, feel free to reach out directly!
What all those big EM physician group banners mean
Walking around the floor of the exhibition hall at any ACEP, it may be tempting to think that the emergency medicine physician group services market is all about size.
The point of those big banners hanging from the rafters, the ones that you can see from almost anywhere, is of course to say something about their brand. The big banners communicate that the company hanging them is big, national, and has deep pockets (i.e., will throw a big party later).
But is that really the distinction you should draw from walking around, big vs. not big? If you’re a new EM physician thinking about where to make your career, it might be tempting to segment your choices into a big national EM physicians group vs. a small “democratic” group. Similarly, if you’re a hospital leader trying to look at emergency medical staffing in your emergency department, you might think it’s a question of a big group vs. a small one (or vs. a regional one).
But that’s really not right. I think it’s more useful and instructive to look at groups based on their growth strategy, or lack thereof. Looked at that way, there are really three categories of emergency medicine physician groups:
- Local groups
- Acquisition groups
- Organic groups
As I’ll explain, each of these has implications for the long-term viability and quality of the services they provide to hospitals.
1. Local EM physician groups
In years past, the option many docs looked for was the small, democratic group, where each of the physicians has a say, and they all make group decisions together about how to run their business. I think, in an ideal world, all of us would love to be a part of such a group.
Unfortunately, the market has been pretty hostile to small democratic groups for long enough that they are slowly becoming extinct. Most have chosen to sell their businesses, or they have gone out of business (for my take on selling, see one of my first newsletters, The Promises and Failures of Consolidation).
Another kind of local group is the non-democratic variety. This is usually a group with either one hospital contract or a small handful, that is run by either one physician or perhaps two or three together.
The pros of hiring (or joining) a local group are clear enough: they are likely to be devoted to the community and to the hospital they are serving. But the cons are equally clear, which is that a local group likely won’t have the outside expertise to really get serious about quality, or the resources to make the business side work. One of the contracts we are picking up right now is from a one-owner group, at his request, because he simply couldn’t make the revenue cycle work, and, a group like ours can.
For years, the question for these local groups was whether to continue to struggle with increased financial pressures and pressures from their hospital partners to meet certain quality metrics or to sell to a larger firm. Which brings us to the next category of EM physician groups.
2. Acquisition groups
Much of the story of emergency medicine over the past ten years has been about growth by acquisition, usually leveraging the financial resources of a private equity firm. Nearly every big group in the country at this point got that way through a partnership with private equity.
These are the groups with the big banners in the exhibition hall at ACEP. If you are about to finish residency, it might be tempting to run toward one of these big groups. The job market for emergency medicine physicians is less certain than it used to be, and you may be thinking that job security lies in size. And the same goes for hospital leaders: with so much at stake, it may be tempting to run toward size.
Yet, as the last three years have shown, size and scale don’t necessarily equate to being “the safe choice.”
First, if your growth strategy is acquisition-based or private equity-based, all you need to do to grow is write a check. In other words, no one checks your quality. They only check to see if your check is going to bounce. This way of growing is easier to do—there is lots of money in private equity.
However, the unintended consequence of growing this way is you take on tremendous amounts of debt. And if you take on debt, and something about your business model changes, it may turn out that what you paid for might not be as valuable as what you expected, and now you have trouble servicing your debt. This has absolutely happened with a few of the large emergency medicine groups (it’s happening very acutely right now to one of the largest), and their hospital partners have had to deal with the fallout.
What has changed about the business of emergency medicine over the last few years? In addition to a changing job market and increased financial pressures, there is the No Surprises Act (NSA). This new law has thrown a huge wrench in the plans of private-equity-backed groups, which perhaps is why so many of them lobbied so hard on the bill.
I wrote about the implications of the No Surprises Act earlier this year. The long-term impact is likely to be an evening out of rates across the industry, with commercial payors doing everything they can to exert downward pressure. I concluded:
The silver lining to the bill overall… is that emergency medicine groups will be less defined by pricing and forced more to compete on quality. The size and leverage of physician groups will matter less, because, over time, most groups will be reimbursed around the same amount for services provided.
In other words, the No Surprises Act has reduced the importance of size and scale to the EM physician group business model. It has also made growth by acquisition a liability, if not done incredibly carefully and wisely.
3. Organic groups
Finally, the third category of EM physician groups is those whose strategy is to grow organically (while it is true that acquisition-based groups can grow organically, that is not their primary strategy).
There are only a handful of these groups in the country, among them Core Clinical Partners. All of our growth over the last three years has been organic, which is to say submitting proposals in response to RFPs and winning new hospital contracts because the leaders there have determined we are the best choice to manage emergency services at that site.
We have no private equity partner, which means we have no crushing debt load to service, and also no board members or decision-makers outside our offices who have a say in how we grow and manage the company. This makes us more nimble and flexible in our contracts, and more able to make inevitable course corrections as a group if and when needed.
Fundamentally, an organic growth strategy means relying on quality. We have to do a good job, and we have to think about what every hospital administrator says about us, because we need every reference to be a good one, or we won’t win the next business.
We also have to get out there and sell our business model to prospective hospital partners, as opposed to selling our model to other physician groups we intend to buy. I believe this makes us more partnership-oriented than acquisition-based groups.
“Now, it’s all about quality”
A few weeks ago I was having a conversation with a hospital executive in charge of EM physician group services. He told me they felt like they had squeezed everything they could out of subsidies for the EM groups. “Now, it’s all about quality and who can perform,” he said.
For the past 18 months, all I’d been hearing about was finances, finances, finances. So, it was nice to hear from a hospital leader that, from a financial perspective, the choices between groups were not particularly compelling. I think this is the beginning of an important, and ultimately positive trend in emergency medicine.
Moving forward, it will be all about who can deliver on quality patient care—groups like ours are very well-positioned to grow in that environment.