Resident/Student Issues: Contract Management Groups

Below is a summary of recent Common Sense articles that hopes to answer any questions residents or students may have about this issue.

CMGs affect the majority of emergency physicians in their daily practice. This is also a central issue to AAEM, who is working towards eliminating the corporate practice of emergency medicine.

What are Contract Management Groups (CMGs)?

CMGs (also known as physician practice management or PPM) flourished in the 1980s when hospitals were having difficulty staffing their emergency departments (EDs), relieving hospital administrators of this burden. CMGs quickly became popular and profitable. Their success led to further growth, increased profits and expanded services, including comprehensive coding and billing services. Currently, AAEM estimates that approximately half of all EDs are staffed by large or national CMGs, such as Team Health, EmCare, PhyAmerica Physician Group and EDS. Some regions are so dominated by the industry that CMGs control the only jobs available to graduating emergency medicine residents.

CMGs are usually bound by a contractual agreement to recruit physicians, manage and staff the ED, and bill and collect payment for ED services. In addition, these companies may cover expenses for continuing medical education, risk management, medical director training, customer relations and client service training. While the development of emergency medicine as a specialty has solved many of staffing shortages of the 1980s, CMGs still play a valuable role in staffing EDs in some of the more isolated rural locations due to their large pool of physicians.

While most of us would prefer to have someone else take care of the business side of medicine, it has become clear that large CMGs threaten our autonomy and ability to practice quality care, while profiting excessively from our hard work.

How do CMGs impair my autonomy? (the case of Mt Diablo)

The standard CMG contract states the emergency physician can be terminated on the spot and remain tied to CMGs through non-compete clauses. This can be devastating for physicians, both personally and professionally, as in the case of Mt Diablo. Team Health is the nation's largest CMG who provides outsourcing services to 232 hospitals. When Team Health lost the ED contract at Mt Diablo Medical Center, they sued three of their contracted physicians for continuing to work at the medical center. One of these physicians, Samuel Glassner, MD, gives his perspective:

"When we continued to work in the same Emergency Department after they were tossed out, and then refused to pay them $50,000, (that's right - FIFTY THOUSAND DOLLARS), for their permission to continue to work at the hospital, they filed suit…. (against) the doctors who stayed on to practice in the ED claiming breach of contract, unfair competition, misappropriation of trade secrets (has any one of us ever been given a document by a CMG labeled "Trade Secret"?), and my personal favorite, tortuous interference with economic relationship. Not exactly what you would call a gracious exit on their part."

The physicians decided to fight back and turned to AAEM for support, who proceeded to file a counter suit against Team Health for engaging in the illegal corporate practice of medicine. Fortunately for the physicians whose careers and livelihoods were at stake, AAEM and Team Health settled their lawsuits.

Why do they hide their billing practices?

Emergency physicians are routinely denied access to the patient care services that are billed and paid on their behalf. CMGs have long defended this practice despite laws to the contrary. Federal law (42 U.S.C. 1395(u.)(b.)(6.)) requires that the monies paid by the Health Care Financing Administration (HCFA) go directly to the healthcare provider, unless the healthcare provider is an employee. In 1996 when HCFA sent a letter to several CMGs stating that HCFA was going to strictly enforce the prohibition against reassignment of fees, CMGs responded by converting emergency physician's status from independent contractor to employee. Despite subsequent letters from HCFA saying that employed emergency physicians have the same right to see what is billed and paid in their name, the situation is much the same. As emergency physicians can be terminated without cause, requesting information on what is billed and paid in your name can put you out of a job.

This situation allows CMGs to extract excess profits from physician fees, often by amplifying CPT codes to maximize billings. This practice, known as fee-splitting, is also prohibited at the federal and state levels for exceeding "fair market value" for services rendered. AAEM estimates that CMGs harvest between $30,000 and $50,000 per year per full time physician. This is how CMGs produce profit margins of up to 40 percent. In addition to being unethical, if a CMG is charged for committing fraud in your name, you are jointly responsible under the current law and therefore also liable. Furthermore, these profits represent an excessive amount of money that is going to national corporations, rather than being invested back into under-funded emergency departments. This is why AAEM strongly opposes the corporate practice of medicine, where physicians are encumbered by the profit concerns of a corporation (See Open Books at http://www.aaem.org/openbooks/, Due Process at http://www.aaem.org/dueprocess/, Corporate Practice of Medicine at http://www.aaem.org/corporatepractice/ and Fee Splitting at http://www.aaem.org/feesplitting/).

Some good news is that HCFA/CMS issued a directive in March, 2004 to Medicare carriers stating that physicians who contract with an entity should have guaranteed "unrestricted access" to claims submitted on their behalf. AAEM pushed for this decision and will be watching its implementation carefully.

What about quality of care?

Again in the name of profit, CMGs do not necessarily hire the most qualified professionals or even board-certified emergency physicians. After searching Team Health's own web-site, Tom Scaletta, MD, secretary/treasurer of AAEM, says that in 2001 he found that nearly half of the 2,100 Team Health emergency physicians listed were not certified by the two primary certification boards in this country--the Allopathic and Osteopathic Boards of Emergency Medicine. They were not accredited by the Accreditation Council for Graduation Medical Education, and more than 100 of their doctors were neither board certified nor board eligible. CMGs have also been known to use 'startup doctors' who are board-certified, residency-trained and experienced when they first take over a contract to meet the expectations of hospital administrators. Then the start-up doctors are moved to staff the company's newer contract and replaced with physicians without board certification.

Ultimately, CMGs impair physicians' ability to improve their practice, given the lack of job security and department revenue. It therefore comes as no surprise that 75% of board certified emergency physicians have felt financially exploited at some point in their career and 49% have considered leaving the field due to unfair business practices (See http://www.aaem.org/medicaltrends/darkside.shtml). Such widespread job dissatisfaction can only have a negative impact on patient care.

But what if I have to work for a CMG?

The reality is that many of us (at least for now) will have to work for a CMG. A recent Common Sense Editor's Letter by Howard Blumstein posed some questions that might help distinguish between fair and unfair CMGs:

1) Does the PPM make medical decisions such as choice of medications? Or are all medical decisions up to the physicians.

2) Can the physician group cancel its contract? Will it terminate after some finite and reasonable period like 2-3 years? Or, alternatively, is it an open ended or very long term contract that is difficult to get out of?

3) Who hires and fires docs? Is it the group or does the PPM control these decisions? Can the PPM terminate docs "without cause" and without due process?

4) How much does the PPM take from the practice? Is it some reasonable amount (that amount would depend on the sort of services provided).

5) Who purchases the malpractice coverage? Is it the group? Or is it the PPM, in which case there is strong incentive to under-insure the docs.

6) What about restrictive clauses? Some private groups, especially in non-EM specialties, may want some restrictive covenants. But is there a clause that keeps a departing doc from competing with the PPM outside of the immediate vicinity of the practice in question?

For additional information on CMGs, see http://www.aaem.org/contractmanagement/. For information on setting up a democratic management group, see http://www.aaem.org/democraticgroups/.

By Samantha Honner, MD
November, 2004