American Academy of Emergency Medicine

AAEM's Letter to the Inspector General

by Robert McNamara, MD FAAEM

If you have been following AAEM's advocacy efforts over the past year you are well aware that we have been working very hard to "open the books" to the working emergency physician. This is obviously important to you so that you can avoid being party to fraud and upcoding, but there is a deeper purpose to these efforts.

It is AAEM's belief that the forced fee-splitting that is commonplace in Emergency Medicine violates the federal and state anti-kickback laws. Essentially, we are being charged a "right to work" fee by contract holders. If we can prove (and this is where the open books is key and why it is so threatening to corporate EM) that the amount of our professional fees that is taken is beyond "fair market value" for what the contract holders return, AAEM believes remedies should be available through these existing laws.

AAEM believes that the current system in EM is a reversal of how it is supposed to work. We support the idea that the physicians should receive the fees and then determine what they will pay for management and other services. This is in the best interest of the patient, the physician, and those entities, including the federal government, that are paying for our services. The following letter is part of our campaign to address these concerns.

January 5, 1998

June Gibbs Brown
Office of the Inspector General
Department of Health and Human Services
330 Independence Avenue, SW
Washington, DC 20201

RE: Illegal Kickbacks in Emergency Medicine

Dear Ms. Brown:

As President of the American Academy of Emergency Medicine (AAEM) I am soliciting the assistance of your office in an important matter. AAEM believes that many emergency physicians are being forced into contractual relationships that violate the Medicare and Medicaid anti-kickback statute, 42 USC 1320a-7b (b). Specifically, emergency physicians are required to pay corporate Emergency Medicine staffing companies amounts that exceed fair market value of the services provided to them. This payment is made in exchange for the right to work in hospital emergency departments where the corporation "owns" the contract.

This is widespread in Emergency Medicine. Estimates are that 60% or more of emergency physicians may be affected by this. The Emergency Medicine marketplace is currently dominated by large corporate staffing companies. In many areas the emergency physicians have no other options for employment. This problem is exemplified by the 1996 annual report of EmCare (1717 Main Street, Suite 5200, Dallas, TX 75201). EmCare reported receiving $33,211,000 of profit in 1996 from emergency physicians professional fees. EmCare staffed 139 emergency departments in 1996 and, assuming an average of five full-time emergency physicians per emergency department, AAEM estimates that each emergency physicians had $50,000 of their professional fees paid to EmCare. A significant portion of this is from Medicare and Medicaid funds that are supposedly directed to the physician. EmCare provides little more than a scheduling function for the emergency physicians, and it is AAEM's belief that this $50,000 is well beyond fair market value for the services EmCare provides.

Importantly, this is a forced splitting of fees as the emergency physician has no other recourse for seeking privileges as an emergency physician in a hospital where a corporation holds the contract. Seeking privileges at another hospital is difficult given the dominance of such arrangements in Emergency Medicine. The list of corporations operating in this manner is extensive and includes EmCare and Spectrum (both now part of Laidlaw, Inc.), Coastal Physician Group, Inc., Med Partners, PhyCor, Inc., Sterling Healthcare (now part of FPA Medical Management), and National Emergency Services. The larger groups are publicly traded with stockholders receiving monies derived from the physician fees.

It is the belief of the American Academy of Emergency Medicine that the Medicare program does not benefit from kickbacks to these corporations. The monies that are directed for the payment of physicians professional fees under Part B of the Medicare program are being diverted to corporate profit with attendant excessive corporate salaries. EmCare reported a profit of $33 million from 139 emergency departments. When one realizes that there are approximately 5,000 emergency departments nationwide, the amount of these kickbacks on a national level is very high. As stockholders clamor for their dividends derived from the Part B payments there are fewer funds available to reimburse the physicians. This may affect the quality of care to Medicare beneficiaries as the corporations seek to hire less costly, less qualified emergency physicians.

I am including a copy of material from the EmCare 1996 Annual Report and an EmCare Holdings, Inc. Proxy Statement* to back up the claims we are making. AAEM stands ready to assist your office in this matter. We are seeking direction from your office as to how we can assist our member emergency physicians who find themselves forced into such a predicament.

Sincerely yours,

Robert M. McNamara, MD FAAEM
President, AAEM


*AAEM members who wish to receive copies of these materials should call the AAEM office at (800) 884-2236.