An Oregon law that addresses hospitals’ corporate involvement in clinicians’ decisions regarding treatment has the attention of Washington state lawmakers.
As U.S. healthcare has increasingly consolidated into corporate ownership structures that include private equity interests, providers nationwide have relentlessly claimed that profits have been prioritized over patients. As a result, state legislative chambers have served as a hopeful avenue for people trying to remove private equity from medicine.
For the past two legislative sessions, Washington lawmakers have unsuccessfully tried to pass bills aimed at preventing the “corporate practice of medicine,” a broad term that generally describes corporations or shareholders — and not licensed clinicians — owning medical practices.
This happens often across the country when a local or regional clinician-owned practice is acquired by a larger corporation that installs a provider as the owner — so that the practice is still, technically, “physician-owned” — but in reality, is controlled by the corporation, which can be owned by shareholders, private equity, or sometimes, a confusing mix of both.
This practice is often referred to as the “friendly physician” model and is partly what led Oregon to pass a law regarding the corporate practice of medicine, the first of its kind in the nation. When adopted, Oregon’s law was viewed as the nation’s strictest guardrails preventing corporate investors’ ownership of health care practices. Washington lawmakers took note and largely modeled their drafted legislation on Oregon’s.
Oregon’s law was quickly back in the national spotlight when it was tested for the first time this year after PeaceHealth, which has three hospitals in Oregon and five in Washington, announced it planned to end its multi-decade contract in Springfield, Oregon, with a local emergency department staffing group and bring in an Atlanta-based company. Citing Oregon’s new law, local providers filed a lawsuit, claiming PeaceHealth and ApolloMD, the company it selected to staff the emergency department, were violating the state’s corporate practice of medicine law.
After months of national attention on the case and a court battle in which a federal judge said ApolloMD officials were being untruthful under oath, PeaceHealth announced it would walk back its partnership with the Georgia group and re-sign with the local group. After signing a new contract, the Oregon physicians’ group dropped its lawsuit, and the ordeal was widely perceived as a victory for proponents of the new law.
Multiple lawmakers in Washington, where PeaceHealth is headquartered, were paying attention and are now discussing how to approach another attempt at passing a similar law in the state.
Washington state Sen. June Robinson, an Everett Democrat and the architect and lead sponsor of the past two bills, remains interested in seeing corporate practice of medicine legislation adopted in the state, but told CDN it is too soon to say whether it will be introduced next session. For now, she’s rethinking nearly the whole bill.
“We can’t deny the fact that there’s a lot of money in healthcare, and hospitals and medical clinics will say that they need private equity, they need capital in order to survive in the current environment,” Robinson said. “Where do you draw that line between, OK, you need capital, you need investment, but how do you prevent that from driving clinical decisions? And that line is really tricky to get right.”
Washington’s version is a heavy lift, Robinson said, because it previously contained restrictions on medical practice organizations and hospitals, which means both groups lobby heavily in opposition.
The Washington State Hospital Association, of which PeaceHealth, Skagit Regional Health and Island Health are members, opposed the legislation and lobbied against it. PeaceHealth and Skagit Regional Health both said in statements that they don’t support the legislation.
PeaceHealth said the legislation, “could unintentionally disrupt team-based care models that are essential to delivering seamless, patient-centered care. It may also introduce new administrative requirements and governance restrictions that increase complexity and cost, without clear benefit to patients.”
“On the hospital side, one of their arguments was that ‘we practiced team-based care,’” Robinson said. “There was some interpretation that language in the bill would, for example, prevent nurse teams from functioning, which was not at all the intent. I personally disagree that that’s what the language said.”
Co-sponsor and Spokane Democrat Sen. Marcus Riccelli said there is strong interest in bringing the bill back, but what concerns can be addressed in the legislation is unclear.
“Are there people who are beholden to stockholders, pushing out care? It’s important that patients can trust the decision is for their health and not for profit,” Riccelli told Cascadia Daily News.
When introduced or passed, state-level corporate medicine laws have raised the question of which agency would, and can, enforce the law.
“Looking at what’s going on in Oregon, the actual lack of clear enforcement in the policy was actually a benefit,” Riccelli told CDN, explaining that sometimes it’s helpful not to be the first state to pass a new type of law. “That’s something to look at.”
Supportive lawmakers have been in conversation with the state health department, said Rep. My-Linh Thai, the Democratic sponsor of the House’s version of the bill, but the department only has the authority to investigate, not to enforce.
If the law is passed, Thai said they could have the state attorney general’s office handle enforcement, but this may entail creating a new department within the office and hiring more lawyers. Alternatively, the legislators could give the health department the authority to enforce, so that way, one agency is handling both investigation and enforcement. This question of enforcement, the legislators noted, must take a strained state budget into account.
The bill was supported by the Washington State Nurses Association and the state Office of the Insurance Commissioner, but the state hospital association has proved to be a formidable opponent. What would help the bill pass, Robinson said, is if more physicians spoke out in support, but many aren’t allowed to because it would mean opposing their employer’s position.
Although that’s not the case for all physicians and companies.
At the time state lawmakers heard arguments over the bill earlier this year, the then-acting medical director of hospitalist services at PeaceHealth St. Joseph Medical Center, Dr. Erika Walker, testified in opposition to the legislation. At the time, Dr. Walker was an employee of Sound Physicians, a staffing group part-owned by UnitedHealth’s OptumHealth and Summit Partners, a private equity firm, with which PeaceHealth contracts. (Physicians in Bellingham recently filed complaints with the state alleging Dr. Walker was involved in patient care without an active Washington state medical license.)
In her testimony opposing the legislation, Dr. Walker identified herself as “a member of Sound Physicians,” adding, “I serve as the medical director at PeaceHealth St. Joseph Medical Center in Bellingham.”
PeaceHealth said in a statement that, “we respect that each person may have their own views on the issues that matter to them — so long as it’s clear they are speaking for themselves and not representing PeaceHealth.” Employees of hospital contractors follow the policies of the contractor, the hospital added.
However, Dr. Walker said before lawmakers, “We’re the only hospital in Whatcom County. Our rural communities depend on access to this care.”
The amount of money spent on lobbying by organizations tasked with protecting the interests of hospitals is, itself, Riccelli said, a warning about whether patients are being put first.
“People spend money to either make money or protect money,” Riccelli said.
