Private equity managers rebuked for slashing US doctor pay

Blackstone has hit back at claims by prominent US lawmakers that private equity-owned medical companies are cutting doctors’ pay and benefits while coronavirus rages across America.

The dispute has erupted at a difficult time for the private equity industry, which has appealed to Congress for financial assistance for portfolio companies.

Elizabeth Warren, the Democratic senator, and Katie Porter, a Democratic congresswoman representing California, jointly wrote in mid-April to Blackstone, KKR, New Mountain Capital and Frazier Healthcare Partners, demanding an end to reductions in pay for physicians employed by healthcare companies owned by the four private equity groups.

Neither Blackstone nor KKR dispute that doctors’ pay and benefits have been cut.

Blackstone, however, hit back in a letter dated April 28 seen by the Financial Times that criticised the lawmakers for peddling “false and misleading claims to score cheap political points”.

“To blame private equity for the unprecedented financial hardship currently facing the entire US healthcare system is intellectually dishonest and irresponsible,” wrote Wayne Berman, global head of government affairs at Blackstone.

Ms Warren, a staunch critic of Wall Street, and Ms Porter responded in a letter this week: “It is our responsibility, as members of Congress, to conduct appropriate oversight over companies that threaten to harm the health and security of the constituents we serve.

“The private equity industry may not be to blame for the ‘unprecedented financial hardship’ facing the entire healthcare system, but there is clear and consistent evidence that you have caused financial hardship for patients and healthcare providers.”

Coronavirus has forced the mass cancellation of elective surgery procedures, leading to significant financial losses for medical staffing companies including TeamHealth, which is owned by Blackstone, and KKR-backed Envision Healthcare.

TeamHealth, which employs 16,000 clinicians, has seen visits to emergency rooms by non-coronavirus patients drop by almost half, while demand for anaesthesia services has fallen 70 per cent.

Envision has also suffered a sharp drop in demand for its services and cut salaries of some of its doctors by 50 per cent.

Pay rates have not been cut for doctors employed by Alteon, a smaller provider jointly owned by Frazier Healthcare Partners and New Mountain Capital.

Nashville-based Envision, which employs more than 25,000 physicians, said that it had been “operating at a significant daily loss for weeks” and had been recently forced to “make difficult decisions” to preserve its ability to care for patients with Covid-19.

In a statement to FTfm, it added that it planned to raise pay to pre-crisis levels as soon as it could.

Envision hired advisers in April to help it restructure its $7bn debt burden and it has not ruled out a Chapter 11 filing given the impact on its earnings from coronavirus.

Both TeamHealth and Envision have already received an undisclosed amount of financial assistance from the US government. 

The row has escalated further with Ms Warren and Ms Porter reiterating their demands that KKR and Blackstone should stop cuts to doctors’ pay and benefits.

“As we said before, now, more than ever, you should be stepping up to protect the financial security of essential frontline [medical] workers,” the two lawmakers wrote in their follow-up letter.

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