WASHINGTON — A private equity-backed health care company is slashing its doctors’ benefits in response to the coronavirus pandemic, even as many of those same doctors work to treat patients infected with the virus.
Alteon Health, which employs about 1,700 emergency medicine doctors and other physicians who staff hospital emergency rooms across the country, announced it would suspend paid time off, matching contributions to employees’ 401(K) retirement accounts, and discretionary bonuses in response to the pandemic, according to an email obtained by STAT.
The company also said it would reduce some clinicians’ hours to the minimum required to maintain health insurance coverage, and that it would convert some salaried employees to hourly status for “maximum staffing flexibility.” Administrative workers’ pay will be cut 20% and executives’ pay 25%, according to the company’s announcement.
The changes, the company said, are an effort to avoid layoffs. At many hospitals around the country, the coronavirus has forced the cancellation of nearly all non-urgent medical procedures, meaning that hospitals and private physician practices’ revenue streams have been suddenly cut off.
The benefit reductions come as part of a nationwide trend of hospitals and health systems reducing benefits and even cutting pay rates for doctors — including those on the front lines of the crisis. Over 1,100 clinicians and staff for the Massachusetts company Atrius Health are facing pay cuts, and doctors at hospitals including Beth Israel Deaconess Medical Center were told their accrued pay would be held back, according to the Boston Globe. Intermountain Healthcare, Utah’s largest health provider, also announced that its clinicians would face pay cuts, the Salt Lake Tribune reported. Hospitals have been particularly hard hit by the loss of high-margin procedures like orthopedic and cardiovascular surgeries, forcing additional pay cuts and furloughs for health workers in Kentucky, Maine, and Georgia, per a Reuters report.
Tenet Healthcare, a Fortune 500 company that staffs hospitals as well as urgent care clinics, including clusters in Detroit and Los Angeles, confirmed in a statement to STAT that it was similarly postponing matching funds for its employees’ retirement contributions.
Alteon, based in Maryland, provides staffing for hospital emergency departments across the country. It is listed within the portfolio of Frazier Healthcare Partners, a private equity firm with offices in Seattle and Menlo Park, Calif., outside San Jose. As of last year, Alteon said its operation included over 1,700 clinicians at 125 practice locations.
The company maintains a presence at hospitals in Queens, N.Y., and in other hard-hit states like New Jersey and Michigan, according to its website.
“We will communicate with you regularly and hope to return compensation to normal levels as soon as possible,” the company’s chief executive, Steve Holtzclaw, said in the email.
The company said it was slashing compensation, effective in mid-April, in response to low patient volumes at hospitals around the country. In light of the rush of coronavirus cases in emergency departments and intensive care units, the federal government has urged hospitals to cancel elective procedures and told the public to avoid setting foot in hospitals unless medically necessary. Those changes have taken a toll on hospital revenues across the country, leading Congress last week to include $100 billion for hospitals in an economic relief package worth well over $2 trillion — an effort to stabilize the nosediving U.S. economy.
“On average, our emergency department and hospitalist programs have seen a decline of approximately 30% across all client populations as patients avoid hospital environments, elective procedures are suspended, and general activity is reduced,” Holtzclaw said in the email.
Insurers have also struggled to quickly reimburse hospitals and companies like Alteon for medical care already provided, Holtzclaw said.
Alteon’s announcement comes in light of a wave of new scrutiny for private equity’s role in health care. On Capitol Hill, the House Energy and Commerce Committee last year announced a bipartisan investigation into three other private equity firms for their role in “surprise” out-of-network medical bills. Such charges often occur when patients visit a hospital within their insurance network, but are unknowingly treated by a doctor employed not by the hospital but by a separate firm.
The congressional investigation focused on three companies that have aroused suspicion surrounding the physician staffing practices they own, and their billing practices: KKR & Co. Inc., Blackstone Group, and Welsh, Carson, Anderson, & Stowe. Frazier Healthcare Partners was not part of the inquiry.
In a statement, a spokeswoman for Tenet said its decision to postpone retirement benefits was an effort to provide “the best possible support for our hospitals and other care facilities so they can continue to deliver life-saving treatment to fight COVID-19.” Employees would begin to receive matching funds for their retirement later in the year, she said.
Alteon did not respond to STAT’s requests for comment.