Ming Lin could see the danger mounting.
It was March 2020, and growing numbers of patients were turning up with flu-like symptoms at the hospital where he worked as an emergency room doctor in Bellingham, Washington.
Dr. Lin was a seasoned veteran of the emergency room. Raised in Texas, he had worked in New York during the terrorist attacks of September 11, 2001, at one of the closest hospitals to the World Trade Center. He had moved to the Pacific Northwest with his family in 2003, taking a job at the hospital in Bellingham, a small city on the Puget Sound, about one hundred miles north of Seattle. Seventeen years later, he was rooted there.
Dr. Lin’s parents and his wife hailed from Taiwan, where the government had distinguished itself for early vigilance against COVID-19. He had been following the spread of the virus in Asia, making him especially attuned to the threat bearing down on the United States. The pandemic had already infected one hundred thousand people worldwide. Cases had been confirmed in Oregon, California, and in the state of Washington, where the governor had recently declared a state of emergency. Yet even as patients began arriving at Dr. Lin’s hospital in March 2020, administrators seemed not to be taking the menace seriously.
People were arriving with high fevers and hacking coughs, and then left to sit in waiting rooms without social distancing. The greeters at the reception desk were not provided protective masks. When some brought their own, they were told not to wear them for fear of alarming patients.
Because of shortages, nurses inside the operating room were being supplied one surgical mask per shift, not the N95 variety that afforded greater protection. They were forced to reuse that mask as they moved from patient to patient, a disturbing breach of basic hygiene.
Dr. Lin proposed that the hospital set up an outdoor triage center, allowing doctors to assess the needs of incoming patients while limiting the risks of spreading the virus. Management ignored him. Ditto his suggestion that patients arriving for treatment should be screened with questionnaires and temperature checks: the administration worried about upsetting people arriving for lucrative outpatient surgeries.
He urged that the hospital move faster to test staff for the virus, using a local laboratory that could provide results within a day, rather than relying on its usual provider, which entailed waits of longer than a week. But the hospital’s regular lab charged only $50 for a test, one-fourth as much as the quicker option—a no-go.
Dr. Lin was technically an employee of TeamHealth, a national staffing company that provided doctors to emergency rooms. When he complained to his supervisors that the hospital was jeopardizing his safety along with public health in a country of more than 300 million people, they opted not to press for changes. That might anger managers at the hospital—the paying client.
Dr. Lin was horrified that considerations of profitability were outweighing concerns about a pandemic that would eventually take the lives of more than half a million Americans. But he was not shocked. His employer, TeamHealth, was owned by Blackstone.
Steve Schwarzman had a knack for gravitating toward money. In the twenty-first century, in the largest economy on earth, money was increasingly in health care.
Americans spent $3.8 trillion1 on medical care in 2019 alone. That was more than double the level of two decades earlier, and an amount larger than the annual economic output of Germany. The money was changing hands in a fashion that was especially attractive to Davos Man—through transactions that were often unavoidable, and almost never transparent.
Schwarzman’s real estate success had demonstrated his dexterity at exploiting the vulnerable. American health care beckoned as the ultimate opportunity. Hardly anyone understood the complexities of their health insurance policies, making medicine a rewarding sphere for price gouging. Medical care was an industry nearly impervious to economic downturns.
Hospital emergency rooms were uniquely attractive2. Nearly half of all health care services were furnished there. The customer was frequently in no state of mind to haggle over costs or consider the financial consequences of submitting to care.
“A few times in every investor’s life, an immense opportunity3 appears,” Schwarzman wrote in his memoir.
One of those arrived in 2016, as Blackstone paid $6.1 billion to take control of Dr. Lin’s employer, TeamHealth, one of the two largest emergency room staffing companies in the United States.
That deal was a milestone on private equity’s aggressive march into American health care. Over the last two decades, the industry has invested more than $833 billion4 into more than seven thousand deals—$100 billion in 2018 alone.
Private equity players purchased entire medical practices (while establishing sham structures that kept doctors legally in control to avoid tripping state prohibitions). The industry focused on expensive specialties like plastic surgery, dermatology, and cardiac surgery. It captured ambulance services.
As in everything that private equity touched, health care found itself subject to intensifying demands for profit. The new owners of hospitals and clinics slashed costs, which typically involved diminishing care. They consolidated facilities and raised prices, while unleashing lobbyists and lawyers to deactivate traditional antitrust concerns. They shuttered institutions that failed to yield adequate returns.
As the logic of profit maximization gained influence—competing with the traditional imperatives of medicine—managers limited their purchases of protective gear and ventilators, undermining American readiness for future disasters. They introduced metrics that encouraged doctors to operate like units of business, focusing on enhancing revenue rather than prioritizing health.
Preparedness was subordinated to efficiency. In an era ruled by shareholder interests, a hospital room that sat unused was no different than a vacant hotel suite or an unsold car. It was capital wasted, an expenditure best skipped to free up cash to return to shareholders via dividends.
Some experts warned that entrusting vast swaths of American health care to Davos Men like Schwarzman was dangerous.
“It’s the same value-extraction strategy5 private equity specializes in,” the economist Eileen Appelbaum wrote in 2019, “only this time it’s quite literally a matter of life and death.”
The following year, the magnitude of the risk became inescapable, as a novel coronavirus swept across the United States and the world.
TeamHealth was one of the two largest players in the emergency room staffing industry. The biggest was Envision Healthcare, which had been purchased for nearly $10 billion by another private equity giant, KKR. Collectively, the two companies employed roughly one of every three6 medical personnel working inside American emergency rooms.
The two companies were masters of the idiosyncrasies of the American health care system—a uniquely confusing tangle of competing insurance companies affiliated with separate networks of doctors, all governed by varying rates of reimbursement and regulated by rules that differed from state to state. They exploited the fact that people with private insurance—as opposed to government-run programs like Medicare—paid wildly differing amounts for the same treatments depending on their health coverage. They also benefited from the reality that even healthy, clear-thinking people, to say nothing of those rolled into emergency rooms on stretchers, were frequently bewildered by the particulars of their policies.
One of the key things that most patients did not grasp was that they could go to a hospital that was solidly part of their insurance network, operating on the reasonable assumption that they would receive care at the lowest rate, only to be treated by an emergency room doctor who was outside of the network, triggering often-exorbitant bills.
Long before the pandemic, this practice was facing scrutiny from congressional panels that were investigating so-called surprise medical billing. The surprise was not of the happy variety. More than a fifth of the time that patients visited the emergency room of a hospital that was within their insurance network, they later discovered that an out-of-network specialist had administered treatment. This resulted in charges7 that frequently ran as much as seven times what Medicare would have allowed. People in low-wage jobs, who lived paycheck to paycheck, often found themselves hassled by collection agents8 for unaffordable bills. Surprise billing was at the center of the story of how medical crises were pushing Americans into bankruptcy.
A 2017 paper by a team of researchers at Yale University described surprise billing as an organized assault on American health care and an affront to the free market system. “These higher payment rates9, caused not by supply or demand, but rather by the ability to ‘ambush’ the patient, represent a transfer from the consumer to physicians,” the paper asserted.
By the summer of 2020, TeamHealth was facing a class-action lawsuit filed in California that accused the company of systematically preying on unwitting emergency room patients. A Blackstone spokesman rejected as “completely false” allegations that TeamHealth had engaged in surprise billing. But the Yale paper found that, in the first months after TeamHealth took over an emergency room, the share of patients billed at out-of-network rates10 soared from less than 10 percent to more than 60 percent. The same paper found that TeamHealth’s arrival at a hospital emergency room was soon followed by a roughly one-third increase11 in its out-of-network billing rates.
Surprise billing had become such a rewarding practice that TeamHealth and Envision spent more than $28 million12 on a 2019 advertising campaign that defeated congressional efforts to ban the practice.
The ads produced as part of their effort—the handiwork of a group named Patient Unity—were masterworks of misdirection. In one widely broadcast spot, a blond mother peered into the camera with a look of grave concern “A surprise medical bill can be traumatic, especially after a trip to the E.R,” she said. But the legislation being proposed was being advanced by “big insurance companies,” she warned. They were seeking to burnish their “record profits” with “a scheme called government rate-setting.” If they succeeded, the result would be “doctor shortages and hospital closures.”
Not for the first time, Davos Man sought to preserve his ability to take advantage of customers by provoking fear of the very mischief he was engaged in, while spinning the proposed regulatory fix as the source of the treachery.
The spread of the virus had exposed the extent to which Dr. Lin’s hospital, like much of commercial life, had been ruled by an excessive compulsion to stay lean as means of rewarding shareholders.
Multinational companies had overdone it on “just-in-time-manufacturing,” sparing themselves the costs of stocking warehouses with backup parts while relying on the web to order what they needed in real time. As electronics manufacturers locked down in China, factories from South Korea to Michigan suffered shortages of Chinese-made components. The world could endure a delay in the availability of the iPhones or auto parts, but the consequences of shortages in health care were profound. The lack of protective gear at Dr. Lin’s hospital, and at medical facilities around the world, were in part an outgrowth of this “just in time” mentality.
The most serious manifestation of the embrace of going lean was a grave shortage of hospital beds.
In the United States, the previous decade had seen the completion of 680 hospital mergers, which had been almost wholly unchallenged by federal antitrust authorities. The new corporate owners tended to view people coming in the door less as patients than as customers. They sought to minimize their dealings with patients covered by government programs like Medicare and Medicaid—which were regulated by revenue-limiting restrictions on pricing—while maximizing their treatment of more affluent patients bearing private insurance. They shuttered hospitals in lightly populated and low-income communities, given the relative dearth of revenues to be harvested.
Rural areas alone saw 170 hospitals shuttered13 in the fifteen years before the pandemic. Over the same span, rural American counties suffered drops in the availability of a range of services14, from surgery to obstetric care—a trend exacerbated by cuts to Medicare.
Corporate owners ran their hospitals as suppliers of services that had to be managed against demand. Too much capacity would yield downward pressure on prices. Shutting hospitals and consolidating their operations to reduce beds secured the same advantages that airlines gained in limiting flights: the ability to charge more.
By the time the pandemic arrived, the United States had 924,000 hospital beds15, down from nearly 1.5 million in the mid-1970s. In the twenty-five metropolitan areas16 that had absorbed the greatest consolidation, the price of a hospital stay had increased by as much as half.
In New York City, eighteen hospitals had closed since 2003, resulting in the loss of more than twenty thousand beds17, and leaving the nation’s most populous metropolitan area exposed during a surge in demand for medical care.
By late March 2020, the city was resorting to the construction of an emergency field hospital in Central Park18. Local morgues had run out of space19, with bodies stored in refrigerated trailers, while exhausting the supply of body bags.
As a second wave built in December 2020, with the United States suffering more than two hundred thousand new COVID-19 cases a day, patients were stuck for hours on gurneys stashed in hospital corridors awaiting care for lack of available beds. Hospitals that served more than 100 million20 Americans—a third of the populace—were in a critical state, having filled at least 85 percent of their intensive care beds.
Years before the coronavirus, Dr. Lin had noticed the subtle manifestations of practicing medicine under the employ of the world’s largest private equity company. At his hospital, Blackstone’s purchase of TeamHealth had tilted the balance slightly yet perceptibly away from patient interests and toward bottom-line imperatives. The concerns of emergency room doctors on a range of medical questions—from proper protocols for stroke victims, to testing for bacterial infections—now competed for primacy with the dictates of hospital management, which had an interest in treating patients faster.
Half the staff meetings were about treating patients; the other half were about how to extract more income from each patient. Schwarzman’s company paid its emergency doctors based on how many Relative Value Units (RVUs) they generated—a measure of revenue per patient. At the meetings, TeamHealth supervisors reminded doctors that some tests, like electrocardiograms, generated additional RVUs. The implication was clear: order more profitable tests, and be sure to document them.
TeamHealth reinforced this imperative by distributing spreadsheets listing every doctor’s name, and ranking their performance by RVU, making clear who was delivering, and who had to try harder.
Dr. Lin saw upsides to this approach. At hospitals that paid emergency room doctors by the hour, some people sat around doing very little. No one sat around inside Dr. Lin’s hospital, because their pay was directly tied to how many patients they treated.
But the downside was also evident. Doctors were incentivized to view patients as profit streams.
Dr. Lin also recognized the severity of surprise billing. Sometimes, people arrived at the emergency room in serious trauma, suffering heart attacks or blunt force injuries, and expressed fears of being admitted, given the size of the bills that their previous visits had generated. Lying on gurneys and in pain, people fretted about what their insurance would cover.
But this process of change had played out gradually. The pandemic swiftly revealed acute dangers.
Dr. Lin asked why the people at the reception desk were not wearing masks and was told that the hospital did not want to frighten patients. Some were arriving for elective procedures like colonoscopies, knee and hip replacements, hernia repair, and back surgeries—a major source of revenue.
This was a fault line running through the American health care system. The federal government, acting on the warnings of epidemiologists, was calling for the cancellation of elective procedures. But hospitals controlled by corporate entities that answered to shareholders resisted such moves as a threat to their bottom lines. At hospitals that did scrap elective procedures, many slashed pay21 and even eliminated staff in response to the hit to their revenues.
The University of Pittsburgh Medical Center had swallowed up other providers in a series of mergers, capturing 41 percent of the market for health care in Western Pennsylvania. With $20 billion in annual revenues, its president and CEO, Jeffrey Romoff, had netted more than $8.5 million in total compensation22 the previous year. The company was refusing to comply with an order from Pennsylvania’s governor to scrap elective procedures. At the same time, the system’s chief medical and scientific officer, Dr. Steven Shapiro, was publicly dismissing the threat23 from the pandemic and urging the authorities to reopen the economy—an obvious conflict of interest. If life got back to normal, his hospital stood to make more money.
In Bellingham, Dr. Lin argued that only surgeries that were required to address life-threatening ailments should be taking place. But elective procedures were the bread-and-butter of the industry. They continued uninterrupted.
Dr. Lin was especially incensed to see the nurses inside the operating room working without proper protective gear even as the hospital told the local newspaper that it had more than ample stocks. He approached his TeamHealth manager, complaining that employees’ lives were being imperiled. This yielded no action. TeamHealth did not want to jeopardize its relationship with the hospital by complaining about its management.
Frustrated, Dr. Lin took to Facebook to sound the alarm.
Previously, he had been an infrequent visitor to the site, going months without posting anything. He did not stand out as a promoter of any particular cause. His profile photo was a shot of himself surrounded by his three children in a swimming pool. He had previously shared a picture of an Elvis impersonator, and a photo of his wife playing the violin. On March 16, Lin posted a note he had sent to his manager detailing his worries about the dangerous conditions inside the hospital. It was “so far behind when it comes to protecting patients and the community,” he wrote, “but even worse when it comes to protecting the staff.”
TeamHealth’s human relations department spotted his Facebook post and arranged a phone call the following day among Dr. Lin, the company’s executives, and hospital administrators. After an hour on the phone, Dr. Lin was in no way reassured.
“The impression I get is that they are not interested in our concern,” he wrote on Facebook. “If bars and restaurants and non-essential stores are closed, so should elective procedures.”
Dr. Lin’s direct supervisor, Worth Everett, called him and urged him to take down his Facebook post and apologize to TeamHealth’s CEO. He said it was inappropriate for Dr. Lin to criticize his employer. TeamHealth’s business was by then struggling with “low volume,” Dr. Everett told him, because fewer people were coming to the emergency room. He accused Dr. Lin of worsening this trend by scaring people.
Dr. Lin refused to comply. He was a doctor whose loyalties were to patients, colleagues, and public health—not to maximizing revenue. COVID-19 cases were then rising inside the hospital.
His Facebook feed filled with support from around the country. People called him a hero. Other health care workers reported that they, too, were laboring with inadequate protection. Some offered to donate masks. Dr. Lin organized a collection effort, directing people to drop off items at a nearby health center.
Then the CEO of the hospital was quoted in the local paper offering assurances that none of the hospital caregivers who had contracted the coronavirus had gotten it via exposure to patients.
Dr. Lin was irate. He ridiculed the claim on Facebook.
The same day—twelve days after his initial post—another supervisor sent him a text: “You need not show up for work, your shift has been covered.”
Dr. Lin texted Dr. Everett to confirm this. His supervisor’s reply eliminated all doubt: he had been fired. He later filed a wrongful termination lawsuit against the hospital.
Dr. Everett did not respond to repeated messages left on his voice mail. When I reached out to Blackstone to ask about the issues that Dr. Lin surfaced, a spokesman for TeamHealth—working for a corporate communications company called Narrative Strategies DC—emailed a statement.
“From the very beginning of the COVID-19 pandemic, TeamHealth took every possible step to support our clinicians doing heroic work,” the statement said.
TeamHealth had not terminated Dr. Lin, according to the statement. Rather, he had been “removed” from his position by the hospital. “We repeatedly offered to place him at another contracted hospital anywhere in the country so he could do the important work of caring for patients during an ongoing global pandemic,” the statement read.
This was a typical Davos Man attack maneuver—hit back harder. Confronted with testimony that TeamHealth prioritized profits over public health, the company was essentially accusing Dr. Lin of dereliction in a disaster.
A few weeks after Dr. Lin’s departure, TeamHealth reduced hours for its emergency room doctors in the face of declining revenues.
By then, Schwarzman and his fellow Davos Men had a fresh opportunity to exploit. The pandemic had become a dire threat to the economy. Governments around the world were readying monumental rescue packages, with scant oversight.
Davos Man had been here before. He knew what to do.