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Envision Healthcare, the physician staffing firm that emerged from bankruptcy late last year, is exiting its California operations -- and one physician organization believes their lawsuit helped push the company out the door.

The American Academy of Emergency Medicine Physician Group (AAEM-PG) that it "resolved the case on confidential terms, including a partial reimbursement of AAEM-PG's attorneys' fees and costs relating to the suit."

"We believe they left California because of our suit and their desire not to see a precedent established that challenges their model on a national basis," David Millstein, JD, a lawyer who specializes in healthcare and complex litigation, and who represented AAEM-PG on the case, told 番茄社区app.

A spokesperson for Envision disagreed with that interpretation, saying in an email that the company "continuously assesses the states in which we operate" and that it "previously decided to exit all its management services and administrative operations in California, where we have been decreasing our footprint over the past several years."

The spokesperson also said the company "vigorously" denies allegations made in the AAEM-PG complaint and that its operating structure is "common across the healthcare sector and widely used by nonprofit, privately held, and public groups as well as hospitals and insurers."

AAEM-PG filed suit against Envision in December 2021, alleging that the company violated California "corporate practice of medicine" laws in its takeover of emergency medicine staffing services at Placentia Linda Hospital in California.

In particular, the suit "challenged the 'friendly physician model' by which non-physicians operate a medical practice in violation of law," according to the AAEM-PG press release. "In order not to run afoul of rules barring lay businesses from employing doctors, a single 'friendly physician' owns a physician group that acts as the direct employer of physicians, but a lay entity nominally providing management services is really in control of the practice, including billing, staffing, hours, payor contracting, and budgets."

The suit alleged that the "friendly physician" was not in fact the real owner of the medical group, which Millstein said is a common practice used by private equity firms and other corporate groups in healthcare across the country.

Envision tried to have the case dismissed in 2022, but the judge denied that request, Millstein said.

"AAEM is completely confident that if [Envision] stayed [in California] and the litigation continued, the testimony and documents obtained during the discovery phase would have proven AAEM-PG's factual allegations against Envision," AAEM on the settlement. "The Academy believes this case will discourage private equity-backed lay entities from seeking to purchase and control medical practices."

Envision filed for bankruptcy in May 2023, citing the No Surprises Act as a contributor to its financial problems. At the time, Envision was owned by private equity firm KKR; it has since taken on other investors, and emerged from bankruptcy in late fall.

Robert McNamara, MD, chair of emergency medicine at Temple University in Philadelphia, who also serves as leadership for AAEM-PG, told 番茄社区app that there's been a "resurgence in looking at the validity of corporate practice of medicine laws." Notably, California's Attorney General has co-sponsored a bill, , that would require the sale of any healthcare entity to private equity or venture capital owners to be reviewed by the Attorney General's office.

"We're the ones who swear the oath to our patients," McNamara said. "The business's job is to put investors first. ... That often doesn't work out for patients."

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