Im not sure I agree with the poster but the argument is something like, “hospitals who kill people receive less business under a free market. Under a regulated one there is less competition for people to choose from.”
I don't think medical care is particularly well modeled as a market: it's not clear that a small town hospital really can have any competition, or that someone in an active medical emergency has any meaningful choice about which hospital they get sent to. Similarly for specialty treatment.
Do they need to? In my hometown there is a private owned hospital that basically no one in town goes to because we all had, or knew someone who had, a bad experience there.
As an aside, The corporate owner of the hospital declared bankruptcy a few years ago.
A well-run healthcare system keeps people out of the healthcare system. Eg. every $1 spent in preventive care avoids $10 (not actual numbers) in other costs down the road through surgeries and other services.
Translate into capitalist terms, our fee-for-service model heavily incentivizes increasing profits through poor patient outcomes.
Sure, if people are dumb sheep with no choice but to keep going. But if a hospital actually fixed people more people are likely to choose that one which results in more business for them and less for their rent seeking competitor.
Definitely misaligned. The need for unlimited growth and profit will never align with healthcare, who's goal should be to keep as many people as healthy and out of the system as possible.
No, government R&D dollars did. Most of the significant advanced were "too risky" for corporations to view them as growth opportunities. Even though taxpayers fund the studies they're charged not only for the products but to read the results.
Government is a double-edged sword. Classifying drugs like psilocybin as class 1, meaning researchers couldn't even study it. Also, 13 year approval process makes it extremely expensive to try to get a drug to market. Of course government R&D dollars are needed!
> need for unlimited growth and profit will never align with healthcare
You’re extending concepts from one part of finance to another without context. Leveraged buyouts, the OG behemoth of PE, are not necessarily based on unlimited growth or profits. They’re one of the few models where steady-state (or even declining) profits sing.
(Not arguing for PE ownership of hospitals, by the way. I think they should be cooperatives.)
So I'm just thinking here but I think leveraged buyouts can lead to moral decay. Like consider a business. It's making 9.5m profit per year. By engaging in various unethical practices that could be increased to 10.5m per year. But why bother? Why give up your morals when it barely makes a difference?
Now someone does a leveraged buyout. The business has to pay 10m a year to service the debt. Now it's suddenly losing 500k a year. If things continue they might have to shut down. Think of poor Joe, his wife just had a child. Could he find another good job in this economy? But... if we bend the rules just a tiny bit, we could turn that loss into a profit... It's for the greater good, isn't it?
> making 9.5m profit per year. By engaging in various unethical practices that could be increased to 10.5m per year
This is orthogonal to leveraged buyouts or even capitalism; it’s maximising personal gains without thought to broader effects.
> But... if we bend the rules just a tiny bit, we could turn that loss into a profit... It's for the greater good, isn't it?
This is a fairer critique. LBOs impose pressure. But this also happens in any other constrained environment. It’s difficult to say why that leads some people to innovate and become disciplined and others to cut corners.
The difference between an LBO and unlevered buyout is the financing. That, in turn, means who can finance it. Arguing leverage causes moral decay is, at its core, an argument that ownership of these businesses should be constrained to the already wealthy; it’s aristocratic morality.
Grounding my scepticism of your claims is that most LBOs create value. They create employment. And for many businesses with low or no growth prospects, they’re the only way for them to persist. That said, they’re daring and glamorous and that means they get written and talked about more than e.g. municipal bonds.
Those are list prices I believe. The whole system is screwed up because of insurance. Insurers negotiate discounted rates, so if you have insurance, even if your insurance does not pay anything, you'll still get the group negotiated rate. The price you'll pay will be 1/10 of those numbers.
It's a broken system because for a person who does have insurance, they will really try to charge you the full $30k. But there's a reason for this too. Most people who don't have insurance are too poor to pay anything, and once the hospital has documented that, they can put their costs to a government "uninsured patient" fund.
It's a classic case of government intervention that is well intentioned but misguided and ends up messing up all the economic incentives. There are also a lot of really slimey and manipulative people floating around in the system, exploiting its brokenness.
I think that the more fundamental problem is price opacity. Insurance contracts make price discovery technically more complex, but not impractical. A medical service provider can legally tell you (in many or most states) that they will not disclose the price of the procedure they will perform on you. That kills free market mechanisms, which could drive the costs down. Most people don't even care, thinking "insurance will pay for it".
price discovery is irrelevant in medical procedures. who wants to go to the cheapest doctor to get heart surgery. the whole concept of pricing in a medical setting is perverse. Doctors are supposed to help the most in need first not based on who can pay more. the hypocritic oath doesn't say anything about pricing.
Well, yes. In a better parallel universe. In our real world, the healthcare industry in the USA is a for-profit business with few partial exceptions. The costs are ruinous and the trend is not sustainable. It is naive not to think about costs, unless you are wealthy. The cost of blood tests done at a local hospital's lab will almost always be much higher than at a large national network like Labcorp or Quest. Even after insurance contract repricing. Quality is the same. Why would you pay more? The doctor belonging to a local hospital network will be inclined to send your blood work there and use "Hippocratic Oath doesn't say anything about pricing" as an excuse...
We can attempt to deduce the point from the comment. The only assertive statement that the comment it replied to was "close to" the stupidest, but not the stupidest.
One possible evidence for that sort of statement is presenting the actual comment that is the stupidest, but such evidence was not presented explicitly.
However, we can assume that the author intends the justification to be self-apparent; with this assumption, the best explanation is that their comment itself is the evidence they wish to present, ergo the actual stupidest comment.
Judging by the grayness of your comment, people seem to find your response even dumber. They made 2 arguments, that people will pay a large amount to save their own life and that there is a regulatory barrier to spinning up your own medical center. It would be wise to attack the substance of those 2 points rather then pretend you are so much smarter than the poster that you don't need to dirty yourself to answer them but narcissistic enough to make sure everyone in the room knows.
Anyone should be allowed to open, own and run a new hospital. Which stands in direct conflict to your opinion.
I bet I could wander through these hospitals, chat to the staff and find ways to reduce cost and drastically reduce outcomes - given the numbers that are being quoted, it is not a challenging task. And I could probably set up a new hospital that did much better and is much popular with patients.
But I'm nobody special, so if I can see that every can. If it isn't happening, it is probably because setting up a good hospital is illegal. Working on making competition easier will get good results.
Can anyone provide a single case of where a private equity majority owned business thrived, expanded, or at least maintained market share for at least three years? It seems private equity focuses on extracting every bit of value from a business, as quickly as possible, and then walking away via asset divestiture and bankruptcy.
Yes and no. The hospital in my hometown is owned by PE. The situation is bad but they still exist, and are still the only hospital without driving half an hour to 'the big city'.
I haven't been in that loop since before covid, but last I heard they were running at a loss for years because they couldn't keep staff. The conditions (and pay) were abhorrent. They also really, really liked to buy entire practices from the most experienced doctors. The practice got absorbed and died quietly while the doctor would very understandably retire early or move far away.
So, yes, they've maintained market share. But only by virtue of being a natural monopoly.
> are still the only hospital without driving half an hour to 'the big city'.
By design.
Look up Certificates of Need. They are an application a prospective new hospital needs before breaking ground, to make sure an area isn’t “overserved” by hospitals (i.e. protecting profits).
Certificates of Need were lobbied for by … drumroll … hospital owners.
In my state this mechanism is being used to block expansion of inpatient mental health care services (in particular, we need many more beds for people recovering from TBI because they are drastically underserved). For the past 4 years the two biggest hospitals in the state have blocked all new hospitals simply because they can, and naturally they don't care to give up a slice of their pie.
> Can anyone provide a single case of where a private equity majority owned business thrived, expanded, or at least maintained market share for at least three years?
Most PE-owned companies do well. Do a paper search for median employment N years afterwards [1], net indebtedness 5+ years post, et cetera.
The problem is outcomes are negatively correlated with transaction size, so the more noticeable a deal the more likely it goes wrong. (There are also a few pirates in suits who go shockingly unpunished. But judging the cohort by them would be like judging tech by Chamath.)
I used to work for a company that was acquired by a PE firm (now known as Revenera). The software I supported got more expensive, the sales folks more aggressive on the "license compliance shakedown" games, and new features and bugfixes highly de-prioritized.
Sales were already going down and they responded by raising prices every time to make up for the lost revenue. The market itself was shrinking less than market share being lost.
Another product line I was less involved in pivoted direction and I guess is still doing OK.
OnSemi had TPG as a majority shareholder for like 5 years and did very well out of it. Initially TPG ruthlessly focused on costs but eventually that allowed OnSemi to go on an acquisition spree, picking up LSI’s fabs in Gresham and another company I can’t remember.
Are they buying the hospitals or the staff firms? Maybe ban non-profit hospitals from using staffing firms or they lose their non profit status. Does kaiser use staffing firms?
Then they have to answer "are we helping the patient" before they grow and expand rather than monopolistically expand while taking gigantic tax deductions.
Wrote Hacking Healthcare, operated/managed hospital systems, blah blah. The study being referenced here is https://doi.org/10.1001/jama.2023.23147. The conclusion of the study is that the identified set of hospitals performed worse on some key metrics, hospital acquired infections are in my opinion a pretty good bellweather of other problems. However, what they are defining as "private equity" seems to be pretty amourphous. Most of the studied hospitals were in private ownership that a lot of people would call "private equity" and then bought by different "private equity". I previously was involved in ownership and management through my company ClearHealth, of some of the facilities studied. Most people would identify that ownership as "private equity". I don't dispute that the hospitals seem to be performing worse after the ownership change (after our interests were divested in 2017-2020). As "private equity" we took over operations and management of many facilities of both public and private ownership and made them run really a lot better for both patients and owners, we were very very good at doing that.
Bottom line there are a lot of very incompetently run facilities out there, of both private, "private equity" and various form of public ownership/management.
It makes a great headline to say that a hospital can be "bought" but ownership and management of hospital systems takes a book to explain. Outside entirely vertical systems like Kaiser and even that has some complexity, hospitals are much more like medical malls than anything else. An ownership and or management company does not dictate what happens under their roofs in anything like the manner a private corporation like Coke, GE or Google would. 29 states make it outright illegal for non-licensed persons to own or manage an entity that engages in the practice or medicine. Most hospitals of any size over 100 beds involve at least dozens of seperately controled and managed entities. See "corporate practice of medicine (CPOM)" laws.
Finally I would add that measuring outcomes on an apples to apples basis is more or less an impossible thing to do. Lots of people don't like to hear that. Again something like HAI I think can be a useful general indicator as well as other measurements of preventable complications, but comparing outcomes at different facilities especially across size and location is more or less useless.
Ownership driving a hospital group for increasing profitability as their main goal will cause optimization for things other than patient care, they don't need to try and micromanage the internals.
> However, what they are defining as "private equity" seems to be pretty amourphous
It is an English anguage report, not an engineering document.
In that context it is crystal clear what is meant by "private equity". It is completely different from "private ownership"
It is not a problem at all.
There is a similar issue with objecting to comparing out comes. The effects are not able to be finely measured,but the scale of the effects makes that a pointless quibble.
The entry of private equity into health businesses, rolling them up into large groupings then squeezing them for profit has been documented in many places. Objecting because the measurements and descriptions are not perfectly precise is not very good.
(It is in the "squeezing for profit" that the problem lies - incase you need some help)
One set of owners will see a hospital as a community good, there to provide quality health care first and return a reasonable long-term sustainable profit.
Another set of owners sees it as a short-term exercise in maximising profit at the expense of everything else.
Both may technically be "private equity". But when Private Equity is mentioned as a category, its typically the latter.
Of course comparing hospital results is hard, and no doubt you can cherry-pick metrics, and find anecdotes to support any position. So the story is whatever will get the most clicks.
But it's not hard to postulate, or support the idea, that when owners maximise for profit, health care comes second. That is the capitalism way.
Of course not all hospital owners are bad. A hospital may change hands multiple times via good owners. Sooner or later though an owner comes along with the goal of extracting the maximum value out of thd business, in the shortest possible time, regardless of the long-term consequences. Value likely accumulated over decades. At which point destruction is inevitable.
Overworking doctors and understaffing to save money and any cutting corners being done is something that should be outlawed, rigorously inspected and investigated constantly. At every single hospital system I've been at in the last 10 years, which is several due to chronic health issues, there definitely needed to be at a minimum 2x as many working staff as there are. There's really not excuse other than corporate greed going on here. Profit margins should not be the bottom line in a life saving institution. It is destroying society from the inside out.
There is quite a bit of ambiguity in your wording and questions as others have mentioned.
With that said, would you talk about your experience in the PE hospitals handling insurance? As far as I know, one of the biggest drivers of consolation in hospitals and clinics is smaller operators struggling to deal with insurance. The second is the rising cost of equipment and specialties as far as I know.
> 29 states make it outright illegal for non-licensed persons to own or manage an entity that engages in the practice or medicine.
What is your point? Almost half of the states allow non-licensed persons to own or manage an entity.
A semi-rural hospital in California saw it's doctors unionizing because of the performance metrics it's management imposed on the doctors that threatened their licenses after they were bought out. Do not know if California is one of those states, but it shows the short sighted profit seeking nature that people do not want to find out about the place they had or going to have their surgeries at.
The staff are miserable at them. I know someone who works at one of these and they can barely keep staff employed. As a result, the quality of care suffers.
>"WhY dO We `haVe` to pAY tRaVELiNg NUrSeS SOOoOOO mUCh?!?"
Because you refuse to employ full-time staff at reasonable salaries, thus encouraging more nurses to become "travelers" getting paid 5x+ on short-term, renegotiable contracts.
When un[der]appreciated nurses find out that their hospital sucks (after having literally been bled dry of funding, talent, and ability to provide actual healthcare), it is a quick revolt into contract nursing.
I LOVE NURSES. To make a nurse hate you, is not an impossible task dear Healthcare Admin.
I know PE can act as vultures and clean up dead companies sometimes, but aside from that what good has PE done? Doesn’t the negative greatly outweigh the positive. What mechanism exists (in the U.S) to deal with this excess?
The excess (the externalization of harms to the general public and thr concentration of benefits in the capitalist class) is exactly the point of capitalism (as in, the reason the former mercantile class fought the established aristocracy for the system of features that eventually had the name “capitalism” applied to it by its critics, not as in the backward-looking idealized rationalization invented by the system’s defenders to counter critics later.)
The US (like most modern mixed economies, as much of the developed world has moved beyond pure capitalism) has a few features (progressive income taxation, some taxation of property and luxuries, schemes of redistribution supported by those) to slightly mitigate that excess, but its still a central feature of the system on which elites rely and which they aggressively defend.
> excess (the externalization of harms to the general public and thr concentration of benefits in the capitalist class) is exactly the point of capitalism
That excess production is also called improving living standards.
The excess being referred to is not the excess of production but the excess of negatige externalities over positive externalities, which is very much not “improving living standards”.
They capture more consumer surplus so the better they are at their job the worse off you are as a consumer. Where the market price is close to the marginal utility it barely matters if the company survived to continue to provide the product or service.
In my view what makes a product like the new Edison Motors EV Semis revolutionary is not the technology but saying no to more money and leaving consumer surplus on the table for the benefit of their customers. It’s hard to say no to more money.
So, the article lists exact counts of the Private Equity Owned hispitals. Is there a lost of them so that we can avoid them?
Seems the first reasonable thing to do. Not so much naming-and-shaming, as providing information so that individuals can make their own market decisions.
74 comments
[ 3.0 ms ] story [ 136 ms ] threadPE owning healthcare is especially problematic because nickel and diming on healthcare is playing with actual lives.
A well-run healthcare system keeps people out of the healthcare system. Eg. every $1 spent in preventive care avoids $10 (not actual numbers) in other costs down the road through surgeries and other services.
Translate into capitalist terms, our fee-for-service model heavily incentivizes increasing profits through poor patient outcomes.
https://www.cnbc.com/amp/2018/04/11/goldman-asks-is-curing-p...
You’re extending concepts from one part of finance to another without context. Leveraged buyouts, the OG behemoth of PE, are not necessarily based on unlimited growth or profits. They’re one of the few models where steady-state (or even declining) profits sing.
(Not arguing for PE ownership of hospitals, by the way. I think they should be cooperatives.)
Now someone does a leveraged buyout. The business has to pay 10m a year to service the debt. Now it's suddenly losing 500k a year. If things continue they might have to shut down. Think of poor Joe, his wife just had a child. Could he find another good job in this economy? But... if we bend the rules just a tiny bit, we could turn that loss into a profit... It's for the greater good, isn't it?
This is orthogonal to leveraged buyouts or even capitalism; it’s maximising personal gains without thought to broader effects.
> But... if we bend the rules just a tiny bit, we could turn that loss into a profit... It's for the greater good, isn't it?
This is a fairer critique. LBOs impose pressure. But this also happens in any other constrained environment. It’s difficult to say why that leads some people to innovate and become disciplined and others to cut corners.
The difference between an LBO and unlevered buyout is the financing. That, in turn, means who can finance it. Arguing leverage causes moral decay is, at its core, an argument that ownership of these businesses should be constrained to the already wealthy; it’s aristocratic morality.
Grounding my scepticism of your claims is that most LBOs create value. They create employment. And for many businesses with low or no growth prospects, they’re the only way for them to persist. That said, they’re daring and glamorous and that means they get written and talked about more than e.g. municipal bonds.
Last year, that same hospital posted 100 million in profits.
It is owned by a PE firm, and people wonder why appendectomies now cost $30k and simple ambulance rides are $15k.
It's a broken system because for a person who does have insurance, they will really try to charge you the full $30k. But there's a reason for this too. Most people who don't have insurance are too poor to pay anything, and once the hospital has documented that, they can put their costs to a government "uninsured patient" fund.
It's a classic case of government intervention that is well intentioned but misguided and ends up messing up all the economic incentives. There are also a lot of really slimey and manipulative people floating around in the system, exploiting its brokenness.
One possible evidence for that sort of statement is presenting the actual comment that is the stupidest, but such evidence was not presented explicitly.
However, we can assume that the author intends the justification to be self-apparent; with this assumption, the best explanation is that their comment itself is the evidence they wish to present, ergo the actual stupidest comment.
I bet I could wander through these hospitals, chat to the staff and find ways to reduce cost and drastically reduce outcomes - given the numbers that are being quoted, it is not a challenging task. And I could probably set up a new hospital that did much better and is much popular with patients.
But I'm nobody special, so if I can see that every can. If it isn't happening, it is probably because setting up a good hospital is illegal. Working on making competition easier will get good results.
c.f. elder care, child care, basic utilities.
If you own things that cannot be allowed to completely collapse, you can always dangle them over the edge and demand ransom.
I haven't been in that loop since before covid, but last I heard they were running at a loss for years because they couldn't keep staff. The conditions (and pay) were abhorrent. They also really, really liked to buy entire practices from the most experienced doctors. The practice got absorbed and died quietly while the doctor would very understandably retire early or move far away.
So, yes, they've maintained market share. But only by virtue of being a natural monopoly.
By design.
Look up Certificates of Need. They are an application a prospective new hospital needs before breaking ground, to make sure an area isn’t “overserved” by hospitals (i.e. protecting profits).
Certificates of Need were lobbied for by … drumroll … hospital owners.
Most PE-owned companies do well. Do a paper search for median employment N years afterwards [1], net indebtedness 5+ years post, et cetera.
The problem is outcomes are negatively correlated with transaction size, so the more noticeable a deal the more likely it goes wrong. (There are also a few pirates in suits who go shockingly unpunished. But judging the cohort by them would be like judging tech by Chamath.)
[1] https://bfi.uchicago.edu/working-paper/the-economic-effects-...
Sales were already going down and they responded by raising prices every time to make up for the lost revenue. The market itself was shrinking less than market share being lost.
Another product line I was less involved in pivoted direction and I guess is still doing OK.
Then they have to answer "are we helping the patient" before they grow and expand rather than monopolistically expand while taking gigantic tax deductions.
Bottom line there are a lot of very incompetently run facilities out there, of both private, "private equity" and various form of public ownership/management.
It makes a great headline to say that a hospital can be "bought" but ownership and management of hospital systems takes a book to explain. Outside entirely vertical systems like Kaiser and even that has some complexity, hospitals are much more like medical malls than anything else. An ownership and or management company does not dictate what happens under their roofs in anything like the manner a private corporation like Coke, GE or Google would. 29 states make it outright illegal for non-licensed persons to own or manage an entity that engages in the practice or medicine. Most hospitals of any size over 100 beds involve at least dozens of seperately controled and managed entities. See "corporate practice of medicine (CPOM)" laws.
Finally I would add that measuring outcomes on an apples to apples basis is more or less an impossible thing to do. Lots of people don't like to hear that. Again something like HAI I think can be a useful general indicator as well as other measurements of preventable complications, but comparing outcomes at different facilities especially across size and location is more or less useless.
It is an English anguage report, not an engineering document.
In that context it is crystal clear what is meant by "private equity". It is completely different from "private ownership"
It is not a problem at all.
There is a similar issue with objecting to comparing out comes. The effects are not able to be finely measured,but the scale of the effects makes that a pointless quibble.
The entry of private equity into health businesses, rolling them up into large groupings then squeezing them for profit has been documented in many places. Objecting because the measurements and descriptions are not perfectly precise is not very good.
(It is in the "squeezing for profit" that the problem lies - incase you need some help)
Another set of owners sees it as a short-term exercise in maximising profit at the expense of everything else.
Both may technically be "private equity". But when Private Equity is mentioned as a category, its typically the latter.
Of course comparing hospital results is hard, and no doubt you can cherry-pick metrics, and find anecdotes to support any position. So the story is whatever will get the most clicks.
But it's not hard to postulate, or support the idea, that when owners maximise for profit, health care comes second. That is the capitalism way.
Of course not all hospital owners are bad. A hospital may change hands multiple times via good owners. Sooner or later though an owner comes along with the goal of extracting the maximum value out of thd business, in the shortest possible time, regardless of the long-term consequences. Value likely accumulated over decades. At which point destruction is inevitable.
With that said, would you talk about your experience in the PE hospitals handling insurance? As far as I know, one of the biggest drivers of consolation in hospitals and clinics is smaller operators struggling to deal with insurance. The second is the rising cost of equipment and specialties as far as I know.
> 29 states make it outright illegal for non-licensed persons to own or manage an entity that engages in the practice or medicine.
What is your point? Almost half of the states allow non-licensed persons to own or manage an entity.
A semi-rural hospital in California saw it's doctors unionizing because of the performance metrics it's management imposed on the doctors that threatened their licenses after they were bought out. Do not know if California is one of those states, but it shows the short sighted profit seeking nature that people do not want to find out about the place they had or going to have their surgeries at.
Because you refuse to employ full-time staff at reasonable salaries, thus encouraging more nurses to become "travelers" getting paid 5x+ on short-term, renegotiable contracts.
When un[der]appreciated nurses find out that their hospital sucks (after having literally been bled dry of funding, talent, and ability to provide actual healthcare), it is a quick revolt into contract nursing.
I LOVE NURSES. To make a nurse hate you, is not an impossible task dear Healthcare Admin.
The US (like most modern mixed economies, as much of the developed world has moved beyond pure capitalism) has a few features (progressive income taxation, some taxation of property and luxuries, schemes of redistribution supported by those) to slightly mitigate that excess, but its still a central feature of the system on which elites rely and which they aggressively defend.
That excess production is also called improving living standards.
In my view what makes a product like the new Edison Motors EV Semis revolutionary is not the technology but saying no to more money and leaving consumer surplus on the table for the benefit of their customers. It’s hard to say no to more money.
What about the study makes you think it’s poorly run?
https://pestakeholder.org/ authored the report. A "union advocacy group"?
JAMA is the Journal of the American Medical Association.
Methinks you are too quick to dismiss this
Seems the first reasonable thing to do. Not so much naming-and-shaming, as providing information so that individuals can make their own market decisions.
https://www.axios.com/2024/01/17/summa-health-ohio-general-c...