I used to work for an adult daycare, for people with mental disabilities, and the amount of times people would play fast and loose with state regulations was concerning. This is an area where the government needs to be hyper vigilant, since some of these clients can't easily stand up for themselves.
Healthcare, especially the patient-facing part, isn’t like other services.
If we want private ownership of this infrastructure it has to look more like either a utility, where the state has a direct say in service changes and pricing, or a partnership, where unlimited liability flows through to the owners. I’m a fan of the latter.
Limited liability was an amazing invention. But it’s not appropriate for healthcare. Turn these services into partnerships and you’ll see the give-a-shit factor quintuple overnight. (You’ll also probably see a reduction in leverage.)
I'm not going to defend private equity, but the article mentions only bad outcomes for services owned by private equity. To get a more complete picture, they should probably also see if there are problems with companies that aren't owned by private equity funds. And then look to see what the positive outcomes associated with both private equity owned and non-private equity owned.
Which is to say... these are anecdotes that warrant further investigation, but then ensure effort is required only for equity fund owned services by looking at the whole picture. If there are industry-wide problems and you focus your effort on private equity fund owned services and companies, you might miss an opportunity to improve the entire industry.
That being said... PE funds have a bad reputation for a reason. I would be surprised to find they're not the worst offenders.
It is a shame that Private Equity destroys businesses when they can do a lot of good if done correctly. I actually like the idea of buying a business to help it grow further but PE just doesn't get it and they are too short sighted and focus on short term profits to squeeze.
Even the legendary Buffet has bad things to say about PE.
Is it correct to understand private equity as transferring service quality to the initial set of customers (who were subsidised) from the new customers who have to give up quality to make the whole venture feasible?
This has happened with special needs schooling in the UK.
Its basically caused costs to balloon to £10 billion.
However this is not entirely down to private equity as, these support packages are now the only way to get specialist support that used to be provided by other state/charity providers.
Profiting off of care provided to vulnerable or disabled people is, I'm going to say it, immoral. We should not be allowing this - for the simple fact that chasing profit inevitably means cutting the quality of care.
My father is currently in a long term care facility. He was in that same one for almost 5 years and never had a problem. Last year it was acquired indirectly via a larger group owned by a private equity firm.
This was not a low end place back in 2023. By the end of the last year not only had the cost increased by 30%. Internally there was a number of layoffs and quality shot down. Originally it was supposed to be 1 registered nurse per 4 people. By the end it was 1 "medical professional" per 20 who constantly rotated. Who would not answer if they had formal medical training.
Before at night people could go for walks on the premises, or if they were hungry they could go get hot food prepared by staff. New management locked everyone in at 8pm. If you missed any meal time you were told cope. Food was not allowed in the "suites" anymore. My dad and his friends there would go get together and spend time at night or socialize. Not allowed anymore after 8pm you were locked in your room.
I pulled my father out of there when he told me the above. Now his new retirement home is now also changing ownership.
This story as presented every time is a bit backwards.
These thinly capitalized private equity groups are in the business of scooping up "distressed assets". Being the only buyer to show up and getting something for less than it's worth.
The bigger story is that all of these business are up for sale and there are no better buyers. Our population is aging, the people who founded and run these private businesses are retiring en masse and cashing out. They don't have kids who want to run these businesses, and the workers of the business don't have the cash to buy it for themselves.
So part of this is a story of inequality - these businesses were accruing lots of capital value faster than even top earners could save to buy them.
But also, there is a clear and obvious policy fix - provide incentives for business owners to hand down their business instead of cashing out. Make it easier to provide long-term loans and financing for small-party buyers.
PE is essentially an active exploitation of the laws. I think you'd want to figure out a way to ensure there are long term incentives like requiring a 10x holding period or face very high short-term taxes for 'flipping' companies, similar to stocks. If a company fails any 'performance fees' or other such looting of the company should be forfeited and returned to creditors/customers/employees.
19 comments
[ 3.1 ms ] story [ 36.4 ms ] threadIf we want private ownership of this infrastructure it has to look more like either a utility, where the state has a direct say in service changes and pricing, or a partnership, where unlimited liability flows through to the owners. I’m a fan of the latter.
Limited liability was an amazing invention. But it’s not appropriate for healthcare. Turn these services into partnerships and you’ll see the give-a-shit factor quintuple overnight. (You’ll also probably see a reduction in leverage.)
Which is to say... these are anecdotes that warrant further investigation, but then ensure effort is required only for equity fund owned services by looking at the whole picture. If there are industry-wide problems and you focus your effort on private equity fund owned services and companies, you might miss an opportunity to improve the entire industry.
That being said... PE funds have a bad reputation for a reason. I would be surprised to find they're not the worst offenders.
Even the legendary Buffet has bad things to say about PE.
Its basically caused costs to balloon to £10 billion.
However this is not entirely down to private equity as, these support packages are now the only way to get specialist support that used to be provided by other state/charity providers.
https://kstp.com/kstp-news/top-news/minnesota-autism-expert-...
This was not a low end place back in 2023. By the end of the last year not only had the cost increased by 30%. Internally there was a number of layoffs and quality shot down. Originally it was supposed to be 1 registered nurse per 4 people. By the end it was 1 "medical professional" per 20 who constantly rotated. Who would not answer if they had formal medical training.
Before at night people could go for walks on the premises, or if they were hungry they could go get hot food prepared by staff. New management locked everyone in at 8pm. If you missed any meal time you were told cope. Food was not allowed in the "suites" anymore. My dad and his friends there would go get together and spend time at night or socialize. Not allowed anymore after 8pm you were locked in your room.
I pulled my father out of there when he told me the above. Now his new retirement home is now also changing ownership.
These thinly capitalized private equity groups are in the business of scooping up "distressed assets". Being the only buyer to show up and getting something for less than it's worth.
The bigger story is that all of these business are up for sale and there are no better buyers. Our population is aging, the people who founded and run these private businesses are retiring en masse and cashing out. They don't have kids who want to run these businesses, and the workers of the business don't have the cash to buy it for themselves.
So part of this is a story of inequality - these businesses were accruing lots of capital value faster than even top earners could save to buy them.
But also, there is a clear and obvious policy fix - provide incentives for business owners to hand down their business instead of cashing out. Make it easier to provide long-term loans and financing for small-party buyers.
I think the ideology of "market rules" at least semi-works until the market is manipulated, which is "always".
I prefer appointing who manages things meant for public good through voting, it's not perfect but at least it's not ultimate profiteering by default.