[HN Gopher] Who employs your doctor? Increasingly, a private equ...
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Who employs your doctor? Increasingly, a private equity firm
Author : yarapavan
Score : 354 points
Date : 2023-07-16 14:44 UTC (8 hours ago)
(HTM) web link (www.nytimes.com)
(TXT) w3m dump (www.nytimes.com)
| balderdash wrote:
| I'm the furthest thing from having any knowledge here, but it
| feels like it should kind of be like how law firms can only have
| lawyers be owners with the idea that owners need to be aligned
| with codes of professional conduct/ethical obligations to clients
| etc
| pydry wrote:
| "UK opposition Labour plans to give workers a third of seats on
| company boards"
|
| https://www.reuters.com/article/us-britain-politics-labour-b...
|
| The business lobbies _freaked_ out when that was proposed, in
| spite of it being fairly moderate. It was one of the reasons
| for the character assassination extravaganza (anti semitism,
| "terrorist friends", etc).
| sxg wrote:
| The ACA enacted a completely opposite law--doctors are not
| allowed to own hospitals.
| CamelCaseName wrote:
| This is true for the veterinary world, probably other
| professions too.
|
| The result is that a veterinarian owns the business on paper,
| but the PE fund can take over or replace them as needed.
| darth_avocado wrote:
| The veterinarian world is doomed. Increasingly PE is taking
| over entire neighborhoods when it come to vet hospitals. This
| is led to increased wait times, lower standards of care,
| higher cost to consumers and higher pet mortality rates. That
| can very well translate to human healthcare.
| rcme wrote:
| But the barriers to starting a new vet are pretty low. If
| existing vets are inadequate, new ones can start.
| classichasclass wrote:
| No. My late father started his own solo vet practice in
| 1983, in that less capital intensive environment, and he
| still required a substantial amount of seed capital to
| procure and retrofit the building to meet regulations and
| have enough in the tank to keep it going through the
| initial lean business years. (There were other
| complications related to the specific property and title
| liens not relevant here.) In these days it's not much
| different than a solo medical practice in terms of
| startup costs.
|
| Later VCA and Banfield asked him every year to sell out
| and he never did, but he was an already established
| practice by then. I can see why new vets are much less
| likely to embark on it.
| rcme wrote:
| Not sure what your point is. I'm not saying you can open
| a vet for free. All businesses require capital. But, as
| evidenced by your father, opening a new vet practice is
| not some totally new thing no one has ever done before.
| People have done it and people will continue to do it.
| pessimizer wrote:
| > opening a new vet practice is not some totally new
| thing no one has ever done before.
|
| No one claimed no one had ever opened a vet practice.
| What they are claiming is that it is expensive. Nobody is
| accusing you of saying that someone can open a vet
| practice for free. What they are claiming is that it is
| expensive.
|
| > People have done it and people will continue to do it.
|
| Everyone knows this that independent vet practices have
| been opened in the past, and that some are likely to be
| opened in the future.
| darth_avocado wrote:
| Capital is the barrier and the requirement is not low in
| the areas PE takes over.
| rcme wrote:
| It seems like a vet would be about as expensive as
| opening a restaurant, maybe 1-3x as much. That doesn't
| seem like the most capital intensive thing ever.
| RALaBarge wrote:
| Other than the doctorate, of course.
| rcme wrote:
| Presumably there is already a supply of licensed
| veterinarians, unless the PE vet practices are hiring
| unlicensed practitioners.
| anigbrowl wrote:
| How many of them have easy access to a million bucks?
| darth_avocado wrote:
| It is more expensive to open a clinic than a restaurant,
| with the costs being anywhere from $500k-$1M. The main
| difference between the two is that the vet clinic has
| higher running costs aka salaries in the early years
| before the practice takes off. For restaurants, it's
| relatively lower (staff salaries and produce) if the
| demand is lower.
| gruez wrote:
| That model works well for professional services (eg. lawyers,
| accountants, consultants) because require very little capital.
| Everything from the office they work in, to the computers they
| type on can be leased. The same can't be said for hospitals,
| which cost hundreds of millions to build and equip. How are you
| going to raise all that capital from only the doctors? They're
| rich, but not that rich. Moreover, the payback on said
| investment is on the order of decades. A doctor late in their
| career has the most to invest, but they're also nearing
| retirement. What are you going to do with their shares? Sell
| them to newly graduated doctors who are hundreds of thousands
| in debt? Let them keep them, at which point they turn into
| quasi-investors?
| boilerupnc wrote:
| There were a number of physician owned hospitals. Here's one
| compiled list [0] circa 2013. ACA seems to have limited
| growth of these hospitals [1]. My view with a local flavor of
| this in Indianapolis (St.V Heart Center) was pretty positive
| and matches with the WSJ articles assertion. When doctors
| feel in control and view the hospital as a reflection of
| their own community - holistically the entire operation
| embodies and reflects that from the doctors to the nurses to
| the staff themselves. Similar to how a small-town practice
| reflects the values of the doctor who runs it and depends on
| its reputation. Some of these hospitals have been sold off
| and I've heard nurses and doctors lament of the better times
| when they felt more autonomy when the doctors made the
| decisions based on shaping a hospital that they'd like to be
| admitted to rather than the vision from an MBA.
|
| "Specialty physician-owned hospitals focused on cardiology
| and cardiac surgery were found to deliver higher-quality care
| than nonprofit hospitals, with lower rates of hospital
| readmission or mortality for high-risk surgery. Physician-
| owned specialty hospitals for orthopedic procedures, such as
| hip and knee replacements, offered lower costs and higher
| quality than nonprofit counterparts."
|
| [0] https://www.beckersspine.com/lists/14578-56-physician-
| owned-...
|
| [1] https://www.wsj.com/articles/end-obamacares-ban-on-
| physician...
| dcow wrote:
| I bet society would figure out how to make it work if the law
| changed.
| ajhurliman wrote:
| That's not true. There was a doctor owned clinic in Seattle
| (The Polyclinic) with multiple locations across the city. A
| few years ago it was purchased by Optum (United Healthcare),
| and the standard of care has fallen through the floor.
| magnawave wrote:
| ...and sadly the doctors have been fleeing too, all my
| doctors have left. Their replacements aren't bad, but not
| to the same top notch level of care. The Polyclinic was
| honestly off the charts excellent, and now it's just
| "fine". In a few more years who knows. The alternatives are
| unfortunately not better.
| balderdash wrote:
| 1) There is a big difference between a hospital and medical
| practice, 2) this is a solved problem as it relates to other
| professional service firm (law firms, investment banks (back
| in the day)).
| gruez wrote:
| > 2) this is a solved problem as it relates to other
| professional service firm (law firms, investment banks
| (back in the day)).
|
| How was it solved?
| balderdash wrote:
| When people are invited to become partners, usually they
| needed to write a check, but also buy-in over a number of
| years using a percentage of their earnings, as well as
| the firm potentially providing financing to buy their
| partnership interest. On retirement, partners were bought
| out (in many cases, getting paid out over a time until
| they were fully bought out)
| appplication wrote:
| As I understand it, there actually are laws for this for
| medical practices in most states (but I think not all?)
| thegaulofthem wrote:
| Easy, hire a partner-figurehead as a rubber-stamp and you're
| off to the races.
|
| I've seen similar in Federal contracting, hire a tick-the-box
| preference point partner with a make-work role to get
| contracts.
| chottocharaii wrote:
| This just in: businesses employ people
| JoshTko wrote:
| This will not end well.
| rr808 wrote:
| This seems just part of corporatization of nearly all jobs. It
| isn't just doctors, its restaurants, pharmacies, taxi firms,
| clothing stores, law firms, home builders. We used to have lots
| of small independent firms doing this, now people just work for
| bigger and bigger companies.
| hkon wrote:
| With enough money and a market you can in the end own everything.
| Which is what these companies have realized.
| multicast wrote:
| It is a free market, about 30% of all hospitals and doctor
| offices in the US are a for profit private corporation, thus they
| can be acquired as any other business by anyone. Like with
| pharma, most people have the very big misconception that just
| because its about health, that hospitals are excluded from free
| market and capitalistic principles. When someone offers hospital
| services or starts developing a new drug, he can charge whatever
| price he wants, and he will do it as long as profits are
| maximized and don't start to plunge due to too large price hikes
| (+ conflicts with insurance companies etc.). Hospitals in
| countries like Switzerland are known for the best medical
| treatment because they are almost 100% for profit - private /
| investor owned. Running a hospital is a business as any other +
| 95% of the US population has a healthcare insurance anyway. At
| topics like healthcare, most people are simply too much Hollywood
| educated and debate with irrelevant individual experiences.
| jmoak3 wrote:
| PE can be replaced with "Some guys".
|
| PE bought your hospital? More like, "some guys" bought your
| hospital.
|
| Ask why "some guys" bought it instead of using their money in the
| market, or why your hospital sold in the first place. As anyone
| who's company has been purchased by private equity knows, it's
| probably because your hospital wasn't doing so hot to begin with
| and "some guys" were willing to gamble that they could turn it
| around and make some money before it blew up. This will mean
| turning the screws on the customers and employees and creating a
| sucky environment. But this is just accelerating what was likely
| already an inevitable decline.
|
| As with any risky investment, there's a solid chance the PE firm
| will lose money on the gamble.
|
| See this recent hacker news submission:
| https://news.ycombinator.com/item?id=36048464, 30% of rural
| hospitals are closing due to costs growing faster than revenues.
|
| Hospitals, in many cases, are not good businesses. Especially in
| places where doctors, nurses, and other staff can demand a
| premium based on their local market's dearth of professionals. PE
| firms in my opinion are part of the slow death of these failing
| businesses - the last attempts of "some guys" desperate for
| returns trying to squeeze blood from a rock that everyone else
| was avoiding.
| bp0017 wrote:
| See, what I fundamentally disagree with is the notion that
| hospitals should be "good business." Why are "some guys"
| allowed to try to make a profit here at the expense of patient
| care? Healthcare (or government) should not be run like a
| business, and instead be provided as a service using the taxes
| we already pay for, much like how roads are built. The health
| of the public is our most vital infrastructure, and public
| infrastructure requires investment that you really can't make
| money on without defeating the whole purpose of public service.
| recursivedoubts wrote:
| america, unsatisfied with spending vastly more privately on
| healthcare than the rest of the world, while _also_ spending more
| publicly on healthcare than the rest of the world, continues to
| find ways to make healthcare yet more expensive and ruinous for
| its citizens.
| dazc wrote:
| Maybe true but, for the rest of the world, you're still the
| 'go-to' place where medical miracles can happen. Money had
| something to do with this.
| orwin wrote:
| I don't think it's true. In fact, I'm pretty sure each year
| 14 millions Americans are going to Canada for medical
| treatment, and richer American are going to Singapore/Uk.
| Retric wrote:
| That is more a function of the size of the US medical system
| than its overall quality. The average American is going to
| whatever hospital is closest when they have an emergency, but
| if you're healthy and wealthy enough to go anywhere then you
| can pick and choose extreme outliers. Large countries simply
| have more extreme outliers in both directions.
|
| More US citizens seek treatment outside the US than foreign
| nationals seek treatment inside the US. But, people have
| specific diseases and sometimes the best treatment is inside
| the US, though more often it isn't.
| chaxor wrote:
| *In mice
|
| - you forgot that part there
| olddustytrail wrote:
| Not really. The number of people that's true for is miniscule
| compared to the number of Americans who engage in medical
| tourism.
| weberer wrote:
| What are the numbers for each one?
| olddustytrail wrote:
| 1.4 million US medical tourism versus 200k traveling to
| the USA (according to Bard).
| poorbutdebtfree wrote:
| Metabolic health is responsible for at least 3/5 of healthcare
| costs. 4/5 of SNAP recipients have at least one underlying
| metabolic health issue. Big food wins. Big medicine wins. Big
| pharma wins.
| elishah wrote:
| > Metabolic health is responsible for at least 3/5 of
| healthcare costs.
|
| I would love to see a source for that, as it is strongly at
| odds with all data that I've ever seen. For example:
|
| "Medical cost of overweight and obesity combined is
| approximately 5.0% to 10% of US healthcare spending." https:/
| /onlinelibrary.wiley.com/doi/abs/10.1111/j.1467-789X....
|
| "Costs attributable to overweight and obesity in Canada were
| $6.0 billion in 2006, with 66% attributable to obesity. This
| corresponds to 4.1% of the total health expenditures in
| Canada in 2006. https://onlinelibrary.wiley.com/doi/abs/10.11
| 11/j.1467-789X....
|
| "Costs attributable to obesity totaled US$ 269.6 million
| (1.86% of all expenditures on medium- and high-complexity
| health care)." https://journals.plos.org/plosone/article?id=1
| 0.1371/journal...
|
| This is a notoriously difficult thing to estimate, and highly
| influenced by exact definitions of any given study, so some
| variance is to be expected. But going from around 6% to >60%
| seems like quite a jump.
| poorbutdebtfree wrote:
| Does this data even include the costs associated with
| private EMS transporting tens of thousands of type 2
| diabetes/dialysis patients every morning from their private
| residences and skilled nursing facilities to chop shops
| like Davita?
| worik wrote:
| We can cherry pick until we go green...
|
| Here is the top result for me at: https://duckduckgo.com/?q
| =Metabolic+health+share+of+healthca...
|
| https://www.hsph.harvard.edu/news/hsph-in-the-news/poor-
| diet...
|
| Starts with:
|
| > Unhealthy diets account for almost 20% of U.S. health
| care costs from heart disease, stroke, and diabetes,
| according to a new study.
|
| Please help yourself to cherries
| elishah wrote:
| Sure, but even that cherry looks a whole lot more like
| the rest of the numbers I've found than the one
| grandparent comment offered.
|
| The study you cite only examines the costs for
| cardiometabolic disease, not all healthcare costs. And
| then says that suboptimal diet is responsible for 18% of
| that specific category.
|
| "18% of the costs of the one category most closely
| linked" and "5-10% of all healthcare costs" seem like
| plausibly compatible measures. Whereas the grandparent
| comment's claim remains out of synch with those by an
| order of magnitude.
| verteu wrote:
| Yes, 20% of the cost "from heart disease, stroke, and
| diabetes", which is significantly less than 20% of the
| total. (The press release has less ambiguous wording: "18
| percent of all heart disease, stroke and type 2 diabetes
| costs in the country").
| projektfu wrote:
| In my space (Veterinary) there has been a ton of this. To people
| who are used to the way things were, it's been very disruptive.
| Lots of boomers are retiring and a young vet would only be able
| to pay a 5x multiple, perhaps, but PE is swooping in at 12-15x.
| They usually lose a bunch of staff at the transition so they have
| to hire quickly. It's good for workers in the short term, as
| wages and salaries are much higher. It's hard for clients, prices
| are up to compensate for the high wage and to increase/juice
| returns. Sometimes the purchases flop spectacularly, but they
| must be winning on average.
|
| At the same time, suppliers have consolidated and there's barely
| any competition. They're also vertically integrating.
|
| 10 years ago we were worried there were going to be too many
| veterinarians. Actually there were, but the wave of age 60+ vets
| retiring has flipped that around. Now there aren't enough vets or
| licensed technicians.
|
| I am concerned that the future will have another big swing in the
| downward direction, while multiple PE firms try to find bag
| holders at the same time. But maybe there industry will just grow
| and grow. Who knows?
| tholman wrote:
| I'd noticed some strange changes at our veterinary office, where
| they'd usually give my dog a full round of shots once a year,
| suddenly they decided to break it up into multiple different
| rounds, meaning I'd pay 3 times instead of the one. After a
| little research I'd found that they'd been bought by a private
| equity firm, and on further inspection had found a lot (NYC) of
| practices had changed hands the last few years.
|
| There's been some antitrust cases, but the FTC clearly can't
| block many. The changes are clearly costing everyone more money
| for no reason, but can anyone really block this?
|
| - [1] https://www.ftc.gov/news-events/news/press-
| releases/2022/06/...
| handwarmers wrote:
| I remember reading about PE's involvement in hospice care and it
| made me feel sick to my core.
|
| https://news.ycombinator.com/item?id=32597326 ( When private
| equity takes over a nursing home)
|
| The Portopiccolo Group got sued, but the lawsuit did not go
| anywhere. https://www.mcknights.com/news/shuttered-nursing-home-
| avoids...
|
| they are shady to say the least -
| https://medicareadvocacy.org/private-equity-and-nursing-faci...
|
| Also see - https://news.ycombinator.com/item?id=36108182 (
| Private Equity Is Now Dominating the US Hospice System)
| mmanfrin wrote:
| Monarchy begets Democracy begets Oligarchy.
| rayiner wrote:
| The best things lawyers ever did for themselves is make it
| illegal for MBAs to own law firms.
| chrisaiv wrote:
| Archive:
| https://archive.is/20230714031646/https://www.nytimes.com/20...
| jimnotgym wrote:
| Time to get my part subject in.
|
| PE firms often control boardrooms without taking seats. Maybe
| they have the right to appoint a director but don't take it up,
| but come to board meetings anyway. The legal phrase for someone
| with control, but not registered as a director is 'shadow
| director'. Shadow directors are supposed to have the same
| responsibilities legally as real directors. In practice they get
| the real directors to risk sanction for insolvency and don't risk
| themselves. This needs tightening up massively.
| ubermonkey wrote:
| PE is a toxic destroying cancer on our economy, and should be
| stamped out as vigorously as possible.
| lordnacho wrote:
| To me it seems like PE has simply discovered a loophole in the
| system. We want a system where creating value for people is
| rewarded, but PE has found a way to legally get the rewards
| without improving society. Normally this is called a scam or a
| fraud, and there are laws for standard stuff like taking people's
| money without giving them what you promised.
|
| For PE however, they've found a way around it, using the
| machinery available in the economy. For instance, once you are
| able to pay out a dividend that covers your cost of purchase,
| whatever comes next doesn't matter a whole lot from an investment
| point of view. You may have saddled the target with a huge debt,
| but that's a heads-I-win-tails-you-lose situation. If the firm
| does ok, PE actually win more. If it goes bankrupt, oh well. PE
| firm is still doing fine.
|
| The risk is entirely on all the other interested parties:
| employees and customers.
|
| But because we only have one side of the "created value" balance,
| all we can really see is some PE guys get paid. We don't see the
| other side, which is pretty hard to untangle. You can make an
| argument that everyone is better off with society organized this
| way, but you can't really ignore that many people seem to think
| they're worse off in this world.
| lr4444lr wrote:
| More like running many kinds of businesses has become more
| hassle than its worth.
|
| Medical malpractice premiums are very high, insurance payouts
| are stingier, and medicine has become more capital intensive
| than ever as newer medicines and diagnostics increasingly
| dominate, along with an aging population that needs more
| intensive care.
|
| Doctors report being more burnt out than ever. It's an
| attractive proposition to outsource the hard and messy stuff to
| a firm that knows the business angle well so that they can keep
| their sanity and focus on what got them interested in medicine
| in the first place while still getting a great salary.
|
| I don't love the situation, but let's not pretend it happened
| in a vacuum.
| vkou wrote:
| No, you've completely misdiagnosed why PE is involved.
|
| It is involved because there is slack on the system in the
| form of downtime, and it figured out that if it just buys up
| all the doctor's offices, makes the doctors rush through the
| cases, and keeps them busy seeing patients every working
| minute, the practice and it's owners will make way more
| money.
|
| Quality of care will decline, but unless the doctor is
| actively doing surgery, or something else risky, whatever
| money they lose due to the decline in quality will be more
| than offset by grinding through patients quicker.
|
| It's almost impossible to sue a doctor for malpractice in
| Texas, yet the exact same problem with PE is happening there,
| too.
|
| Vets are another example where this is happening - and again,
| it's not because of frequent $XYZ,000 malpractice
| settlements. Anything that's not billable hours seeing
| patients is considered to be damage by the system, and
| capitalism tries to route around it.
| tpmoney wrote:
| >It is involved because there is slack on the system in the
| form of downtime, and it figured out that if it just buys
| up all the doctor's offices, makes the doctors rush through
| the cases, and keeps them busy seeing patients every
| working minute, the practice and it's owners will make way
| more money.
|
| This doesn't explain why doctors are selling though. Why
| aren't doctors just not selling their practices and taking
| a more relaxing job running things themselves? Why are they
| choosing the option that requires them to "rush through the
| cases, and [keep] busy seeing patients every working
| minute"? Surely if that was something they enjoyed doing,
| they could do that and capture all the "slack" for
| themselves? So why sell your office to someone else to
| capture all that slack while your own work load increases?
| vkou wrote:
| > This doesn't explain why doctors are selling though
|
| Retiring doctors are selling because this lets them cash
| out their practice for way more than they'd otherwise get
| for closing it and auctioning off the equipment.
|
| > Why aren't doctors just not selling their practices and
| taking a more relaxing job running things themselves?
|
| The ones that are selling are the ones exiting the rat
| race, the downsides aren't affecting them.
| tpmoney wrote:
| So why aren't new doctors opening their own practices?
| What has changed in the last 20/30/40 years that are
| leading up and coming doctors to choose working for
| someone else instead of opening their own practice?
| vkou wrote:
| > So why aren't new doctors opening their own practices?
|
| For the same reason that nobody builds out a second set
| of power lines to compete with an incumbent power
| utility.
|
| It's capital-intensive, the size of the medical market
| for the area is fixed, and you'll just be fighting the
| established practice for it in a zero-sum game.
|
| You can win, but it's going to be way more work for less
| reward than just finding a PE practice that's hiring/a
| traditional practice with spare space that's looking for
| a partner.
| fiprofessor wrote:
| I think they will over time if PE deals start to implode
| or reveal themselves to be as bad as people claim. But
| the reaction will take a while to happen.
|
| With partnership-based models, it's not necessarily the
| case that most of the doctors who owned their practices
| were necessarily that entrepreneurial. Many probably
| joined the practice and then became partners after a few
| years with buy-in and sweat equity. There's some risk and
| business management involved, but not the same as really
| doing your own thing. The path was laid out. (Kind of
| like lawyers at big law firms.)
|
| The real entrepreneurs were the ones who initially
| founded a practice from scratch. But for some specialties
| where PE has taken hold, you need a group of people with
| enough capital to do that, negotiate contracts with
| hospitals for admitting privileges, wait-out a non-
| compete from a prior practice, etc. That takes time, and
| meanwhile, the net share of PE held firms may still
| increase for a while as other firms continue to sell out.
| lotsofpulp wrote:
| Because the ROI dropped precipitously. Governments were
| paying much better, insurance companies were paying much
| better, liability was a lot less, documentation and
| paperwork was a lot less.
|
| The 80s to 00s doctor years were very good. Now the power
| is in the hands of the government and huge insurance
| companies, and to compete with them, you need to be part
| of a large healthcare provider group, which ends up
| happening as an employee.
|
| Plus medical school debt and increasing years to become
| fully practicing like having to do longer residencies and
| fellowships.
| lapcat wrote:
| Possibly medical school debt.
|
| And of course nobody has sympathy for doctors with
| student loan debt, but the debt may still have important
| effects on the economy down the line.
| Calavar wrote:
| > Doctors report being more burnt out than ever. It's an
| attractive proposition to outsource the hard and messy stuff
| to a firm that knows the business angle well so that they can
| keep their sanity and focus on what got them interested in
| medicine in the first place while still getting a great
| salary.
|
| The corporatization of medicine is one of the major causes of
| burnout, not an escape from it. I am not aware of any
| physician who enjoys things like things like "all hands"
| meetings with the CEO and CMO to talk about the "new vision"
| for the group. Or doing several different annual/biannual
| compliance trainings for meaningless BS. Or having to go
| through several layers of internal bureacracy if they want to
| buy a new piece of equipment. Or having zero say in the
| hiring process for the ancillary staff that they work with.
| Or having very little say in how many patients they see
| during the day, or during which hours, or which types of
| diagnoses, or how the clinic staff does intake and rooming.
|
| The docs who are selling their practices to PE are doing so
| to cash out right as they go into retirement, not to
| outsource their admin work. Admin work is already outsourced
| in the private practice model. The practice hires ancillary
| staff for clerical work and contracts an accounting firm for
| help with the financials.
| flippinburgers wrote:
| Regarding burnout I know individuals in the medical field who
| wish they could control their schedules by reducing the
| number of clients per day, but they simply are not allowed to
| because leadership expects them to turn certain levels of
| profit.
| wpietri wrote:
| This would be a good argument if it were only medical
| practices where PE was active and having a malign effect. But
| that's most definitely not the case.
| MattGaiser wrote:
| That just means for numerous professions, running a
| business is more hassle than it is worth. Accounting,
| dentistry, massage, etc. all come to mind. Those people
| want to all practice their field, not deal with licenses,
| paperwork, insurance, and tax. Everything from burnout to
| higher required investment to increased regulatory hassle
| applies to other fields as well.
| vkou wrote:
| > Those people want to all practice their field, not deal
| with licenses, paperwork, insurance, and tax.
|
| This problem has been solved for a century, in the form
| of the practice which employs support staff, sometimes a
| multi-practitioner practice which shares those staff.
|
| PE rolling into it has been a very recent phenomena.
| wpietri wrote:
| That doesn't mean that. That is what one might infer if
| one believed the conclusion were true. But that's only
| persuasive to those predisposed to believe it. Which I am
| not.
|
| Regardless, running a business has always been more
| hassle than it's worth _for people who would just rather
| have a job_. But it has been worth it for those who
| prefer independence. If you wanted to claim that things
| were radically worse, you could take a swing at it. But
| given the rise in communications, computers, SaaS, and
| service outsourcing, there 's a strong case to be made
| that it's much easier to run a professional service
| business.
|
| And I think the just-want-to-do-the-work thing is a bit
| of a red herring. I was recently talking with an
| optometrist whose joint practice was sold to a PE firm.
| His precise complaint was that PE was _interfering_ with
| just doing the work, which he saw as helping patients.
| MattGaiser wrote:
| Did he say what lead him to sell then?
| wpietri wrote:
| It is frustrating to me when I respond in detail to
| somebody's querulous points and they just abandon
| everything discussed to hare off in some new direction.
| It certainly doesn't motivate me to write a quality
| reply.
| maxerickson wrote:
| Doctors are burnt out because there aren't enough of them and
| they make a lot of money working for businesses that
| prioritize revenue generation.
| treis wrote:
| Think the economic reality is that the days of a doctor hiring
| a couple employees and hanging their shingle are over. The
| capital requirements are too high and the counter parties too
| big for individuals to thrive anymore. PE is one of the ways to
| consolidate and get some economies of scale. Plus I think most
| doctors prefer doctoring to running a business.
| maxerickson wrote:
| We should flood the market with doctors so that private
| equity doesn't see it as an attractive investment to hire
| them.
| lordnacho wrote:
| But there's nothing to stop all the doctors in an area from
| forming a cooperative. That would also be private equity, but
| not in the sense described in the article.
|
| The PE in the article is firms with other values than what
| traditional medical professionals have, and those values are
| conflicting.
| treis wrote:
| There's some anti-trust complications with loose
| cooperatives negotiating as a collective. Fine line between
| collective bargaining power and price fixing.
|
| Organizations more like employee owned businesses exist but
| those come with their own sets of problems.
| s1artibartfast wrote:
| It seems that way if you only look at the PE part of the
| transaction. When a firm takes on debt, someone is backing that
| debt and loses out if the firm fails. If it's a the same PE
| firm or a bank making the loan, they would lose in the case of
| a bankruptcy.
|
| In theory, there's nothing wrong with companies trying new
| things and sometimes failing. The only problem is when barriers
| are too high and it is difficult to replace failed companies.
| wpietri wrote:
| Very well put. And this has been going on for a while. A decade
| ago the NYT had a great article on how private equity destroyed
| Simmons Mattress: https://archive.is/uGYrT
|
| And you're right that the effects are obscured. I happened to
| be talking with an optometrist earlier this year. He and his
| partners sold their practice to a PE firm on the promise of
| making everything better. But he had started to moonlight at
| somebody else's non-PE practice because the PE overlords kept
| making things both worse and more expensive for the patients,
| and less and less satisfying for the doctors. And all of this
| was explained in a hush-hush tone, presumably because there
| were NDAs involved.
| dragonwriter wrote:
| > To me it seems like PE has simply discovered a loophole in
| the system
|
| Serving private equity literally _is_ the focus of the system
| in capitalism; it hasn't found a loophole, it is the thing
| around which the system is engineered.
|
| > For PE however, they've found a way around it, using the
| machinery available in the economy.
|
| No, the effect you describe is literally what several centuries
| were spent engineering the machinery of the economy to create,
| its not an unintended pathway recently discovered that that
| machinery can be bent toward.
|
| Its what "capitalism" was named, by its critics, for.
| YetAnotherNick wrote:
| > The risk is entirely on all the other interested parties:
| employees and customers.
|
| How is PE increasing their risk in any way?
|
| Maybe you are right that PE are getting more wealth than they
| create value but unless you want PE to be banned because of
| jealousy, you haven't pointed on any negative consequence due
| to them.
| civilized wrote:
| I think it should be illuminating to balance narratives like
| this with simple questions along classical economic lines:
|
| 1. Why is private equity ending up with all these resources?
| Who is selling to them and why? Why didn't this happen before?
| It's not like PE is new.
|
| 2. When PE loads up a firm with supposedly unsustainable
| billions of debt, someone is on the other side of that
| transaction, lending the billions. Who does that and why? Are
| they perpetual suckers, unaware of the decades of experience we
| have doing this?
|
| I don't necessarily think the conventional prestige media
| narrative around PE is _wrong_ , but it never seems to get
| around to asking these basic economic questions. It can't be as
| simple as some metaphor where bandits are roaming the economic
| countryside pillaging innocent victims. Voluntary transactions
| are occurring and we need to understand why to address any
| underlying issues.
|
| "Unpleasant things are happening, we need some sort of
| regulation" doesn't seem like a sufficient basis for socially
| beneficial action. Whatever underlying issues are making
| healthcare an attractive PE target will probably persist, and
| maybe get worse, if all we do is pass some kind of "PE bad,
| stop PE" law.
| amelius wrote:
| > Why is private equity ending up with all these resources?
| Who is selling to them and why? Why didn't this happen
| before? It's not like PE is new.
|
| Exploiting financial loopholes is like hacking. We see more
| hacking these days because more people depend on these
| systems, and more exploits are found.
|
| Note: "hacking" can be defined as using a system in a way it
| was not intended to be used. Hacking is also punishable by
| law. PE firms and the like should not get away simply because
| they are following the law, as they are abusing the law in
| the same way as hackers abuse computer systems.
| ericjmorey wrote:
| The victims never consent to the sale. They have no say in
| the transactions that victimize them. You're looking at two
| parties making a transaction and assume that those are the
| only two parties that are part of the transaction.
| prepend wrote:
| > The victims never consent to the sale.
|
| It's extremely rare for a forced sale. Usually it's a
| public company and shares are purchased on public
| exchanges, or for privately held companies the board and
| shareholders approve the sale.
|
| It's not that these are the only people impacted by the
| sale, but it's the best method possible to govern sales.
| candiodari wrote:
| I think the idea here is that the "victims" are people
| needing or wanting medical treatment, and find it's made
| impossible for them to get it. Yes, they're not really
| involved in the transaction but still have something
| taken away from them.
|
| You could argue that it's the government, medicaid and
| medicare especially that are taking away from them ...
| but that doesn't make as good a scapegoat as banks and
| pension funds. Sorry, not pension funds, I mean evil
| private equity investors ...
| civilized wrote:
| This can be true of any corporate sale though. How do we
| distinguish sales that must be stopped because there are
| victims who must be protected from other sales?
| IG_Semmelweiss wrote:
| 1 - why didnt this happen before? Thwre was never this much
| of money created in the system, and Capital was never this
| cheap.
|
| 2 - its usually employees, and sometimes even customers, who
| are non equity shareholders but long term beneficiaries of
| the health of the company. Workers usually are not organized
| well enough to repel a a saavy PE firm. But careful, in some
| cases, PE may be liberating a firm being sucked dry from low-
| productivity workers or richly paid pensioners. Its hard to
| know which is which unless you are diving into the details.
|
| PE is not wrong, just like unions are not wrong, but what
| matters is what is their management style. Parasite, or
| builder?
| [deleted]
| jameshart wrote:
| > someone is on the other side of that transaction, lending
| the billions. Who does that and why? Are they perpetual
| suckers, unaware of the decades of experience we have doing
| this?
|
| The lenders in a PE buyout are securing that loan on the
| assets of the purchased company. Real estate, brand names,
| IP, capital equipment. Their worst case scenario is that
| stuff all gets sold off and they get paid back from the
| firesale proceeds.
| s1artibartfast wrote:
| If that's the case then there are no losers left holding a
| loss, what seems to be the problem?
|
| That's just a group of people buying a company and selling
| it off the assets for a profit.
| lordnacho wrote:
| My current working theory. Happy to hear from any of the
| actual PE people who are reading this.
|
| 1. As you can imagine, not everyone has the wherewithal to
| launch a PE firm. Only people who are well connected in the
| financial world will get access to the funds. People who have
| friends in the investment sector for instance. There's plenty
| of stories about how VC (which isn't the same thing)
| investment is hard to get a meeting for if you don't know
| someone in the firm. PE works in a similar way, certain
| people know the players and get the deals together. Of course
| a lot of it is a promise of future business.
|
| 2. When a firm is acquired, the M&A advisors that did the
| deal get paid. When a firm is restructured (from bankruptcy),
| the same happens. Lawyers as well. These people all get paid
| to make the deals happen. Part of what happens is the M&A
| people will talk someone in the lending department into doing
| the deal. And remember it isn't just one bank or one lawyer
| or one lender on each deal. The lenders will all take a piece
| of the debt, which can be sold on (eg packaged in various
| tranched products) to investors (pension funds etc). If you
| smooth out the poop enough it doesn't smell so bad.
|
| That's what I can glean from my far corner of the financial
| world, while I do work in finance I'm pretty removed from PE.
| ahzhou wrote:
| 1. Connections talk, but money talks even louder. The
| companies they buy are also trying to sell for top dollar
| and rarely court just one buyer.
|
| 2. CLOs are definitely problematic, but the current rate of
| default is vastly overstated. If private credit defaults at
| the rate people seem to think it does, we'd be looking at a
| GFC-type situation. I can't say if there's systematic risk
| in CLOs a la MBS, but any possible risk hasn't materialized
| yet. The biggest PE firms today rarely default. Blow-ups
| such as Toys-R-Us are newsworthy for a reason.
|
| See my comment below for more information. I'm not in PE,
| but I am very familiar with how the sausage is made.
| s1artibartfast wrote:
| Regarding 2, the still requires you to believe that either
| Banks or Pension funds are fine with hemorrhaging millions
| or billions of dollars buying PE debt and haven't figured
| it out over the course of a half century.
|
| I think the real answer is more unsettling for some. PE
| debt has volatility but is on net a profitable investment.
| You can smooth out volatility with volume and by spreading
| it around.
|
| This is the only explanation that doesn't depend on a
| source of dumb money that can never learn buying this debt.
|
| I'd be willing to change my opinion I came across data
| showing that PE debt has net losses over a multi-decade
| time scale.
| coryrc wrote:
| > still requires you to believe that either Banks or
| Pension funds are fine with hemorrhaging millions or
| billions of dollars buying PE debt
|
| The managers of those funds make money based on deals and
| they move on before the deal goes south. Principal agent
| problem.
|
| EDIT: lordnacho explains better:
| https://news.ycombinator.com/item?id=36751012
| s1artibartfast wrote:
| That's certainly a possibility, but I wouldn't put it at
| the top of the list without ruling out the possibility
| that they actually make money.
|
| Where does the claim that PE debt is a loser come from?
|
| According to one of the top links on google, state
| pension returns from PE investments is almost twice that
| of their stock investments if you look at 2000-2021
| (11%/yr vs 6.9%/yr)
|
| https://caia.org/blog/2022/07/20/long-term-private-
| equity-pe...
| civilized wrote:
| > the M&A people will talk someone in the lending
| department into doing the deal.
|
| According to the standard narrative, lenders have been
| repeatedly duped into throwing billions into bad PE
| investments for decades.
|
| If you had a friend who asked for a thousand dollars every
| month, always promised to pay you back and never did, how
| long would you continue to give him a thousand dollars each
| month?
|
| If "talking" alone can accomplish this, I think we need to
| start considering the intervention of supernatural forces
| in these deals.
| anigbrowl wrote:
| Everyone knows fraud exists, yet fraudsters continue to
| flourish; they are good at leveraging new technology and
| tropes to rebrand themselves.
|
| Consider the frequent complaints about scammers marketing
| substandard products on Amazon; the issue is well
| understood, the markers of scammers are well identified,
| but Amazon does nothing about it because the lesses from
| disgruntled customers are less than the revenue from
| shapeshifting scammers.
| lordnacho wrote:
| It's the agency that causes the issue. And a little bit
| of financial engineering.
|
| Say you have a friend who often can't pay back his debts.
| But he can pay 80% of them.
|
| You have another friend who wants to lend to safe
| debtors. Why not get that safe tranche, the bottom 80%?
| He needs to show he's safe so he can take more risk. He
| loves going out to dinner with you.
|
| Another guy wants to take some risk. You give him the
| 20%, but you also let him into some other deals that you
| have, so that he doesn't always lose. In fact, it turns
| out this guy isn't paid on the returns, he's paid on
| assets managed. And he's not even going to be around that
| long, he'll be onto the next role long before the bond is
| up. And they're in a bag of other stuff anyway.
|
| Turns out you're not even the guy lending the money. You
| work on a transaction basis. Your next job might be as
| one of the friends. Or on the PE side.
|
| So you and your buddies keep skimming a bit of the money
| off each year, well mixed with other stuff that you are
| managing.
|
| Well smeared poop.
| YPCrumble wrote:
| It feels like most answers to "who is at the losing end of
| any transaction" is pension funds, which are guaranteed by
| the government. So by your theory PE firms are sucking in
| taxpayer money by fleecing pension funds run by financiers
| who aren't smart enough to get into PE.
|
| Basically until pension funds aren't bailed out by the
| government this will continue.
| horsawlarway wrote:
| You don't stop making blood to get rid of leeches. You
| pull the leech off.
| BSEdlMMldESB wrote:
| you do if/when you have such a case of leeches that you
| die.
| worik wrote:
| > You don't stop making blood to get rid of leeches. You
| pull the leech off.
|
| No. You heat the leech with a match and it falls off.
|
| Fire is the cure
| username135 wrote:
| Purge with fire. Got it.
| lordnacho wrote:
| That's more or less correct.
|
| We have so many layers of agency in our economic system,
| and it isn't really a good thing.
| alephnerd wrote:
| I'm adjacent to the space and I'd disagree with this
| statement: "fleecing pension funds run by financiers who
| aren't smart enough to get into PE."
|
| Institutional Investment Funds (pensions, endowments,
| sovereign funds, etc) need returns well beyond inflation
| to ensure long term stability.
|
| To do this, they will mix and match various different
| investment vehicles to minimize risk.
|
| This means a fund will have a varying percentage of funds
| invested in stocks+ETFs, commodities+futures, cash in
| hand, real estate assets, IP assets, and greenfield
| opportunities.
|
| Essentially, you are dealing with dozens of different
| financial instruments, and while you may have an above
| average understanding of how all these work, you won't
| have the resources, staffing, or ability to optimize
| returns on all these instruments.
|
| This is why Funds end up having VC firms make VC
| investment decisions, PE firms (itself a loaded term
| because PEs specialize in different markets and sectors)
| making equity investment decisions, etc.
|
| If you are able to specialize in one specific sector (aka
| have both the domain experience and the network of
| founders, operators, and managers) then at that point you
| may as well open your own firm and manage investments on
| the behalf of other institutional investors.
|
| It's all about specialization.
|
| Also, fund operating costs cannot exceed more that 2%.
| This means you can only really charge AT MOST 2% YoY on
| the entire value of the fund. That 2% will have to cover
| your entire expenses (salary, insurance, office space).
| This means most operations have to be extremely lean as
| there isn't much money to spread around.
| coastermug wrote:
| I believe this to be the case also. In the UK we have
| lots of cases cropping up of PE being the bad guys, but
| the current owners being to blame for buying these
| companies in unstable positions and allowing the sellers
| to make fortunes. It does often seem like it is Pension
| funds making these poor investments. I am also really
| happy to see this line of questioning on HN, as it has
| been lacking in previous discussions.
| everybodyknows wrote:
| > ... someone is on the other side of that transaction,
| lending the billions. Who does that and why? Are they
| perpetual suckers, unaware of the decades of experience we
| have doing this?
|
| I listened to a podcast interview with a financial
| professional who advises public pension fund boards. What he
| said in all but words was that, yes, the political appointees
| who actually vote on decisions _are_ perpetual suckers.
| ahzhou wrote:
| Pensions are very rarely lenders. They may invest in
| lenders but tend to look at historical performance.
|
| Political appointees are not the ones making investment
| decisions. At most they are setting very broad themes. For
| example, political appointees are the ones that say all
| investments must be carbon-neutral.
| pessimizer wrote:
| > Political appointees are not the ones making investment
| decisions.
|
| Political appointees are making investment decisions by
| choosing the people who make investment decisions.
| ahzhou wrote:
| > Why is private equity ending up with all these resources?
| Who is selling to them and why? Why didn't this happen
| before? It's not like PE is new.
|
| PE as an investment strategy was pioneered by KKR in the
| 60's, beginning with the acquisition of family-owned
| businesses facing succession issues. The strategy exists
| because there's really poor liquidity for private companies.
| If you're a founder who wants to sell your stake, you either:
| 1. Sell to a strategic buyer 2. Sell to an
| individual 3. IPO 4. Sell to PE
|
| The first three options may not be always viable at a given
| point in time (aka illiquidity). Strategic buyers aren't
| always looking to buy, an individual may not have enough
| capital, and IPOs place a huge amount of reporting burden on
| a company. PE is the only reasonable exit option for a huge
| swath of private companies. Take a hypothetical family-owned
| supermarket chain with 10 locations across 3 cities in the
| midwest. All the kids are terrible successors. Who's going to
| buy it? 1. A strategic buyer, such as
| Walmart, may not be interested right now. 2. An
| individual probably doesn't have enough enough money to buy
| the whole thing 3. An IPO saddles the business
| with reporting requirements that simply don't make sense for
| a supermarket with only 10 locations
|
| People sell to PE because it's often the only way to exit.
| Almost all bootstrapped companies belong in this category. At
| the end of the day, PE funds are simply groups of
| professional investors that specialize in buying out
| companies. If they are poor investors or poor operators, they
| will tank the company. If they are good investors and good
| operators, they will sell the firm for a profit in the
| future.
|
| --------
|
| > When PE loads up a firm with supposedly unsustainable
| billions of debt, someone is on the other side of that
| transaction, lending the billions. Who does that and why? Are
| they perpetual suckers, unaware of the decades of experience
| we have doing this?
|
| Many people offer debt, from private credit funds such as
| Golub Capital to bank syndicates. The best lenders are not
| suckers and the best PE funds almost never default.
| Oftentimes, the PE fund itself is collateral. PE funds that
| regularly default will have a difficult time finding a
| lender.
|
| People also misunderstand the purpose of debt. It's simple
| math:
|
| You want to buy a company for $100M. You can buy the entire
| thing with cash and sell it again after it doubles in 5
| years, netting yourself $100M, giving you a 1x return.
|
| Alternatively, you can pay $20M down and borrow $80M at a 10%
| interest rate (simple interest for ease of calculation). When
| you sell it for $200M in 5 years, you net $200M - $20M - $80M
| * 1.5 = $60M, giving you a 3x return.
|
| Obviously, you've also increased the risk - your business
| must be capable of paying off an extra $8M a year in
| interest.
| disgruntledphd2 wrote:
| Full disclosure, I don't work in finance, so I may be getting
| a bunch of this wrong.
|
| > Why is private equity ending up with all these resources?
|
| Because they have cash, mostly from pension funds and
| insurance companies.
|
| > Who is selling to them and why?
|
| The doctors running the practices, more generally they're
| rolling up companies in relatively dispersed industries where
| they believe they can make money.
|
| In the best case, this is because replicating administration
| across many SMEs is much less efficient than centralising it.
| In the worst case, it's a way to buy them companies with the
| cash flows of the company themselves, and pay out fat
| dividends while gutting the actual business.
|
| Why didn't this happen before?
|
| Really low interest rates super-charged the amount of money
| that PE could borrow , and helped them raise money because
| insurance and persion funds needed to get above premium
| returns which were hard to find because of said really low
| interest rates.
|
| Additionally, banks became much less likely to lend money
| since the 2008 crash (because of requirements around capital
| buffers) so PE was basically the only game in town.
|
| Honestly though, I think the good times are over for PE, as
| most of the industry (and finance in general) has been
| cushioned by a low interest rate world, and as debt starts to
| cost real money we're gonna see a _lot_ of these bets unwind.
|
| > When PE loads up a firm with supposedly unsustainable
| billions of debt, someone is on the other side of that
| transaction, lending the billions.
|
| Banks. Again, these loans are assets, and assuming that the
| business continues as normal and interest rates don't rise,
| these were OK(ish) risks. More importantly they built a bunch
| of relationships with the PE people, so it wasn't about any
| one individual loan, but rather the constant amount of deal
| flow.
| civilized wrote:
| On the last point, interest rates aren't the only thing
| that matters to loans. The default rate also matters. If I
| borrow a billion dollars from you to pay myself and I have
| no good plan to pay you back, it doesn't matter how low
| interest rates are, you'll still be out a billion dollars.
| fencepost wrote:
| If the business is still viable with the debt load, the
| bank continues to get paid on the loan but whoever owns
| the company doesn't get much profit. There are plenty of
| businesses or there that exist but don't thrive or grow,
| the PE sucking of vitality just moves businesses that
| might have thrived into that category.
| fiprofessor wrote:
| > _Honestly though, I think the good times are over for PE,
| as most of the industry (and finance in general) has been
| cushioned by a low interest rate world, and as debt starts
| to cost real money we 're gonna see a _lot_ of these bets
| unwind._
|
| Maybe the current bets will unwind, but I'm not sure that
| means there won't be a good time era of another round of
| bets. After all, interest rates were very high in the 80s,
| and that was a heyday for PE, right?
| disgruntledphd2 wrote:
| Sure, but that the first day of PE, they had loads of
| massive conglomerates to strip. Those are all gone now,
| and the current management structures (except in tech)
| are hostile to insourcing so there's not as much fat to
| cut.
|
| Like, definitely some PE firms will survive, but I'm
| willing to bet (not short though ;) ) that an awful lot
| of them will go belly-up/be unable to raise more funds in
| the next 5-10 years.
| fakedang wrote:
| 1.) PE is enabled by easy money. If you look at the PE
| industry, the entire sector was enabled initially through the
| rise of junk bonds in the 80s, bonds so "worthless" but cheap
| issued by high risk companies (everyone was issuing bonds
| back then) with high reward for the winners - kinda like VC
| as an investment. In recent history, it was the ZIRP and of
| late money-printing. Easy money with high returns always
| pulls out money from more conservative investments like
| government bonds or blue chip stocks, and into more risk-
| tolerant sectors like PE and VC.
|
| 2.) Underwriting banks issue the debt for the PEs. They get
| paid handily, both from the constant debt payments PE firms
| take out of cash flow and from repeat underwriting business
| as investment bankers for future deals. Banks have their own
| ways of disposing junk debt that fails, but usually PE debt
| doesn't fail - the only ones being shafted are the company
| employees and the company itself. The management of the
| company, the owners and shareholders of the company, and the
| PE firm itself all make out of it like bandits.
|
| Nowadays, the traditional bread and butter of PE, such as
| leveraged buyouts, are mostly gone, with most of the returns
| coming from other avenues such as Real Estate (like buying up
| homes in Western cities), Emerging Markets and more passive
| investments in family/practitioner-owned businesses, like the
| Healthcare space.
| underlipton wrote:
| Ready for a fun conspiracy theory? Guess where most PE guys
| start (i.e., where their base professional network is
| developed, where their expertise is, etc.). If you correctly
| guessed "Ivy League undergrad and business schools" and
| "investment banking", you can probably tell where I'm going
| with this. The gameplan is simple: lend your buddy the money
| to buy the business. Now you have a line to the person who
| has the most access to data about, if not control over, the
| direction of the business. Wherever it happens to go, you can
| be ahead of the market. Long if it's going to survive and
| grow; short if it's doomed. He's happy because the decision
| to be lenient or aggressive about repayment lies with his own
| contact - you.
|
| How do you get businesses to agree to your terms? Well, they
| hired consultants at some point. Oh, those guys are your
| buddies, too. You have acquaintances on the BoD, too.
|
| Why go through all the trouble? Besides the fact that you're
| becoming filthy rich, you also have the opportunity to remove
| rivals and consolidate markets under an n-opoly. More money.
| More control.
|
| >"Unpleasant things are happening, we need some sort of
| regulation" doesn't seem like a sufficient basis for socially
| beneficial action.
|
| How about fraud and insider trading?
|
| I realize that this is a simplistic and somewhat paranoid
| take on the matter, but in a society with a broad and
| continuous history (distant and recent) of corruption at
| elite levels, maybe securities violations and revolving door
| employment aren't just for our politicians. I wonder if we're
| dealing with Occam's Razor: how are PE firms achieving
| phenomenal profits while the businesses they use to do so
| die? Easy: they're cheating.
| fiprofessor wrote:
| > _The gameplan is simple: lend your buddy the money to buy
| the business. Now you have a line to the person who has the
| most access to data about, if not control over, the
| direction of the business. Wherever it happens to go, you
| can be ahead of the market. Long if it 's going to survive
| and grow; short if it's doomed. He's happy because the
| decision to be lenient or aggressive about repayment lies
| with his own contact - you._
|
| But if the business is privately held (because the borrower
| used the loan to buy the business), then what market is the
| lender going long/short against in this hypothetical
| conspiracy? Other (public) businesses in the market?
| Potential investors when the PE firm sells and takes the
| business public?
| underlipton wrote:
| >Other (public) businesses in the market?
|
| That. Or, you have been shorting the company for some
| time, because you know it has been targeted for
| demolition. A PE takeover is the signal that you no
| longer need to hedge those shorts; the company, loaded
| with the debt used to purchase it, will soon go bankrupt,
| and you will be absolved of closing your short positions,
| for all practical purposes.
|
| This may not apply to the subject of the article (PE
| firms buying medical establishments), but it may speak to
| the character of their new strategy. Perhaps they won't
| kill this goose because they payer has endlessly deep
| pockets.
| fiprofessor wrote:
| > _A PE takeover is the signal that you no longer need to
| hedge those shorts; the company, loaded with the debt
| used to purchase it, will soon go bankrupt, and you will
| be absolved of closing your short positions, for all
| practical purposes._
|
| I think it's just the opposite: you'll be forced to close
| your short position when the PE company buys. When PE
| firms "take over" a public firm, they generally take it
| private, and the takeover involves buying all outstanding
| shares, typically at a premium over current share prices.
| underlipton wrote:
| I don't know if that's necessarily the case, in practice.
| Aside from the cases where a PE firm does keep the
| company public, there's at least one case where short-
| sellers weren't made to close out their positions when a
| company was taken private (Next Bridge Hydrocarbons, if
| you're curious).
| AndrewKemendo wrote:
| >Voluntary transactions are occurring
|
| This is where discussions break down because there's broad
| disagreements on what is and is not considered "voluntary" -
| there are ethical/moral traditions that claim nothing is
| voluntary, while others that claim everything is.
|
| We can gain clarity by defining the opposite then:
| Involuntary
|
| So, what set of circumstances would be required to declare
| that someone is doing labor "Involuntarily?" and thus there
| is no "free market" for labor.
|
| For example, would you say that the person who is manually
| sorting trash out of recycling for <$40,000/yr [1] is doing
| so voluntarily?
|
| Maybe someone really loves that and wants to do it and would
| do it for free. That's possible but unlikely. Maybe someone
| made decisions such that this is the only job that they can
| get without moving or some other major life decision. Is that
| still voluntary simply because they are in that position?
| Assuming they aren't disabled, they can always put their
| things in a bag and walk to some place with more options.
| What of people that are disabled then? How much of what they
| do is voluntary? You get the point
|
| The challenge then is asking, given that there is no
| OBJECTIVE answer to the question of what is voluntary
| (Extreme example: You should be constantly trying to break
| out of prison, otherwise you doing what the guards tell you
| to is "voluntary") then "voluntary" shouldn't be a
| discriminator on whether society has something to say about a
| transaction between people.
|
| Extreme (unreasonably IMO) freemarketeers view individuals as
| atomic complete units and that's the end of the story. So
| irrespective of starting or current positions EVERYTHING is
| voluntary and the world is all-v-all pvp no hold barred
| competition. That's who is in PE and finance, so that's what
| you're up against.
|
| [1] https://www.talent.com/view?id=685b4384e8d6
| sgregnt wrote:
| Volanturelly, in my mind, means that you can decide how to
| employ your resources as you wish (e.g., time education,
| capital, skills). If your resources allow you only ever a
| few options, like sorting garbage, you are still doing it
| voluntarily. If you have many resources (not necessarily
| material, e.g., education) this will give you more options.
|
| Your abilities are teaded agains all other ppl's abilities
| in a free market.
|
| There are complications to this view, but the example with
| sorting garbage, in my mind, is actually an easy case. Yes
| it is definitely voluntary.
| AndrewKemendo wrote:
| >You can decide how to employ your resources as you wish
|
| Thank you. So would you say the following is a correct
| interpretation of your argument:
|
| "Any action or set of actions is voluntary, provided
| there are at least two choices"
|
| Follow up question which I do not mean sarcastically or
| anything other than explicit:
|
| Do you consider "Die/cease to function" a persistent
| choice? That is to say, if there are only the following
| options: [x, die] then because die is an option, anything
| for x is always voluntary?
| ars wrote:
| Your question is wrong. Voluntary means that the person
| giving you the choice is not the one _creating_ the
| choices.
|
| So your choice is "work", or "starve and die" - the
| person offering the job is not creating the "starve and
| die" choice, therefor it is voluntary.
|
| Your choice is "work", "I will beat you" - this in
| involuntary.
|
| Your choice is "work for $1,000,000", or "work for a bar
| of gold" - this is involuntary because the person
| offering the choices created the choices.
| lordnacho wrote:
| Does this mean that as long as there are two people
| making offers, anything you do is voluntary?
| ars wrote:
| Your sentence is not written carefully.
|
| Rephrasing: As long as there are two independent people
| making offers, your choice between the two offers is
| voluntary. (Do not forget the 3rd option: accept neither
| offer.)
| lordnacho wrote:
| Would you like to work for the Garbage Collection Company
| of America?
|
| Would you like to work for the American Garbage
| Collection Company?
|
| Would you like to starve?
|
| Aha, you've volunteered to work as a garbage collector.
|
| I think this isn't what people think of as voluntary.
| Sophie's Choice is a better description.
| ars wrote:
| You clearly didn't read what I wrote, because your
| options do not match the situation I wrote.
|
| I mean you wrote two basically the same companies, while
| I clearly said "independent", and you wrote "Would you
| like to starve", i.e. these companies are telling him
| work for us or don't work at all, while I clearly wrote
| that the person giving the choice must NOT create the
| choice.
|
| And in Sophie's Choice the camp Dr setup both options.
|
| I have to ask: If you are going to ignore what people say
| to you, why do you even bother replying? If you just want
| to tell people your opinion post it as a top level
| comment, not a low effort reply.
| lordnacho wrote:
| > Rephrasing: As long as there are two independent people
| making offers, your choice between the two offers is
| voluntary. (Do not forget the 3rd option: accept neither
| offer.)
|
| I then make a very obvious example where there are two
| independent companies offering similar crappy jobs. Plus
| your 3rd option.
|
| There's no one person giving the choice, there are two
| companies and your third option. Perfectly conforming to
| what you say:
|
| > clearly wrote that the person giving the choice must
| NOT create the choice
|
| Ok? So there is a situation, a very obvious one, that
| arises from the conditions that you're claiming making
| something voluntary. You have two different companies
| offering substantially the same thing. Now it is
| voluntary when the outcome is no different from if there
| were just one company offering the (only) choice.
|
| That is clearly something you will have to explain. I
| know you can't see how many upvotes a comment has, but I
| can tell you it doesn't seem like I am the only person
| who has spotted this.
|
| > And in Sophie's Choice the camp Dr setup both options.
|
| But it is also a term that means "an undesirable decision
| that has to be made".
|
| Before you accuse other people of not reading, I think
| it's worthwhile to have a scan for irony.
| AndrewKemendo wrote:
| You're suggesting a different definition of "voluntary"
| which is:
|
| >the person giving you the choice is not the one creating
| the choices
|
| Who is creating the choices if not the people who are
| offering the jobs?
|
| >So your choice is "work", or "starve and die"
|
| So then you've answered my second question above, which
| is, if there is a persistent acceptable choice of "die"
| then any alternative must be voluntary.
|
| My question is, from your perspective unless someone is
| physically restrained then anything they do is purely
| voluntary?
| ars wrote:
| > Who is creating the choices if not the people who are
| offering the jobs?
|
| Is that a real question? The universe create the choices.
| This person offered a job - they are not God, they do not
| have control over the person. They simply offered a job.
| I guess you would rather they didn't offer the job?
|
| > My question is, from your perspective unless someone is
| physically restrained then anything they do is purely
| voluntary?
|
| Obviously. Although there are other kinds of restraints,
| threats for example.
|
| I mean, any other definition leads to contradictions and
| ridiculous situations where employers are blamed for
| offering jobs to low value occupations.
|
| I can't find it right now, but someone wrote an essay
| that basically boiled down to how when people help
| others, instead of getting credit for what they did do,
| they get blamed for what they could have done.
|
| That's what you are trying to do. In such a world no one
| is willing to help anyone.
|
| Don't do that, it leads to a horrible world.
| ryandrake wrote:
| "Do this or die" does not imply meaningful choice. It
| doesn't matter if that death is from murder or
| starvation. For all of us who are not independently
| wealthy "work" is involuntary, but choice of jobs often
| (but not always) is voluntary.
| ars wrote:
| > "Do this or die" does not imply meaningful choice.
|
| You are upset that the person does not have good options.
| But that does change anything - deciding to accept a job
| offer does not make the work involuntary.
|
| You are focusing out the outcome, but outcomes are not
| the question here, choices are. The employer is not
| responsible for the way the universe exists, and they are
| not forcing the person to live in it.
| chewz wrote:
| 1) NIRP and search for yield
|
| 2) Older doctors, stomatologists etc... Running an individual
| practice is a challenge, requires constant investment and
| learning and at some point in life there is an incentive of
| larger cash out.
|
| And why? Because as West deindustrialized potenial for profit
| lays in high-value services. Instead of an aluminium smelter
| you purchase 100 of orthodontist practices. After purchase
| you cut on costs, raise prices and the investment pays out
| rather quickly....
| uLogMicheal wrote:
| On top of this, most of it is leveraged capital at a fraction
| of the actual cost, so the risk is almost vacant for the firms.
| Corrupt banking leads to infinite leverage for the super-
| wealthy to buy up / control it all. They do not need to care
| because they risk little and still profit even if it crashes
| because the tangible assets have shifted to their side of the
| gap.
| lotsofpulp wrote:
| Is it leveraged? Or is it often times money from underfunded
| government employee pension funds and whatnot, seeking higher
| returns to make up for the underfunding from previous
| decades?
| uLogMicheal wrote:
| Wouldn't inflation cause these to perpetually be
| underfunded giving reason to borrow/spend more?
|
| It is a lot of debt/leverage at this point --
| https://www.wsj.com/articles/private-equitys-food-binge-
| goes...
|
| The funds snapped up a record 786 makers of food and
| beverages worth $32 billion in 2021, using bundles of debt
| to pay for their purchases, according to data from S&P
| Global Market Intelligence.
| AndrewKemendo wrote:
| You really nailed the problem with the financialization of
| everything.
|
| I'm busy figuring out how we got here, and how to get out of it
| but you've perfectly described how the incentives are flipped.
|
| I'd further add that regulatory capture means that
| financialization is a ratchet process, so undoing it is
| multiples more difficult than putting it into place.
| gmd63 wrote:
| Many arguments for sketchy business moves like ticket scalping
| or PE / market making is that they "create liquidity"
|
| Who is to say that a business should be liquid? Why? What is
| the value in making it easy to bail on your responsibilities,
| and why should we encourage people to quickly build a
| complicated and powerful system and make it easy for them to
| recuse themselves of that duty?
| Aunche wrote:
| I see your point, but otherwise you'd be punishing people for
| pursuing essential lines of work. A software engineer at a
| FAANG gets to enjoy liquidity without scrutiny even if
| they're just facilitating the sale of ads. Why shouldn't a
| doctor who saves lives get to do the same?
| gmd63 wrote:
| The value of your actions is not just the immediate work
| you do. It's the long term effect of the sum of your
| choices.
|
| If you save lives only to put your system that you've built
| in the hands of a price extracting PE firm, it's arguable
| you are violating the Hippocratic oath. One of the other
| commenters mentioned a study that measured a 10% increase
| in mortality after PE acquisition on average.
| lapcat wrote:
| > To me it seems like PE has simply discovered a loophole in
| the system.
|
| The fundamental loophole is that "the free market" is
| practically a religion in the United States (the so-called
| Invisible Hand taking the role of a god doling out rewards and
| punishments), and a significant portion of the population is
| vehemently opposed to any regulation of capital. You can even
| see this attitude in some of the comments here, where
| commenters are claiming that the problem is too much regulation
| rather than too little.
|
| Moreover, political campaigns are financed by private
| "donations" (i.e., legal bribes), so the lawmakers themselves
| are practically indebted to wealthy interests who don't want to
| be regulated.
| Buttons840 wrote:
| I want a political cartoon that shows "The Free Market Ideal"
| with a bustling market full of wooden stands with fruit and
| produce, handmade goods, handmade signs, lots of people
| making choices and talking with the merchants one-on-one,
| haggling over prices, etc.
|
| The next cartoon pane shows "The Free Market Reality", and
| it's a bunch of tired looking people standing in line for one
| of two automated computer terminals.
|
| The truths portrayed would be: Those selling in the market
| have automated processes, there is no talking with the
| merchant, no haggling over prices, and there are not dozens
| of carts to choose from, in many markets there's 2 or maybe
| 3, or sometimes only 1.
| throw47474777j wrote:
| > The fundamental loophole is that "the free market" is
| practically a religion in the United States
|
| Blaming something for being practically a religion is about
| as empty a piece of reasoning as it's possible to make.
|
| Why not actually suggest a solution rather than just throwing
| your hand up at the whole thing?
| lapcat wrote:
| > Why not actually suggest a solution rather than just
| throwing your hand up at the whole thing?
|
| A solution to which problem?
|
| The solution to the problem of private equity running the
| medical system is government-run health care, like in most
| other nations, who spend less on health care per person
| than the US but whose populations are nonetheless
| healthier.
|
| Or are you talking about the problem of the severe
| ideological divide? Or some other problem?
| throw47474777j wrote:
| > but whose populations are nonetheless healthier.
|
| Population health is not caused by medicine.
|
| > Or are you talking about the problem of the severe
| ideological divide?
|
| Since you suggested that ideology is the "problem", I
| would in fact be very interested to know if you have any
| ideas about how to solve it?
| mfer wrote:
| > The solution to the problem of private equity running
| the medical system is government-run health care
|
| A super majority of the medical R&D is funded by the US
| system. The gov run systems pay for a minimum of it. Of
| the U.S. adopts a system like other gov run countries
| where does the medical R&D get financed?
| bowyakka wrote:
| Be a shame if someone looked up this on Google and found
| that it's not as outsized as some think
|
| https://data.oecd.org/rd/gross-domestic-spending-on-
| r-d.htm
| zone411 wrote:
| Incorrect. You linked to the overall R&D spending data,
| not medical R&D spending.
|
| You can find the health R&D expenditure data here:
| https://www.oecd-
| ilibrary.org/sites/health_glance-2017-72-en...
|
| It shows the U.S. spending 2.4x that of Europe on pharma
| expenditure as a % of GDP, and 3.2x that of Europe on
| government R&D health budgets as a % of GDP.
|
| Edit: somewhat newer data is here https://www.oecd-
| ilibrary.org/sites/fc8b43f4-en/index.html?i...
|
| It shows that the R&D pharma spending gap has actually
| increased even further to 3.5x.
| fallenasleep wrote:
| US americans are already spending the money that funds
| that R&D. One possible solution that occurs to me just
| now (and is therefore very half baked) is that there must
| be a way they could continue to spend that money to fund
| research, while also having a functioning medical safety
| net
| brightball wrote:
| In the US, the problem is too much regulation but that
| regulation comes from different levels like insurance
| companies, medicare, medicaid, etc.
|
| I know somebody who owns a therapy business. Medicaid rates
| have not increased in 15 years and increasingly make it
| harder and harder to do your job. The level of stress and
| pressure it creates is intense.
|
| What do you think is going to happen when private equity
| comes around and offers an exit?
|
| I can't speak for the pressures on doctors as confidently,
| but I can assume there are similar issues.
|
| So what you end up with is regulatory pressure that is
| forcing the market to a certain position, which makes private
| equity seem like the only realistic escape. In a true free
| market, this wouldn't happen or it would be significantly
| more expensive for the PE firms to make acquisitions. The
| businesses would either fail quickly or become successful
| enough to increase their rates and thus the compensation for
| their employees and owners, which removes incentives to sell.
|
| I was at a sporting event earlier this year where I overheard
| an exec from an insurance company (I was a guest of somebody
| with pricey tickets). He was complaining about how a hospital
| was forcing them to increase rates after being willing to
| drop them as an insurance provider, because the insurance
| company would lose all business in the area of the hospital
| wasn't on board. It's a microcosm of the stuff happening
| behind the scenes.
| sgregnt wrote:
| I also agree with you.
| nirvdrum wrote:
| Large purchasers dictate pricing or discounts on suppliers
| everywhere. Walmart is famous for it. I can certainly
| understand the frustration, but the flipside is most people
| on Medicaid couldn't afford market-rate services anyway.
| Since we don't have a single-payer health care system in
| the US, unless your friend is legally required to accept
| Medicaid, I'm not sure this a regulation issue.
| lapcat wrote:
| > In the US, the problem is too much regulation but that
| regulation comes from different levels like insurance
| companies, medicare, medicaid, etc.
|
| If only there were a single payer. ;-)
|
| Seriously, there should be single-payer health care. Also,
| there's the fundamental question of whether you view health
| care as a political right or as a personal privilege. The
| free market is very good at serving the privileged, not so
| great at serving everyone universally, equally. If you're
| ok with millions of people having little or no health care,
| that's definitely what you'll get with a totally free
| market for health care.
| candiodari wrote:
| The problem is not single payer health care, it's that
| the single payer that does exist (both medicare and
| medicaid _are_ single payer) has decided not to increase
| the amount of money available, not even inflation
| adjustments, for 15 years.
|
| How good would you feel about your job, even if well-paid
| initially, after 15 years of no raise. Not even inflation
| or cost-of-living adjustments.
|
| And would you sell if someone came and offered you money
| for your customers, knowing they'd get screwed sooner or
| later?
| Mordisquitos wrote:
| > it's that the single payer that does exist (both
| medicare and medicaid are single payer) has decided not
| to increase the amount of money available
|
| Excuse my ignorance as a non-American, but I don't
| understand how Medicare and Medicaid can be called
| "single-payer", even if we bunch both of them together
| for the sake of the argument. Are certain healthcare
| providers restricted so as to _only_ accept Medicare and
| /or Medicaid patients, and cannot by law accept those who
| are privately insured or would like to pay out of pocket?
| That is the only context in which I can imagine
| Medicare/Medicaid being called "single payer".
| alistairSH wrote:
| Single-payer as in the government pays. We have Medicare,
| Medicaid, and veterans all covered by the government. If
| a provider wants to serve those markets (old, poor, vets)
| they have to accept the rates offered by the government.
| lapcat wrote:
| > Single-payer as in the government pays.
|
| Those aren't the same things.
|
| The government paying for services in a private market is
| not single payer.
| candiodari wrote:
| Single payer in the US simply means the patient doesn't
| front any money. The doctor/hospital/... just gets the
| money for medical services rendered directly from
| insurance (and insurance collects things like a
| deductible from the patient, not the doctor. Essentially,
| insurance guarantees payment to the medical provider and
| deals with all patient financial matters). Medicare and
| medicaid _are_ single payer.
|
| Things aren't called the same thing everywhere. For
| example, "single payer" is called "third payer" in
| Northwest Europe.
|
| Expensive (e.g. expat) insurance tends to be single
| payer/third payer even though it is 100% private
| insurance. You just go to a doctor, they help, other than
| your insurance card, no questions asked.
| lapcat wrote:
| > Single payer in the US simply means the patient doesn't
| front any money.
|
| No, that's not what it means.
|
| > The doctor/hospital/... just gets the money for medical
| services rendered directly from insurance (and insurance
| collects things like a deductible from the patient, not
| the doctor. Essentially, insurance guarantees payment to
| the medical provider and deals with all patient financial
| matters).
|
| You seem to be describing medical insurance in general,
| not single payer health care.
|
| > Medicare and medicaid are single payer.
|
| No, they're not. "Medicare for All" would be single
| payer. https://en.wikipedia.org/wiki/Single-
| payer_healthcare
| alistairSH wrote:
| Uh, that's pretty much the definition of single-payer, at
| least as commonly used.
|
| From Wikipedia: _Single-payer healthcare is a type of
| universal healthcare in which the costs of essential
| healthcare for all residents are covered by a single
| public system (hence "single-payer")._
|
| The difference here being the US has a fractured system,
| with several government systems (but from the same
| government). Medicare for All would be try single payer.
| donw wrote:
| The US has not had a "free market" for quite some time now.
| mediascreen wrote:
| People often see the United States as the ultimate free
| market, but compared to other countries it can be seen as
| pretty heavily regulated.
|
| According to the Heritage Foundation's Economic Freedom
| ranking, it ranks 25th, well below "socialist" states like
| Denmark (in 9th place) and Sweden (in 10th place).
|
| https://www.heritage.org/index/ranking
| lapcat wrote:
| That's a political propaganda piece by a notorious right-
| wing think tank.
|
| "The Heritage Foundation (abbreviated to Heritage) is an
| American conservative think tank based in Washington, D.C.
| The foundation took a leading role in the conservative
| movement during the presidency of Ronald Reagan, whose
| policies were taken from Heritage's policy study Mandate
| for Leadership."
| https://en.wikipedia.org/wiki/The_Heritage_Foundation
| mediascreen wrote:
| I know they are a right-wing think tank, that is why I
| referenced them when it comes to rank "market economy"
| factors that people who believe in and want to have "free
| markets" care about.
|
| In what way is it a political propaganda piece? From what
| I can tell it's a pretty transparent ranking of countries
| by factors that the organisation cares about.
|
| While the Scandinavian countries have high taxes and
| regulated labour markets, they have deregulated markets,
| strong property protections and are very simple to do
| business in.
| lapcat wrote:
| One of their policy goals is deregulation in the United
| States. Thus, they have a vested interest in showing that
| the United States has too many regulations.
|
| And they don't even define what their categories mean.
| I'm willing to bet that "labor freedom" to them means
| "right-to-work" and no minimum wage, for example. In any
| case, without proper measurable definitions, they can
| easily manipulate their index to say whatever they want.
| renewiltord wrote:
| If you believe this, you should find it pretty easy to
| indemnify me for the hospital I am starting where I will
| operate and practice medicine. Be aware that I have no degree
| in medicine and have majored in Mathematics. Since the free
| market is a true religion, there must be no regulation
| preventing this. My hospital is able to compete on pure
| outcomes.
|
| Of course, I don't actually think you believe this bit about
| the free market. I think you've been trained to rant here
| because this community rewards views like that.
| lapcat wrote:
| You scoff, but read some of the other comments here:
|
| "More like running many kinds of businesses has become more
| hassle than its worth. Medical malpractice premiums are
| very high"
|
| "This is the kind of economic distortion that should be
| expected when onerous government-imposed regulation of
| practitioners, medication, and medical devices creates
| barriers to entry that reduce competition. While such
| regulation may have been imposed to try to increase safety,
| quality, and consistency, for example, it also ends up
| interfering with the incentives of the participants."
|
| > Of course, I don't actually think you believe this bit
| about the free market.
|
| I do believe it. What I said was "a significant portion of
| the population is vehemently opposed to any regulation of
| capital", which is not to say that the entire population is
| opposed. In fact, the population is very divided over this.
| There's more than one religion. :-)
|
| In any case, the problem as I see it is that capital is
| very creative and inventive and coming up with new and
| terrible ways to extract profit, and regulation of these
| new terrible things comes far too slowly, if ever,
| precisely because the public is so divided, creating legal
| gridlock.
|
| You're talking about old regulation. Of course long ago
| we've established regulations for the provision of medical
| care. Whereas private equity taking over everything is a
| relatively new phenomenon.
|
| > I think you've been trained to rant here because this
| community rewards views like that.
|
| Oh, I've been ranting for decades.
| hotpotamus wrote:
| As long as you call it "alternative" medicine, you should
| actually have a lot of latitude to do so. If you get to the
| point where you actually kill someone after cutting them
| open and rooting around, or poisoning them too much, then
| you might run into some regulation. But if you can avoid
| that, I suspect you'll be fine.
| monero-xmr wrote:
| Unlike in Europe and the UK, where such political influence
| from corporations and the wealthy never happens /s
|
| At least in the US we (try) and make donations public. The
| places where it's "banned" are black holes.
| shadowfox wrote:
| > At least in the US we (try) and make donations public.
| The places where it's "banned" are black holes.
|
| That is definitely an interesting take. So, is your ideal
| society one where anybody is allowed to give and take
| bribes as long as it is public?
| dingusdew wrote:
| [dead]
| monero-xmr wrote:
| I think the world is so complex that a politician -
| especially the sort democracies typically elect - cannot
| be expected to be an expert in all subjects and things
| they are supposed to vote on and make rules for. Lacking
| perfect knowledge, they must rely on outside advice,
| directly from those affected or indirectly from their
| assistants and technocrats who advise them. At all points
| it's possible to manipulate the outcome.
|
| Given that influence and manipulation is impossible to
| stamp out, and then realizing that some of those that
| want to influence are some of the richest and most
| powerful entities on earth, I would personally rather
| allow lobbying and donations to be legal, but require all
| of it to be public. That way you can tell who is taking
| money from who.
|
| Otherwise, it's just the mafia and insiders games all the
| way up the chain.
| ryandrake wrote:
| > Lacking perfect knowledge, they must rely on outside
| advice, directly from those affected or indirectly from
| their assistants and technocrats who advise them.
|
| There is a huge dufference between "subject matter expert
| advises lawmaker to vote some way" and "business tycoon
| hands a bag of money to lawmaker to vote some way."
| Somehow, America has equated the two, and considers them
| equally acceptable.
| lordnacho wrote:
| I thought the whole Citizens United thing served to obscure
| where money was coming from?
| prepend wrote:
| Citizens united makes it easy to donate any amount of
| money to political causes. But there's still some limited
| visibility into who is funding the PACs.
| raincole wrote:
| You logic:
|
| 1. In Europe and UK, bribery (Let's not sugercoat it as
| "lobbying". We all know what it is.) is illegal. So people
| will just do it secretly. In other words, legislation
| doesn't prevent bad things, in this case, bribery, from
| happening.
|
| 2. In the US, bribery is legal, but hiding the records is
| illegal. So people will make it public. In other words,
| legislation does prvent bad things, in this case, covert
| bribery, from happening.
|
| I guess legislation is just so much more effective in the
| US.
| sgregnt wrote:
| For me and my friends free market is not a religion, it is
| thoroughly thought out concept that proved it self over and
| over again.
|
| I this your count misrepresent the reality.
|
| In my mind, people who oppose free market capitalism usually
| don't understand how it works.
|
| The good thing is that reality is what settles the debate.
| What happens is that people vote with their feet --- and
| millions of ambisious people from countries where there is
| less free market economy are desperately trying to come to US
| to realize their full potential, but not the other way
| around.
| HWR_14 wrote:
| > millions of ambisious people from countries where there
| is less free market economy are desperately trying to come
| to US to realize their full potential, but not the other
| way around.
|
| I'd like to see your statistics on immigration and
| emigration. Most people coming to America are coming from
| Mexico or the Caribbean, which I would consider to be free
| market capitalist societies, just poorer ones. How is the
| free market more restrained there than in the US?
|
| (Note, for the purposes of the statistics I looked at, both
| Venezuela and Cuba are not generalized to "Caribbean" but
| have their own categories)
| throw9away6 wrote:
| When does this free market capitalism exist?
| danielmarkbruce wrote:
| There is a lot of survivorship bias in reporting. Buying
| companies and trying to make money at it is an _incredibly_
| competitive game to be in. Yeah, the winners make billions, but
| so does Lebron.
| SkyMarshal wrote:
| _> You may have saddled the target with a huge debt_
|
| I'm not sure that's the model PE is using in healthcare. My
| impression is that they're buying hospitals and medical
| practices, then obscuring the cost of actually providing care,
| so they can charge insurance companies not something reasonable
| like cost+20% but rather the maximum amount they think they can
| get out of the insurance company. Their financial modelers
| figure out after each procedure the max they can charge based
| on the procedure, the insurance company and plan, patient's
| finances, etc.
|
| The net effect is to drive up medical insurance costs across
| the country, impoverishing and bankrupting many people while a
| small number of PE folks get rich. It's an entirely extractive
| business model, not wealth-creating or innovation-producing.
|
| Laws that simply require total transparency in medical care
| pricing and pre-publication of prices for all procedures and
| drugs would probably go a long way toward fixing this, and in a
| capitalism-compatible way. We require transparency among
| publicly traded companies, SEC has extensive rules about that,
| but less so for private ones like hospitals and medical
| practices. That's the loophole PE is exploiting.
| lordnacho wrote:
| You are actually right, I focused too much on the financial
| angle and not the operational.
|
| I myself was "affected" if buying a shitty burger qualifies
| as a form of victimization. Ed's Easy Diner here in the UK
| totally changed their burger after getting acquired, to
| something inedible.
|
| This PE-driven enshittification is actually the more
| important thing about it: every damn thing in society is made
| a little bit worse for the consumer (and the employees) due
| to people buying up the businesses and quite directly making
| everything about the service worse.
| stubybubs wrote:
| I live in Canada, where we have socialized medicine. Our
| survival rates for major cancers are on par the US and our
| infant mortality rate is lower, though we spend far less. We
| certainly have problems related to physician pay and cost of
| living crisis, but we are dealing with them. A lot of the
| problems we have here are the same as in the US: not enough
| nurses due to burnout, retiring physicians, etc.
|
| I have never once in my life thought "I sure wish there was
| somebody in the middle extracting value from this whole
| situation." Contributes absolutely nothing. Doctors are plenty
| efficient (pathologically so) and no MBA is going to speed
| things up. Long term outcomes are ideologically opposed to
| short-term capitalism. You cannot relate a reduction in type 2
| diabetes or stroke cases 20 years later to a quarterly report.
| It's insanity to have them involved at all.
| chimeracoder wrote:
| > I live in Canada, where we have socialized medicine. Our
| survival rates for major cancers are on par the US
|
| That's not really true. Cancer is one area that has been
| extensively studied over multiple rounds of years-long
| comparative studies, and while Canada is not as far behind
| the US in survival rates for cancers as other developed
| countries are, it's still decisively behind the US.
|
| You're correct that the middlemen here serve no purpose and
| are effectively leeches upon the system (with patients paying
| the price in the end, with both their wallets and their
| health). However, cancer is not the example that proves this
| point - it's one are where the US system does quite well, by
| the numbers.
| wnc3141 wrote:
| I think its more of a systematized rentiership rather than
| fraud. There's no difference between local ownership and
| private equity except for the level of systematization.
|
| With that said, I do agree that we've rewarded this form of
| rentiership and also enhanced the barriers to entry for other
| forms of private ownership (like a partner owned firm). This is
| in place of value created as a source of wealth, which the tax
| system has entirely devalued
|
| The whole practice of a LBO does seem like a fraud almost. I
| dont understand how a buyer can "lend" to the purchased firm
| without bearing actual risk perhaps I don't understand the
| mechanics there fully
| cardamomo wrote:
| > Normally this is called a scam or a fraud
|
| So why not call it a scam or a fraud? I know there's likely a
| solid legal argument for not classifying it as such, but laws
| can be changed.
| lordnacho wrote:
| Because those are terms for standard pretend-products like
| when someone buys a timeshare or gets a watch they thought
| was a Rolex.
|
| This is its own thing that operates on another level.
|
| The only thing they have in common is that people aren't
| getting the value they thought.
| colordrops wrote:
| I get a sense that the recent acceleration across industries of
| cost cutting and profit squeezing is due to PE activities.
| darth_avocado wrote:
| PE is pretty much ruining everything:
| https://www.nytimes.com/2023/04/28/opinion/private-equity.ht...
| lifeisstillgood wrote:
| The thing about PE that confuses me, in fact it's about all
| finance.
|
| Why is it that a business can be bought by a PE firm, that uses
| the existing cash flow of the business to fund the loan
| repayments, but the business itself cannot get a loan to invest
| in new capital / buy the CEO a yacht etc?
|
| There feels like there is a missing market. There is the super
| safe regulated world of public corporations, where you loan MSFT
| your cash and they will spend it on marketing O365 or something.
| And there is the highly specialised one of a kind "selling it for
| parts" M&A.
|
| But where is the middle market where a PE firm makes an offer and
| the next day the business itself puts up a prospectus and is able
| to find enough semi-liquid capital to take the self same bet?
|
| Why is it so hard to raise funds?
|
| or ami missing something
| benguild wrote:
| No wonder why the billing is so cranked up
| throw9away6 wrote:
| Is there a site somewhere that tracks PE shittified firms? I'd
| pay money to be able to have a list of places to avoid.
| tsunamifury wrote:
| PE is essentially buying all needs of a first world human.
| Medicine, homes, essential services, farmland, in an attempt to
| extract margin from the last possible places they can.
|
| It feels like we've re entered the 80s again but worse where now
| we have 100 billionaires buying up farmland under the guise of it
| being better that they own it rather than the farmers for...
| reasons.
|
| I think this is essentially late stage capitalism, where there is
| little left to offer the general population for margin, but much
| that can be taken away. I'd hazard a guess this is where
| capitalism turns on us and becomes a regressive force for America
| as margin stops fueling opportunities and starts fueling general
| decline for marginal returns. Im not pro socialist and I don't
| have a solution -- but I think we should recognize this and think
| hard on how to pull up out of this.
| engcoach wrote:
| I wonder if public co-ops can rival the influence / power of PE
| firms?
| uLogMicheal wrote:
| Public co-ops do not get free FED money. Gap inducing
| inflation has been forced upon us, certain players get to use
| the leverage to buy up everything, the rest are left arguing
| over scraps.
|
| This is a side-effect of a central banking system without
| proper checks and balances.
| tsunamifury wrote:
| I see that now, I was 24 when that policy started and I'm
| 38 now. And I feel like the entire world was bought out
| from under me with free money to those with capital
| leverage.
| gruez wrote:
| >It feels like we've re entered the 80s again but worse where
| now we have 100 billionaires buying up farmland under the guise
| of it being better that they own it rather than the farmers
| for... reasons.
|
| I don't get it. Are the billionaires buying the land from the
| farmers at gunpoint? If it's so disastrous for the farmers to
| sell, why did they sell in the first place?
| dcow wrote:
| It's more a tragedy of the commons. People can act 100%
| rational at 100 ft. but at the same time be selling their
| souls collectively at 1000 ft. So the question becomes,
| "should society work to mitigate the tragedy"?
|
| Blackrock buys all the land. What do we do? Doesn't matter if
| they did it at gunpoint or not, the outcome is not desirable,
| and we write and enforce the laws.
| olddustytrail wrote:
| It's not disastrous for the farmers. It's just bad news for
| people who require food at any point in their lives.
|
| I'm sure it'll be fine as long as your account doesn't get
| cancelled.
| tsunamifury wrote:
| Yea it's a classic, aggregate individual leverage of simple
| players by sophisticated players to gain monopoly over the
| system.
|
| Oh it's fine now farmers can sell, until it's not.
| goodpoint wrote:
| >private equity firms own more than half of all specialists in
| certain U.S. markets
|
| "own" specialists? Did the US went all the way back to slavery?
| adgjlsfhk1 wrote:
| no. they just have 5 year contacts that cost a few hundred
| thousand to break
| rqtwteye wrote:
| I still remember when my dentist sold his practice to a larger
| group. Suddenly they found things that needed to be fixed
| immediately during every teeth cleaning. After two years I went I
| another dentist and suddenly my teeth were healthy again.
|
| I think private equity will break capitalism. Instead of people
| being interested in something and also making profits, with PR
| you have people that only care about profit and have no passion
| for the product.
| zug_zug wrote:
| ZocDoc needs a filter "not owned by private equity"
|
| Presumably the effect is -> PE forces doctors to spend less
| time/thought per patient -> patients receive worse care ->
| patients change providers
|
| Whoever can provide value to patients to forces "market
| efficiency" and helps patients and the system as a whole.
| peyton wrote:
| Nah the grift is that insurers are price-takers in a local area
| (if you want to provide insurance to businesses in Seattle, you
| need to cover e.g. cardiology in Seattle), so PE buys up all
| the cardiology practices in Seattle and charges more.
| gmd63 wrote:
| It's so frustrating that such a basic, non-intelligent move
| is the go-to by the biggest players that can afford such a
| strategy. It's completely counter to the presumption that
| wealthier players are more suited to allocate resources for
| efficient outcomes.
| [deleted]
| akomtu wrote:
| Isn't it the basic winning strategy in the monopoly game?
| Buy up all prisons, then bankrupt your competitors.
| doodlebugging wrote:
| My former dermatologist practice had several offices in this
| region staffed by good, trained physicians. It was a pleasant
| place to visit for the every so often check-up. During the first
| months of the pandemic I cancelled a regular appointment because
| our area was hot with COVID.
|
| Late last year I finally decided to reschedule that appointment.
| The whole practice had sold out to PE. It had been renamed with a
| name that has religious connotations though all the doctors were
| still there.
|
| I'm always suspicious of mixing religion with health care but in
| this area, north Texas, it isn't unusual to see that type of
| branding in business names any more. It seems that everyone from
| your yard person to your doctor wants you to know how patriotic
| or pious they are so they stick it in their business name or
| logo. Pretty disgusting to me and I dodge those outfits almost as
| a rule because they tend to be full of hypocritical assholes who
| smell the extra income that can flow their way if they just add a
| little Jesus or veteran reference somewhere.
|
| The markets decided a long time ago to use the tools that
| actually worked and that's why we have trained physicians doing
| the health care instead of preachers.
|
| Anyway, after that appointment I have decided that I will not
| return and if I ever need to visit another dermatologist I will
| look for one that is still independent. That old practice has
| allied with a sketchy compounding pharmacy and they encourage you
| to use that pharmacy instead of using Walgreens, CVS, etc.
| probably because there is some level of kick-back in action from
| referrals.
|
| It all seems so broken and filled with greed. It reminds me of
| the software world where everyone wants you to subscribe and pay
| perpetually for apps that in most cases offer no long term value
| and which will inevitably be abandonware when the coder moves on
| to the next big grift. SaaS is a huge scam infecting the business
| world. Everyone should offer the option to pay based on actual
| usage or to buy a perpetual license to use a single version with
| the option to buy upgrades as they are available, based on the
| individual's own needs.
| VancouverMan wrote:
| This is the kind of economic distortion that should be expected
| when onerous government-imposed regulation of practitioners,
| medication, and medical devices creates barriers to entry that
| reduce competition.
|
| While such regulation may have been imposed to try to increase
| safety, quality, and consistency, for example, it also ends up
| interfering with the incentives of the participants.
|
| The lack of real competition, combined with the introduction of
| significant unnecessary costs and other overhead, encourage and
| enable the participants to act in ways that may not be beneficial
| to the patients.
|
| The truly unfortunate part is that such regulation often takes
| options and choices away from the patients, preventing them from
| accessing alternatives that may help mitigate or avoid the
| perverse incentives introduced by regulation.
| digdugdirk wrote:
| Patient options and choices such as "go to the doctor" vs "go
| into crippling debt while trying to navigate a labyrinthine
| billing nightmare"?
|
| Just as an alternative point of view - you describe these
| regulations as "government-imposed". Would it not be equally
| (if not more) likely that these regulations are being created
| and supported by the industry players themselves?
|
| This lack of real competition that you mention sounds like a
| dream if you have few scruples and a captive market. And
| telling someone that they'll die unless they pay for your
| services seems to be about as captive of a market as you can
| get.
| userabchn wrote:
| I think choices was meant to mean things like being able to
| choose between competing healthcare providers.
|
| Created and supported by big industry players that get them
| turned into law (and thus "government-imposed" - classic
| regulatory capture.
|
| On the Mexican side of the border there are clusters of
| doctors, dentists, etc., offering lower cost treatment. I
| imagine that a large part of the decreased cost is due to
| reduced regulations that make it easier for small,
| independent providers to offer their services, which in turn
| results in substantial competition between the many providers
| to offer the lowest cost for the standard of treatment that
| patients want.
| 8note wrote:
| That's describing two different services, preventative
| care, and reactive care.
|
| Your only choice for reactive care is generally only the
| closest place, and you may not even get a choice on the
| provider because you were unconscious when it was chosen.
|
| Once you're there hooked up to a machine, how are you
| changing provider now that you know their services aren't
| right for you?
| [deleted]
| MereInterest wrote:
| Alternatively, this is the kind of economic distortion that
| occurs when excessive de-regulation removes the floor of a
| market, allows local monopolies to flourish, and allows a
| system in which the most profitable action is to let people
| die.
|
| While such deregulation may have been imposed to increase
| competition, it also interferes with the incentives of the
| participants.
|
| The lack of real oversight, combined with the introduction of
| unnecessary profit margins and shareholder returns, encourage
| and enable the participants to act in ways that are harmful to
| patients.
|
| The truly unfortunate part is that deregulation often takes
| options and choices away from patients, as an unregulated
| market's tendency toward monopoly prevents them from accessing
| alternatives that may help mitigate or avoid the perverse
| incentives introduced by quarterly performance targets.
| oatmeal1 wrote:
| Strongly disagree with this comment. The most powerful
| monopoly one can hold is one entrenched by the will of the
| government. Every time the people have asked the government
| to step in and regulate healthcare, corporate lobbyists have
| crafted the laws in such a way to weigh down any potential
| competitors.
|
| In the US, the more regulated a market is, the more likely
| people are to demand further regulation, because they
| incorrectly blame the free market when the market is anything
| but free.
|
| The unnecessary deaths in US healthcare are largely
| attributable to waste and incentive mis-alignment; the person
| paying for healthcare isn't the one receiving it, so it is no
| wonder patients receive poor care.
| lordnacho wrote:
| > the person paying for healthcare isn't the one receiving
| it, so it is no wonder patients receive poor care.
|
| This works fine in fields like the restaurant business or
| the haircutting business, where people can decide for
| themselves what they want to eat or how they want their
| hair, and they can decide for themselves whether their food
| or their haircut is satisfying.
|
| The sector where it is least applicable is healthcare. You
| don't know what disease you've got, you don't know what can
| be done, and you don't know what the incentives of the
| people who do know are. This makes it hard to take
| advantage of the feedback loop from the other industries
| mentioned.
| lucaspm98 wrote:
| I don't completely disagree, but that's the edge cases of
| mystery diseases or rare cancers that make for good
| headlines.
|
| The vast majority of healthcare is basic screenings
| (physicals, x-rays, bloodwork) and chronic disease
| management (birth control, blood pressure). These
| services are more or less understood and interchangeable,
| and absolutely can compete on service, quality, and
| price.
| worik wrote:
| > The vast majority of healthcare is....
|
| ...entirely unnecessary procedures done for profit
| verteu wrote:
| Reminds me of "Does Private Equity Investment in Healthcare
| Benefit Patients?" [1].
|
| > Our estimates show that PE ownership increases the short-term
| mortality of Medicare patients by 10%, implying 20,150 lives lost
| due to PE ownership over our twelve-year sample period. This is
| accompanied by declines in other measures of patient well-being,
| such as lower mobility, while taxpayer spending per patient
| episode increases by 11%. We observe operational changes that
| help to explain these effects, including declines in nursing
| staff and compliance with standards.
|
| [1]
| https://www.nber.org/system/files/working_papers/w28474/w284...
| ackbar03 wrote:
| Capitalism at its best! America! Fk yeah!
| [deleted]
| kjghkjghkjgh wrote:
| That is a "working paper" and has not been peer reviewed.
| verteu wrote:
| Excellent point -- I'll look for a meta-analysis of the peer
| reviewed ressearch.
| Calavar wrote:
| Another good article in this space is the New Yorker's report
| on Hahneman Hospital [1], which was acquired by a private
| equity firm and dissolved a few years later.
|
| [1] https://www.newyorker.com/magazine/2021/06/07/the-death-
| of-h...
| EMCymatics wrote:
| Commenting so I can revisit this with a more thorough response.
| rqtwteye wrote:
| "while taxpayer spending per patient episode increases by 11%.
| "
|
| I am sure they are already working on increasing this from only
| 11% to much more.
| starcraft2wol wrote:
| As they acknowledge, this factor is extremely difficult to
| isolate from demographics, geography, religion, etc.
| synetic wrote:
| But it is not difficult to isolate from common sense. No one
| should profit from denying someone healthcare. All systems
| have ration care but it is immoral for someone to profit by
| denying care. Profit motive does not make for a good
| healthcare system.
| starcraft2wol wrote:
| That's using the theme of the study to support what you
| already believe, without examining what the study actually
| shows. I don't disagree that your reasoning sounds
| plausible, but that's irrelevant of the study's quality.
| synetic wrote:
| We live in an imperfect information world. We do studies
| and try our best to determine cause/effect. Rarely can
| such a study be a proof. This is where common sense comes
| in. Sometimes it is wrong too.
| cscurmudgeon wrote:
| > But it is not difficult to isolate from common sense. No
| one should profit from denying someone healthcare
|
| How does one profit from denying services?
| xenospn wrote:
| Ask your health insurer. They have an army of people
| whose job is exactly that.
| synetic wrote:
| Is this a serious question? You can't think of a scenario
| in which a company in America profits from denying care?
| You should research insurance companies and understand
| how it is they make a profit.
| toast0 wrote:
| Medical insurance in the US has strict limits on profits.
| If they deny a little care, they can hit their cap, but
| if they deny too much, they have to send premium refunds.
| Really, the way to increase costs is to increase spending
| on care --- then they have more profit available, if they
| also increase premiums.
| synetic wrote:
| The CEO of United Healthcare makes around $50 million a
| year. The Medicare administrator makes around $400,000 a
| year. Administrative costs for Medicare are around 10%.
| Healthcare companies balked at being held to the same
| standard. Health insurers have their profits regulated
| but not lab services and whatnot. There are ways around
| the limits.
|
| What is your overall point though? Do you think it's a
| good idea to have profit motives governing healthcare? Do
| you believe PE owned hospitals are good? Do you disagree
| that there are instances of companies profiting from
| denying care?
| kjghkjghkjgh wrote:
| Should a Lasik surgeon provide Lasik to everyone regardless
| of their ability to pay?
| [deleted]
| worik wrote:
| > Should a Lasik surgeon provide Lasik to everyone
| regardless of their ability to pay?
|
| Yes
| synetic wrote:
| The lasik surgeon in your example isn't profiting by
| denying care. Their profit does not increase by declining
| service.
| kjghkjghkjgh wrote:
| Is a PE hospital profiting when it denies care too? How
| is that different from a lasik surgeon denying care?
| synetic wrote:
| I didn't make claims about how PE hospitals make a
| profit. I just said that no one should profit from
| denying care. I can think of a situation in which a
| hospital's owners want to make sure their return on their
| investment exceeds x% per year and the hospital
| administrators deny care based on this consideration
| (otherwise they might get fired for not generating enough
| profit). This isn't the scenario I had in mind when I
| wrote that no one should profit from denying care. WhenI
| wrote that I was thinking of insurance companies and
| wanted to convey a sense that profit driven motives in
| health care can have bad consequences. Some things ought
| not be profit driven.
| dcow wrote:
| Nobody should profit from healthcare at all. I don't care
| if doctors and nurses and board members and janitors all
| make fuck you money, or if hospitals reinvest tons of money
| to perpetually have state of the art facilities. But the
| profit dynamic is too much.
| kjghkjghkjgh wrote:
| How would vaccines and new drugs be invented without any
| profit incentive?
| nobodyandproud wrote:
| Strawman. PE and hospitals aren't the ones inventing
| drugs and vaccines.
| thfuran wrote:
| Isn't a lot of that coming out of universities already?
| kjghkjghkjgh wrote:
| Many are but they also work with for profit pharma
| companies to fund the work.
| worik wrote:
| > Many are but they also work with for profit pharma
| companies to fund the work.
|
| It is sad to think that making profits for your masters
| is the only incentive to do good.
|
| It is the way the system has been built.
|
| It is not done much for many people's suffering
|
| https://en.wikipedia.org/wiki/Neglected_tropical_diseases
| #Ec...
| [deleted]
| boondoggle16 wrote:
| Don't people live long enough already? We can't pay for
| our retirees.
|
| Old age medical care costs $1M+. I know the morally
| correct thing to do when I get old - give that money to
| kids instead.
|
| Vampires.
| callmeal wrote:
| > How would vaccines and new drugs be invented without
| any profit incentive?
|
| The same way they were invented before.
|
| https://www.ncbi.nlm.nih.gov/pmc/articles/PMC6351694/
| An interviewer once inquired about the ownership of the
| polio vaccine patent, to which Salk famously answered,
| "Well, the people, I would say. There is no patent. Could
| you patent the sun?"
|
| https://www.t1international.com/100years/
| On January 23rd, 1923 Banting, Best, and Collip were
| awarded the American patents for insulin. They sold the
| patent to the University of Toronto for $1 each. Banting
| notably said: "Insulin does not belong to me, it belongs
| to the world." His desire was for everyone who needed
| access to it to have it.
| starcraft2wol wrote:
| Individuals often respond to social status incentives
| more than cash. Undoubtedly this invention helped Salk's
| financial and personal outlook in other ways.
|
| Also the models of development of these is just
| completely different from what modern medicines often
| requires. Specifically, operateing large research labs
| (which are heavily regulated) and then pursuing the
| marathon that is FDA approval. Individuals will still
| tinker, but those industrial scale developments are not
| going to happen without funding.
| worik wrote:
| > Individuals often respond to social status incentives
| more than cash
|
| Incentives matter. But they are not the whole story.
|
| People act for reasons other than incentives, also.
| disgruntledphd2 wrote:
| I dunno, the _reason_ that we have such long patent
| periods is supposedly to pay for all the losses in Phase
| 1 /2/3. However, if we merely let scientists do clinical
| research, as per usual, and license the right to conduct
| these studies to contract research labs, and then license
| the production rights for the successful trials to
| contract manufacturers, we could probably cut out a huge
| amount of the waste and marketing spend by
| Pfizer/Novartis et al and still achieve the better goals.
|
| In fact, because the people in this chain would be less
| incentivised to focus on diseases of rich people, then
| humanity might overall be better off.
| kjghkjghkjgh wrote:
| Modern vaccines and new drugs are vastly more expensive.
| It costs for example over $1 billion to fund a new drug.
| disgruntledphd2 wrote:
| Yeah, but does it have to be?
|
| Like, definitely there's costs associated with Phase
| 1/2/3 etc, but right now the actors in the chain have
| absolutely no incentives to limit these costs, as they
| help to justify the huge profits gained from the
| temporary monopoly of patents.
|
| Also, it's worth noting that all the big Pharma companies
| spend much, much more on marketing than they do on
| research.
| worik wrote:
| > Yeah, but does it have to be?
|
| No. Definitely not.
|
| We learnt that during the mad scramble for a Covid
| vaccine.
|
| Followed up by a sickening cash grab.
| anigbrowl wrote:
| Some people like fixing problems for their own sake and
| giving away the fruits of their labor to maximize the
| overall benefit. The notion that the profit motive is the
| only reason anyone gets up in the morning is false.
| synetic wrote:
| A large majority of people going into scientific research
| do so for a love of the subject and not to become rich.
| They just want to make enough money to live a decent life
| and pursue knowledge.
| kjghkjghkjgh wrote:
| Yes and their university medical research typically
| requires infrastructure and funding, which are often
| provided by for profit pharma corporations.
| synetic wrote:
| The following is sarcasm. If only one could think of a
| mechanism by which an entity controlled by people elected
| by the voting public could fund such things.
| thfuran wrote:
| How are people going to make fuck you money if there's no
| profit?
| triceratops wrote:
| Ironically with no profit there's lots of cash left to
| pay employees fuck you money.
| nine_k wrote:
| The same way how some non-profits and endowment funds
| operate. They are designed to produce a constant,
| predictable supply of money for their cause, and not try
| to maximize their profit and take over the world. Think
| about the way the Nobel Prize is funded, for instance.
| dcow wrote:
| Honestly I've had this happen multiple times recently,
| where people don't understand revenue vs profit. Profit
| is what you put in the business bank account _after_ you
| pay operating costs which includes salaries. You can make
| fuck you money by making idk $2MM per year. That doesn 't
| come out of profits. Profits are commonly paid out to
| owners/investors in the form of dividends.
| thfuran wrote:
| That's sophistry. Yes, accountingwise, revenue and profit
| aren't the same thing, but if healthcare is going to be
| raking in so much money that the hospitals are throwing
| fuck you money at the janitors, it's clearly highly
| profitable for a lot of people, and they want "nobody to
| profit from healthcare".
| synetic wrote:
| You are now engaging in sophistry. Doctors in England can
| be paid more in their system than they make now without
| putting in profit motives. In a publicly funded system
| one can pay lots of money to workers without profit in
| the system.
|
| It's as if Americans don't understand that government can
| provide services and not be profit driven.
| thfuran wrote:
| >Doctors in England can be paid more in their system than
| they make now without putting in profit motives
|
| Could their pay increase without the doctors profiting?
| synetic wrote:
| This is a nonsensical response. You know what is meant by
| "profit" in the context of this discussion. You argue in
| bad faith particularly since you deliberately left off
| the motive part of my statement.
|
| Obviously what is being discussed is that non-workers
| should not reap monetary rewards from denying care or
| otherwise siphoning out money from the healthcare system.
| You may nitpick each word and be as pedantic as possible
| but none of that will demonstrate that having PE firms in
| charge of hospitals would be better than a government or
| nonprofit entity running things.
| verteu wrote:
| > As they acknowledge, this factor is extremely difficult to
| isolate from demographics, geography, religion, etc.
|
| No? They used "a within-facility differences-in-differences
| design to address nonrandom targeting of facilities" so
| they're measuring the change in outcomes at the same facility
| before & after takeover.
| cscurmudgeon wrote:
| That is not conclusive either. If PE had not acquired them,
| may be they would have been worse or better? This analysis
| doesn't answer that.
| wpietri wrote:
| If your standard for "conclusive" is "study must fork the
| universe to compare the same business with different
| timeline" then you may be waiting a while.
|
| Regardless, in this case, where the ongoing harm could be
| very large, we have to at some point go with the best
| evidence available.
| swsieber wrote:
| I mean... people who go to cancer clinic have cancer at a
| higher rate than those who don't. Cancer clinics cause
| cancer. And therapists create mentally unstable people,
| etc.
|
| You wouldn't have to fork the universe. I think a
| randomly distributed trial would work, and could be
| reasonably made to work. Not sure though.
|
| FWIW, I think we should prevent private equity in lots of
| places, especially hospitals.
| swsieber wrote:
| I mean... people who go to cancer clinic have cancer at a
| higher rate than those who don't. Cancer clinics cause
| cancer. And therapists create mentally unstable people,
| etc.
|
| You wouldn't have to fork the universe. I think a
| randomly distributed trial would work, and could be
| reasonably made to work (woth Gov. help). Not sure
| though.
|
| FWIW, I think we should prevent private equity in lots of
| places, especially hospitals.
| starcraft2wol wrote:
| > study must fork the universe to compare the same
| business with different timeline
|
| Unfortunately, that might be what's necessary to know. I
| am not knocking the research quality, but there are
| limits on what we can conclude, and obviously other
| important factors have not been sufficiently isolated.
| verteu wrote:
| By this standard, should we not believe that smoking
| causes lung cancer? After all, a controlled experiment on
| humans has never been done.
| starcraft2wol wrote:
| Those studies aren't similar in methodology or subject at
| all. Can you acknowledge there are unmeasured social
| factors at play in this simple survey analysis, or not?
|
| If so, I'm happy to speculate about the epistemology of
| tobacco studies.
| verteu wrote:
| > Those studies aren't similar in methodology or subject
| at all.
|
| They both used observational health data to create a
| causal conclusion on mortality. How is that not a
| similarity in methodology?
| cscurmudgeon wrote:
| > If your standard for "conclusive" is "study must fork
| the universe to compare the same business with different
| timeline" then you may be waiting a while.
|
| My standard is authors (and random internet commenters)
| to have an inkling of the progress in causal analysis and
| related progress in the last two decades.
|
| Edit: Some resources:
|
| https://www.ncbi.nlm.nih.gov/pmc/articles/PMC9300826/
|
| https://journals.sagepub.com/doi/pdf/10.1177/1536867X0800
| 700...
|
| https://www.hsph.harvard.edu/miguel-
| hernan/research/causal-i...
|
| From 1999:
|
| https://liberalarts.tamu.edu/sociology/wp-
| content/uploads/si...
| verteu wrote:
| I'm quite familiar with causal analysis [1]. What are
| your qualifications in the field?
|
| The paper performs half a dozen standard robustness
| checks [2]. Which exactly do you believe are missing? Be
| specific, and include reasons why we should reasonably
| expect the opposite outcome.
|
| [1] Senior ML Researcher @ Google, top 3 PhD, etc.
|
| [2] Placebo analysis, instrumental variables, MTE
| analysis, breaking down the effect into plausible
| mechanisms such as reduction in front-line staffing,
| limiting results to nursing homes owned by the same
| chain, etc
|
| edit: Instead of linking random surveys on causal
| inference, please make a specific claim, such as "the
| authors should have used propensity scoring", or "causal
| inference studies should all be ignored." Otherwise,
| there's no way to have a debate.
| worik wrote:
| > I'm quite familiar with causal analysis [1]. What are
| your qualifications in the field?
|
| That is nonsense.
|
| This is not a pissing contest about qualifications, or a
| contest cherry picking research.
|
| It is a rolling catastrophe - decades in the making - for
| USA people. In general it is that money is being
| transferred in industrial quantities from everybody to
| the very rich. Specifically money is getting sucked out
| of the health system for the benefit of a few at the cost
| of the many.
|
| FFS socialise your medical system. Spread the cost like
| sane people and drive out the greed heads
|
| If you can send a rocket to the moon.....
| anigbrowl wrote:
| You should have read back up the thread, and see who
| turned it into a pissing contest and ended up distracting
| from the moral and ethical arguments by vague quibbling
| about the methodology.
| verteu wrote:
| Agreed! I only mentioned it because "curmudgeon" chose an
| ad-hominem argument in lieu of a concrete criticism of
| the methodology.
| starcraft2wol wrote:
| That's nice of you to list where you work. On HN there
| are many qualified and intelligent people, so we
| generally prefer to talk about the issues directly.
|
| > half a dozen standard robustness checks
|
| My original comment isn't arguing they used tools
| improperly, it's an epistemology argument. It's about the
| limitations of what information could even be gathered
| from this kind of study.
| wpietri wrote:
| I think it's hilarious that somebody who has been here
| for all of 11 days wants to tell somebody who is coming
| up on their 10-year HNiversary what "we generally
| prefer".
| starcraft2wol wrote:
| I'll let you figure that one out on your own.
| [deleted]
| verteu wrote:
| This was a reply to cscurmudgeon's objection, not yours.
| (You can tell because my comment is a reply to his
| comment.)
| johndhi wrote:
| An absolutely wild and illuminating statement
| alach11 wrote:
| When possible, I prefer people who work for me to have incentives
| that are aligned with mine. PE-owned medical practices and even
| many private practices throw that out the window, with financial
| incentives to do procedures or run tests.
|
| I was talking to my wife's obstetrician about this last week and
| he also feels strongly about it. He's paid a flat salary and gets
| no financial benefit for a c-section vs. an induction vs. a
| conventional delivery. I'd like to keep it that way.
| chimeracoder wrote:
| > PE-owned medical practices and even many private practices
| throw that out the window, with financial incentives to do
| procedures or run tests.
|
| Quite the opposite. They tend to be under capitated contracts
| with insurers, which means they are responsible for the costs
| of services they provide, but receive a flat amount for
| reimbursements. This explicitly encourages _underutilization_
| of care.
| bradleyjg wrote:
| The supposedly not for profit hospital systems conglomerates
| are as rapacious as any robber baron. Nominal form is no
| guarantee.
| starcraft2wol wrote:
| > gets no financial benefit for a c-section
|
| I don't think that's typical anywhere. The incentives they face
| are less concrete. It may be more inconvenient or uncomfortable
| for the doctor. If something goes wrong and there is a legal
| risk, it's difficult to retroactively justify not immediately
| changing strategies.
| goodpoint wrote:
| It's actually typical in some countries, and it's mean to
| avoid the conflict of interest around prevention VS selling
| treatments.
| Calavar wrote:
| In the US, C-sections reimburse higher than vaginal
| deliveries across the board. What's changed over the years is
| who gets the extra money from the C-section. It used to be
| the physician, but nowadays it is increasingly the hospital.
| The incentive to do C-sections over vaginal deliveries is
| still there, but it's transforming into a population level
| incentive (i.e. is the hospital structuring staffing and
| workflow in a way that favors C-sections) rather than an
| individual one (i.e. is a particular physician very trigger
| happy with C-sections).
| tryptophan wrote:
| Flat salary is an incentive to do the easiest option or least
| work. You can't win with the incentive game.
|
| One nasty way that can manifest is to under test because if you
| don't find anything you don't have to do anything.
| Brybry wrote:
| Do doctors need an incentive game?
|
| We're already selecting a highly motivated subset of the
| population with the med school process.
| therealdrag0 wrote:
| Incentives are unavoidable. So best to try to identify them
| whether you want to change them or not. "Highly motivated"
| in a way means even more driven by incentives, just a
| particular set of them.
| stubybubs wrote:
| Financializers and engineers so often miss the human factor,
| or try to design around it. At some point in this process
| involving care for humans, you have to rely on people simply
| choosing to do the right thing, even if it's hard. This has
| been medicine's tradition for a long time. The fewer layers
| between doctor and patient the easier it is to do this. You
| also have to provide enough resources for them and some kind
| of work/life/pay balance.
|
| In Canada we have fee for service, with incentives to care
| for specific populations (remote or chronic conditions etc.)
| Doctors (or their clerk) do their own billing direct to
| provincial health services. It works. We rely on individual
| morality and they generally do the right thing. Our outcomes
| are good.
| nobodyandproud wrote:
| A flat incentive with a clinical outcome stick doesn't have
| the warped incentive of PE.
| burkaman wrote:
| Doesn't this apply to all jobs? You're sort of suggesting
| that salaried employment can't work, because employees will
| be incentivized to do the easiest or least work. Clearly it
| does work in practice though, despite this alleged
| fundamental flaw.
| syvolt wrote:
| That seems infinitely better than the status quo. Having
| unnecessary procedures is much worse. With the former you can
| go to another doctor, with the latter they'll just run up
| your bill until you're broke or dead unless you're one of the
| exceedingly rare few who gets medical advice from multiple
| doctors (most can't afford that or do not have alternative
| in-network doctors).
| leoh wrote:
| > You can't win with the incentive game.
|
| I agree that incentives are frequently and perhaps typically
| exploited, especially when crafted carelessly or not iterated
| upon, as most incentives seem to be.
|
| I would be eager to contemplate a _clinical outcome based_
| incentive scheme.
| raphman wrote:
| Wouldn't this incentivise doctors to only accept cases with
| a high chance of quick success?
|
| Young child with cancer? Nope, not worth the risk.
|
| Patient with mental health problems? Takes too long,
| outcome not easily measurable.
|
| Obese patient with back pain? Let's do surgery instead of
| investigating and treating the root causes.
| boondoggle16 wrote:
| No, this is way too simplistic. They can be judged on
| relative performance of cases.
|
| Just like schools, you can tell which teachers are good,
| even in districts with bad kids.
| brentis wrote:
| Came here looking for this angle. Seeing doctors now
| feels like talking to someone who has memorized an
| actuary-like table for the doctor's risk/reward versus
| patients benefit/outcome as in the past.
|
| Have a torn meniscus and given age is dumped into "excise
| meniscus tear" bucket. While Dr knows that shortens the
| path to knee replacement (which he no less pointed out on
| several occasions).
|
| Going to Dr. Now seems like you are a walking revenue
| center vs. patient in need.
|
| (ps. Many current accredited studies suggest repair
| attempt vs. removal)
| ubermonkey wrote:
| That's kind of reductive.
|
| Traditional American fee-for-service medicine has been
| absolutely shown to (a) drive practitioners to do
| unnecessarily risky and expensive things and (b) fail to
| produce better outcomes than salaried physician facilities.
| darrin wrote:
| A bonus based on risk-adjusted outcomes would put pay in
| alignment with patient care. This would require much better
| outcome analysis and reporting though (also a good thing).
| swagasaurus-rex wrote:
| Perverse incentives have a particularly gnarly likelihood of
| a feedback loop which causes even more destruction.
|
| Healthcare in America is a prime example. So is higher
| education, in which the lenders and universities collude to
| raise prices as much as possible.
| jbaber wrote:
| Am I a Pollyanna for believing all other things being equal,
| doctors want to do the ethical thing and that direct
| financial incentive to do otherwise is an obstacle they have
| to overcome.
| pc86 wrote:
| Physicians are absolutely reimbursed per procedure, per
| surgery, per test, etc. OB specifically has a higher
| concentration of employed doctors, but the hospitals are still
| reimbursed the same way, and these numbers are 100% taken into
| account when determining things like bonuses and promotions.
| But other specialties (like family med) are still dominated by
| private practices where physicians directly earn more by doing
| more.
|
| The balancing act of this is that oversight is (typically) by
| qualified medical professionals who can judge whether a given
| procedure, test, surgery, etc. was medically indicated or not.
| Calavar wrote:
| > 100% taken into account when determining things like
| bonuses and promotions
|
| Eh, there's some truth to what you said but it's a bit of a
| stretch.
|
| For bonuses, it depends on specialty and practice. In my
| current job I have zero incentive structure, period. If by
| some miracle, zero patients showed up on my shifts over the
| course of an entire year, I would make exactly the same as if
| I averaged 20 patients per day. I also don't get any
| reimbursed for any of the procedures I do -- 100% of that
| goes to the hospital. This is an increasingly common
| compensation model in pretty much every nonsurgical
| speciality and even in a small number of surgical ones
| (Ob/Gyn, as you mentioned).
|
| As for promotions, I don't think that's true at all. First,
| physicians tend to have a very flat hierarchy outside of
| academics. (At many hospitals, you're either CMO, a
| department chief, or just some guy.) What this means, in my
| personal experience, is that promotion is such a remote
| possibility that it's something that 80 to 85% of physicians
| don't spend any time thinking about. Second, productivity is
| not a principle criterion for promotion. When a hospital or
| clinic promotes a physician, they take a large chunk of that
| physician's clinical time and replace it with administrative
| work. If you're trying to maximize revenue, your most
| clinically productive person is precisely the last person you
| want to do that with.
|
| > But other specialties (like family med) are still dominated
| by private practices
|
| Family medicine is definitely _not_ dominated by private
| practices, at least for new grads. Private practice is
| quickly going extinct everywhere except for those specialties
| that have a high proportion of out-of-pocket payors (plastic
| surgery, dermatology, orthopedics) or those specialties where
| the demand is high but the supply is so thin that hospitals
| can find themselves battling with each other to sign
| contracts with the one of the few practices in their area
| (neurosurgery, otolaryngology, CT surgery in some parts of
| the country).
| j-bos wrote:
| Having recently spent too much time at too many medical offices,
| I've been able to ask doctors about how thier businesses work. So
| far only one has said they own their practice, and he's of the
| opinion most doctors cannot pull off ownership becuase they exit
| med school bound by debt, and never end up with enough capital to
| hang their own shingle, much less to buy an existing practice
| when competing with PE. Of course this is 3rd hand anecdota.
| moomoo11 wrote:
| I think if we can get more health data access then we can slowly
| automate out general practice type doctors.
|
| Only doctors around will be those who are highly specialized in
| orthopedics, neurology, etc.
|
| For everyone else who needs a Z pack or headache pills, they can
| just get their care from a AI doctor in their pocket. Why do I
| need to wait days or weeks to see a general practice doctor? That
| doesn't sound fair.
|
| Cuts costs heavily. Most people live long with just eating
| healthy and moving around. I'm sure it will be fine for most
| people.
|
| I personally don't see a doctor each year. I exercise, eat whole
| non processed foods (cheaper than whatever packaged crap), and I
| get my lab work done regularly. The only times I've gone in are
| when I broke something or was heavily bleeding from an injury.
|
| I'll bet if most people put down the Diet Coke in favor of a
| water, we would save billions of dollars right off the bat.
| hkon wrote:
| Great that you have good health. It does not however make you a
| medical expert.
| moomoo11 wrote:
| Never said I was. Just a victim of never getting an
| appointment when it's most necessary. And it's factually true
| that Diet Coke isn't necessary for the health of the body.
| johndhi wrote:
| [flagged]
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