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Services that PE has ruined in my city by rent-seeking:
- Veterinary services
- Dental services
- Optometry services
- Urgent care services
I wish there were some kind of public database that allowed easy lookup of whether a given company is owned by a private equity firm.
Storage unit rental went from $90 in 2014 to $110 about 2017, but then was acquired by CubeSmart which is publicly traded: now $241 per month. I know the local taxes and they have stayed about the same all those years.
Though less critical to our lives, PE has ruined loads of retail and restaurant options as well - Sears, Toy ‘R’ Us, Red Lobster, and Shari’s come to mind.
Water used to be managed by a local cool here where I live. I had been for decades.
A few months ago i got an email saying that PE had acquired it.
I was paying between ~$25/month before. Today i got the first bill from new management for $89.
Same volume/usage, nothing significantly different.
Sigh.
Toy Stores for kids should be on the list
Coutry wide only 16% of dental practices are DSO, and it's not that functionally different from junior dentists getting loans to set up their practices with practices themselves as a collateral.
If we’re going to stick with private ownership of our healthcare infrastructure, patient-facing providers should at least be required to be B Corps, with one Board seat set to represent the doctors’ and nurses’ interests and a second patients’ interests. (Not sure how you’d elect the latter.)
There should also be strict leverage, related-party transaction and dividend limits. In exchange, we might provide a public lender of last resort for healthcare providers who need a lifeline.
Banning private equity from healthcare is a good headline. And if I were a candidate, I’d probably run on it. But it’s a band-aid to a broader incentive problem.
The issue is, at least in the US, if we ban PE/VC from healthcare, who is going to do it?
Americans are deeply divided on the big bad guvmit
Thats essential Democratic Socialism and would lead to minorities benefitting.
As such, liberals and conservatives agree its a bad idea.
My daughter is “on the spectrum” and dealing with these therapy places was just a huge waste of time and money. I don’t know if the places we went to were owned by private equity or what but the quality was really bad and this is in a major metropolitan area that is also affluent. The therapist seemed like good hearted people, but they were paid so miserably that there was constant turnover. The billing practices were always shady and complicated and frustrating. Not to mention most of these places have 6 to 12 months waiting list to see anybody in the first place.
Exactly the same experience with long term care for elderly relatives. It's all about getting their money. Care is perfunctory.
It’s part and parcel to the mental healthcare system for the last decade or so. There is no place that does better because every single provider is dependent on private health insurance which rarely pays without major and intense hassle.
I really dislike this, especially because it ultimately results in worse care for the kids.
I think the place I take my kid to for therapy is likely private equity owned, but it's also about the only place available in my area.
I know they are charging around $80 per season, and I also know that the salaries for their therapists are around $25 to $30 per hour.
That leaves a very healthy margin for everything from employee benefits to building rental to admin (which I think is probably where the majority of margin goes).
I think you're over-estimating how much slack there is in the organization.
A rule of thumb is that benefits cost an employer 25-30% of salary. So you're already pushing to 50% of revenue going to direct salary costs. Then there are employees in non-revenue roles (HR, legal, accounting, IT, etc...) and employees doing non-revenue work.
Finally, you have rent, licensing, insurance, and all the other fixed costs.
It's worth asking if you're curious or have a good relationship with the provider. Some may be willing to tell all about their ownership or management situation if prompted politely.
I know of a childcare center that was acquired recently. Not sure if by PE or just another business, but the employees are less than thrilled with the changes.
applying this same kind of logic that PE uses, equating healthcare workers to machines is the bane of the industry.
and then people complain why ther doctors burn out. what do you expect when you ingrained on them that every hour not booked is $80 lost, so we need to book them 24/7, cut their lunch break and squeeze every inch of life from them.
These should be useful signals to regulators. Regulation is imperfect but somehow we blame companies that take advantage, either of immature or nonexistent regulation (which might be the case here) or of poorly written regulation (e.g. circa 2000 California energy regulation that let Enron and company run wild).
These companies, in finding essentially arbitrage opportunities, are, perversely, helping strengthen regulation, but only if regulators pay attention to what is going on and do something about it, instead of just watching it happen.
This fails to recognize the existence of lobbyists and regulatory capture.
Can anyone explain me like im 5 - what is the alternative and what’s so special about private equity firms in this context?
Like those centers are going to be owned by someone one way or another - what is so special or bad about equity firms vs alternatives?
Genuine question. Because I don’t have a clue how this works in US.
This won't be at a 5yo level, but here's an attempt: there are a two things specific to private equity that often leads to higher prices and worsening service:
1. PE aren't investors like you and me. We can go to our brokerage and buy shares of a public company, hold those shares, vote on directors and proposals, etc... Or we can buy and sell ETF/mutual fund shares that own companies. Then, we (or fund managers) can sell those shares after any period of time we want. Could be years, decades, or minutes. Whatever meets our investing goals. The same is actually true for hedge funds. We buy a a piece of a company, hold it as long as we want, then sell to take profit/loss. When PE buys a company though, they buy the whole company AND they have a specific timeline in mind. This is because PE firms are actually temporary private "investment funds": partners put in money and expect a certain return on investment after a certain period of time. At the end, that's when the fund needs to wind down and return capital + returns. So, there's already a ticking clock on anything a PE firm buys, and pressure to generate return before time runs out. They typically do this by taking a company public on the stock market (maybe again) or selling it to someone else. (This doesn't always succeed, but there are other options then, like continuation funds.)
2. PE funds also take on a lot of debt. They can't afford to buy whole companies or roll up entire industries just with their investors' funds, so they borrow a lot. Now, the companies they buy for their portfolios not only need to generate returns for their investors, they also need to do that AFTER making payments on that debt. It multiplies the pressure.
There are a lot of cases where PE bought struggling companies, and with discipline and incentives turned things around on a timeline. But there are also a lot of cases where PE bought stable but boring companies, used debt and pressure to force them to raise prices, cut services, lay off workers, and lower quality in order to generate returns at the pace required.
(Most of this I learned from reading Matt Levine columns, I'm not an expert and don't work in this industry at all, so I may have some details wrong.)
An individual likely (hopefully) has a moral compass.
A family introduces some perverse financial incentives but you also get long term (ie multi generation) planning and reputation concerns.
A group of practicing professionals who own the operation will hopefully exhibit some shared pride and professionalism.
A co-op or similar arrangement ties the interests directly to the local community.
The larger the public company the less overlap there will be with the customer's interests. At least they might worry about reputation and stock price though.
Pretty much the only concern PE has is avoiding litigation. Their primary motivation is maximizing value extraction over the short or medium term.
Just a driveby speculator but my guess is PE dillutes interest in and responsibility for the businesses.
Individuals or family holdings are more likely to have concern for their reputations in addition to finances, public companies are more likely to scrutinized offsetting what would be their much lower reputational concerns. But PE is diffuse and often distant enough to eliminate human reputational concerns while being held to far lower stadards than public companies.
The optimal version of a PE is to take a failing business and either turn it around or carve up assets and reallocate people to do something useful and profitable. The more a business is failing, the cheaper it is to takeover and for the PE to do the work of a fungus. But this process can also become a disease if it is too easy for them to takeover, taking a healthy host and carving it up. This is mimicked in real life when conditions turn a fungus into a hostile organism on something that is living; maybe it is just a little sick but the environmental conditions help the fungus more than it ought to leading to it being a killer instead of a resource freer.
The real question to ask is why can they take on so much debt? And for that, one needs to acknowledge the fact that, particularly for the well-connected, debt is easy to obtain as banks essentially create money for loans. There are constraints (otherwise the banks would make themselves trillionaires), but the constraint is not the quantity of money. This creation of money through lending leads to inflation which further supports operating via debt as those who take out loans see the real value of the loans decrease. The banks just made up the money so there isn't a direct loser from the inflation other than everyone who has to deal with increased prices. You can think of it as a broad, regressive tax on the population to fund these firms doing far more than they should.
With an actual constrained money supply tied to real wealth in the economy, the PE firms would have to focus on the best deals which means the businesses that are truly dying and their role is to turn the nonproductive assets into something productive.
---
I asked ChatGPT to critique my answer (which is unaltered above) and it said to tone down the lending being propped up by inflation and instead emphasized the following:
>Inflation can help leveraged borrowers, but in PE the bigger structural advantages are: • Interest deductibility (a massive tax subsidy to debt) • Limited liability (upside captured, downside partially socialized) • Fee extraction independent of performance • Ability to load debt onto the acquired company, not the PE fund
I then asked it to answer the question without regards to my context and it basically said PE is different because of
> • short ownership horizons • high leverage • strong control • financial returns as the primary goal
Here is the link to the short conversation if interested: https://chatgpt.com/share/6963a0de-7a04-8012-8c36-afef5dd74f...
We already know that Private Equity kills people in the hospitals [1] and nursing homes [2] for profit. So why do we continue to allow them to operate Healthcare facilities?
[1] https://jamanetwork.com/journals/jama/fullarticle/2813379
Private equity is into this. Into that. The problem is some folks just got too much damn money. They gotta put it somewhere.
>“Private investors making a little bit of money while expanding access is not a bad thing, per se,” Singh said. “But we need to understand how much of a bad thing this is and how much of a good thing this is. This is a first step in that direction.”
Who gets to say what "a little bit of money" is here?
They started slapping my kids hands, forcibly shoving him back in his chair, and grabbing my kids face and torquing his neck. Jon Paul Saunders, a leader in ABA, swore up and down 'this is the best in ABA'. When I looked at the data, my kid had all but stopped screaming/crying with other RBT's, but was more than double the crying/screaming with the rbt's doing the slap, push, face yank teqnique.
At this point, my son had done 18 months of ABA and was being used to train new RBT's (high turnover field of course). The prescribed hitting was creating behavioral problems at home, but was being used to justify extensive hours of ABA.
I dont think a profit driven model is great for these kids.
If anyone wants to see how private equity has transformed the veterinary industry check out www.privateequityvet.org/vet-list - over 7000 practices mapped across the US so far. Our dog died at the hands of a recently acquired PE practice :(
Are you surprised? there's money to be made.
Absolute cancer.
Try to buy an HVAC or heavy motor capacitor.. guess who owns all of the manufacturers?
Private equity just makes everything worse for consumer. Squeezes every penny out.
Private equity goes where the money is. Nothing is magically non-exploitative just because it's done by a bunch of small businessmen instead of a private equity company. There's a reason why Private Equity bought so many dialysis clinics. There's a reason why they're doing this.
It's easy to scam the government out of money for this because a bunch of well-meaning "useful idiots" will say "pay whatever it takes; give them as much money as they need; it's for human lives!" and none of that is true. It's all about using different battalions to rent-seek on normal tax-paying Americans.
Tim Walz lost his hope for re-election over this but he's not the only one. In time we will discover a large array of healthcare scams and home-care and autism/child mental health are going to be near the top.
ah yes, another market where the private equity scum have realised that "the market is inefficient" and that the existing businesses aren't "extracting maximum consumer surplus"
fortunately the UK doesn't have this problem for people as the state run healthcare system has set the price floor at zero
it hasn't stopped the private equity scum completely though, instead they have bought up most of the country's formerly independent vets
> From only 10% in 2013, almost 60% of veterinary practices are now owned by large companies
they then immediately "optimise the demand curve", doubling/tripling their prices, meaning there are now people that can no longer afford to treat their pets
Reading the headline all I can think about is that many people with autism are not capable of communicating, or if they are, only in a limited way. Literally people who do not have a voice to speak for themselves.
Private equity in healthcare shows particularly clearly how far capitalism is willing to go. Profiting from the suffering of humans and animals, while probably still feeling good and even heroic about it, disgusts me.
Come to think of it, I don't think I've ever experienced a product or service that took a turn for the better, after the company was acquired by PE.
There might have been a time where PE bought up mismanaged companies, and turned them around - but the PE acquisition spree we've seen for the past 10 years or so...it seems exclusively to cause enshitification. And it is happening everywhere. There will always exist some niche PE firms for every sector out there, nothing is safe.
> The primary concern is that private equity firms may prioritize financial gains over families, said Daniel Arnold, a senior research scientist at the School of Public Health.
...may? How are they not already by gobbling them up in a calculated way. Targeting states with lax insurance claim scrutiny
If corporations are people than PE firms should be executed like the leaches on society they are. Nothing makes me see red like the fact that basic services are increasingly being captured by these disgusting rats so they can squeeze every last cent out of society possible.
What did you think was going to happen when you've got guaranteed payments and a growing customer base as people celebrate their "neurodiversity" whilst at the same time demanding subsidies and yelling "ableist" at anyone who criticises them or the system?
So politicians pretend to care by throwing more money at their cronies and get away with it because won't someone PLEASE think of the children. And then people pat them on back and vote for them in the next election, and blame "capitalism" while the people they've just voted back in make millions.
They even say "We're also dealing with children who are largely insured by Medicaid programs" and yet still people are failing to join the dots...
Releasing an almost-3,000-page expose on private equity this week.
It's hard to argue against those who say private equity ruins everything. It's astonishing. And massively depressing.
You can download for free when you search the 'net for Founderstowne.
Is it even moral to help people if investors aren't making a profit in the process? (/s)
Makes sense. Half the people I know now have autism including Elon musk so it’s quite lucrative.
Because autists make the best engineers? So autism center becomes a recruiting tool.