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Who employs your doctor? Increasingly, a private equity firm

nytimes.com

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Re: Who employs your doctor? Increasingly, a private equity firm

#171

Post by tpmoney »

vkou wrote: post #124
lr4444lr wrote: post #59

Earlier quoted context omitted.

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 out…

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…

>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?

Re: Who employs your doctor? Increasingly, a private equity firm

#172

Post by disgruntledphd2 »

civilized wrote: post #109
lordnacho wrote: post #46

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 machin…

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…

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.

Re: Who employs your doctor? Increasingly, a private equity firm

#173

Post by raincole »

monero-xmr wrote: post #122
lapcat wrote: post #114

Earlier quoted context omitted.

> 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,…

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.

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.

Re: Who employs your doctor? Increasingly, a private equity firm

#174

Post by fakedang »

civilized wrote: post #109
lordnacho wrote: post #46

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 machin…

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…

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.

Re: Who employs your doctor? Increasingly, a private equity firm

#175

Post by j-bos »

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.

Re: Who employs your doctor? Increasingly, a private equity firm

#176

Post by wpietri »

MattGaiser wrote: post #156
wpietri wrote: post #74

Earlier quoted context omitted.

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.

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.

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.

Re: Who employs your doctor? Increasingly, a private equity firm

#177

Post by thfuran »

dcow wrote: post #111
thfuran wrote: post #64

Earlier quoted context omitted.

How are people going to make fuck you money if there's no profit?

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.

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".

Re: Who employs your doctor? Increasingly, a private equity firm

#178

Post by vkou »

tpmoney wrote: post #171
vkou wrote: post #124

Earlier quoted context omitted.

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…

>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…

> 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.

Re: Who employs your doctor? Increasingly, a private equity firm

#179

Post by sgregnt »

lapcat wrote: post #114
lordnacho wrote: post #46

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 machin…

> 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,…

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.

Re: Who employs your doctor? Increasingly, a private equity firm

#180

Post by prepend »

ericjmorey wrote: post #126
civilized wrote: post #109

Earlier quoted context omitted.

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…

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.

> 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.

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