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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

#211

Post by fiprofessor »

disgruntledphd2 wrote: post #172
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…

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…

> 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?

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

#212

Post by treis »

lordnacho wrote: post #145
treis wrote: post #101

Earlier quoted context omitted.

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.

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.

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.

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

#213

Post by lordnacho »

ars wrote: post #198
AndrewKemendo wrote: post #183

Earlier quoted context omitted.

>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 follo…

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 becaus…

Does this mean that as long as there are two people making offers, anything you do is voluntary?

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

#214

Post by amelius »

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…

> 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.

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

#215

Post by Buttons840 »

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,…

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.

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

#216

Post by stubybubs »

tryptophan wrote: post #35
alach11 wrote: post #4

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 inductio…

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.

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.

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

#217

Post by underlipton »

fiprofessor wrote: post #208
underlipton wrote: post #146

Earlier quoted context omitted.

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 m…

> 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…

>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.

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

#218

Post by disgruntledphd2 »

fiprofessor wrote: post #211
disgruntledphd2 wrote: post #172

Earlier quoted context omitted.

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…

> 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 t…

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.

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

#219

Post by Mordisquitos »

candiodari wrote: post #190
lapcat wrote: post #151

Earlier quoted context omitted.

> 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 s…

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…

> 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".

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

#220

Post by s1artibartfast »

lordnacho wrote: post #136
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…

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…

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.

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