Who employs your doctor? Increasingly, a private equity firm • Hacker News Board

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

#221

Post by tpmoney » Sun, Jul 16, 2023, 7:11 PM UTC

vkou wrote: post #178

tpmoney wrote: post #171

Earlier quoted context omitted.

>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 affectin…

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?

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

#222

Post by civilized » Sun, Jul 16, 2023, 7:12 PM UTC

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…

> 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.

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

#223

Post by ryandrake » Sun, Jul 16, 2023, 7:14 PM UTC

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…

“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.

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

#224

Post by benguild » Sun, Jul 16, 2023, 7:15 PM UTC

No wonder why the billing is so cranked up

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

#225

Post by throw9away6 » Sun, Jul 16, 2023, 7:15 PM UTC

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.

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

#226

Post by fiprofessor » Sun, Jul 16, 2023, 7:17 PM UTC

underlipton wrote: post #217

fiprofessor wrote: post #208

Earlier quoted context omitted.

> 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…

> 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.

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

#227

Post by fallenasleep » Sun, Jul 16, 2023, 7:19 PM UTC

mfer wrote: post #162

lapcat wrote: post #140

Earlier quoted context omitted.

> 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 ideologic…

> 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?

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

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

#228

Post by ryandrake » Sun, Jul 16, 2023, 7:21 PM UTC

monero-xmr wrote: post #164

shadowfox wrote: post #155

Earlier quoted context omitted.

> 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?

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 ou…

> 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.

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

#229

Post by everybodyknows » Sun, Jul 16, 2023, 7:21 PM UTC

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…

> ... 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.

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

#230

Post by ahzhou » Sun, Jul 16, 2023, 7:23 PM UTC

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.

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.

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> 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.