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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

#341

Post by lotsofpulp »

uLogMicheal wrote: post #144
lotsofpulp wrote: post #102

Earlier quoted context omitted.

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?

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.

No, they are underfunded because it is easier to win elections by shortchanging the pension plans and keeping taxes low now, counting on future taxpayers to make up the deficit.

Nothing stopping them from playing it conservatively and investing in high grade bonds and whatnot, but they want to hit those 8% annual returns (not including the underfunding in the first place), and so it drives them to riskier and riskier assets.

And of course corruption of someone on the board of the pension plan investing in their friend’s nephew’s investments and so on.

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

#342

Post by multicast »

ComputerGuru wrote: post #336
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…

> 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? In at least some of the cases, the answer is absolute corruption with PE paying the other party “on the side” to sign off on a deal only a sucker would agree to. See…

Wrong. Banks who provided billions in loans to PE firms for decades, are now getting more cautious. But not because they fear of a failed investment, but certain investors of the bank do and that means problem for the bank. The Banks actually don't care what happens to the company being bought. An investment bank which provides a loan never sits on its debt. They are bundled into financial products like CDO, CLO etc and sold to institutional and wealthy private investors. This bought the rise to a new ''era'' recently, where PE firms set up special investment funds to fund big acquisitions of other PE firms. The reason being the current situation of the financial markets and the general negative mood in the markets.

Example with a retailer from the UK, which turned costly for the investment bank: https://www.youtube.com/watch?v=DKYKT4pvYYA&pp=ygUTZnQuY29tI...

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

#343

Post by matheweis »

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.

ACA restricted doctors from owning hospitals under the guise of preventing fraud in the form of self referrals.

https://www.cms.gov/Medicare/Fraud-and-Abuse/PhysicianSelfRe...

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

#344

Post by pjmorris »

zone411 wrote: post #314
bowyakka wrote: post #240

Earlier quoted context omitted.

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

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/sit…

60 Billion a year (if I've read you charts correctly) is a drop in the bucket of US annual medical spending (4 Trillion/year.)

You could pick the next most expensive country's plan, triple US R&D expenditures, and still spend way less. The GP's point about it not being outsized is correct.

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

#345

Post by multicast »

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…

> Why is private equity ending up with all these resources?

Most of the cash (50-90% - changed through time to time) comes from the banks - leverage, the investing commitments to the PE firm by e.g. pension funds and private invetors, take only a small portion of the equity. The leverage enables the high returns of PE funds, the high debt burden on the company incentivizes the PE firm additionally to make the bough company more efficient and profitable. But this has changed through the last few years. PE firms are starting investing more of their investors money, due to lack of banks providing big loans for big transactions.

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

#346

Post by stubybubs »

chimeracoder wrote: post #321
stubybubs wrote: post #115

Earlier quoted context omitted.

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 on…

> 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 middlem…

For breast cancer, we're talking 88.6% vs 85.8%. It's very much on par. We generally do better with lower socioeconomic status people as well. Another thing to consider is that we treat everyone. You don't have to consider of it's going to bankrupt your family before you engage in treatment. So we often treat people who are sicker and poorer because we don't have affluence as a selection mechanism for our patient population.

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

#347

Post by thoughtstheseus »

s1artibartfast wrote: post #302
coryrc wrote: post #299

Earlier quoted context omitted.

> 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

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-ter…

Those returns are completely different. Private equity assets cannot be easily sold. Try realizing that 11% return and you will quickly see it does it not exist. You need to take a substantial haircut to sell.

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

#348

Post by multicast »

disgruntledphd2 wrote: post #218
fiprofessor wrote: post #211

Earlier quoted context omitted.

> 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.

Big PE firms are now setting up new investment vehicles that specialize in funding big investments of other PE firms. PE firms are starting to invest more and more into equity with their own investors money, thus amount of investments shrink - get more expensive - and the capital needed rises. But I am not sure that this causes more PE firms to close shop on a large scale, but more likely resulting in less transactions being done overall.

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

#349

Post by chimeracoder »

stubybubs wrote: post #346
chimeracoder wrote: post #321

Earlier quoted context omitted.

> 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 middlem…

For breast cancer, we're talking 88.6% vs 85.8%. It's very much on par. We generally do better with lower socioeconomic status people as well. Another thing to consider is that we treat everyone . You don't have to consider of it's going to bankrupt your family before you engage in treatment. So we often treat people who are sicker and poorer because we don't have affluence as a selection mechanism for our patient po…

> For breast cancer, we're talking 88.6% vs 85.8%.

Sure, you can cherry-pick one family of cancers to make a point, but again: there's a whole series of studies that have been conducted on this exact question for the last 30+ years, tracking all common cancers, and which have consistently shown the same results: while Canada does not perform as badly (with respect to the US) on cancer survival rates as many other OECD countries do, Canada does still fall behind the US.

> Another thing to consider is that we treat everyone. You don't have to consider of it's going to bankrupt your family before you engage in treatment. So we often treat people who are sicker and poorer because we don't have affluence as a selection mechanism for our patient population.

Yes, and that actually works against your point: even though there people in the US who can't get treated because of cost barriers, the survival rates are still better in the US.

There are a lot of things to criticize about the US healthcare system. The survival rates of cancers are not one of them.

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

#350

Post by thfuran »

synetic wrote: post #276
thfuran wrote: post #259

Earlier quoted context omitted.

>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?

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 pos…

>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.

You accuse me of arguing in bad faith while repeatedly implying that I'm arguing for things I haven't even remotely approached?

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