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Private equity turned vulnerable elderly people into human ATMs

theguardian.com

31–40 of 143 posts

Re: Private equity turned vulnerable elderly people into human ATMs

#31
post #17

My parents ended up being forced by circumstances to move into a retirement home about five years ago. Fortunately, the place turned out to be run by people who mostly cared about their clients and so my parents' lives were basically OK, except that the food sucked (which AFAICT is par for the course at retirement homes). But a few months ago the place was acquired by a different company, which is trying to squeeze o…

I’m sure the new owners are scummy, but the fundamental problem isn’t scummy people. There’s lots of markets that are okay-ish notwithstanding scummy people. Even those with natural lock in effects. The fundamental problem is it is at the intersection of two out of the three areas of the economy that have had insane cost growth over the last 30 years—-housing and healthcare (the third is education.) For the first one…

> housing and healthcare (the third is education.) For the first one we know roughly what we need to do but won’t. For the second we don’t even have that.

Healthcare costs increasing is of very little concern to nursing facility ownership. Almost none of that is borne by the facility itself. They'll often hire skeletal crews of CNAs and LPNs (I was a paramedic, rare was it to see a facility in our area that even had an RN, and if they were, they were the DON, Director of Nursing, and had no direct hand in patient care). The facilities would contract with a physician service who oftentimes would not even speak to the patient, let alone -see- them.

And every, every single interaction with actual care provision was fully billed to the patient/resident's insurance. Anything that is not a profit making center for facility ownership is ruthlessly subcontracted out. A solid portion of the SNFs in my county will openly call 911 for anything beyond the most absolute basic first aid, even when their employees are ostensibly better educated/trained than the EMTs who might be responding.

Healthcare costs in the US are an abomination, but that's not the issue here, or not directly.

Re: Private equity turned vulnerable elderly people into human ATMs

#32
I worked for a while selling fractional nurses into for-profit nursing/retirement homes at the end of Covid, got to interview some industry experts, who told me that these for-profit homes are the 21st century equivalent of 19th century insane asylums. If you or your loved ones have to enter one, seek at all costs a home that is not for profit (Catholic orders run some, Jewish organizations others, the VA also offers these homes to vets). Every single one will uphold higher values than the for-profit entities sucking resources from people who are no longer in a position to advocate for themselves.

Re: Private equity turned vulnerable elderly people into human ATMs

#33
post #17

My parents ended up being forced by circumstances to move into a retirement home about five years ago. Fortunately, the place turned out to be run by people who mostly cared about their clients and so my parents' lives were basically OK, except that the food sucked (which AFAICT is par for the course at retirement homes). But a few months ago the place was acquired by a different company, which is trying to squeeze o…

The way you nonchalantly mentioned your dad died last week caught me off guard -- my condolences!

Thank you. But he was two months shy of his 90th birthday and, except for struggles with osteoarthritis and Parkinson's, he had a good run. I'm sad that he's gone, but it's not like it took anyone by surprise. And I'm glad that his suffering, which towards the end was not insignificant (though he was very stoic about it), is over.

The last week has actually been pretty (ahem) interesting in a lot of ways. I should probably write a blog post about it.

Re: Private equity turned vulnerable elderly people into human ATMs

#34
I don't understand how PE manages to get debt financing for LBOs? Seems like a big risk for the creditors?

If I buy a corp at 10% net margin for 5x ebidta on 80% leverage, i’ve really paid 1x ebidta. then lets say 20% of revenue was going to R/D and stuff that would only pay off in a few years. I cut all R/D so now its at 30% net margin.

So I can triple my money every year because it’s now generating profits of 3x my original downpayment every year (minus interest payments). After a few years of zero R/D the company has no good products to sell, demand falls, and it’s declared insolvent. Well, I dont care about my 20% equity downpayment because I already got like a 3-9x return. But the debt financers are screwed.

Re: Private equity turned vulnerable elderly people into human ATMs

#35

I don't understand how PE manages to get debt financing for LBOs? Seems like a big risk for the creditors? If I buy a corp at 10% net margin for 5x ebidta on 80% leverage, i’ve really paid 1x ebidta. then lets say 20% of revenue was going to R/D and stuff that would only pay off in a few years. I cut all R/D so now its at 30% net margin. So I can triple my money every year because it’s now generating profits of 3x my…

> don't understand how PE manages to get debt financing for LBOs? Seems like a big risk for the creditors?

Hype aside they tend to pay it back. When they don’t, recovery is streamlined.

Re: Private equity turned vulnerable elderly people into human ATMs

#36
post #24

Earlier quoted context omitted.

The biggest sign something is broken is when someone writes: "Thankfully, my mother died before the acquisition, and my father died last week, only a few months after the acquisition, so I don't have to deal with this any more." Depressing to read. I'm not sure on which side.

To be fair, my mother had cancer and my father had Parkinson's, and that was a much bigger factor in their ultimate quality of life than any deficiencies in the retirement home they found themselves in. So I don't mean "thankfully" in the sense that "thankfully they died prematurely so they didn't have to suffer under their home's new management", I mean it, "Thankfully the natural course of their lives timed their d…

I got what you were saying. I read it the same way. I’m sorry for your loss.

No one leaves this planet alive, and the best you can hope for is that the majority of your time is spent relatively healthy and independent.

Re: Private equity turned vulnerable elderly people into human ATMs

#37

Private equity didn't. People did. We really need to get rid of limited liability and corporate fictions.

I’ll generally defend PE. But when it comes to healthcare, private ownership and leverage are just a bad mix.

Re: Private equity turned vulnerable elderly people into human ATMs

#38

Could someone (please not an LLM) attempt to steel man the following position for me: Private equity is overall good for society

Broadly speaking, private equity is used to describe anything leveraged we don’t like. When we like it, we tend to describe it as a start-up, family business or simply “firm.”

Re: Private equity turned vulnerable elderly people into human ATMs

#39

Could someone (please not an LLM) attempt to steel man the following position for me: Private equity is overall good for society

Private equity is good for society because it provides a financial incentive for owners of the equity to increase the value of a company. The value of a company is tied to how much value it provides society. Financial incentives do work in practice in affecting behavior in humans. Especially with the scale that some companies can reach. In conclusion the concept of privately held equity existing accelerates the betterment of society.

Re: Private equity turned vulnerable elderly people into human ATMs

#40
post #8

It isn’t the fault of private equity that banks make excessive loans against assets in a leveraged buyout. Banks (such as per the article, The Royal Bank of Scotland) have a duty to ensure that their loans are of properly assessed risk, and if the PE firm that wants to or has bought an asset does not look qualified to run it, then the banks should not be making the loans. Articles that keep casually dropping triggers…

> It isn’t the fault of private equity that banks make excessive loans against assets in a leveraged buyout

Credit lends. Equity owns. It’s absolutely the fault of the owners, first, if their business is fucking up. That’s why they lose their chips before the banks do.

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