"After a hospital was acquired by private equity, admitted Medicare patients had a 25% increase in hospital-acquired complications, compared with patients admitted before acquisition. Patients also had 27% more falls and 38% more bloodstream infections caused by central lines, which are temporary surgically inserted ports that allow easy intravenous access for patients receiving repeated drug infusions or other treatments.
The increase was seen despite private equity hospitals' placing 16% fewer central lines than before the buyout."
I am not sure who the private equity firms are, but I thought it was alarming when insurers started purchasing hospitals, urgent care facilities and even your standard family med doc, as they would be negotiating with themselves on how much profit they could make off each appointment. But I didn't consider lower standards when it comes to patient care, this adds a whole different dimension.
No one wants to learn the lesson that while government administration of some things might be "inefficient", any efficiencies brought about by privatization will be turned into margins by the private entity rather than savings to the end customers. Private entities need to maintain margins and will cut service to maintain them.
Water is a monopoly right? Seems obvious that privatizing a monopoly doesn't help, because there's no competition incentive to keep prices down and service up.
One of the big problems is that infection control and antibiotic stewardship don't have billable procedures most of the time, and are thus viewed as cost centers by hospital leadership.
And therein lies the most significant problem with unbounded capitalism. Capitalism is a very, very powerful tool, because it redefines everything in terms of money. This enables the magic of specialization and trade, but it also causes situations like this where greedy and/or thoughtless people chip away at the margins of things like safety and let other people suffer the consequences.
> I thought it was alarming when insurers started purchasing hospitals, urgent care facilities and even your standard family med doc
I am skeptical of that conclusion. Kaiser Permanente gets good results, and they are an HMO: the very definition of an insurer owning the hospital/urgent care/family doc.
*A* hospital. Single. I'm certainly not going to defend private equity. But if we're going to do a takedown, let's do it correctly. Cherry picking what is likely an outlier is not doing it correctly.
Not sure where you got the idea that the study was only of a singular hospital, seeing as the study outline details claims for 600k hospitalizations in 51 private-equity hospitals are compared to 4m comparable hospitalizations in 259 non-private-equity hospitals.
The writing of the article was not as precise as it needed to be (I assume for the sake of saving space and words). It was a summary given in lay terms to an audience that could dig deeper into the source research results if they needed further clarification.
"After private equity acquisition, Medicare beneficiaries admitted to private equity hospitals experienced a 25.4% increase in hospital-acquired conditions compared with those treated at control hospitals. ... This increase in hospital-acquired conditions was driven by a 27.3% increase in falls and a 37.7% increase in central line–associated bloodstream infections at private equity hospitals, despite placing 16.2% fewer central lines."
Some things never change. So typical of HN. A comment lacking in critical thinking is added. The punters jump on to further the false narrative. And...the correction to that misguided affair is down voted. Y'all are funny. Ignorant, but funny.
> "Hospital success is measured not only in dollars or the number of patients who pass through the doors, but also in lives saved"
As if profits are the primary goal of hospitals and saving lives/treating patients is just an afterthought.
The capture of all life sustaining efforts by for-profit entities is probably the number one problem in the western world which is driving all others. Climate change, famine, homelessness, death from preventable disease.
None are caused by unsolvable problems but instead by the inability of the for-profit/market based system to provide for human needs.
I think a lot about how hard it is for us to imagine a better world. My foot kind of hurts. It’s been this way for years and I’ve changed shoes to something that’s better but I’d love to have it looked at by a podiatrist. But also every time I visit the doctor, despite having insurance, I end up having to pay a lot of money. So maybe I don’t see a doctor about my foot. It’s fine.
But in a better world I wouldn’t have any reason not to get my foot checked up on. Maybe there is something that could be done for it and maybe it makes my life better. Or it’s fine and I get peace of mind and stop worrying.
Now multiply this across the entire population. What if everyone had lower barriers to health care. The amount of population wide well being would increase a lot. And that’s the part I think we usually have a hard time conceptualizing when we think about a better world. But it’s a very real possibility!
Except, if it's tax funded the hospital does not need to generate revenue to enable that goal. It can focus on saving lives, and maybe even do preventative care which lowers overall health costs for society by dealing with problems early on. As a society, that saves money, leaving everyone better off
Seems obvious. Private equity is all about sacrificing everything on the altar of cost cutting, quality be damned. Why should we be surprised they do the same to the hospitals they buy?
It’s pretty clear to me that the overriding economic issue of our time is how do we systematically realign delivering quality and efficiency with profits. It’s pretty obvious that there are major breakdowns in both the current practices of laissez-faire and of regulation. Its seems to be an exception when a company delivers on all three of quality, efficiency, and profits.
how do we systematically realign delivering quality and efficiency with profits
We don't. We should just acknowledge that certain sectors of the economy (including healthcare and education) are fundamentally incompatible with private profit. These sectors should be ring-fenced with their own managed budgets and money flowing out of the system should be subject to 100% tax rate.
> how do we systematically realign delivering quality and efficiency with profits.
Free entry into the market, along with competition, are the free market forces that naturally balance those attributes over time.
Keep in mind that within a given market, there can be multiple different balances at once, depending on the varying needs and priorities of the buyers and sellers involved.
> It’s pretty obvious that there are major breakdowns in both the current practices of laissez-faire and of regulation.
Even if it may be somewhat freer than in places like Canada or the UK, for example, the US health care sector shouldn't be considered a real free market or laissez-faire in any meaningful way.
The US health care sector is highly regulated. This significantly reduces competition, and also makes it extremely costly and difficult for new entrants to participate in the markets.
Regulation-imposed distortions that decrease competition and impede market entry should be expected to result in the inefficiencies and other problems we see.
Fixing the problem is rather simple: remove the regulations, allow free market entry and competition again, and put the onus back on market participants to choose for themselves what's best for them and their own particular situations.
In a world of so many distractions, what's not a surprise?
Also, I think unless people are trained to question everything, they tend to flow with the dominant narrative. Private equity makes health care more efficient!
I'd love to know how to get people to focus on potential problems and ask questions.
What we have is not a free market. We have a system that has been consolidated and pushed towards high inefficiencies by pharma companies, insurance companies and hospital conglomerates.
A free market would be one where government hospitals exist alongside private for profit hospitals. A free market would have insurance as an optional convenience, not a mandatory one. A free market would have one price for medicine regardless of how you pay for it, where paying with insurance wouldn’t cost $34 when paying out of pocket and using GoodRx costs $2. A free market would be one where opening a private practice for a doctor would not be prohibitively expensive for family medicine because they need to hire 5 administrators to deal with the entangled mess of insurance payments.
I’d love to see evidence supporting the claim that a free market would make these things come to pass. Otherwise, this comes across as a list of things you’d like to see, with “the free market” standing in as the just-so story that will magically right all that is wrong
Not to mention all the territorial regulatory capture on the provider side.
I'm supportive of greater "publicizing"(?) of healthcare but I also agree that there are many, many, many ways in which competition could be increased to actual improve free market dynamics.
Not even monopolies, literally no market forces. If you have a heart attack or a stroke, it doesn't matter what the prices listed for care are or customer reviews. You get to a hospital as fast as you fucking can. There are literally no market forces in play a lot of the time. Also, if you don't live in a big city, there may only be a single hospital by you that provides the treatment you need. Again, no market forces.
Food is a terror-nightmare that can only be fixed by completely rethinking our values. We are literally seeing lifespan decline as food manufacturers addict their customers, capture regulators, destroy the environment, and pretty much single handedly reduce life expectancy. In many ways, we have regressed to the point of having a food system that works worse than it did under the better periods of communism.
Electronics I think has been mostly successful as a regulated free market.
I’m struggling to understand how the standard PE model works, particularly the debt component. PE firms seem to target mediocre businesses, load them with debt, and then harvest returns and eventually the assets. Why would a bank loan money for such an arrangement, given how often these businesses end up in bankruptcy (Toys R Us as an example)? Is the debt collateralized and bundled with better performing debt or sold off to an unwitting buyer?
> PE firms seem to target mediocre businesses, load them with debt, and then harvest returns and eventually the assets
Private equity no longer necessarily involves large amounts of debt, i.e. LBOs. Most managers have an economic effect they deploy to bring efficiency to an industry. The first popular one was deconglomeratisation. Then capital structure management. Digitisation and supply chain management followed. In each phase, they delivered then overcorrected.
Hospitals initially started on the scale side. The thesis was that the biggest cost centre is administration, so if you linked together the administration of many hospitals you could reduce costs compared to private practices. This initially panned out. But hospitals are natural monopolies; those initial theses were rapidly corrupted.
> given how often these businesses end up in bankruptcy
Private-equity backed companies tend to be more resilient, not less [1].
It is a mix of tax loopholes. They can load up on debt, pull cash out. The big scam is share buybacks, they use the loans to by up their own stock. That was illegal from the 30a-80s, the Regan administration legalized it and it's been a race to the bottom. The other part is banks create money at multiples of their deposits. Fractional reserve lending. This creating money and then charging interest that isn't created is the root of this mess. They system worked well when there was fresh land and slaves to grab. It has continued w industrial growth. But now we are running out of oil to pump and other resources are starting to become scarce. This whole private equity is becoming a shackle on our economic system, almost 24% of the economy is controlled by private equity, and a chunk of that is carry forward profits which aren't taxed until withdrawn. They get to sell not pay capital gains and go into the next one. Good luck trying that yourself.
Buy the company, saddle it with the debt used to acquire it, take all its real estate and transfer it to a separate company, make the company rent from the company that owns the real estate at inflated prices. If its something like a software company you convert its software to a rental model and keep jacking up the price so that now an annual subscription costs the same as the perpetual license price from three years ago with 25 years of maintenance. Sure, you just lost 98% of your customers, but really, you just need one or two customers that can't leave you to keep it running in perpetuity. In the case of a retail store, though, you just run the store into the ground over the next year or two and now your real estate division is the #1 creditor of the retail chain and gets first pick of the liquidation and it now owns the real estate, which it then sells for 10x its real value to a developer who will bribe the local approval board to turn the area that is zoned commercial only due to flood risk is now overpriced homes or condos. When everything floods the victims that bought houses or condos will have to move elsewhere.
Or, your PE firm is actually owned by a foreign country and they don't care about profit as their long term goal is wrecking your country's economy.
There are different playbooks, but one is to take a declining business and cut unprofitable parts until it becomes (at least temporarily) profitable. The debt has a higher interest rate that reflects the risk of the strategy not being successful (hence being called junk bonds).
Even in the case of bankruptcy though, the bondholders may still come out OK. Toys R Us actually made about 5 billion in debt payments in the years it was privately owned, and it took about 5 billion in debt as part of the buyout. The bondholders may not have gotten the return they were expecting, but they mostly got their principal back.
All of that said, the real problem as I see it with PE is that it's just so exploitative. The only thing that matters is the investor's money. For example, one very common strategy after a buyout is to cut quality in various forms. People may have a positive quality impression of a store or a brand, and then keep buying it even after the PE company cuts quality. It takes them a while to realize that the product they're buying is not what it once was, and so the PE firm is making money by tricking people into buying bad products.
The hospital case is just an extreme example of this where the cuts in quality lead to people getting sick and dying.
"it depends" - but there are several components at play:
PE benefited greatly from a long-term decline in interest rates. The amount of debt a company can service at a given profitability is directly related to the current prevailing interest. So as long as interest rates drifted down, PE firms could buy, load with debt to be paid out as dividend, and sell again, sometimes to the next PE buyer.
Secondly, banks will not hold this debt directly on their books, but either sell bonds directly (the low interest environment led to some life insurers and other long term investors to buy pretty risky corporate debt) or repackage them with (hopefully) uncorrelated debt to obtain better ratings (price).
There's an argument that the success of PE funds had everything to do with them being a macro bet on falling interest rates.
> "When health systems buy hospitals, they generally do not use borrowed money," said Song, who is also an internal medicine physician at Mass General. "In contrast, the classic private equity buyout uses a small amount of cash, but a large amount of debt."
This is a red herring. Health systems have different metrics for success than "the market". The former, ideally balances QoC with costs. The latter by definition only cares about ROI in terms of profits (either from revenue or from playing hot potato with other buyers). There's no reasonable argument why we should expect private equity to result in anything but a degradation of QoC if it doesn't have a considerable negative impact on profitability or resale value (and that's even ignoring situations in which a loss may be desirable or acceptable).
I don't understand why governments allow to privatize hospitals or other public ressources, often with the reasoning that otherwise they wouldn't be profitable. We don't expect other public services like fire departments or road construction to make money. Why should hospitals be treated differently?
My sense (as someone with generations of family in healthcare) is, at least in the US, there's a massive gap between what the healthcare system was like decades ago and how it functions now. At one point in the distant past there was probably a better balance of population size and number of providers, service demand and provider type, a greater number of more independent and locally run hospitals and clinics, less regulation about certain important issues, more permanent employee positions with more standard employer benefits, and so forth and so on.
At least in some areas of the US there used to be public hospitals, run at the local (state or county level) but they were essentially privatized or defunded to the point where they had to close or become privatized.
I could give lots of examples of this, but things now are less local, more controlled by centralized, private but national entities, more regulation, more consolidation of clinics and hospitals, and so forth and so on.
I'm for putting more central resources in public control (government insurance, more public clinics and hospitals) but also believe there needs to be more deregulation of important elements and more competition to drive down costs on the supply end.
In my opinion, there's a lot of hidden factors driving up healthcare costs, in the form of insulating providers and hospital and clinic chains from competition, taking choice aware from consumers, decreasing transparency about costs, as well as "hiding" public funding of healthcare that's already happening. It feels a bit like, in the US at least, we have this system that likes to pretend it's 1960, at least insofar as doing so benefits certain people and groups.
Because there is no practical way for rich people to use luxury fire departments that deprive the filthy proles of protection, or luxury roads for that matter.
If we do enter an era of slowing actual growth, we will really have a problem with the financial industry trying to cannibalize the entire economy to find "alpha" somewhere.
Everything in our economy could work just fine without a lot of growth except finance, which absolutely cannot work and collapses completely unless number always goes up forever.
>Everything in our economy could work just fine without a lot of growth except finance
Which includes all taxpayers, since all those government employees are paid with the "growth" in the form of underfunded defined benefit pension and retiree healthcare. Or the people counting on their 401k numbers to go up.
Readit News
The increase was seen despite private equity hospitals' placing 16% fewer central lines than before the buyout."
I am not sure who the private equity firms are, but I thought it was alarming when insurers started purchasing hospitals, urgent care facilities and even your standard family med doc, as they would be negotiating with themselves on how much profit they could make off each appointment. But I didn't consider lower standards when it comes to patient care, this adds a whole different dimension.
I am skeptical of that conclusion. Kaiser Permanente gets good results, and they are an HMO: the very definition of an insurer owning the hospital/urgent care/family doc.
*A* hospital. Single. I'm certainly not going to defend private equity. But if we're going to do a takedown, let's do it correctly. Cherry picking what is likely an outlier is not doing it correctly.
"After private equity acquisition, Medicare beneficiaries admitted to private equity hospitals experienced a 25.4% increase in hospital-acquired conditions compared with those treated at control hospitals. ... This increase in hospital-acquired conditions was driven by a 27.3% increase in falls and a 37.7% increase in central line–associated bloodstream infections at private equity hospitals, despite placing 16.2% fewer central lines."
https://jamanetwork.com/journals/jama/fullarticle/2813379
> "Hospital success is measured not only in dollars or the number of patients who pass through the doors, but also in lives saved"
As if profits are the primary goal of hospitals and saving lives/treating patients is just an afterthought.
The capture of all life sustaining efforts by for-profit entities is probably the number one problem in the western world which is driving all others. Climate change, famine, homelessness, death from preventable disease.
None are caused by unsolvable problems but instead by the inability of the for-profit/market based system to provide for human needs.
But in a better world I wouldn’t have any reason not to get my foot checked up on. Maybe there is something that could be done for it and maybe it makes my life better. Or it’s fine and I get peace of mind and stop worrying.
Now multiply this across the entire population. What if everyone had lower barriers to health care. The amount of population wide well being would increase a lot. And that’s the part I think we usually have a hard time conceptualizing when we think about a better world. But it’s a very real possibility!
Deleted Comment
If the primary goal of a hospital is to save lives, which it is, then the hospital needs to generate sufficient revenue to enable that goal.
We don't. We should just acknowledge that certain sectors of the economy (including healthcare and education) are fundamentally incompatible with private profit. These sectors should be ring-fenced with their own managed budgets and money flowing out of the system should be subject to 100% tax rate.
Free entry into the market, along with competition, are the free market forces that naturally balance those attributes over time.
Keep in mind that within a given market, there can be multiple different balances at once, depending on the varying needs and priorities of the buyers and sellers involved.
> It’s pretty obvious that there are major breakdowns in both the current practices of laissez-faire and of regulation.
Even if it may be somewhat freer than in places like Canada or the UK, for example, the US health care sector shouldn't be considered a real free market or laissez-faire in any meaningful way.
The US health care sector is highly regulated. This significantly reduces competition, and also makes it extremely costly and difficult for new entrants to participate in the markets.
Regulation-imposed distortions that decrease competition and impede market entry should be expected to result in the inefficiencies and other problems we see.
Fixing the problem is rather simple: remove the regulations, allow free market entry and competition again, and put the onus back on market participants to choose for themselves what's best for them and their own particular situations.
Also, I think unless people are trained to question everything, they tend to flow with the dominant narrative. Private equity makes health care more efficient!
I'd love to know how to get people to focus on potential problems and ask questions.
A free market would be one where government hospitals exist alongside private for profit hospitals. A free market would have insurance as an optional convenience, not a mandatory one. A free market would have one price for medicine regardless of how you pay for it, where paying with insurance wouldn’t cost $34 when paying out of pocket and using GoodRx costs $2. A free market would be one where opening a private practice for a doctor would not be prohibitively expensive for family medicine because they need to hire 5 administrators to deal with the entangled mess of insurance payments.
I'm supportive of greater "publicizing"(?) of healthcare but I also agree that there are many, many, many ways in which competition could be increased to actual improve free market dynamics.
It fails with monopolies though.
Nobody while having a heart-attack stops and thinks about shopping around for a lower price. "hmmm, about to die, let me see if I have any coupons".
Take insulin for example, companies can charge whatever they want, what are customers going to do? Just die?
Electronics I think has been mostly successful as a regulated free market.
Um, the whole point of the free market is to destroy profit!
To paraphrase Jeff Bezos, your profit is my opportunity.
Private equity no longer necessarily involves large amounts of debt, i.e. LBOs. Most managers have an economic effect they deploy to bring efficiency to an industry. The first popular one was deconglomeratisation. Then capital structure management. Digitisation and supply chain management followed. In each phase, they delivered then overcorrected.
Hospitals initially started on the scale side. The thesis was that the biggest cost centre is administration, so if you linked together the administration of many hospitals you could reduce costs compared to private practices. This initially panned out. But hospitals are natural monopolies; those initial theses were rapidly corrupted.
> given how often these businesses end up in bankruptcy
Private-equity backed companies tend to be more resilient, not less [1].
[1] https://siepr.stanford.edu/news/private-equity-firms-show-re...
Or, your PE firm is actually owned by a foreign country and they don't care about profit as their long term goal is wrecking your country's economy.
Even in the case of bankruptcy though, the bondholders may still come out OK. Toys R Us actually made about 5 billion in debt payments in the years it was privately owned, and it took about 5 billion in debt as part of the buyout. The bondholders may not have gotten the return they were expecting, but they mostly got their principal back.
All of that said, the real problem as I see it with PE is that it's just so exploitative. The only thing that matters is the investor's money. For example, one very common strategy after a buyout is to cut quality in various forms. People may have a positive quality impression of a store or a brand, and then keep buying it even after the PE company cuts quality. It takes them a while to realize that the product they're buying is not what it once was, and so the PE firm is making money by tricking people into buying bad products.
The hospital case is just an extreme example of this where the cuts in quality lead to people getting sick and dying.
PE benefited greatly from a long-term decline in interest rates. The amount of debt a company can service at a given profitability is directly related to the current prevailing interest. So as long as interest rates drifted down, PE firms could buy, load with debt to be paid out as dividend, and sell again, sometimes to the next PE buyer.
Secondly, banks will not hold this debt directly on their books, but either sell bonds directly (the low interest environment led to some life insurers and other long term investors to buy pretty risky corporate debt) or repackage them with (hopefully) uncorrelated debt to obtain better ratings (price).
There's an argument that the success of PE funds had everything to do with them being a macro bet on falling interest rates.
It’s incorrect. The leveraged buyout, for example, found its footing in the high-rate environment of the early 1980s.
This is a red herring. Health systems have different metrics for success than "the market". The former, ideally balances QoC with costs. The latter by definition only cares about ROI in terms of profits (either from revenue or from playing hot potato with other buyers). There's no reasonable argument why we should expect private equity to result in anything but a degradation of QoC if it doesn't have a considerable negative impact on profitability or resale value (and that's even ignoring situations in which a loss may be desirable or acceptable).
At least in some areas of the US there used to be public hospitals, run at the local (state or county level) but they were essentially privatized or defunded to the point where they had to close or become privatized.
I could give lots of examples of this, but things now are less local, more controlled by centralized, private but national entities, more regulation, more consolidation of clinics and hospitals, and so forth and so on.
I'm for putting more central resources in public control (government insurance, more public clinics and hospitals) but also believe there needs to be more deregulation of important elements and more competition to drive down costs on the supply end.
In my opinion, there's a lot of hidden factors driving up healthcare costs, in the form of insulating providers and hospital and clinic chains from competition, taking choice aware from consumers, decreasing transparency about costs, as well as "hiding" public funding of healthcare that's already happening. It feels a bit like, in the US at least, we have this system that likes to pretend it's 1960, at least insofar as doing so benefits certain people and groups.
Everything in our economy could work just fine without a lot of growth except finance, which absolutely cannot work and collapses completely unless number always goes up forever.
Which includes all taxpayers, since all those government employees are paid with the "growth" in the form of underfunded defined benefit pension and retiree healthcare. Or the people counting on their 401k numbers to go up.