There's a pattern to the kinds of companies PE buys and I think it points to the real problem.
They like companies with some kind of moat that makes it hard to unseat them. Basically, companies where there is no alternative for the consumer. That way, they can inflict abuse but know there will be nowhere to run.
There are two different ways to achieve this. Monopoly and regulation. Hospitals have both government granted locational monopoly and tons of regulations that make it impossible to compete.
Private equity is the symptom, not the disease.
Until we get at the disease, new monsters will be born with different name filling the same ecological niche. It's economic natural selection played out in the environment we created.
Regulation is usually what you accept in exchange for a monopoly. I would argue a granted monopoly without any regulation is evidence of regulatory capture.
If you want to argue from first principles, and we accept for a moment that granted monopoly is the system we are working in (whether or not you feel it's the optimal regime) then I'd argue there's a clear gap in regulation, as flagrant abuse of the consumer has not been prevented.
Not really. Monopolies are an invitation to competition: Your margin is my opportunity, as it were. They are therefore hard to maintain absent some kind of external force to support it: Regulations (regulatory capture), licensing, explicit grant from the government, intellectual property laws, or some kind of collusion or market manipulation (more leading to oligopolies rather than monopolies).
This is how industrial barons of the early-mid 20th century operated, as an example, with collusion and price fixing type things. Or hospitals and medical facilities today with certificate-of-need laws enforced by the government.
This is inaccurate - natural monopolies are a thing.
Monopolies happen due to barriers to entry, and not all barriers to entry are government-created or illegal: network effects, big upfront costs, economies of scale, control of a scarce resource, etc.
Regulation can produce a monopoly, but lots of regulations also exist to keep natural monopolies in check.
True. Though I don't like the term 'natural monopoly'. Most natural monopolies aren't - or don't have to be.
Maybe a term like 'natural markets' captures it better? The property being that natural markets/monopolies provide some sort of substrate on which a market can exist.
Good regulations seem to be ones that force open protocol and interoperability of these platforms that get large. This creates a new marketplace abstraction layer that enables new innovation to thrive.
I'm certainly glad that I'm not on AOL's internet. And also glad that internet exists in part due to Bell's telephone system being forced open.
Bad regulations do not seem to have that characteristic. It's too bad we do not have vocabulary to tell them apart. Public good type regulations are more muddy and can be used as a weapon more often than not.
Most people, especially governments, aren't positioned to analyse monopolies.
>Regulation can produce a monopoly, but lots of regulations also exist to keep natural monopolies in check.
My favourite example of this is Australias NBNCo.
Every midwit on the street capable of reading a newspaper would tell you, theres a NATURAL MONOPOLY on internet services, which is why Australia needed NBNCo.
However, the enabling legislation also made it a federal crime to overbuild the NBN, because the internet isnt a natural monopoly. We have also had calls to nationalise other fibre networks, and lots of cases of NBN overbuilding other networks.
The truth of it, is that Natural Monopoly is just a thought terminating cliche. There are barriers to entry to markets, but the only kind of monopoly is regulatory. Unless you regulate some dipshit will find a way to sneak a fibre through your power duct or something. If there was enough of an interest, we could have multiple power or water hookups too. There's no reason why we cant have competitive garbage collection, and theres probably somewhere on the planet that does. Even pit and pipe isnt a monopoly, I have seen plenty of places with multiple pit providers.
Take garbage hauling. You have five haulers running the exact same routes through town, stopping at different houses. Government is unhappy with the tremendous added wear on the roads from the redundant trucks, and the extra traffic, so it strikes a deal and grants exclusivity to one hauler.
This is a granted monopoly. It has real positives, such as the same service at 5x less road wear. It should also be obvious that to be positive overall the deal needs to prevent abuse of the public.
If there are 5x as many truck runs, the trash per truck is 1/5th.
The more likely result is that each of the providers runs far fewer trucks than a single provider would because trucks and drivers cost money. Unless the 5 companies figure out how to get the total revenue to 5x, they can't pay for that.
Let's do an example.
Suppose we have a street with 100 houses and it takes 5 houses to fill a truck. Therefore, it will take 20 truck runs to collect that street's trash.
If there is only one trash company, it will need 20 truck runs to service that street.
If there are five trash companies, each with an equal share of those 100 houses, each of those companies needs only 4 runs to service its 20 houses. Why would any of them do more runs?
Yes, the average distance per run may be higher for the 5 companies, but it won't be 5x.
> Yes, the average distance per run may be higher for the 5 companies, but it won't be 5x.
You contradict yourself at the end of the comment. Yes, it could be estimated a linear equation (mx + b) where m is the cost per house and b is the cost per route, roughly. And then you could have a system of which equations, where each row in the system’s matrix corresponds to an additional company.
The optimal result is probably not 1 company, but it’s probably not 1 company per house either
Some part of Ohio functions as a granted monopoly for the power company.
They are given 5-year contracts, but an agency exists to tabulate complaints, reaction time to outages, and so on. If they don't impress the agency near the end of their contract, it will be opened up for market bidding.
Because of this pressure, the monopoly power company has even been known to reduce rates, proving a priori that they are indeed serving the public interest at a commendable level.
The Americans simply will not reject their broken for-profit medical system wholesale. What I see is one more attempt at chipping away at it in hopes that maybe they can succeed piecemeal.
Reagan and other racists succeeded in turning government benefits into a synonym for POC stealing from White Americans.
It’s fine for a military defense contractor to go a few billion over budget for a weapons platform that barely works, but if a single mother uses food stamps to buy cake ingredients and then sells a few pieces of cake that’s a travesty.
Millions of Americans, not just white, but plenty of Hispanics, Blacks and Asians too, voted to take away their own medical insurance.
Because they know that they’re just temporarily embarrassed millionaires. Not the type of people who need handouts.
I don’t think it’s useful to categorise these things as “solved” or “not solved”. They always exist on a scale.
I can tell you I am infinitely more happy living with the Australian medical system than what the US has even if it isn’t flawless with zero issues left to deal with.
For profit IS the problem, the fundamental issue is that there are some services that needs to be run at a loss because the profit is the service which is being provided, that is the whole point of public service and paying taxes in order to have those operated.
Now I'm not advocating for reckless spending, you can run services with reason while staying within a spending envelope, but there is a striking difference between entities that are specifically aligned for profit and those who aren't, and this is very noticeable in the health sector, in America, were wealth directly correlates with health.
Not offering solutions here, because I think it's more multi-faceted than I know about. But when people are afraid to take on the debt of on-board EMS for a 911 call, and local pharmacies are forced out to be bought up by the top national pharmaceutical companies letting them rent-seek, I do think "for profit" is part of this multi-faceted problem.
> The United States has both market forces and massive access problems.
It boggles my mind when I still occasionally hear people speaking out against all forms of single payer healthcare in the US saying they don't want to have to wait weeks/months to see a doctor like they do in Canada/UK/wherever.
If I give them the benefit of the doubt of not being paid lobbyists for the medical insurance industry, I can only surmise these people haven't been to a non-emergency doctor since prior to 2020.
Because even here in the US if you aren't fabulously wealthy with concierge medical you'll be waiting weeks/months to see a 'doctor'. And you'll almost certainly never actually see a doctor, you're going to see an overworked NP (no shade on NPs here, most of whom are great, just establishing how our medical system actually works in 2026).
> Because even here in the US if you aren't fabulously wealthy with concierge medical you'll be waiting weeks/months to see a 'doctor'. And you'll almost certainly never actually see a doctor, you're going to see an overworked NP (no shade on NPs here, most of whom are great, just establishing how our medical system actually works in 2026).
But it's simply not true. my mom broke her back last year and before we realized that her back was broken, we saw an urgent care doctor, same day, within 30mins (I don't recall the exact timescale now, but it was pretty much instant). Who promptly gave my mom an Rx and told us to go to the ER. Personally, urgent care appointments have always been available within 2hrs, and even stuff like an xray (usually in a centralized office, so some travel required) is possible same day. This isn't special treatment.
If someone is waiting long for care, it isn't a problem with the system - and the alternative you speak of isn't going to solve the "I'm not a medical doctor" problem either, which is the main objection to the long wait-times. Minor hypochondriac-ness notwithstanding - nothing will be able to solve that completely - money is the back-pressure mechanism to avoid waste of limited resources. Whether anybody likes it or not, doctors/xray-machines/etc are not infinite (for now heh).
For-profit health-care insurance companies should burn in hell, though.
My father had his heart in afib for over 3 months straight as US hospitals and doctors jerked him around and set appointments weeks out before they finally removed his thyroid, despite a family history of thyroid problems and having multiple previous hospital trips for suspected heart attacks, which by itself should give the obvious conclusion that his thyroid needed to be removed.
Being in afib just for a few days can cause permanent heart damage, heart attack, and death. And even once they decided it should be done, it was another 2.5 weeks before they scheduled the surgery. I don't see how anyone can think the US medical system is any good for anybody but the obscenely wealthy.
No doctor in existence would consider that an acceptable scenario, but the profit driven investors seemingly had no problem with him dieing when they had more profitable patients to serve first.
Urgent care would not be urgent if you had to wait months. Hang out with a few elderly people who actually need to see specialists more than people like me. Over the years, I've heard plenty of stories from people I know waiting multiple months to see specialists.
Yeah, and specialists are "usually" not available via urgent care. If not for the like of urgent care, specialties would be worse. The fact that it takes so long for such access is still a demand and supply problem at the end of the day, no way around the knowledge bottleneck - fixing that means shifting demand to different, more plentiful, supply (doing that soundly is not trivial, but likely easier than attempting to multiply the specialists, depending on the specialist). ERs are expensive because they have to have certain specialties "on tap" 24/7, among other reasons. This is not a unique problem of any single health-care system.
> But it's simply not true. my mom broke her back last year and before we realized that her back was broken, we saw an urgent care doctor, same day, within 30mins (I don't recall the exact timescale now, but it was pretty much instant). Who promptly gave my mom an Rx and told us to go to the ER.
Ok.
But in the reply you are responding to I specifically carved out an exception for emergency situations:
> I can only surmise these people haven't been to a non-emergency doctor since prior to 2020.
Your mom's situation was certainly an emergency.
I'm glad she was seen promptly, but her situation is very different than someone who needs to see a specialist for something that is not immediately life threatening (even if waiting could have serious long term health consequences).
Urgent care is not a replacement for a family doctor or internist who can track your health across long periods of time. That's like comparing a substitute teacher to a tutor; a sub might be able to answer your questions, but they cannot track your academic progress over time and help you tackle an extended course.
Exactly. Last time I moved to a new area, out of about 5 local family doctors, the shortest wait time for a New Patient Appointment was eight months. In the good ol' non-socialized-medicine USA. So for eight months, we had to rely on urgent care for every medical need.
30 years ago, you’d just call your GPs office and they would have told you to go to the ER. Instead your moms insurer paid $150 for an interaction that likely funneled you their medical networks local hospital and added low value.
Urgent care is a grift to replace a relationship with a doctor or practice with a lower paid, lower skilled NP. It’s more a sales funnel that anything.
I don’t remember the last time I had to wait more than a few days to see a GP or more than a week for a specialist on an employer’s PPO insurance plan. I’ve had them at several employers ranging from university to FAANG so it’s not exactly something only fabulously wealthy people have access to.
The problem is there is a huge bathtub curve in insurance quality between employers and the public market. It’s a rude awakening when you can’t afford COBRA rates and have to fall back to a “bronze plan” or whatever is available on the exchanges.
FAANG employee health insurance? Something like 1% of American workers get that, if even that many. Then throw in my oil company friends here in Houston and a few other industries which give premium benefits and you still have a tiny subset of the American workforce getting exceptionally strong benefits. Not at all indicative of the experience of most Americans.
The universities I worked for (both public and private) provided the same level of PPO insurance, as did a random fitness startup, a clinical diagnostics company, and a construction company. I invite you to reread the part where I said “several employers [plural] ranging from university to FAANG”.
Here in Houston, my friend who works at UH has excellent insurance. A quick search online confirms that it is much better than average. Different structure for employees at Rice, my alma mater, but still excellent. Gemini describes these employees being in a kind of "benefits bubble" here in Texas, and they're getting something way better from what most Texans get.
You said FAANG, so perhaps you're in California, a state that has laws regulating health insurance to an extent that make it unique in the USA?
> You said FAANG, so perhaps you're in California, a state that has laws regulating health insurance to an extent that make it unique in the USA
That is definitely a confounding factor, although I’m curious how much of that is the urban vs rural split in other states. (The construction company was not in California but oil boom-town adjacent in Texas)
On the other hand, most states with significant tech workforces have Medicaid which most people will qualify for if they're laid off (I did!) and these are excellent. People pay for cobra despite a public option being available.
Part of ACA was the creation of regional health cartels. If you’re in a region with shitty networks, care may be hard to get. Where I live there’s a teaching hospital with a doctor focused medical network and a big Catholic hospital chain.
In my scenario, There is a good market for cardiac, OB, and some other specialties in each network. The rest is a monopoly— the catholic network doesn’t staff neuro for example, they just have consultants.
> It boggles my mind when I still occasionally hear people speaking out against all forms of single payer healthcare in the US saying they don't want to have to wait weeks/months to see a doctor like they do in Canada/UK/wherever.
Conversely, people consistently put forth single-payer as a panacea without considering what other differences exist between the systems.
For example, in the US a medical residency is required by law but the number of residency slots is constrained because the AMA wants to reduce supply/competition. Change who pays the premiums and that's still just as much of a problem, and it might even make it worse to give the lobbyists an even deeper pocket to siphon money from.
Another significant source of costs in the US system is that doctors can prescribe much more expensive patented drugs or devices and no part of the system is given the incentive to say no to something which is only slightly or negligibly better but dramatically more expensive. Likewise, many of these patents are obvious (e.g. extended release version of existing drug or combination of two common existing drugs) and shouldn't be granted, but nevertheless are. But if those patents are issued and the system is required to pay for a drug when a doctor prescribes it, the seller has a monopoly for the patent term and can charge the monopoly price. The normal way to solve that is for "customers" to be more exposed to cost differences between treatment options, so that things that are only marginally better can only charge marginally higher prices, which is the opposite of how single-payer works.
"Single payer" is essentially replacing insurance companies with the government, but that doesn't solve any of the problems that exist in the parts of the system that aren't the insurance companies.
You're still assuming that the insurance companies are the biggest problem, and on top of that that single-payer is the best way to improve even that part of the system.
For example, why do we have insurance companies "negotiating" with providers and having "in-network" nonsense instead of requiring universal price transparency? Instead of the insurance company setting the price, have them set how much they cover, e.g. they pay 90% of the second lowest price that service is available for within 100 miles of the patient. Then the patient chooses where to go and pays whatever the insurance doesn't cover. Meanwhile the providers are all required to publish transparent pricing so there is a public database of everyone who can perform a service and how much they charge.
Then a patient receiving non-emergency care (which is the large majority of medical expenses) can decide whether they want to travel 50 minutes to get the lowest price, or pay a little more of their own money because another provider is closer or provides optional amenities. Which in turn makes the providers actually compete with each other, which is the thing single-payer doesn't get you.
This is not my family's experience on distinctly not-concierge-medicine Kaiser Permanente in the Bay Area. Always meet with doctors (and NPs), have gotten in quickly when necessary, etc.
California is the only state that regulates wait times for specialists. When you uttered the words "Bay Area" it signaled that you enjoy better service than most Americans. I know people in states very close to yours (as well as my own) who have had extensive wait times.
I have never waited more than a day to see a doctor and hardly more than a week to see a specialist. I'm on a ppo plan so I just make an appt. If someone doesn't have an appointment I find someone else.
The main issue I've had is finding a gp in Portland Oregon. I want a male who is accepting new patients which is seemingly impossible to find.
I'm in the US, and I see my GP every two weeks + can arrange for an appointment within about a day or over the phone whenever I need it.
If I need to be referred to a specialist though, I could be waiting months just for the initial consultation, and then months again before anything happens. Also, there just aren't specialists in my area for some things. Been trying to get a consult about dissociative disorder for years now.
My GP is great though, he constantly tells me about exciting new papers he's been reading and he loves to share science and research level stuff. It's clear that he loves his job, it makes me super happy.
I'm unsure if I'm reading you correct. Are you saying that the disease is all "monopoly and regulation", or just some of it? Healthcare, infrastructure, etc are natural monopolies, and the alternative isn't much better. No one wants four parallell roads or multiple competing electrical grids, or side-by-side hospitals.
We however don't want unnatural monopolies that have enough capital to swat away any competition, nor do we want natural monopolies taken over by rent-seekers.
Genuine Q: Are they buying failing businesses because they see potential and want to get those on the right track, or are they buying them because their forecast tells them they can still make money, before shutting them down for eternity?
It doesn’t matter to PE as long as they can make a profit.
Buy a failing business and leverage debt on it until you can’t, spend the money on yourself restructuring the business.
Buy a working business and gut it for multiple.
Buy failing businesses to offset tax burden.
This a meta level game, they don’t care about the outcome as long as it produces profit.
Product quality goes down the drain? That product is retirement homes, healthcare, food, utility, schools, it doesn’t matter. There is a million levels of separation and paperwork and a corp structure to prevent shit swimming up the stream.
Net result, if you live in America look around you, go to an auto service center, or a clinic. It’s been gutted for profit one way or another.
Is there such a pattern? I'm not aware of any data pointing towards one, and I know lots of businesses with no monopoly or regulatory moat that have been acquired by private equity firms. I think people just don't care when PE buys businesses that don't seem very important.
If PE buys something that doesn't have a moat then they can't enshittify it because the customers would immediately switch to alternatives.
They often still buy those things, e.g. when there is a failing company in a competitive market that could do better with new management, but then no one complains about it because they're not making the product worse (and can't because there is actual competition).
> They like companies with some kind of moat that makes it hard to unseat them.
The biggest moat is capital.
PE is buying up things like medical practices, law firms, vets, etc, where typically there would be an upwards path for one generation to hire new blood to cover their markets and then sell partnership stakes to them when they want to retire. But why should an owner of a practice sell to their junior staff when PE is there offering 2, 3, 5x as much?
Consolidation of these kinds of businesses at the hands of PE is endemic of systemic lack of capital acquisition of a generation of people, held down by debt and concerns about practical shit like healthcare.
PE is just a symptom of larger macro economic trends, namely the depletion of the next generation from free cash they could use to become business owners.
> But why should an owner of a practice sell to their junior staff when PE is there offering 2, 3, 5x as much?
The better question is, why does a medical practice have a moat? What exactly is the PE firm buying? When the senior doctor retires, what stops the junior one(s) from renting their own offices and taking their patients with them?
The answer is presumably something like, non-compete agreements, or vendor lock-in from EMR systems, or some kind of insurance or regulatory bureaucracy. So then we need to identify what it actually is and do away with it so the next generation's juniors don't have to outbid Wall St to acquire it.
These PE-owned companies create market demand by being shitty. Somehow they are able to keep their margins and their market so that their business model makes sense. That's a puzzle, right?
There is no shortage of investment looking for great returns. A market with huge demand not being met adequately is a dream to investors. Even more when you know the competition must continue to fuck their customers because they paid above market rates for the purchase and the business is saddled with debt obligations it must meet (Leveraged buyouts do that).
What could stop new competition from beating them out?
It is capital? It’s going to the same PEs and private markets.
Who the hell is going to take the risk on and for what? Take x billon dollars to build from scratch or near guaranteed profit to buy 50 practices and shittify them for near guaranteed profit.
Show me an example of trend reversal please of this happening in any sector. These are essentials and basics and they are captured, this isn’t a froyo start up that has a 3 year cycle.
The PE firm creates market demand for the goods/services that the purchased company used to provide at a better value to the customer.
So yes, the 'creation' is a demand which is sort of a destruction of the value that the customers previously had. In a fair market, this demand can be met. But a PE buys strategically such that this demand is not possible to satisfy because the company they purchased is entrenched in some way (regulation/monopoly).
Younger veterinarians are drowning in school debt and can't buy the practices from the older folks that are retiring. So, private equity is basically snatching all of them up right now, betting that childless millennials are going to pay tons of money on veterinary care when their pandemic pups begin to reach end-of-life.
They're going to cut wages for all the staff, and hike all the prices, because unlike with human medical care, there's hardly any regulation (yet).
Up here in Canada, we've seen vet clinics rapidly go corporate in the last couple of decades. Even ignoring prices, the degradation in the quality of care offered is stark. Vets working for corporate clinics are heavily micromanaged. They get less time per animal, are pressured into certain diagnoses and prescriptions, etc.. A lot of us now refuse to take our pets to clinics that aren't owned by the vets working there. Unfortunately, in many places there aren't a lot of options.
To put humans through this kind of misaligned system is the stuff of nightmares.
My life goal that I can't work on yet is to run vet clinics as a non-profit in locations where private equity has a monopoly and are in extraction mode. With operational excellence, I think they can be out-competed by running a cost effective practice, so people don't have to decide between putting their pet down prematurely, and spending $5k per night (yes, that happened to my friend in San Francisco. $5k/night is not an exaggeration).
The predatory businesses are able to do the extraction only because of the practical monopoly they have in a neighborhood.
I believe the ops can be open sourced and replicated franchise style. And vets, who originally get into the career because they love animals will be drawn to it, and they have bills to pay, but that can be taken care of with a reasonable payment structure.
I hope someone else does this so I don't have to. But I think I have to at some point. I'd also love to hear if this is a dumb idea.
I love this idea but I think the PE angle also means suppliers and vendors will charge them far less for bulk order and those suppliers/vendors themselves may be a horrible little mix of MBA-brained owner practices that actively upcharges small businesses who have far less negotiating leverage
I think the only way to do it is to have your neighborhood actively being okay with seeking local services something that a lot of neighborhood groups I frequent seem to be a big fan of (farmer's markets are an indication of this - if there's strong and regular FMs being hosted, there's people willing to burn a little extra disposable income for better, more reliable products)
I’be been similarly interested and long ruminating about whether it would be possible to achieve something similar to this in the restaurant industry. For example to have a non profit operating a franchise of a fast food location and instead of having thw 20% corporate tax rate and profit going towards retained earnings and dividends to instead be reinvested in the mission which would be better, more nutritious ingredients to better healthily feed your local customers and two to provide the staff a livable wage. Like you, I keep turning it over in my head and contemplating it rather passively as it’s way outside of my lane of Data Engineering, but I’d like to think that the market would eventually identify this as viable if it at all would be. With the ever looming fear of layoffs and future of future employment in writing software I keep thinking about that scene of the firing in “Up In The Air” where the guy they let go had always dreamt of being a chef and was finally able to pursue it after getting laid off from his high paying job that he had come to hate. Typed on my phone with my cat on my lap ; so plz excuse any run on sentences or imperfections.
Good luck to you and I sincerely hope that you succeed. It's not a dumb idea.
But on the human side many health systems are non-profit, and they generally aren't any cheaper or better quality than their for-profit competition. The real problem is local market power and lack of anti-trust enforcement.
I visited the veterinarian recently for a routine exam of my dog. The vet gave the exam and at the end of it, a technician handed us what looked like an invoice. The invoice had like 12 different items on it and totaled $1,400. No explanation, and no differentiation between items.
We were flabbergasted. Asked the tech what was optional or what was required as part of our visit and he said, oh, just the top line item for the exam. $95.
It has to be illegal to do that. I feel like next time I go in there they are going to give me the ol' Clark Stanley runaround.
Yes please, add vets to the bill. The problem you’re describing gets exacerbated when PEs buy practices. They undercut the very few other surviving practices and remove any ability for new practices to open up. In the last 3 years, we went from 10 to just 3 emergency vets in a 20 mile radius. Now if I need to go to an emergency vet, I drive half an hour if there’s no traffic and pay $200 to just be seen.
This insanity is creating a crisis amount of pets being abandoned, and then euthanized by the animal services. People can’t afford to have pets anymore.
What is so costly about a veterinary practice that new veterinarians can't just start their own? Why would they need to buy one? There is certainly some benefit to working for some one for a while, and maybe eventually buying out an established practice... but if they want too much for it, just start your own?
If you start your own veterinary practice, and eventually build up a steady stream of happy customers, then sooner or later the PE firms will come knocking on your door, too.
Imagine you're drowning in student debt and worrying about keeping your business afloat, when someone offers you $5M, and says you'll still get to work with animals, which you love, while they take care of the financial and business side, which you didn't enjoy. It's a no brainer for most people.
No way. I think most people realize “they are offering me $5M because they know they’ll make a good profit on this business. That means it’s worth more.”
I think that's true to an extent. And, especially successful people, often would rather be their own boss for less money than to be a corporate cog. Having the freedom to make ethical judgements yourself and build local community is a real luxury. We are, mostly, just social animals that want to build our status by helping each other out in the end.
Two things, I think, might make the decision for them, in spite of that:
- The money is actually more than their business could be projected to make alone. This is because the PE firm isn't just buying the single practice but every practice in the area to kill competition. Get that captive market and you can charge more.
- The personal ownership freedom can be already lost on these independent people if they feel they are already tied down too much. I know this is especially the case in small medical offices where insurance and regulation can over-rule them. Feeling like you don't have control in this way can cause a lot of depression (tangent but look up how we condition mice in order to test treatments of antidepressants on them). At that point, the monied exit starts looking like a better option.
it is worth more, but you have to do 100% of the work to get 25% more upside.
Or take $5m and get no more upside and 70% less work. The "work" here is dealing with regulations, insurance companies, administration, payments, and accounting, not actually looking after dogs
the PE model is often to provide a competent regtech/administration core and then plug heaps of regulated businesses into it and centralise all the admin
imagine opening a vet in SF in 1950 in a cheap shoplot and people just paid you with hard cash or cheques in person, you wrote receipts with a biro, and filed taxes once or twice a year on a few sheets of paper... compared to now
Indeed. But remember a PE firm has economies of scale because they own many vet practices. They can negotiate better rates with suppliers than you can, and better payment terms. Maybe they even own some of those suppliers. They can divide their advertising costs by all the practices they own, whereas you can't.
Even if you were willing to be as ruthless as a PE firm, raising your prices and sacking half your staff, and even if you were somehow an expert in financial engineering and business optimization, you still won't make the business as profitable as they can.
* Most small brick & motor businesses do not turn a profit in their first 2 years. So you’ll need a significant amount of runway, in a business where raising capital isn’t guaranteed.
* There’s probably more cost in medical supply, equipment, and certification than you’d expect. There’s standards for security of the medications.
* Most veterinary clinics have staff. That’s payroll expenses.
* Any new business will need marketing. You’ll probably want a large sign/billboard, a decent website, and social media.
* Just leasing office space and furnishing it is surprisingly expensive.
Australia is on its way down this path after Brookfield / Healthscope was holding a private hospital hostage against the government and had performance so degraded a child died. Hopefully we (aus) continue down this path of burning off the rot.
I don’t have a problem with privately owned clinics, but I do think it should have to be majority owned by the operators. What percentage of that 45% is just doctors that run their own office vs. investment firms.
I agree there is still a long way to go. I hope this case shows that there is political will and ability to push back against private equity rot. Many of the commenters here treat these forces as inevitable and unstoppable - but it is possible to take ground back against them. It's unfortunate it took the death of a child for this to happen.
when people talk about how healthcare needs to be better and better and more and more, I say "tell me under your plan what diseases/injuries to what extant will not be treated: who do you say "no" to? Every country could spend every collective nickel they have, and some people still would not live to see the next morning, but in a way that's ok because there probably wouldn't be any breakfast either, that money was spent on healthcare.
What exactly are you calling for? I thought millenial and genz home ownership was the problem we need to fix. Are we going to sacrifice hipster housing for healthcare? Since most healthcare today is probably needed by boomers, think carefully about your answer.
Very strange comment. I would encourage you to read the specifics of the actual case. The hospital was severely under resourced resulting in a simple case being neglected and the child dying. The child could have received basic treatment and they would have survived.
Underresourcing the hospital was a deliberate decision by Brookfield to push for a government bail-out. Anyone who made money off this should be in jail.
Absolutely no idea what the rest of your comment is about. Our hospitals should have the resources to treat a sick child. Some might say that's the entire point of society.
You're fighting a losing battle advocating for public stewardship of anything on this website. The majority of people I've spoken with here are American, doing very well for themselves, and aspirational entrepreneurs.
They have no concept of how much cheaper medical care can be. They don't realise there is enough for everyone. They are blind to the fact that many other countries care for all of their people for a fraction of the price. The people on this forum live in a strange parallel reality where there is only enough to go around, even though that hasn't been true for a very long time.
So when people ask why they don't provide for the poor or fix their broken healthcare system by introducing single-payer healthcare, they'll speak to you like you're an idiot or a child. "Who is going to pay for that?", they ask, while paying an order of magnitude more for a GP visit than any other citizen of any other nation does. To them, you just have a poor understanding of economics.
Can someone steelman private equity, please? I'm honestly looking for the upsides (for non-investors) of when PE moves into an industry like medicine and begins buying up businesses that traditionally aren't already large chains.
I already hear the downsides frequently from someone whose work is directly affected.
Private equity just means controlling a company outside of the public stock markets, it is incredibly broad, and covers everything from blackrock buying every vets office in an area, to a plumber buying out another plumber when they want to retire.
The steelman argument is that private equity is just property rights. If I build a business I get to decide what to do with it.
What most people are arguing against is a specific kind of PE where an institutional investor will either use aggressive financial engineering to force a profit, even if it kills the business, or when those same investors aggregate market share to the point where it is detrimental to consumers. Sprinkle in a little bit of heartless MBA bullshit, and that is what people specifically don’t like.
A stronger steelman is that it results in resources getting allocated in smarter/healthier ways across society.
If there's some business that's getting by but the land it's on is more valuable (e.g. for housing) than the business, some investors buy the business, sell the land, make the business account for the land value, wind the business down if it can't, and there are apartments there a few years later.
Berkshire Hathaway is in some sense also PE (though done by a public company that you can invest in) and Warren Buffett's culture is to find great companies run by great managers and let them cook. That long-term view is the exception and not the rule though.
In medicine, it's a solution for someone who wants liquidity (buy kids new home, help local dog shelter, add a new mistress) and doesn't want to retire, yet.
The problem is that the terms are custom and YMMV as an existing patient of said practice.
I think that "everyone should be able to do what they want with their own property", per se, is not a good principle for society. Sometimes people should not be allowed to do what they want with their property. In particular, I think the more property a person has, the less freedom they should have to do what they want with it. (This can also take the form of "the amount of property a person can own should be limited".)
I was speaking in generalities, if that wasn't extremely obvious.
Obviously, yes, people are - and should be - constrained in what they can do with their property. Even the most capitalist systems on earth place restrictions on property. I didn't think it was necessary to caveat that control of private property is not absolute or without consequences. I'm not aware of any capitalist systems that do not put greater protections on people that control large amounts of property (see monopoly, environmental, antitrust, public securities law, etc. Most of those are basically irrelevant to people who don't own large amounts of property).
The point is that for property to mean anything at all, an owner must be allowed to direct the use of that property. What's the point of owning a house if I can't make any decisions about what to do with it. I don't really own a house if I can't decide that I want to live in it, or to sell it.
Yes, but what if you own 100 houses? I'm pretty sure there is some number N of houses (or total value of houses) where I would be fine telling the person, "You don't get to decide what to do with these houses anymore, they're going to be given to people who need houses." Not as a matter of antitrust or monopoly but just directly as a matter of an individual controlling too much wealth.
Aside from that, once you admit that there can be restrictions on property rights, it's unclear how property rights in and of themselves is a steelman of private equity. Why not just say that "you can't sell to private equity" is one of the restrictions? Or, perhaps more subtly, why not say that a private equity company of a certain size is not allowed to buy any additional company, independent of what rights that company's owner has to sell?
Easy to imagine practices where the primary owner is going to retire and looking for an out.
Maybe they find a buyer in a doctor, maybe they don't, but PE provides them an exit that keeps the practice operating in the community.
Many people don't really run businesses efficiently. There was an interesting video I saw recently where a sole doctor practice made a few changes to their workflow that allowed them to hire more doctors and handle 2x as many people - I would expect a PE firm would pursue similar changes that help increase the number of people they can service, increasing competitiveness and lowering prices in the long run.
I don't know how these tradeoffs interact with patient care, but I wouldn't inherently expect PE to be worse at this than any other operating model.
Lots of other efficiencies to look at. Tons of them are directly bad for the patient (capturing more of the surplus is an efficiency that businesses generally go hard at).
Ultimately, I think the issue is when people making decisions are able to treat the impact as an abstraction.
A structure to run business efficiently using practiced methods is always a good thing. However from what little I have understood, the goal of Private Equity is to maximize the dollar value on their investment. Somehow they have settled with the playbook that running a business even profitably isn't the best idea. Instead its much more profitable to take over the struggling business at good price, squeeze everything possible from the assets (thats where PE seem to be investing their expertise unfortunately) over duration of time. Update the books in a manner that it saves money on taxes and carry forwards the loss, making money in the process.
My favorite is to sell the building(s) to their private real estate company and lease back. Then IPO the company and keep the rent coming on a 25 year lease.
>> Maybe they find a buyer in a doctor, maybe they don't, but PE provides them an exit that keeps the practice operating in the community.
If the practice is to continue, there must still be practitioners working there. Id prefer they buy out the one retiring, but the retiree can sell to whoever they want.
> Many people don't really run businesses efficiently.
In many cases that's a good thing, depending on what we mean by efficient. Lots of people run businesses in ways that make less money than they could, and often that's good.
> I don't know how these tradeoffs interact with patient care, but I wouldn't inherently expect PE to be worse at this than any other operating model.
Doesn't the evidence suggest it is indeed often worse?
Why do you need to sell a private practice? There’s no brand to sell, it’s just you and that will be gone.
PE is scourge in this space. They’ve probably taken over every dental office already and now they push unnecessary procedures and whatever your insurance will bear just because.
Most private practices are small groups, not individuals. It absolutely sucks to have to find a new doctor who’s a good fit for you, when you’ve been seeing the same person for years or even decades. Usually when your doctor retires you rely on them to make a recommendation for a replacement. Usually that’s another partner in their same practice. At the very least, you (historically) expect them to sell the practice to someone they think is a worthy successor. Patients are fairly sticky.
And many of these PE sales require the selling partner to stay on for at least a year or two to ease the patients through the transition and so the patients get used to the changes before the doctor actually retires. That way, sticking around after the doctor retires doesn’t feel like such an upheaval.
If there is truly nothing as you say, there is nothing for PE to buy, and no problem. If there is nothing to sell of value, what stops new dentists from seamlessly opening an office?
Maybe in your neck of the woods vets operate out of the trunk of their cars, but all the ones I've ever engaged had offices, expensive medical equipment, an office building, and trained staff.
Person B has a pile of money and thinks that that business is (or can be) a good investment.
That's it.
So, what happens if person A is prohibited from selling their business? Are they forced to keep working because they don't have enough other savings to retire on? Do they shut the business down in order to retire? Something else?
.
Calls to ban private equity are attempts to play "shoot the messenger".
Sell the assets maybe, potentially to somebody who wants to use them to run the same kind of business in the same kind of location with the same employees.
It's hostile to the consumer to call it the same business. A name change gives them the opportunity to decide for themselves whether the new owner is worth supporting. It's similarly hostile to the employees to assume that their loyalties can be bought and sold. Let the new owner of the assets re-hire them for the same position in the same location if he wants to, but lets not have them be for sale.
I think that last point is opposite; it’s seen as heartless when the new owner of a business goes through rehiring existing employees instead of assuring them they still have a job.
Isn't offering them a job that's equivalent to their old one indistinguishable from assuring them that they still have a job? No need to make people reinterview, but at least give them the option to turn down the offer.
Maybe I'm making too big of a deal out of semantics, but every time somebody buys me it makes me angry.
I don't think it's equivalent because it's paperwork they now have to think about, they're wondering if it's wiping away old employment promises or systems, did everyone get one of these offers, etc.
Definitely see how some would prefer the job reconsidered, though. There's no system that makes everyone happy, including to never sell a business.
These things are good to think about; appreciate it.
May be categorizing the different private equities can be helpful here. A PE interested and invested for growth is always the best outcome. A PE only looking to salvage and squeeze is that gives the bad branding to PE.
> A PE interested and invested for growth is always the best outcome.
(Throwaway) I work at a top ~10 PE.
This is what we do. One portfolio company has a product on old tech. We bring in a product team, a CTO, internal tech teams. Help shape a roadmap to tackle the most egregious tech and product debt so teams can move faster. Fix non-existent or outdated pricing strategy that has not evolved with the industry. Fix, grow, or evolve GTM to reach new customers. Help bring fresh leadership resources in when needed.
Industry is typically "boring" and systems are valuable, but aging. We invest, modernize, and try to grow new rev streams, new customers. Portfolio is SaaS focused (can't speak for those that invest in real estate and healthcare).
The employees of the PE also co-invest so everyone is aligned to help the portfolio companies grow and exit. This is a multiyear process.
I'm going to side-track a bit, but since I'm being courted by PE I thought I'd ask.
>> The employees of the PE also co-invest
Is this voluntary, or mandatory?
I ask because I've seen clauses along the lines of "75% of bonuses are paid in shares, not available for sale for 5 years."
Using bonus money to buy shares props up the share price, but delays the employee actually seeing the bonus for 5 years. Seems pretty win-lose to me, and kinda puts me off.
Is this a standard practice you mean by co-invest?
(As an aside, I'm not a fan of buying shares where I work, that's not a good portfolio-diversification model. If the business goes under it's not good to lose both your job, and investments, on the same day.)
There is carry and co-invest. Carry is a grant (like options). Co-invest is additional funds that you commit for capital calls when the fund invests. My comp is base + cash bonus (1.#x base) + carry (~2/3 of my base every year for 10 years).
Yes, locked away until some distribution event. Bonus is cash (YMMV), but if you don't already have the capital for a capital call, you're right that your bonus effectively ends up in the fund to meet capital call requirements at some point.
Co-invest is "strongly recommended at the amount specified". Legally, they cannot compel you to, but basically the way it is worded...
Should you co-invest? Look at CalPers for realistic rate of returns. Look at the PE portfolio; do you think it holds? Ask them to walk you through a case study of their timeline with a successful portfolio co. CalPers is not playing around. Some funds will 3x, 4x over the lifetime (historical performance not indicative of future perf). You pay capital gains tax on that earning.
Best case: you already have the cash to cover the co-invest capital calls. Worst case: you are borrowing money or using your bonus to plow more into the portfolio.
Naming couple companies that you acquired for whom you changed the trajectory would be a lot stronger signal without revealing your identity.
On side note, its rare to see anyone fixing the old tech, its hard to fix, needs a different kind of talent thats hard to hire for the PE money. The folks who can understand some one else's decade old code and run their imagination through all the possible assumptions or trade off that might have been made in code/system are rare to find.
Finding new customers, finding more things to sell, finding synergies with other items in your portfolio, increasing the price for existing products are more realistic.
We have portfolio level CTOs that specialize in this playbook. Fixing the tech means many things. Many companies don't even have CI (forget CD). Some have really broken processes and handoffs between teams. And yes, some are running COBOL backends.
Sorry, naming a portfolio company would reveal the PE.
It basically comes down to interest rates right? If interest rates are low, the discounted-cash-flows analysis will favor maximizing long-run profitability. If interest rates are high, you can do better by squeezing the business in the short term and placing the money you obtained into some sort of high-yield, low-risk investment vehicle.
The positive argument about PE adding value is around efficiency of processes and scale. Interest rates can make a difference however in reality I doubt that it effects the outcome in most cases. Companies have already invested in staff with certain type of expertise and they are unlikely to change their plans or rehire based on the interest rates in short run.
My PE is SaaS heavy portfolio. Pricing strategy, GTM, product roadmap; companies have rev, good moat, good customer base. But clear opportunity to grow rev.
Many companies are held by original founders. Leadership teams in eng and product have been the same for a decade+; lacking exposure to how the industry is shifting. AI, for example, has slow adoption in some cases.
When interest rates are low, it's most profitable to invest in extremely high risk, extremely high reward unicorn startups. That makes way more money on average than any long-run profitability. In fact, long-run profitability is basically never the most efficient use of money regardless of market conditions.
Why does everything have to be obsessed with growth? Especially with practically every (first world, at least) country having a birth rate well below replacement.
Not all businesses are obsessed with growth. Many mature businesses are managed for value rather than growth and focus on returning profits to shareholders through dividends or stock buybacks.
Except they always strip mine the business. Cut the quality and push unnecessary shit. But, hey, you can fill out your forms on an iPad instead of pen and paper. Very cool.
> So, what happens if person A is prohibited from selling their business?
I actually made that thought experiment. Disallow selling businesses. Disallow selling shares. Disallow stock market. Disallow mergers. The only way to acquire a business is to found it or to inherit it. The only way to quit a business is to shut it all down, with all assets liquidated, all liabilities settled, and all contracts terminated.
The main downside is that it's harder for to make money. Otherwise... I only see positives. And no, it wouldn't kill innovation. The investors would just have to invest the old fashioned way - by founding companies or expanding their existing businesses. As for job security, we already don't have it in the current system.
That's such an incredibly shortsighted view of the downsides.
In your model, the only possible business owners would be those with major capital resources to begin with, encouraging the spread of existing businesses into a sprawl: Walmart is now your doctor, pharmacist, and pharma manufacturer. Nobody would start a small business because they'd have to carry all liability, any new ideas are limited to spread at a glacially slow pace, because companies can't be aquired or acqui-hired, but can instead only scale on their own revenues.
It's worse than that. When the owner retires, all staff lose their jobs. That's a fairly big bummer.
I'm currently part of a "small" business/factory (around 50 employees). The owner is nearing retirement. Are all 50 of us gonna hit the streets tomorrow? Should our customers, many longstanding over 20 years get their contracts terminated? Do they get any warning? Can they easily switch to other suppliers? Is our offering somewhat unique?
Frankly, I think the thought-experiment is very incomplete if you can't see major downsides.
Recently, the owner of the factory my grandfather worked for the last 30 years has retired and sold their business, as a single package, fully operational, with employees and pending orders. It was still shut down and all employees were let go without any severance. From what I know, this is the norm for retirement sales, not the exception.
In this thought experiment, the result would be very similar to what happened, except with less wealth concentration, and with fewer Boeing-McDonnell Douglas mergers that ruin good companies in pursuit of short term profits (because short term profits are harder to realize by design).
Lost jobs are also a lot less of a problem in countries with functioning safety net.
> In your model, the only possible business owners would be those with major capital resources to begin with
Or you get a loan. Or you get an investor on board. How is that different from the current situation?
> encouraging the spread of existing businesses into a sprawl: Walmart is now your doctor, pharmacist, and pharma manufacturer.
It's happening anyway. My last vaccination was done 100% at Walmart.
> Nobody would start a small business because they'd have to carry all liability
How is that different from the current situation?
> any new ideas are limited to spread at a glacially slow pace, because companies can't be aquired or acqui-hired
Acquisitions are a relatively recent inventions, acqui-hires even more so. People have been doing massive inventions at rapid pace for like 200 years before being bought out by FAANG was a viable business strategy.
> but can instead only scale on their own revenues.
You can sell all your offices, desks, printers, laptops, machinery, land, inventory, intellectual property, and anything else you want to your heart's content, to anyone you want, for any price you want. The only thing you can't sell is the legal entity itself.
OK. Your job is from now is dung transport. Because you inherited it, whether you like it or not.
Sure, you are allowed to start a new business. But where would you get money? You can't sell your dung transport business, and you don't have enough money of your own to just start a new business from scratch.
It's crazy what some people will come up with just to have something to criticize instead of the actual contents of the thing they're replying to. Nobody said continuing an inherited business is mandatory, least of all me.
I am all for serious discussion about shortcomings of my idea. But this isn't it.
Yes. It absolutely does, because your system heavily favors inherited capital that HAS to stay within the family. It also heavily discourages capital mobility, risk-taking, and entrepreneurship.
Say "hello" to dynastic marriages, noble lineages, etc. The _best_ case is the system of medieval guilds.
It makes it impossible to share part of a business, including stocks. It also massively increases the friction of takeover by killing all employee, vendor, and client contracts, so the buyer cannot benefit from any of these without arranging for it separately. It also invalidates the strategy of leveraged buyout. But yes, it can be done in principle. Which is especially important in the "who will take over the local dentist's office" scenario - this system would heavily favor small business owners who want to do the business personally over holding corporations and PE funds.
Nope. It will result in a large company moving in and buying all the assets (still allowed), and forcing the employees to work for less money. Because why not?
I live in a small midwest market, and all the landscaping companies are locally owned and awful.
PE bought two of them, combined them into one, and now they, at about the same cost, do what they say they are going to do, answer the phone, hire competent people, and do a good job.
Likewise, PE has bought up most of the local plumbing and HVAC, and that's been a bit of a bummer, and gotten more expensive, but if you need someone right now, they are there (and answer the phone, etc), as opposed to the local concern who may be on vacation and can get back to you in 2 weeks.
There are some really good local small businesses/trades people, but like the 1950s, in a lot of aspects they are overly romanticized.
My controversial opinion: chains/large businesses are more convenient, cheaper, better (and more consistent) service, and the big one: you can complain up the chain when a local branch/franchise fucks up vs dealing with a sole proprietor. There's plenty of small businesses I do value (thrift stores, bodegas, etc), but for services? The choice is obvious.
Many medical practices (and other businesses) are poorly operated and administered. I think of my dentist: terrible website (even by 1995 standards), awful at follow up, weird insurance coverage (since she doesn't have time to follow up with new plans it seems) and almost no appointment reminders. There are obvious things to do that could drive business for her.
It makes sense to me that someone could come in and say "hey, let me run the business + finance side of the house while you practice medicine" and at least on paper I can see a real world where that works out for everybody.
Of course, soon you end up with dentists pushing unnecessary procedures and more, so it doesn't always works out that way.
In human med, it's a pretty standard practice to offer a management company 10% ownership for them to handle the business shit.
I'm not arguing with you; I'm legitimately curious what happened to that model and why PE has swooped in as more attractive to doctors. Maybe it's the payout and/or the fact that they don't have to handle business owner decisions at _all_ anymore?
Those are two different things, typically.
A business manager taking 10% means they're still running the practice day to day and seeing patients.
PE will come in to buy the entire practice from the doctor/dentist/vet that owns the practice, buying it from them entirely.
Improving efficiency and optimizing profit are two overlapping segments on the road to crap. It’s not easy to stop the car once you put the bean counters in the driver's seat. If a company is able to do so, it’s usually because there’s a strong leader or culture to resist the slide. But otherwise it’s a thousand small decisions that all seem reasonable on their own.
That's easily circumvented with management service organizations. More broadly, it's a stupid idea, especially beyond a few areas like law. If you own a golf course, you shouldn't have to sell only to a golfer.
It should be more about making certain levels of consolidation and deep erosion of local ownership illegal.
We have run this country on an assumption that we must give businesses a high amount of freedom. An argument can be made that businesses have been given too much freedom in our system. We’ve allowed Amazon and Ticketmaster and Walmart to exist and they shouldn’t exist in their present form.
Healthcare practices that provide necessary care shouldn’t even really be allowed to be for-profit entities if you ask me. The incentives become too perverse as a result.
>Healthcare practices that provide necessary care shouldn’t even really be allowed to be for-profit entities if you ask me. The incentives become too perverse as a result.
Why stop at healthcare? Why not other essentials of life, like food or toilet paper?
You’re absolutely right. For example, we’ve seen the negative impacts from excessive agricultural consolidation.
Many of them already lack profitability without subsidy.
Many agricultural products all pass through the same mega-sized processors and entities. Driscoll’s, Tyson, etc.
We’ve already made things like water and sanitation non-profit/government owned so the idea of doing more of that for food and essentials isn’t that crazy.
>You’re absolutely right. For example, we’ve seen the negative impacts from excessive agricultural consolidation.
Like what?
>Many of them already lack profitability without subsidy.
That doesn't mean anything without context. How are the non-PE farms doing?
>We’ve already made things like water and sanitation non-profit/government owned so the idea of doing more of that for food and essentials isn’t that crazy.
>Google “taylor farms cyclospora” or “tyson beef prices shortage” for an example of the problems of highly consolidated processing.
I already addressed cyclospora in another comment, but how is consolidation or tyson beef supposed to be blamed for the shortage? Media reports blamed the shortage on droughts and/or screw worms, hardly a tyson issue. Not to mention tyson hasn't exactly been raking it in during all this shortage:
>Yet despite record beef prices, the “Big Processors”, as Mr Trump calls them, are not thriving. Shares in Tyson, the largest, have tumbled by 40% since 2021—and by 7% since it cut its earnings forecast on September 3rd. It now expects its beef business, which brings in 40% of revenue, to lose as much as $775m this year. Trouble in the division has dragged the company’s overall operating margin down from 8.5% in 2021 to 2.6%. JBS, which is Brazilian, has said its North American business lost $427m in the first half of 2026.
>it can't have a national foodborne illness outbreak.
Which is bad for PR and great for clicks, but it's entirely unclear whether we're better off on average. What about all the years where we didn't have a mass outbreak? Would it be better if every state/county had separate food supply chains, and they had the same rate of illness, but it's more randomly dispersed so it doesn't make it to national TV? Think the difference between airplane crash (maybe one incident per year, hundreds of deaths per incident) vs car crashes (40k/year)
Hmm yes. Two deaths, over a thousand hospitalizations, and not a single state in the US with zero cases, but those are just things that are real and happened which means they do not take into account things that didn’t happen or things you could imagine in your mind.
If we simply envision a nation without diarrhea have we not eradicated it in our hearts, where it matters mos
It’s absolutely relevant because a diversified food supply would result in smaller farms, other things held equal.
You have fewer single points of failure, but more opportunities for failure and a tougher time addressing it via inspection, and less capital available to implement compliance.
> Healthcare practices that provide necessary care shouldn’t even really be allowed to be for-profit entities if you ask me. The incentives become too perverse as a result.
You don't need to disallow them for necessary care to be provided. You can just have public healthcare programs. That can look like publicly-owned hospitals or regulation that private hospitals must provide certain services under certain conditions if they want to keep operating. Private healthcare then works to provide more than that basic service that fulfills necessary care, to the benefit of the public that can afford more.
Can you define profit? Would a doctor be allowed to earn more than $200 per hour? $300 per hour? $400 per hour? Is a doctor allowed to be paid per procedure or time?
How much would you want to sacrifice your 20s and early 30s? How much would you need to work in the middle of nowhere where your kids won’t have the best opportunities?
"We’ve allowed Amazon and Ticketmaster and Walmart to exist and they shouldn’t exist in their present form."
Do you realize that when Walmart moves into a community, prices charged for everyday things overall drop significantly, both at Walmart and their competition, which means that poor families are able to buy more with every dollar.
They then get to skim the other side of those subsidies, too, since they sell so many items that qualify for SNAP and WIC, as well as being one of the largest if not the largest prescription supplier in the country.
And what happens if walmart closed up shop? Do those employees magically evaporate and not need benefits? Why are we putting the blame on the employee's best employment option?
>What competition? When Walmart comes to town, the competition closes.
Why? Because they're sending goon squads to trash all the existing businesses? If walmart replacing "the competition" because they're offering lower prices and consumers are switching, why is this bad?
Everything explodes and people die in the streets.... No, other businesses move in to fill the economic needs because there is a profit to be made and provide jobs in doing so.
>Because they're sending goon squads to trash
You have a horrifically simplistic world view and can't imagine where goon squads actually are.
There was an article around 2 decades ago on how Walmart manipulates prices at an unimaginable scale via their suppliers. If you supply Walmart they automatically become your biggest customer. Walmart knows this, and has you by the proverbial balls. If you don't meet their demands they drop you in a heartbeat which is a death sentence for any business who's capitalization is not in the 10s of billions. There was a saying in this article I can no longer find but to summarize.
"To compete against Walmart is to invite death. To work with Walmart is to embrace it".
Simply put they are so large they have near monopoly power over a good chunk of manufacturing.
>There was an article around 2 decades ago on how Walmart manipulates prices at an unimaginable scale via their suppliers. If you supply Walmart they automatically become your biggest customer. Walmart knows this, and has you by the proverbial balls. If you don't meet their demands they drop you in a heartbeat which is a death sentence for any business who's capitalization is not in the 10s of billions. There was a saying in this article I can no longer find but to summarize.
So what's the complaint here, that walmart negotiates aggressively, passing those better prices to buyers, and that's... bad? Given we're in a thread complaining about healthcare, should walmart do the opposite, instead using the insurance company strategy of encouraging their suppliers to pad their margins, so they can offer "modest" (in % terms, high in absolute terms) markups?
Around the turn of the century, my grandmother lamented how Wal-Mart had ruined the shopping experience in her small town. When the local hardware store and other stores closed, she ended up only with Wal-Mart where she said the employees didn't know anything and couldn't really help you. Anecdotal, I know, but this is a common refrain throughout the country, that by using their monopoly power they're able to undercut local businesses until they go bankrupt. The assumption is that we're left with is a net win due to lower prices for the consumer, but let me tell you another story.
An older relative had a very successful small conglomerate of businesses. One of them manufactured something costing close to $100 that Wal-Mart was interested in selling in its stores. After extensive negotiations, my relative told the Wal-Mart VP no because Wal-Mart was pressuring them to use cheaper parts that would make the product wear out more quickly. Wal-Mart didn't care because they'd be able to make the sales and then consumers would come back to buy again sooner, but my relative felt that was dishonorable. The VP said it was the first time a potential supplier ever walked away from him. They are notorious for their abuse of suppliers, and the ethical concerns are often very palpable. You might suggest this is simply market forces playing out, but we decided long ago that monopoly power often leads to a market we don't want to see in this country.
We the people get to decide what kind of society we want to live in. Their monopoly power means that in so many of the rural areas where they are, they might be one of the few viable employers. When people are poor, it's not so easy to just tell them to relocate to another geographical area, so it's easier for the entities benefiting from that to maintain the status quo at the expense of others. If we decide that for Wal-Mart to stay in business in the USA they need to pay employees more, with health insurance, then so be it. If they can't, then they can just go out of business and be replaced by a company that is able to navigate that balance better, offering pretty low prices while paying a bit more in wages.
Walmart is able to offer lower prices because it does not pay its employees enough. The people being hurt is the society at large that has to allocate taxes towards SNAP and other social benefits so that Walmart can continue to underpay people. Those resources could go to other programs. That is why Walmart is bad.
Walmart is paying what people are willing to work for. The "greeter" standing at the door is not creating $25 an hour in economic value. The biggest issue is we as a society have overextended SNAP and social benefits, trying to equalize outcomes, rather than recognize that entitlements should be a last resort and a safety net against things like starvation. Someone should not weigh 275 on SNAP.
Does SNAP need a better system to provide healthy food? yes.
Should employers be required to provide sufficient earnings such that employees do not require SNAP? Also, yes.
Is blaming employees who are on SNAP due to Walmart overhiring and cutting hours of at the threshold where the earnings would cross into full time with federally regulated benefits in order to pass the cost of operations to the public acceptable via absurd reductive reasoning a bald case of blaming the victims? Yes.
I'm not sure whether you are pretending that Walmart's practices are acceptable, due to a willful disregard for the complexity of the larger systemic failures that permit corporate abuse, or due to simple ignorance.
I'm not sure which looks worse, but neither makes you seem compassionate. Though the fat shaming does make you look like an ass.
>Does SNAP need a better system to provide healthy food? yes.
Yes, SNAP absolutely should not enable unhealthy consumption, especially because the majority of those diseases of affluence just hit taxpayers again via Medicaid spending.
>Should employers be required to provide sufficient earnings such that employees do not require SNAP? Also, yes.
The thrifty food plan from the USDA puts weekly food costs at about $75 for a man and about $60 for a woman. Walmart's company wide minimum pay is $14 per hour. Minus a bit for taxes, add a bit back for EITC/other tax credits, and you are covering a week of food in less than 8 hours of work. They have sufficient earnings. They choose to spend the earnings elsewhere because taxpayers are subsidizing their food.
>Is blaming employees who are on SNAP due to Walmart overhiring and cutting hours of at the threshold where the earnings would cross into full time with federally regulated benefits in order to pass the cost of operations to the public acceptable via absurd reductive reasoning a bald case of blaming the victims? Yes.
Walmart is under no obligation to hire them as full time employees. They are free to accept a different job, negotiate a contract for full time employment, etc. They aren't a "victim" because the job they accepted doesn't meet every one of your standards. They are assumably mentally competent adults who made their own decisions and are free to make different decisions at any time.
>I'm not sure whether you are pretending that Walmart's practices are acceptable, due to a willful disregard for the complexity of the larger systemic failures that permit corporate abuse, or due to simple ignorance.
Walmart's practices are acceptable. It's incredible to think that a job offering double the federal minimum wage (or more), in a reasonably safe, air conditioned environment, along with retirement matching, employee discounts, and even paid tuition/books is somehow corporate abuse.
How much do you think stocking a shelf is worth?
>I'm not sure which looks worse, but neither makes you seem compassionate. Though the fat shaming does make you look like an ass.
It’s wild to blame Walmart for government subsidies when it’s the government not Walmart who decides who gets benefits.
Is Walmart to blame they hired a single mother of 3 for $20/hr? Would this women be better off if Walmart never existed and she was unemployed?
And then turn around and blame Walmart for selling essential food items for low prices because SNAP can be used to pay for them. Would you rather SNAP beneficiaries pay more for groceries so they have less to eat?
Prices may drop, but wages drop even further and the compound effect of local government subsidies and loses when competition dies means everyone loses because everything in the local area dies.
> We’ve allowed Amazon and Ticketmaster and Walmart to exist and they shouldn’t exist in their present form.
Unpopular knowledge is that these businesses are generally illegal in their current forms under existing US law. The relevant laws are still in effect, they are just rarely enforced. The scale of the lawbreaking runs to the trillions of dollars annually, and it directly harms every US consumer.
The illegal conduct is so pervasive that even explaining the existing federal law makes one sound ridiculous, because companies have been explicitly advertising illegal behavior for decades. Because there is no sanction.
One of my faves is the notion that $BIG_RETAILER can buy in bulk and get better pricing, which they pass on to the consumer. You may have seen a company advertise something like this. It sounds like smart business! There is an active federal law[1] that explicitly prohibits this arrangement.
Lack of enforcement of that law is a factor in the disappearance of the American "high street" and the demise of many small retailers.
My #1 call for reform in the US is to simply start enforcing laws, even if doing so makes rich people/companies uncomfortable.
I'm not a lawyer, but a cursory search shows there's a bunch of carveouts. It's not a straightforward ban on all favorable pricing for big players. For instance, if there's an actual cost justification (eg. bigger buyer = more efficient shipping) that's allowed. Same with offering volume discounts that are available to all buyers. That's not to say everything's above board, but it's not as simple as "wow big box stores get better pricing than mom and pop shops, so there must be federal laws being violated".
I hesitated before linking that specific statute because I suspected someone would parse it as you have. Not a bad thing, just distracts from the larger point that the US government currently has tools (of which Robinson-Patman is only one) to prevent & reverse the extreme consolidation that harms every American.
In the context of this article -- we may not need a new ban specific to preventing private equity from owning medical practices. We could simply enforce existing laws around e.g. market consolidation, consumer harm, etc.
That’s a good expansion of the premise, I’d support your idea wholeheartedly. Let PE raid chain restaurants and toy stores, not essential services where they add no value and only extract wealth.
Pe is good when it is taking big risks on something new. That is hard so that is not what most pe does. Most pe is just figuring out ways to insert artificial inefficiencies into the system to syphon money off. Ie tax arbitrage, patent/copyright abuse, geographic or other market power abuse, etc. Basically find a way to move money around the system with no net benefit to society while having a bunch of it fall in your pocket is 90% of what pe does and its poison. The other 10% is vitally important to continued growth and prosperity and its often hard to tell which is happening until its over.
PE staff are more intelligent and more shrewd than the people running the businesses they buy. Being a good doctor doesn't make you a good businessman.
I'm not a huge fan of PE but the point of economics to deliver cheap and quality goods to consumers not keep people in a job.
In healthcare in US in particular I think the main thing that capital should be (if regulators allow) boutique / specialists that e.g. are the best in the biz at doing MRI scans, in some states my understanding is that it's literally illegal to start a business aiming to make one small part of the process better.
> What does it mean in this context to be more intelligent and shrewd than the existing owners?
Streamlining everything. Sometimes this is done in a bad faith way, but it’s often not difficult to do it in a good faith way.
Some simple examples:
- right-sizing staff (can be reducing, increasing, or changing roles)
- improving marketing (e.g., simple things like customer reactivation, packaging the product/service better, or just plain, ol’ getting the word out better via stuff like before/after pics or success stories)
You're putting the cart in front of the horse. Their incentive and their job isn't about 'streamlining' anything, let alone in a good-faith way, and that just so happens to deliver some extra cash on the side in a pleasant surprise. Their sole purpose is the profit, and they will try absolutely anything to get it. Sometimes it may accidentally produce good outcomes, but in general there's no rule or incentive to ensure that happens. They can do anything, and if there's anything to go off of, every entity I see desperately chase profit over all turns utterly evil. Being evil just deepens your toolbox for getting the only thing that matters in the world - money - so of course they tend to win out over anyone who still actually cares about the underlying business or customers.
In theory this is true, but in practice I am skeptical that it's generally possible to do this with generic "business" intelligence that is not accompanied by specific understanding of and genuine care for the actual substance of what the business does. That is, no matter how good you are at "business", you're not going to have a good hamburger stand unless you care about making good hamburgers. It's true that the importance of this varies from one business to another, but I don't see any particular tendency for PE to gravitate towards industries where it matters less. (Medicine is an example of an area where it would matter most.)
There's more than one form of intelligence, and being good at fixing people doesn't necessarily correlate with managing a business. As silly as it sounds, watching Shark Tank will really demonstrate that someone can have a legitimately great idea, but if they aren't business minded, it wont matter.
I mean, losing money is not sustainable. If a doctor or physician group isn't business savvy and can't earn a profit they will eventually go under. That's not good for the patient.
Most doctors make good money, but most who are good doctors could make much more.
Simple example pitch that many general practitioners might consider using (based on local laws, of course):
“Insurance covers C, Y, and Z. I can offer these additional services for A, B, and C that are not covered by insurance.”
Where I live, you get a lot of this via “concierge doctors”, but that system can go far beyond basic concierge service, and people are willing to pay for top quality care.
Contrary to popular belief, being intelligent in one thing does correlate with being intelligent at other things[1]. For doctors, the comparison with private equity (MBAs?) might be close, but it's not hard to imagine the targets of other PE rollups have owners that are more average in intelligence, think plumbing or roofing.
Which section of that very long article are you claiming supports your assertion?
Here's a bit from the start of the "Concept" section:
>> In a famous research paper published in 1904,[8] English psychologist Charles Spearman observed that children's performance measures across seemingly unrelated school subjects were positively correlated. The consistent finding of universally positive correlation matrices of mental test results (or the "positive manifold"), despite large differences in tests' contents, has been described as "arguably the most replicated result in all psychology".[9]
>being intelligent in one thing does correlate with being intelligent at other things
vs
>The consistent finding of universally positive correlation matrices of mental test results (or the "positive manifold"), despite large differences in tests' contents, has been described as "arguably the most replicated result in all psychology".[9]
How are they contradictory? Did the first part of my comment make you think there was a negation?
Remove “more intelligent” here and I’ll give you some benefit.
The problem with healthcare “economics” is that providing high quality care is likely not as profitable as middling care, or sub-standard care.
You say that economics is meant to deliver cheap quality goods, but in reality here economics for PE is value extraction and has nothing to do with consumer good at all - unless of course there’s more profit there. Most of the time, there isn’t.
That's really not true. Studies have shown that there's little correlation between care quality and profitability. In some cases non-profit health systems charge high prices and deliver terrible care quality. The reality is that most provider organizations are run by incompetent managers. People used to working in modern tech companies would be shocked to see the waste, inefficiency, and missed opportunities. PE acquisitions may cause some problems but the new managers do at least bring a basic level of discipline and operational competence that was often missing before.
Modern tech companies are not managed well at all in my experience! They’re rife with waste.
Management often makes terribly unprofitable decisions and often work to protect their slices of the pie rather than the org.
Tech companies are saved by their margins, their aura, and low interest rates.
Better examples might be grocery stores or other low margin businesses that require some fairly ruthless prioritization (at least that is what I’m to understand)
To your care / profitability argument: that is good news! However, I do believe that concern for profitability will always outweigh a care quality argument so there is a misalignment of incentives in that case. I would look to insurers to demonstrate this, generally, but can imagine a PE-owned hospital system might attempt similar measures.
Ideal outcome is a great manager that also cares and ends up paying doctors more and providing excellent care while driving down costs using better processes and negotiating with suppliers. But, uh… not sure how often the benevolent PE firm actually shows up historically.
Apple is not a PE firm. They are a public consumer goods company with a ton of different business lines. Their duty is shareholder value and making good products that sell is one way to do that.
Value extraction is a short term play. It’s usable by most companies in a pinch, but normally only happens before their death or slow decay into zombie-dom. At least, that’s what my anecdata tells me.
Apple has, for most of its existence, been a distant second choice, because IBM and Microsoft captured the enterprise, which trickled down into consumer buying habits.
It survived, then thrived, by making its products so appealing that customers would buy them anyway.
We know how to make MRI cheaper. Put it in a can. MRI suites are built with copper shielding in the walls, and the machines are really heavy, which creates huge capital costs. (Capex is a big problem for medicine.) There's an easy solution: you can just put an MRI machine in a standard tractor-trailer container and bring the patients in. Nothing has to be constructed or installed.
None of the private equity chains with the sans-serif fonts, simplified logos and trisyllabic names are doing this, though. It's bad marketing. Patients don't want to walk outside to an MRI machine in the parking lot. It feels sketchy. Never mind that they score just as well on the ACR image quality tests as the in-room machines. Who the hell knows what that is?
In reality, it's the county hospitals and big universities that use them! Places that have in-house physicists who can argue for what really makes sense in practice. A major problem with healthcare as a business is that the customer does not usually understand the product, but they still need to buy it, and there are time constraints.
> Patients don't want to walk outside to an MRI machine in the parking lot. It feels sketchy.
Seems like you could build a hallway around the trailer; if you do it right, nobody knows it's a trailer in the middle of the building. If you do it really well, you can still pull the trailer out.
Hard disagree about "more intelligent". They are playing a financial game using a combination of leverage and reptilian ruthlessness to EBITDA hack.
They buy one (or more) companies, often with only the slimmest understanding of what those companies do, slash opex by gutting the company with layoffs (yay EBITDA), maybe staple a few such companies together with leveraged buy-outs, then resell the whole bundle for more than they paid.
From experience, they don't give a single crap whether the resulting mess still functions. They care about selling the company for more than they bought it for. That prospect is only tenuously and at best accidentally related to whether the company still functions.
The private equity companies I've had to deal with were full of braindead MBA spreadsheet monkeys and used car salesmen. Their chief differentiator was that they worked 80 hours a week and were enthusiastic about laying people off without much deliberation.
Thinking private equity is "more intelligent" than business owners is like thinking house flippers are "more intelligent" than home owners. No. They know how to rip out carpet and replace it with laminate on the cheap. They know how to cut corners and hide it. They know buyers will over value a fresh veneer of paint. They don't give a shit about the long-term health or value of the house. They are not better stewards of houses. They specialize in short-term profit maximization and that is literally it.
PE attacks organizational sclerosis, can save companies that otherwise slowly deteriorate, reallocates resources faster, creates an unusually powerful form of corporate governance, Debt can impose useful discipline, can provide capabilities that smaller companies couldn't build themselves.
A society doesn't necessarily benefit from preserving every existing job. It benefits from creating increasingly productive jobs.
If I own a hospital that makes infinite money and every patient that comes to it dies the economy measures this is infinite productivity. This is contrived, but really matches some of what we see in real life.
This is why making a measurement a target can be horrifically destructive and contrary to the actual goal society wants.
The west doesn't seem to believe in the idea of social stability over increased profits which can lead to things like corporations being the social structure that is optimized for rather than the wellbeing of the individuals it contains. Left to run out of control the society can collapse.
> If I own a hospital that makes infinite money and every patient that comes to it dies the economy measures this is infinite productivity. This is contrived, but really matches some of what we see in real life.
You wouldn't have any business if all, or many, of your patients die.
The history of government regulations mostly only being made in response to people dieing seems to refute that. If what you claimed is true, those businesses killing people would have gone under, rather than continuing until there is enough public outcry to regulate it.
It seems to me that oligarchies as a whole function a lot like PE's taking over a socially unstable polity.
The west has been an oligarchy for several decades at least, so it's not that people in the west don't believe in social stability, it's that they are living in the hollowed out shell of the former "company" where that doesn't exist. We need to optimize for the people's prosperity and well being.
Longevity decreases, cost of living increases on every metric, rampant inflation, ever increasing economic uncertainty, increases in mental health issues, increasingly unstable populism overturning long standing institutions.
There is also the effect where it doesn't matter if are or are not doing better by the numbers, it question is do they feel they are doing better. People act on how they feel, not on how they are.
Private Equity allows an owner to sell their income generating but slowly dieing company for its value today. The company will keep operating for 3-5 years and then rapidly shutdown.
This is valuable for business owners, because it gives them a way to get the value out of a failing business without having to ride it all the way into the ground.
It's valuable for consumers because it provides locations to shop for halloween supplies.
While not perhaps the best argument is the private equity provides liquidity for founders that want to exit. If you started business X, you’ve grown it for 20-40 years and you want to retire, selling is typically the answer. Let’s say the business makes $1m/yr after tax cash flow, PE might buy for $10m, besides PE there aren’t a bunch of likely buyers for your business (of course maybe there is a big competitor, and maybe you could sell it to an employee (but they probably don’t have the money and would need you to seller finance etc)). So for entrepreneurs with a successful small business (say $2-5m+ of ebitda) selling to private equity is the clearest path to a liquidity event for them.
The economist did a piece in defense of private equity a few months ago. Basically boils down to more efficient resource allocation across an entire economy, deep pools of capital to rapidly transform businesses into things people want to buy from.
Small(er) businesses can be poorly run. In theory private equity takes knowledge already in practise in other locations and shares it with this new location, improving results. Downside of course is that they care a lot less about that specific location than the previous owners would have.
One specific practise I’d like to see banned is private equity buying companies with debt the company then assumes. It staggers me that it’s legal.
That's a silly suggestion. The lenders buying that debt know what they're getting into. Those are sophisticated investors. If lenders want to limit what borrowers are allowed to do then there's nothing stopping them from imposing debt covenants on the deal. No need for the government to ban anything.
So form a shell buying company A and secure the debt of company A with the assets of the newly purchased company B? Congrats, you added about 5 minutes of paperwork.
I’m arguing against the practice of leveraged buyouts. You aren’t describing all of the steps of a leveraged buyout. You are just describing a buyout. Buyouts are fine. Leveraged buyouts are what I think is not. I cannot be more clear or keep explaining until you go learn the difference since you aren’t understanding what I’m saying.
I suspect there’s a survival bias at work here. The PE purchased companies that continued to thrive are ones you probably never even knew got bought out.
Those are certainly some... examples. Not things I would hold up as a sign that PE is a good thing since all those businesses look like they are perpetually on the edge of collapse around my area. Dilapidated, mostly empty parking lots, poor service from understaffing. I think we would all be better off if those businesses died and left room for others to replace them.
Who’s preventing a competing coffee shop or burger restaurant from opening? If your area is such a prime business market, but these businesses aren’t capitalizing on it, one of your assumptions may be wrong.
The fact that they are still there in business, even if it is low and crappy business, will still hold onto some customers. And long established business has advantages that a new business can't buy. If there isn't enough traffic for two burger joints, it can become a standoff of both bleeding money until one of them fails, and the new business likely doesn't have the same credit line.
Many new medical treatments/approaches involve heavy capex (robots, light and ion sources, imaging systems, etc) and removing private money that doesn't belong to individual physicians personally will suck a vast amount of capital out of healthcare, creating significant forces against innovation and deployment.
PE exists because a lot of companies are poorly managed. It's better for your local hospital to be taken over by a PE firm than to go out of business. You can say that it would be even better if the government ran the hospital, and you would be right, but that would require a radical overhaul of the American healthcare system. Until that happens, PE plays a major role in keeping things working.
> PE exists because a lot of companies are poorly managed.
This is a non-sequitur. The existence of private equity has an effect on how companies are run, not the other way around. Many well-run companies are targeted by PE exactly because they're well-run and have carved out a sizable captive audience for themselves. And when PE takes over, said company usually ceases to be well-run on all metrics except one.
PE exists because of the non-linear relationship between money accumulation and power. This effect means that it is more beneficial for any company to hoard capital as much as it can rather than "waste" it on the wider economy; after accumulating enough capital, the company can pivot away from whatever market it was in before and focus solely on asset management. PE mostly results from too low taxation on inert wealth compounded by zero-interest rate monetary policies.
I don't think I agree with this, most of the regulation I see is for patient protection. Stark, AKS, HIPPA, etc... are all strong regulation aimed at protecting individuals.
From fee-splitting prohibitions to FDA regulated medical devices, almost all of the day to day regulations I've dealt with in healthcare are squarely aimed at ensuring safety, protecting privacy, preventing fraud and controlling costs.
These businesses would simply stop existing if no purchaser came forward. Many first-world economies face a demographic cliff where boomers are retiring and there is nobody in the next generation who can afford to take over the local dentist office, the HVAC company, etc.
I don’t think that’s true though in all cases. Sometimes PE just offers more money passing the debt into the company they acquire. But smaller players would still take control.
You are forgetting that if PE weren't there to buy out local dentist offices at a premium, then these offices would sell at far lower price, making them affordable to the next generation.
That's not a demographic cliff, that's a financial power cliff, and it's caused exactly by too much money being tied up in PE companies and offshore accounts. All that money taken out of the local economy is leaving each generation with an increasingly smaller size of the pie, even when the pie itself has been consistently growing. You even admit yourself that the problem is that the next generation "can't afford" to maintain the outgoing generation's standard of wealth.
It sounds like there's too much money in PE and not enough in the hands of young people. I'm told there is a secret ancient technique for rectifying such a situation.
At a general level, PE (and really much of capitalism generally) is built around the idea that financial efficiency should be the guiding principle re: capital allocation, so the steelman argument is that PE takes financially inefficient businesses, makes them more financially efficient, and that is good because that's the best way to allocate capital.
a financially inefficient business may be a business that employs more people than it absolutely needs, a business that treats customers/vendors more generously than it absolutely needs to, or even a business that exists as a going concern that would be more financially efficient if sold off for parts or went into bankruptcy.
i personally don't believe financial efficiency should be the guiding principle for everything or really anything, and I believe as a society we should account more for non-financial efficiencies (like treating human beings generously and kindly), and I think it's fine for an inefficient business to continue existing if that means more people have jobs for longer or customers/vendors are treated more generously. fundamentally, i think this line of thinking is dehumanizing, as it views the world (humans, nature, information, knowledge etc.) as resources/materials and not much else.
that all being said, i at least understand the principles and the materialist idea that everything can be viewed as material/resource and why people pursue them (esp because pursuing them effectively can make you fabulously wealthy).
i often say when talking about this stuff with friends: if you're willing/able to see everything (including/especially people) as resource/material, you're well positioned to obtain a lot of material resources/material. whether that's a good thing for you or the rest of the world is another question (and my view is that it's straight up bad).
Easy. PE 99% of the time buy businesses that were already failing and provide a lifeline. A failing business can't afford to pay for expensive medical treatments without a loan that a bank will not provide since it is failing.
People who are vehemently against PE generally do not have any idea of how the system works
That's one model of private equity, but PE has also been buying up very successful local businesses in areas like veterinary care. The PE firm keeps the name and branding of the local vet because people have traditionally wanted to take their pet to a trusted local vet, not a big chain.
They don't have to have an in-depth understanding of leveraged finance to get pissed off when their doctors start doubling prices or their own employment conditions get worse or their parents get treated badly in care homes because the staff are now overworked etc. they're mad at the outcomes they're overwhelmingly not actually trying to debate the merits of it from an exit liquidity perspective.
My main problem with PE is that it is being invested in by things that I do not consider "investors" like retirement funds, teacher's pensions, annuities, etc. Many of these things have sort of implicit guarantees from the State or Federal government. These organizations should be completely banned from investing in PE. PE investments should only be invested in by "investors", and investors understand that their investment may go to zero.
Remember that when private equity buys out a business, there is at least one major winner in that moment: the current owners who have been building up that business over years.
One foreseeable consequence of this bill is that it reduces the ultimate value of starting and building your own practice, leading to more consolidation among existing large operators. As this is foreseeable, I also imagine that it's an unstated goal.
I ask this honestly, do you work in private equity?
I ask because, no one else would believe that private equity is anything other than a middle man to the exact outcome you are describing, with the detour of cutting jobs and benefits from the remaining employees while simultaneously trying to buy the company for we cheaply as possible from the owner, and selling it at as a price as possible. PE steals value from both ends.
I did a small research project based on medical billing challenge data (https://medgis.te0.io/). I tried to correlate the data to PE firms (best effort). As far as I could tell they were just a volume player but not the worst. After talking to people in the industry, theres some real sleezy doctors out there. Some do appointments at hospitals even if not required so they can charge more. There’s more anecdotes. All the incentives are messed up and I’m not sure how to fix without policy changes.
PE has bought most of hvac, electrical, plumbing, daycare, dentist. They keep the same local well established name, but is run centrally by the PE firm. They employ smooth talking salesmen to convince homeowners to pay tens of thousands of dollars for simple things. The salesmen makes 150K+ commissions. The actual plumbers/hvac people make $20/hour. The HVAC salesmen convince unsuspecting homeowners to spend 30K - 70K on upgrades and warranties. They also get a percentage from the manufacturer, usually some shitty brand. They sell warranty/services package which is questionable.
If you want to look at how similar laws have played out in practice recently at the state level, look up 2026 CPOM (Corporate Practice of Medicine) laws in Oregon, California, and Washington or Massachusetts in 2025.
I feel like medical practices should be like law firms where effectively non-lawyers can’t own equity and equity owners have to comply with ethics and code of conduct rules…
Most doctors don't want to be business owners. It used to be that they were kind of forced to operate in partnerships but now most choose to become employees. This might be worse for patients but for better or worse there's no going back.
Can you cite - antidotally the only doctors I know that would rather be an employee work for big hospital chains or already sold their practice for a pile and are happy with less responsibility.
Also, I don't think they're particularly opposed to owning their practice. I can understand them not wanting to manage a business. But for that problem, they can hire professional managers. Which is basically how hospitals work; if the doctors all want the CEO replaced, he gets fired. There's a physicians board and the trustees tend to listen to it.
So you're proposing to create a privileged class of investors with MD degrees who are protected from competition and will be able to earn above-market returns on their equity? Why would we want provider organizations to have a higher cost of capital? Makes no sense at all.
Yes they will earn above market return on a lower capital base with medical shares in medical practice trading closer to book value - and the economics are the profit share not equity value of the firm. Earning $250k/yr on a $1m capital contribution requires a whole lot less rent seeking than earning the same $250k on a $5m share purchase.
If you want to look at it that way there's already a much worse problem; a "privileged class" of service providers has a government-enforced total monopoly on the market for medical practice!
Warren was a 1980s Republican who did legal work on behalf of major corporations including Big Oil vultures.
She stayed in the race for Super Tuesday in 2020 rather than consolidating the progressive vote for Sanders.
Right before, her campaign accepted millions in funding from billionaires after promising not to. Her comment was roughly, as soon as others stop taking billionaire money, I will stop.
Make it a leverage limit. Otherwise you’ll have other players come in and replicate the playbook.
The short-term fix is banning PE. The long-term one is restricting the leverage these groups can take. Then put limits on upstream leverage. We have these across our economy. We just don’t apply them to this sector.
Most state bar associations require a lawyer (or group of them) to own law firms. That _doesnt_ prevent law firms from doing crazy deals to gain liquidity for their partners, including from private equity.
Dictating who has to “own” something just incentivizes people to separate ownership from financial benefit. In most cases that’s just plain worse than letting real ownership happen.
If there is a business practice you don’t like, regulate the practice, not the corporate structure.
The 'fake' price is due to the negotiation of reimbursement between major healthcare chains and insurers. The most regulated piece - Medicare - is the only piece where there's fairly transparent pricing.
> Ask an American hospital how much something costs - you will get a completely fake price back
You think the government tells hospitals to lie to you? The hospitals lie because the government doesn't force them not to. Laissez-faire capitalism causes that. Regulation is needed to fix it.
I need you to help me connect the dots, because a bare URL is not the same thing as communication. What does the airline deregulation act have to do with hospitals giving you fake prices because nobody forces them not to?
What do you think would force hospitals to give you real prices if not the law?
A) can probably only be fixed with regulation. Why would hospitals and insurance otherwise make prices transparent? The current state serves them really well.
Because in a fair market they would be competed away - prices of food, computers, bonds, etc are not transparent because of regulation - it's largely because of the tax incentive as far as I've read from healthcare economists.
Most importantly to fight it as Private Equity is creeping like a cancer into good health systems globally, even in Europe, to slowly but surely siphon away all that is good.
It's important to fight it now before it is too late and other places also fall apart into a degraded, predatory, dystopian US system !
This has infested veterinary practices. Vet costs have increased 8-12% annually for 4-5 years now. The process approaches the vet saying their integrated back office system will save you local personnel and allow the vet to increase client service hours by wasting less on admin. Their system fractures a vet visit into service actions - each of which has a fee. They create a medication factory where a bottle of 100 tablets that cost $1 each becomes $5 a tablet, plus a dispensing fee. Over the past 6 years this has increased vet bills by 50-80%.
Sadly, this brings people to abandon pets because they can not afford vet bills = death for the pet or a hard/short life as a stray. This private equity has also infested dentistry, which shows up as more dental bankruptcies as more people choose extraction over implants/root canals.
I'm not so sure limiting competition is the way to go here. One thing I hate about US healthcare is the lack of price transparency. They would rather shut an entire hospital down before giving you a price sheet. So when outfits like Walmart were looking to get into healthcare and offer basic services like blood tests, checkups, xrays, and common procedures available for flat fees and published prices, the reaction of the US healthcare community was that of a primal scream of terror, and they - specifically hospital groups -- have mobilized an army of lobbyists to try to prevent anyone else from competing.
Hospitals are massive byzantine organizations with so many management layers and so many shady billing techniques, from charging for procedures not performed, to changing what they charge you based on when they find out how much you can pay, it's crazy. What other business forces you to sign a waiver agreeing to pay whatever they decide to charge you, without them telling you what that is, or they will refuse to serve you?
PE buys up hospitals to gut them, make them less capable, and cheaper to run.
Then, they buy up air ambulance services to unnecessarily fly patients to other hospitals they own because it's more profitable at the expense of care delays and worse outcomes. Meanwhile, patients and their families are stuck with exorbitant air ambulance bills $20k-60k.
If for-profit healthcare is allowed then it could be regulated like banking, with requirements to prevent failure (including requirements for financial health), and if there is failure, to ensure customers are protected and provide for continuity.
Like banks, failure of a healthcare institution can be destructive for its customers and the community. If a bank goes under, especially a significant one for the community, regulators see that it's acquired by a surviving institution - often with only a weekend of downtime.
Yes, a lot of bills are introduced in one chamber and die in that same chamber. This case is referring to it being introduced by "Senators Elizabeth Warren (D-Mass.), Ron Wyden (D-Ore.), and Jeff Merkley (D-Ore.), along with Representatives Val Hoyle (D-Ore.), Alexandria Ocasio-Cortez (D-N.Y.), and Suhas Subramanyam (D-Va.)", presumably there's a companion bill for the house, since the links seem to only have the Senate version.
I feel it would be good to bring in (or back) compulsory partnership structures for key professional businesses like GPs, dentists, pharmacies, vets and accountants.
The PE buy-up of these core local businesses isn't great for society generally, service delivery and the existence of a middle class.
The other thing I feel gov should do is force a separation of distributors and point of sale, with rules that allow smaller business to buy at the same pricing as larger.
People seem to forget a key requirement of capitalism is for government to create a level playing field for business. I cant see a better way to do this, and I suspect it would be very beneficial to the bulk of society if gov made some changes down this line.
I wonder if ai can help doctors reclaim their practices, as the bureaucracy of dealing with insurance may become easier. Administrative overhead must be cheaper with ai. It was the main reason for consolidation and giving up management to hospitals and private equity.
AI can help doctors with the administrative side but insurance companies are also deploying AI. We're seeing an escalating arms race with provider AIs battling against payer AIs.
That's only one part of economies of scale. The technical and legal compliance costs for running a provider organization are also killing small practices. And provider organizations also consolidate in order to gain power for negotiating rates with commercial insurers.
I think it's more likely AI will cause disruption by ruthlessly optimizing on behalf of individuals.
Private Equity can afford to have people sitting around all day figuring out tricks and optimizations to save a buck here and there, and this is a power imbalance because the plebs care about things like spending time with their family, and they don't spend all their time trying to save a buck.
Maybe one day the AIs will optimize for us while we spend time with our families. And if a new vet opens that costs $15 less, the AI will route customers to the new business, driving prices down, until we reach 0 profit margin across all industries.
There's probably like a 10 trillion dollar incentive to not allow AI to truly work on behalf of individuals though, so we'll see what happens. For instance, just look at the ad industry alone; if AIs are shopping truly on behalf of individuals, and this becomes wide spread, then the ad industry is just gone.
Optimization of medical care in usa is mostly limited by regulation and fear of lawsuits. Neither of which is going away. You can always get cheaper care in other parts of the world.
> employers expect health care plan costs to rise by an average of 11 percent per worker in 2027, unless benefits are cut
I am sure most workers would prefer to get that extra 11% as a cash raise, but because healthcare costs are out of control the same care costs 11% more.
Certainly some companies will throw up their arms and hire someone overseas instead.
The cap is generous. If an insurance company is hitting it, competition is failing to keep them in check and lifting the cap would just let them gouge deeper. Of course, that doesn't keep them from constantly yapping this talking point, as if it wasn't that way before, as if we don't have evidence that it wouldn't work. "Just lift our profit cap" is self-serving baloney.
That's not the issue, it's because an insurer's absolute profit only grows if the premium base grows. This removes any reason to compete on reduced costs and an incentive to have the costs go up.
If they aren't at the cap -- which is generous -- they can grow their profit by controlling costs. For once.
If they are at the cap, they wouldn't have passed on the benefits from controlling costs anyway because the cap is generous and reaching it proves that they have enormous pricing power.
There is simply no way that lifting the generous cap results in benefit to the consumer. It's a slimy self-serving talking point through and through.
Except you can grow the premium base by adding customers as well, as you are featured in a direct price comparison on the ACA website. Higher premiums mean less customers, unless you are offering more services that they find valuable.
Medicine is extremely capex intensive and only become more so. Sucking private capital out of healthcare is going to make it vastly worse for everyone; higher prices and less innovation. I think we can criticize the often ruthlessness of PE while realizing that limiting medicine's ability to invest would be a huge self-own and only force further centralization into the biggest non-profit centers.
Medicine is already held back enough by the lack of ability to use debt to finance its sales, unlike almost every other industry; you can repossess a car but you can't repo an implant or administered drug, forcing everything to be paid for in cash upfront. Medicine needs as much access to capital as it can get.
I have no words for how completely toxic the surge of PE in healthcare has been. It's driven the degradation of care everywhere I've been. Healthcare chains have no issues with investment (see any annual reporting document to see how much money is sitting in various investments, mostly RE); smaller clinics being eaten up by PE chains is not an answer to centralization, it's just another mechanism of it.
"Private equity" also includes venture capital here. It means all private direct investment. The thing you are imagining is one small corner of what private equity actually is.
I'm sorry, compared to what? We're not talking about a routine doctor's office for healthy people. Advanced care is extremely technologically intensive and your local surgeon is not personally buying the $20M in infrastructure required for many modern advanced treatments. Venture capital has been essential for progress in medicine, and many advanced therapies are going to be increasingly delivered vertically integrated for the widest accessibility and best outcomes.
agreed but that is not what they are talking about banning -- "PE" is expansive and includes all those other things. If they narrowed this proposal to just what people are thinking of as "PE" here rolling up clinics and gaining local pricing power that would be different and I'd agree with you
> agreed but that is not what they are talking about banning
I think you misunderstand me. I think what is proposed to be banned (employers of doctors who are PE firms) should not exist. It is strictly not necessary, and there's an excellent example of the consequences playing out across Massachusetts right now (which explains the bill's introduction by Warren)..
I'm not sure how we decided only lawyers can run law firms but that anybody can operate a hospital...
It feels to me as if the US is a useful example for the outcomes of a focus on capitalist ideals does for medical services in a country.
Apologies if an AI summary is offensive to some, but here we go:
> The US is a world leader in advanced and specialist medicine, but its overall system for providing affordable, accessible, equitable medical care to its citizens ranks poorly—last among the 10 comparable high-income countries in the strongest recent comparison.
There's a pattern to the kinds of companies PE buys and I think it points to the real problem.
They like companies with some kind of moat that makes it hard to unseat them. Basically, companies where there is no alternative for the consumer. That way, they can inflict abuse but know there will be nowhere to run.
There are two different ways to achieve this. Monopoly and regulation. Hospitals have both government granted locational monopoly and tons of regulations that make it impossible to compete.
Private equity is the symptom, not the disease.
Until we get at the disease, new monsters will be born with different name filling the same ecological niche. It's economic natural selection played out in the environment we created.
Regulation is usually what you accept in exchange for a monopoly. I would argue a granted monopoly without any regulation is evidence of regulatory capture.
If you want to argue from first principles, and we accept for a moment that granted monopoly is the system we are working in (whether or not you feel it's the optimal regime) then I'd argue there's a clear gap in regulation, as flagrant abuse of the consumer has not been prevented.
Not really. Monopolies are an invitation to competition: Your margin is my opportunity, as it were. They are therefore hard to maintain absent some kind of external force to support it: Regulations (regulatory capture), licensing, explicit grant from the government, intellectual property laws, or some kind of collusion or market manipulation (more leading to oligopolies rather than monopolies).
This is how industrial barons of the early-mid 20th century operated, as an example, with collusion and price fixing type things. Or hospitals and medical facilities today with certificate-of-need laws enforced by the government.
This is inaccurate - natural monopolies are a thing.
Monopolies happen due to barriers to entry, and not all barriers to entry are government-created or illegal: network effects, big upfront costs, economies of scale, control of a scarce resource, etc.
Regulation can produce a monopoly, but lots of regulations also exist to keep natural monopolies in check.
True. Though I don't like the term 'natural monopoly'. Most natural monopolies aren't - or don't have to be.
Maybe a term like 'natural markets' captures it better? The property being that natural markets/monopolies provide some sort of substrate on which a market can exist.
Good regulations seem to be ones that force open protocol and interoperability of these platforms that get large. This creates a new marketplace abstraction layer that enables new innovation to thrive.
I'm certainly glad that I'm not on AOL's internet. And also glad that internet exists in part due to Bell's telephone system being forced open.
Bad regulations do not seem to have that characteristic. It's too bad we do not have vocabulary to tell them apart. Public good type regulations are more muddy and can be used as a weapon more often than not.
Most people, especially governments, aren't positioned to analyse monopolies.
>Regulation can produce a monopoly, but lots of regulations also exist to keep natural monopolies in check.
My favourite example of this is Australias NBNCo.
Every midwit on the street capable of reading a newspaper would tell you, theres a NATURAL MONOPOLY on internet services, which is why Australia needed NBNCo.
However, the enabling legislation also made it a federal crime to overbuild the NBN, because the internet isnt a natural monopoly. We have also had calls to nationalise other fibre networks, and lots of cases of NBN overbuilding other networks.
The truth of it, is that Natural Monopoly is just a thought terminating cliche. There are barriers to entry to markets, but the only kind of monopoly is regulatory. Unless you regulate some dipshit will find a way to sneak a fibre through your power duct or something. If there was enough of an interest, we could have multiple power or water hookups too. There's no reason why we cant have competitive garbage collection, and theres probably somewhere on the planet that does. Even pit and pipe isnt a monopoly, I have seen plenty of places with multiple pit providers.
Take garbage hauling. You have five haulers running the exact same routes through town, stopping at different houses. Government is unhappy with the tremendous added wear on the roads from the redundant trucks, and the extra traffic, so it strikes a deal and grants exclusivity to one hauler.
This is a granted monopoly. It has real positives, such as the same service at 5x less road wear. It should also be obvious that to be positive overall the deal needs to prevent abuse of the public.
Nope.
If there are 5x as many truck runs, the trash per truck is 1/5th.
The more likely result is that each of the providers runs far fewer trucks than a single provider would because trucks and drivers cost money. Unless the 5 companies figure out how to get the total revenue to 5x, they can't pay for that.
Let's do an example.
Suppose we have a street with 100 houses and it takes 5 houses to fill a truck. Therefore, it will take 20 truck runs to collect that street's trash.
If there is only one trash company, it will need 20 truck runs to service that street.
If there are five trash companies, each with an equal share of those 100 houses, each of those companies needs only 4 runs to service its 20 houses. Why would any of them do more runs?
Yes, the average distance per run may be higher for the 5 companies, but it won't be 5x.
> Yes, the average distance per run may be higher for the 5 companies, but it won't be 5x.
You contradict yourself at the end of the comment. Yes, it could be estimated a linear equation (mx + b) where m is the cost per house and b is the cost per route, roughly. And then you could have a system of which equations, where each row in the system’s matrix corresponds to an additional company.
The optimal result is probably not 1 company, but it’s probably not 1 company per house either
Now do Amazon deliveries. I'm only half-joking.
Some part of Ohio functions as a granted monopoly for the power company.
They are given 5-year contracts, but an agency exists to tabulate complaints, reaction time to outages, and so on. If they don't impress the agency near the end of their contract, it will be opened up for market bidding.
Because of this pressure, the monopoly power company has even been known to reduce rates, proving a priori that they are indeed serving the public interest at a commendable level.
Am I the only that is happy that "cheap unregulated doctors" isn't the solution to shaking up monopolistic health care?
That doesn't seem true to me.
Monopolies are the result of failure of competition. There's no "invitation" to compete, but a clear warning that a new entrant will have no chance.
This is why profit seeking organisations aim to become a monopoly as then they are guaranteed profits and can abuse customers as they wish.
The Americans simply will not reject their broken for-profit medical system wholesale. What I see is one more attempt at chipping away at it in hopes that maybe they can succeed piecemeal.
Reagan and other racists succeeded in turning government benefits into a synonym for POC stealing from White Americans.
It’s fine for a military defense contractor to go a few billion over budget for a weapons platform that barely works, but if a single mother uses food stamps to buy cake ingredients and then sells a few pieces of cake that’s a travesty.
Millions of Americans, not just white, but plenty of Hispanics, Blacks and Asians too, voted to take away their own medical insurance.
Because they know that they’re just temporarily embarrassed millionaires. Not the type of people who need handouts.
I'm not sure anyone has solved the problem, though.
"For profit" isn't really the problem, fee for service is.
Value based arrangements and capitated payment structures are real improvements.
When you don't have any market forces constraining utilization, you get massive access problems.
I don’t think it’s useful to categorise these things as “solved” or “not solved”. They always exist on a scale.
I can tell you I am infinitely more happy living with the Australian medical system than what the US has even if it isn’t flawless with zero issues left to deal with.
For profit IS the problem, the fundamental issue is that there are some services that needs to be run at a loss because the profit is the service which is being provided, that is the whole point of public service and paying taxes in order to have those operated.
Now I'm not advocating for reckless spending, you can run services with reason while staying within a spending envelope, but there is a striking difference between entities that are specifically aligned for profit and those who aren't, and this is very noticeable in the health sector, in America, were wealth directly correlates with health.
Not offering solutions here, because I think it's more multi-faceted than I know about. But when people are afraid to take on the debt of on-board EMS for a 911 call, and local pharmacies are forced out to be bought up by the top national pharmaceutical companies letting them rent-seek, I do think "for profit" is part of this multi-faceted problem.
The United States has both market forces and massive access problems. I'm not sure you can establish that causal relationship.
> The United States has both market forces and massive access problems.
It boggles my mind when I still occasionally hear people speaking out against all forms of single payer healthcare in the US saying they don't want to have to wait weeks/months to see a doctor like they do in Canada/UK/wherever.
If I give them the benefit of the doubt of not being paid lobbyists for the medical insurance industry, I can only surmise these people haven't been to a non-emergency doctor since prior to 2020.
Because even here in the US if you aren't fabulously wealthy with concierge medical you'll be waiting weeks/months to see a 'doctor'. And you'll almost certainly never actually see a doctor, you're going to see an overworked NP (no shade on NPs here, most of whom are great, just establishing how our medical system actually works in 2026).
> Because even here in the US if you aren't fabulously wealthy with concierge medical you'll be waiting weeks/months to see a 'doctor'. And you'll almost certainly never actually see a doctor, you're going to see an overworked NP (no shade on NPs here, most of whom are great, just establishing how our medical system actually works in 2026).
But it's simply not true. my mom broke her back last year and before we realized that her back was broken, we saw an urgent care doctor, same day, within 30mins (I don't recall the exact timescale now, but it was pretty much instant). Who promptly gave my mom an Rx and told us to go to the ER. Personally, urgent care appointments have always been available within 2hrs, and even stuff like an xray (usually in a centralized office, so some travel required) is possible same day. This isn't special treatment.
If someone is waiting long for care, it isn't a problem with the system - and the alternative you speak of isn't going to solve the "I'm not a medical doctor" problem either, which is the main objection to the long wait-times. Minor hypochondriac-ness notwithstanding - nothing will be able to solve that completely - money is the back-pressure mechanism to avoid waste of limited resources. Whether anybody likes it or not, doctors/xray-machines/etc are not infinite (for now heh).
For-profit health-care insurance companies should burn in hell, though.
I can do anecdotes too.
My father had his heart in afib for over 3 months straight as US hospitals and doctors jerked him around and set appointments weeks out before they finally removed his thyroid, despite a family history of thyroid problems and having multiple previous hospital trips for suspected heart attacks, which by itself should give the obvious conclusion that his thyroid needed to be removed.
Being in afib just for a few days can cause permanent heart damage, heart attack, and death. And even once they decided it should be done, it was another 2.5 weeks before they scheduled the surgery. I don't see how anyone can think the US medical system is any good for anybody but the obscenely wealthy.
No doctor in existence would consider that an acceptable scenario, but the profit driven investors seemingly had no problem with him dieing when they had more profitable patients to serve first.
Urgent care would not be urgent if you had to wait months. Hang out with a few elderly people who actually need to see specialists more than people like me. Over the years, I've heard plenty of stories from people I know waiting multiple months to see specialists.
Yeah, and specialists are "usually" not available via urgent care. If not for the like of urgent care, specialties would be worse. The fact that it takes so long for such access is still a demand and supply problem at the end of the day, no way around the knowledge bottleneck - fixing that means shifting demand to different, more plentiful, supply (doing that soundly is not trivial, but likely easier than attempting to multiply the specialists, depending on the specialist). ERs are expensive because they have to have certain specialties "on tap" 24/7, among other reasons. This is not a unique problem of any single health-care system.
If you break your back in a place like Canada or the UK you are also going to be seen quickly.
Both systems triage. The wait for non urgent needs in the US system is still weeks to months
> But it's simply not true. my mom broke her back last year and before we realized that her back was broken, we saw an urgent care doctor, same day, within 30mins (I don't recall the exact timescale now, but it was pretty much instant). Who promptly gave my mom an Rx and told us to go to the ER.
Ok.
But in the reply you are responding to I specifically carved out an exception for emergency situations:
> I can only surmise these people haven't been to a non-emergency doctor since prior to 2020.
Your mom's situation was certainly an emergency.
I'm glad she was seen promptly, but her situation is very different than someone who needs to see a specialist for something that is not immediately life threatening (even if waiting could have serious long term health consequences).
Urgent care is not a replacement for a family doctor or internist who can track your health across long periods of time. That's like comparing a substitute teacher to a tutor; a sub might be able to answer your questions, but they cannot track your academic progress over time and help you tackle an extended course.
Exactly. Last time I moved to a new area, out of about 5 local family doctors, the shortest wait time for a New Patient Appointment was eight months. In the good ol' non-socialized-medicine USA. So for eight months, we had to rely on urgent care for every medical need.
30 years ago, you’d just call your GPs office and they would have told you to go to the ER. Instead your moms insurer paid $150 for an interaction that likely funneled you their medical networks local hospital and added low value.
Urgent care is a grift to replace a relationship with a doctor or practice with a lower paid, lower skilled NP. It’s more a sales funnel that anything.
> relationship with a doctor or practice
What if I don't care about this whatsoever?
Go to a doc in the box and be happy.
I don’t remember the last time I had to wait more than a few days to see a GP or more than a week for a specialist on an employer’s PPO insurance plan. I’ve had them at several employers ranging from university to FAANG so it’s not exactly something only fabulously wealthy people have access to.
The problem is there is a huge bathtub curve in insurance quality between employers and the public market. It’s a rude awakening when you can’t afford COBRA rates and have to fall back to a “bronze plan” or whatever is available on the exchanges.
FAANG employee health insurance? Something like 1% of American workers get that, if even that many. Then throw in my oil company friends here in Houston and a few other industries which give premium benefits and you still have a tiny subset of the American workforce getting exceptionally strong benefits. Not at all indicative of the experience of most Americans.
The universities I worked for (both public and private) provided the same level of PPO insurance, as did a random fitness startup, a clinical diagnostics company, and a construction company. I invite you to reread the part where I said “several employers [plural] ranging from university to FAANG”.
Here in Houston, my friend who works at UH has excellent insurance. A quick search online confirms that it is much better than average. Different structure for employees at Rice, my alma mater, but still excellent. Gemini describes these employees being in a kind of "benefits bubble" here in Texas, and they're getting something way better from what most Texans get.
You said FAANG, so perhaps you're in California, a state that has laws regulating health insurance to an extent that make it unique in the USA?
> You said FAANG, so perhaps you're in California, a state that has laws regulating health insurance to an extent that make it unique in the USA
That is definitely a confounding factor, although I’m curious how much of that is the urban vs rural split in other states. (The construction company was not in California but oil boom-town adjacent in Texas)
On the other hand, most states with significant tech workforces have Medicaid which most people will qualify for if they're laid off (I did!) and these are excellent. People pay for cobra despite a public option being available.
That’s not necessarily an insurance issue.
Part of ACA was the creation of regional health cartels. If you’re in a region with shitty networks, care may be hard to get. Where I live there’s a teaching hospital with a doctor focused medical network and a big Catholic hospital chain.
In my scenario, There is a good market for cardiac, OB, and some other specialties in each network. The rest is a monopoly— the catholic network doesn’t staff neuro for example, they just have consultants.
> It boggles my mind when I still occasionally hear people speaking out against all forms of single payer healthcare in the US saying they don't want to have to wait weeks/months to see a doctor like they do in Canada/UK/wherever.
Conversely, people consistently put forth single-payer as a panacea without considering what other differences exist between the systems.
For example, in the US a medical residency is required by law but the number of residency slots is constrained because the AMA wants to reduce supply/competition. Change who pays the premiums and that's still just as much of a problem, and it might even make it worse to give the lobbyists an even deeper pocket to siphon money from.
Another significant source of costs in the US system is that doctors can prescribe much more expensive patented drugs or devices and no part of the system is given the incentive to say no to something which is only slightly or negligibly better but dramatically more expensive. Likewise, many of these patents are obvious (e.g. extended release version of existing drug or combination of two common existing drugs) and shouldn't be granted, but nevertheless are. But if those patents are issued and the system is required to pay for a drug when a doctor prescribes it, the seller has a monopoly for the patent term and can charge the monopoly price. The normal way to solve that is for "customers" to be more exposed to cost differences between treatment options, so that things that are only marginally better can only charge marginally higher prices, which is the opposite of how single-payer works.
"Single payer" is essentially replacing insurance companies with the government, but that doesn't solve any of the problems that exist in the parts of the system that aren't the insurance companies.
It's not worth it to solve any of the problems, let alone the biggest problem, if we can't solve all of the problems immediately, after all.
You're still assuming that the insurance companies are the biggest problem, and on top of that that single-payer is the best way to improve even that part of the system.
For example, why do we have insurance companies "negotiating" with providers and having "in-network" nonsense instead of requiring universal price transparency? Instead of the insurance company setting the price, have them set how much they cover, e.g. they pay 90% of the second lowest price that service is available for within 100 miles of the patient. Then the patient chooses where to go and pays whatever the insurance doesn't cover. Meanwhile the providers are all required to publish transparent pricing so there is a public database of everyone who can perform a service and how much they charge.
Then a patient receiving non-emergency care (which is the large majority of medical expenses) can decide whether they want to travel 50 minutes to get the lowest price, or pay a little more of their own money because another provider is closer or provides optional amenities. Which in turn makes the providers actually compete with each other, which is the thing single-payer doesn't get you.
This is not my family's experience on distinctly not-concierge-medicine Kaiser Permanente in the Bay Area. Always meet with doctors (and NPs), have gotten in quickly when necessary, etc.
California is the only state that regulates wait times for specialists. When you uttered the words "Bay Area" it signaled that you enjoy better service than most Americans. I know people in states very close to yours (as well as my own) who have had extensive wait times.
> California is the only state that regulates wait times for specialists
Really?
> you'll be waiting weeks/months to see a 'doctor'
I live in the US, and this is false, with Zocdoc I can see even specialists within 24-72 hours. All I have is my wife's United plan, nothing fancy,
I have never waited more than a day to see a doctor and hardly more than a week to see a specialist. I'm on a ppo plan so I just make an appt. If someone doesn't have an appointment I find someone else.
The main issue I've had is finding a gp in Portland Oregon. I want a male who is accepting new patients which is seemingly impossible to find.
I'm in the US, and I see my GP every two weeks + can arrange for an appointment within about a day or over the phone whenever I need it.
If I need to be referred to a specialist though, I could be waiting months just for the initial consultation, and then months again before anything happens. Also, there just aren't specialists in my area for some things. Been trying to get a consult about dissociative disorder for years now.
My GP is great though, he constantly tells me about exciting new papers he's been reading and he loves to share science and research level stuff. It's clear that he loves his job, it makes me super happy.
(He's an MD, not NP, and he takes Medicaid)
I'm unsure if I'm reading you correct. Are you saying that the disease is all "monopoly and regulation", or just some of it? Healthcare, infrastructure, etc are natural monopolies, and the alternative isn't much better. No one wants four parallell roads or multiple competing electrical grids, or side-by-side hospitals.
We however don't want unnatural monopolies that have enough capital to swat away any competition, nor do we want natural monopolies taken over by rent-seekers.
That’s absolutely not true. Private equity regularly buys small businesses, D2C businesses, retail businesses, failing businesses, software businesses…
Genuine Q: Are they buying failing businesses because they see potential and want to get those on the right track, or are they buying them because their forecast tells them they can still make money, before shutting them down for eternity?
It doesn’t matter to PE as long as they can make a profit.
Buy a failing business and leverage debt on it until you can’t, spend the money on yourself restructuring the business.
Buy a working business and gut it for multiple.
Buy failing businesses to offset tax burden.
This a meta level game, they don’t care about the outcome as long as it produces profit.
Product quality goes down the drain? That product is retirement homes, healthcare, food, utility, schools, it doesn’t matter. There is a million levels of separation and paperwork and a corp structure to prevent shit swimming up the stream.
Net result, if you live in America look around you, go to an auto service center, or a clinic. It’s been gutted for profit one way or another.
That’s also a correlation of federal vs state policy. Federal leaves nowhere to run.
Is there such a pattern? I'm not aware of any data pointing towards one, and I know lots of businesses with no monopoly or regulatory moat that have been acquired by private equity firms. I think people just don't care when PE buys businesses that don't seem very important.
If PE buys something that doesn't have a moat then they can't enshittify it because the customers would immediately switch to alternatives.
They often still buy those things, e.g. when there is a failing company in a competitive market that could do better with new management, but then no one complains about it because they're not making the product worse (and can't because there is actual competition).
> They like companies with some kind of moat that makes it hard to unseat them.
The biggest moat is capital.
PE is buying up things like medical practices, law firms, vets, etc, where typically there would be an upwards path for one generation to hire new blood to cover their markets and then sell partnership stakes to them when they want to retire. But why should an owner of a practice sell to their junior staff when PE is there offering 2, 3, 5x as much?
Consolidation of these kinds of businesses at the hands of PE is endemic of systemic lack of capital acquisition of a generation of people, held down by debt and concerns about practical shit like healthcare.
PE is just a symptom of larger macro economic trends, namely the depletion of the next generation from free cash they could use to become business owners.
> But why should an owner of a practice sell to their junior staff when PE is there offering 2, 3, 5x as much?
The better question is, why does a medical practice have a moat? What exactly is the PE firm buying? When the senior doctor retires, what stops the junior one(s) from renting their own offices and taking their patients with them?
The answer is presumably something like, non-compete agreements, or vendor lock-in from EMR systems, or some kind of insurance or regulatory bureaucracy. So then we need to identify what it actually is and do away with it so the next generation's juniors don't have to outbid Wall St to acquire it.
No, it's money. Younger generations have less money. It's not more complicated than that.
I notice that you haven't actually answered the question of what they're supposed to be needing to buy.
These PE-owned companies create market demand by being shitty. Somehow they are able to keep their margins and their market so that their business model makes sense. That's a puzzle, right?
There is no shortage of investment looking for great returns. A market with huge demand not being met adequately is a dream to investors. Even more when you know the competition must continue to fuck their customers because they paid above market rates for the purchase and the business is saddled with debt obligations it must meet (Leveraged buyouts do that).
What could stop new competition from beating them out?
It's not capital.
It is capital? It’s going to the same PEs and private markets.
Who the hell is going to take the risk on and for what? Take x billon dollars to build from scratch or near guaranteed profit to buy 50 practices and shittify them for near guaranteed profit.
Show me an example of trend reversal please of this happening in any sector. These are essentials and basics and they are captured, this isn’t a froyo start up that has a 3 year cycle.
PE doesn't create anything. They extract from margins.
It only works by having more capital to begin with.
Otherwise you wouldn't see consolidation where it shouldn't exist.
I think I could have been clearer.
The PE firm creates market demand for the goods/services that the purchased company used to provide at a better value to the customer.
So yes, the 'creation' is a demand which is sort of a destruction of the value that the customers previously had. In a fair market, this demand can be met. But a PE buys strategically such that this demand is not possible to satisfy because the company they purchased is entrenched in some way (regulation/monopoly).
The disease is Capitalism.
It's actually worse with veterinary practices.
Younger veterinarians are drowning in school debt and can't buy the practices from the older folks that are retiring. So, private equity is basically snatching all of them up right now, betting that childless millennials are going to pay tons of money on veterinary care when their pandemic pups begin to reach end-of-life.
They're going to cut wages for all the staff, and hike all the prices, because unlike with human medical care, there's hardly any regulation (yet).
Up here in Canada, we've seen vet clinics rapidly go corporate in the last couple of decades. Even ignoring prices, the degradation in the quality of care offered is stark. Vets working for corporate clinics are heavily micromanaged. They get less time per animal, are pressured into certain diagnoses and prescriptions, etc.. A lot of us now refuse to take our pets to clinics that aren't owned by the vets working there. Unfortunately, in many places there aren't a lot of options.
To put humans through this kind of misaligned system is the stuff of nightmares.
> To put humans through this kind of misaligned system is the stuff of nightmares.
And also the natural market equilibrium, apparently.
There's nothing natural about this
My life goal that I can't work on yet is to run vet clinics as a non-profit in locations where private equity has a monopoly and are in extraction mode. With operational excellence, I think they can be out-competed by running a cost effective practice, so people don't have to decide between putting their pet down prematurely, and spending $5k per night (yes, that happened to my friend in San Francisco. $5k/night is not an exaggeration).
The predatory businesses are able to do the extraction only because of the practical monopoly they have in a neighborhood.
I believe the ops can be open sourced and replicated franchise style. And vets, who originally get into the career because they love animals will be drawn to it, and they have bills to pay, but that can be taken care of with a reasonable payment structure.
I hope someone else does this so I don't have to. But I think I have to at some point. I'd also love to hear if this is a dumb idea.
I love this idea but I think the PE angle also means suppliers and vendors will charge them far less for bulk order and those suppliers/vendors themselves may be a horrible little mix of MBA-brained owner practices that actively upcharges small businesses who have far less negotiating leverage
I think the only way to do it is to have your neighborhood actively being okay with seeking local services something that a lot of neighborhood groups I frequent seem to be a big fan of (farmer's markets are an indication of this - if there's strong and regular FMs being hosted, there's people willing to burn a little extra disposable income for better, more reliable products)
I’be been similarly interested and long ruminating about whether it would be possible to achieve something similar to this in the restaurant industry. For example to have a non profit operating a franchise of a fast food location and instead of having thw 20% corporate tax rate and profit going towards retained earnings and dividends to instead be reinvested in the mission which would be better, more nutritious ingredients to better healthily feed your local customers and two to provide the staff a livable wage. Like you, I keep turning it over in my head and contemplating it rather passively as it’s way outside of my lane of Data Engineering, but I’d like to think that the market would eventually identify this as viable if it at all would be. With the ever looming fear of layoffs and future of future employment in writing software I keep thinking about that scene of the firing in “Up In The Air” where the guy they let go had always dreamt of being a chef and was finally able to pursue it after getting laid off from his high paying job that he had come to hate. Typed on my phone with my cat on my lap ; so plz excuse any run on sentences or imperfections.
Good luck to you and I sincerely hope that you succeed. It's not a dumb idea.
But on the human side many health systems are non-profit, and they generally aren't any cheaper or better quality than their for-profit competition. The real problem is local market power and lack of anti-trust enforcement.
I visited the veterinarian recently for a routine exam of my dog. The vet gave the exam and at the end of it, a technician handed us what looked like an invoice. The invoice had like 12 different items on it and totaled $1,400. No explanation, and no differentiation between items.
We were flabbergasted. Asked the tech what was optional or what was required as part of our visit and he said, oh, just the top line item for the exam. $95.
It has to be illegal to do that. I feel like next time I go in there they are going to give me the ol' Clark Stanley runaround.
Yes please, add vets to the bill. The problem you’re describing gets exacerbated when PEs buy practices. They undercut the very few other surviving practices and remove any ability for new practices to open up. In the last 3 years, we went from 10 to just 3 emergency vets in a 20 mile radius. Now if I need to go to an emergency vet, I drive half an hour if there’s no traffic and pay $200 to just be seen.
This insanity is creating a crisis amount of pets being abandoned, and then euthanized by the animal services. People can’t afford to have pets anymore.
What is so costly about a veterinary practice that new veterinarians can't just start their own? Why would they need to buy one? There is certainly some benefit to working for some one for a while, and maybe eventually buying out an established practice... but if they want too much for it, just start your own?
If you start your own veterinary practice, and eventually build up a steady stream of happy customers, then sooner or later the PE firms will come knocking on your door, too.
Imagine you're drowning in student debt and worrying about keeping your business afloat, when someone offers you $5M, and says you'll still get to work with animals, which you love, while they take care of the financial and business side, which you didn't enjoy. It's a no brainer for most people.
No way. I think most people realize “they are offering me $5M because they know they’ll make a good profit on this business. That means it’s worth more.”
I think that's true to an extent. And, especially successful people, often would rather be their own boss for less money than to be a corporate cog. Having the freedom to make ethical judgements yourself and build local community is a real luxury. We are, mostly, just social animals that want to build our status by helping each other out in the end.
Two things, I think, might make the decision for them, in spite of that:
That's how cynicism can win out. And we all lose.It's worth more with business practices that the current owner wouldn't be willing to do.
it is worth more, but you have to do 100% of the work to get 25% more upside.
Or take $5m and get no more upside and 70% less work. The "work" here is dealing with regulations, insurance companies, administration, payments, and accounting, not actually looking after dogs
the PE model is often to provide a competent regtech/administration core and then plug heaps of regulated businesses into it and centralise all the admin
imagine opening a vet in SF in 1950 in a cheap shoplot and people just paid you with hard cash or cheques in person, you wrote receipts with a biro, and filed taxes once or twice a year on a few sheets of paper... compared to now
Indeed. But remember a PE firm has economies of scale because they own many vet practices. They can negotiate better rates with suppliers than you can, and better payment terms. Maybe they even own some of those suppliers. They can divide their advertising costs by all the practices they own, whereas you can't.
Even if you were willing to be as ruthless as a PE firm, raising your prices and sacking half your staff, and even if you were somehow an expert in financial engineering and business optimization, you still won't make the business as profitable as they can.
* Most small brick & motor businesses do not turn a profit in their first 2 years. So you’ll need a significant amount of runway, in a business where raising capital isn’t guaranteed.
* There’s probably more cost in medical supply, equipment, and certification than you’d expect. There’s standards for security of the medications.
* Most veterinary clinics have staff. That’s payroll expenses.
* Any new business will need marketing. You’ll probably want a large sign/billboard, a decent website, and social media.
* Just leasing office space and furnishing it is surprisingly expensive.
Dogs use the same x-ray machines that people do.
no amount of public money needs to be spent on companion dogs who can be cheaply euthanized.
Australia is on its way down this path after Brookfield / Healthscope was holding a private hospital hostage against the government and had performance so degraded a child died. Hopefully we (aus) continue down this path of burning off the rot.
https://www.abc.net.au/news/2025-03-27/nsw-government-joes-l...
That's for hospitals though, in one state.
Approximately 45% of GPs in Australia work in practices owned by private companies
https://www.monash.edu/business/che/impact-and-engagement/re...
I don’t have a problem with privately owned clinics, but I do think it should have to be majority owned by the operators. What percentage of that 45% is just doctors that run their own office vs. investment firms.
I agree there is still a long way to go. I hope this case shows that there is political will and ability to push back against private equity rot. Many of the commenters here treat these forces as inevitable and unstoppable - but it is possible to take ground back against them. It's unfortunate it took the death of a child for this to happen.
You have to start somewhere.
performance soooo degraded a child died?
when people talk about how healthcare needs to be better and better and more and more, I say "tell me under your plan what diseases/injuries to what extant will not be treated: who do you say "no" to? Every country could spend every collective nickel they have, and some people still would not live to see the next morning, but in a way that's ok because there probably wouldn't be any breakfast either, that money was spent on healthcare.
What exactly are you calling for? I thought millenial and genz home ownership was the problem we need to fix. Are we going to sacrifice hipster housing for healthcare? Since most healthcare today is probably needed by boomers, think carefully about your answer.
Very strange comment. I would encourage you to read the specifics of the actual case. The hospital was severely under resourced resulting in a simple case being neglected and the child dying. The child could have received basic treatment and they would have survived.
Underresourcing the hospital was a deliberate decision by Brookfield to push for a government bail-out. Anyone who made money off this should be in jail.
Absolutely no idea what the rest of your comment is about. Our hospitals should have the resources to treat a sick child. Some might say that's the entire point of society.
You're fighting a losing battle advocating for public stewardship of anything on this website. The majority of people I've spoken with here are American, doing very well for themselves, and aspirational entrepreneurs.
They have no concept of how much cheaper medical care can be. They don't realise there is enough for everyone. They are blind to the fact that many other countries care for all of their people for a fraction of the price. The people on this forum live in a strange parallel reality where there is only enough to go around, even though that hasn't been true for a very long time.
So when people ask why they don't provide for the poor or fix their broken healthcare system by introducing single-payer healthcare, they'll speak to you like you're an idiot or a child. "Who is going to pay for that?", they ask, while paying an order of magnitude more for a GP visit than any other citizen of any other nation does. To them, you just have a poor understanding of economics.
Can someone steelman private equity, please? I'm honestly looking for the upsides (for non-investors) of when PE moves into an industry like medicine and begins buying up businesses that traditionally aren't already large chains.
I already hear the downsides frequently from someone whose work is directly affected.
Private equity just means controlling a company outside of the public stock markets, it is incredibly broad, and covers everything from blackrock buying every vets office in an area, to a plumber buying out another plumber when they want to retire.
The steelman argument is that private equity is just property rights. If I build a business I get to decide what to do with it.
What most people are arguing against is a specific kind of PE where an institutional investor will either use aggressive financial engineering to force a profit, even if it kills the business, or when those same investors aggregate market share to the point where it is detrimental to consumers. Sprinkle in a little bit of heartless MBA bullshit, and that is what people specifically don’t like.
A stronger steelman is that it results in resources getting allocated in smarter/healthier ways across society.
If there's some business that's getting by but the land it's on is more valuable (e.g. for housing) than the business, some investors buy the business, sell the land, make the business account for the land value, wind the business down if it can't, and there are apartments there a few years later.
Is that not just a subset of this:
> The steelman argument is that private equity is just property rights. If I build a business I get to decide what to do with it.
Berkshire Hathaway is in some sense also PE (though done by a public company that you can invest in) and Warren Buffett's culture is to find great companies run by great managers and let them cook. That long-term view is the exception and not the rule though.
It is a broad term. VC is a subset of PE.
In medicine, it's a solution for someone who wants liquidity (buy kids new home, help local dog shelter, add a new mistress) and doesn't want to retire, yet.
The problem is that the terms are custom and YMMV as an existing patient of said practice.
>If I build a business I get to decide what to do with it.
I don't think that follows necessarily, especially not categorically.
> The steelman argument is that private equity is just property rights. If I build a business I get to decide what to do with it.
You're gonna need to steelman that again, because in and of itself that is also not something I see as desirable.
To be clear: You don't think it is desirable to be able to do what you want with your own property?
If you can't allow property rights then there is no way to steelman people exercising property rights.
I think that "everyone should be able to do what they want with their own property", per se, is not a good principle for society. Sometimes people should not be allowed to do what they want with their property. In particular, I think the more property a person has, the less freedom they should have to do what they want with it. (This can also take the form of "the amount of property a person can own should be limited".)
I was speaking in generalities, if that wasn't extremely obvious.
Obviously, yes, people are - and should be - constrained in what they can do with their property. Even the most capitalist systems on earth place restrictions on property. I didn't think it was necessary to caveat that control of private property is not absolute or without consequences. I'm not aware of any capitalist systems that do not put greater protections on people that control large amounts of property (see monopoly, environmental, antitrust, public securities law, etc. Most of those are basically irrelevant to people who don't own large amounts of property).
The point is that for property to mean anything at all, an owner must be allowed to direct the use of that property. What's the point of owning a house if I can't make any decisions about what to do with it. I don't really own a house if I can't decide that I want to live in it, or to sell it.
Yes, but what if you own 100 houses? I'm pretty sure there is some number N of houses (or total value of houses) where I would be fine telling the person, "You don't get to decide what to do with these houses anymore, they're going to be given to people who need houses." Not as a matter of antitrust or monopoly but just directly as a matter of an individual controlling too much wealth.
Aside from that, once you admit that there can be restrictions on property rights, it's unclear how property rights in and of themselves is a steelman of private equity. Why not just say that "you can't sell to private equity" is one of the restrictions? Or, perhaps more subtly, why not say that a private equity company of a certain size is not allowed to buy any additional company, independent of what rights that company's owner has to sell?
Easy to imagine practices where the primary owner is going to retire and looking for an out.
Maybe they find a buyer in a doctor, maybe they don't, but PE provides them an exit that keeps the practice operating in the community.
Many people don't really run businesses efficiently. There was an interesting video I saw recently where a sole doctor practice made a few changes to their workflow that allowed them to hire more doctors and handle 2x as many people - I would expect a PE firm would pursue similar changes that help increase the number of people they can service, increasing competitiveness and lowering prices in the long run.
I don't know how these tradeoffs interact with patient care, but I wouldn't inherently expect PE to be worse at this than any other operating model.
Lots of other efficiencies to look at. Tons of them are directly bad for the patient (capturing more of the surplus is an efficiency that businesses generally go hard at).
Ultimately, I think the issue is when people making decisions are able to treat the impact as an abstraction.
A structure to run business efficiently using practiced methods is always a good thing. However from what little I have understood, the goal of Private Equity is to maximize the dollar value on their investment. Somehow they have settled with the playbook that running a business even profitably isn't the best idea. Instead its much more profitable to take over the struggling business at good price, squeeze everything possible from the assets (thats where PE seem to be investing their expertise unfortunately) over duration of time. Update the books in a manner that it saves money on taxes and carry forwards the loss, making money in the process.
My favorite is to sell the building(s) to their private real estate company and lease back. Then IPO the company and keep the rent coming on a 25 year lease.
>> Maybe they find a buyer in a doctor, maybe they don't, but PE provides them an exit that keeps the practice operating in the community.
If the practice is to continue, there must still be practitioners working there. Id prefer they buy out the one retiring, but the retiree can sell to whoever they want.
As an owner of a medical clinic, there's an unbelievable difference between founder and inheritance.
One is ambitious, the other is a nepo baby.
This is ridiculous. Most clinicians prefer to be employees rather than business owners.
> Many people don't really run businesses efficiently.
In many cases that's a good thing, depending on what we mean by efficient. Lots of people run businesses in ways that make less money than they could, and often that's good.
> I don't know how these tradeoffs interact with patient care, but I wouldn't inherently expect PE to be worse at this than any other operating model.
Doesn't the evidence suggest it is indeed often worse?
> and lowering prices in the long run.
My sweet summer child...
Why do you need to sell a private practice? There’s no brand to sell, it’s just you and that will be gone.
PE is scourge in this space. They’ve probably taken over every dental office already and now they push unnecessary procedures and whatever your insurance will bear just because.
They sell because it’s their retirement nest egg.
Most private practices are small groups, not individuals. It absolutely sucks to have to find a new doctor who’s a good fit for you, when you’ve been seeing the same person for years or even decades. Usually when your doctor retires you rely on them to make a recommendation for a replacement. Usually that’s another partner in their same practice. At the very least, you (historically) expect them to sell the practice to someone they think is a worthy successor. Patients are fairly sticky.
And many of these PE sales require the selling partner to stay on for at least a year or two to ease the patients through the transition and so the patients get used to the changes before the doctor actually retires. That way, sticking around after the doctor retires doesn’t feel like such an upheaval.
>At the very least, you (historically) expect them to sell the practice to someone they think is a worthy successor.
PE isn’t that.
Yes, obviously. But historically that was the case, so it’s what patients mostly expect. Hence the loyalty after the sale, and the value to PE.
It is a brand and a book of customers someone has built up with surprising stickiness.
If there is truly nothing as you say, there is nothing for PE to buy, and no problem. If there is nothing to sell of value, what stops new dentists from seamlessly opening an office?
Maybe in your neck of the woods vets operate out of the trunk of their cars, but all the ones I've ever engaged had offices, expensive medical equipment, an office building, and trained staff.
> Can someone steelman private equity, please?
Step back and look at what it fundamentally is.
Person A has a business they want to sell.
Person B has a pile of money and thinks that that business is (or can be) a good investment.
That's it.
So, what happens if person A is prohibited from selling their business? Are they forced to keep working because they don't have enough other savings to retire on? Do they shut the business down in order to retire? Something else?
.
Calls to ban private equity are attempts to play "shoot the messenger".
The business itself need not be a sellable thing.
Sell the assets maybe, potentially to somebody who wants to use them to run the same kind of business in the same kind of location with the same employees.
It's hostile to the consumer to call it the same business. A name change gives them the opportunity to decide for themselves whether the new owner is worth supporting. It's similarly hostile to the employees to assume that their loyalties can be bought and sold. Let the new owner of the assets re-hire them for the same position in the same location if he wants to, but lets not have them be for sale.
I think that last point is opposite; it’s seen as heartless when the new owner of a business goes through rehiring existing employees instead of assuring them they still have a job.
Isn't offering them a job that's equivalent to their old one indistinguishable from assuring them that they still have a job? No need to make people reinterview, but at least give them the option to turn down the offer.
Maybe I'm making too big of a deal out of semantics, but every time somebody buys me it makes me angry.
I don't think it's equivalent because it's paperwork they now have to think about, they're wondering if it's wiping away old employment promises or systems, did everyone get one of these offers, etc.
Definitely see how some would prefer the job reconsidered, though. There's no system that makes everyone happy, including to never sell a business.
These things are good to think about; appreciate it.
May be categorizing the different private equities can be helpful here. A PE interested and invested for growth is always the best outcome. A PE only looking to salvage and squeeze is that gives the bad branding to PE.
This is what we do. One portfolio company has a product on old tech. We bring in a product team, a CTO, internal tech teams. Help shape a roadmap to tackle the most egregious tech and product debt so teams can move faster. Fix non-existent or outdated pricing strategy that has not evolved with the industry. Fix, grow, or evolve GTM to reach new customers. Help bring fresh leadership resources in when needed.
Industry is typically "boring" and systems are valuable, but aging. We invest, modernize, and try to grow new rev streams, new customers. Portfolio is SaaS focused (can't speak for those that invest in real estate and healthcare).
The employees of the PE also co-invest so everyone is aligned to help the portfolio companies grow and exit. This is a multiyear process.
I'm going to side-track a bit, but since I'm being courted by PE I thought I'd ask.
>> The employees of the PE also co-invest
Is this voluntary, or mandatory?
I ask because I've seen clauses along the lines of "75% of bonuses are paid in shares, not available for sale for 5 years."
Using bonus money to buy shares props up the share price, but delays the employee actually seeing the bonus for 5 years. Seems pretty win-lose to me, and kinda puts me off.
Is this a standard practice you mean by co-invest?
(As an aside, I'm not a fan of buying shares where I work, that's not a good portfolio-diversification model. If the business goes under it's not good to lose both your job, and investments, on the same day.)
Differs by company. Best thing you can do: check CalPers (CA pension: https://www.calpers.ca.gov/investments/about-investment-offi...) listing of investments for your PE's internal rate of return and historical performance for some funds.
There is carry and co-invest. Carry is a grant (like options). Co-invest is additional funds that you commit for capital calls when the fund invests. My comp is base + cash bonus (1.#x base) + carry (~2/3 of my base every year for 10 years).
Yes, locked away until some distribution event. Bonus is cash (YMMV), but if you don't already have the capital for a capital call, you're right that your bonus effectively ends up in the fund to meet capital call requirements at some point.
Co-invest is "strongly recommended at the amount specified". Legally, they cannot compel you to, but basically the way it is worded...
Should you co-invest? Look at CalPers for realistic rate of returns. Look at the PE portfolio; do you think it holds? Ask them to walk you through a case study of their timeline with a successful portfolio co. CalPers is not playing around. Some funds will 3x, 4x over the lifetime (historical performance not indicative of future perf). You pay capital gains tax on that earning.
Best case: you already have the cash to cover the co-invest capital calls. Worst case: you are borrowing money or using your bonus to plow more into the portfolio.
Thanks
Naming couple companies that you acquired for whom you changed the trajectory would be a lot stronger signal without revealing your identity.
On side note, its rare to see anyone fixing the old tech, its hard to fix, needs a different kind of talent thats hard to hire for the PE money. The folks who can understand some one else's decade old code and run their imagination through all the possible assumptions or trade off that might have been made in code/system are rare to find.
Finding new customers, finding more things to sell, finding synergies with other items in your portfolio, increasing the price for existing products are more realistic.
We have portfolio level CTOs that specialize in this playbook. Fixing the tech means many things. Many companies don't even have CI (forget CD). Some have really broken processes and handoffs between teams. And yes, some are running COBOL backends.
Sorry, naming a portfolio company would reveal the PE.
It basically comes down to interest rates right? If interest rates are low, the discounted-cash-flows analysis will favor maximizing long-run profitability. If interest rates are high, you can do better by squeezing the business in the short term and placing the money you obtained into some sort of high-yield, low-risk investment vehicle.
The positive argument about PE adding value is around efficiency of processes and scale. Interest rates can make a difference however in reality I doubt that it effects the outcome in most cases. Companies have already invested in staff with certain type of expertise and they are unlikely to change their plans or rehire based on the interest rates in short run.
It's not always "efficiency".
My PE is SaaS heavy portfolio. Pricing strategy, GTM, product roadmap; companies have rev, good moat, good customer base. But clear opportunity to grow rev.
Many companies are held by original founders. Leadership teams in eng and product have been the same for a decade+; lacking exposure to how the industry is shifting. AI, for example, has slow adoption in some cases.
When interest rates are low, it's most profitable to invest in extremely high risk, extremely high reward unicorn startups. That makes way more money on average than any long-run profitability. In fact, long-run profitability is basically never the most efficient use of money regardless of market conditions.
Why does everything have to be obsessed with growth? Especially with practically every (first world, at least) country having a birth rate well below replacement.
Not all businesses are obsessed with growth. Many mature businesses are managed for value rather than growth and focus on returning profits to shareholders through dividends or stock buybacks.
Because everyone promised themselves a lot of benefits in old age that they want someone else to provide them.
Except they always strip mine the business. Cut the quality and push unnecessary shit. But, hey, you can fill out your forms on an iPad instead of pen and paper. Very cool.
> So, what happens if person A is prohibited from selling their business?
I actually made that thought experiment. Disallow selling businesses. Disallow selling shares. Disallow stock market. Disallow mergers. The only way to acquire a business is to found it or to inherit it. The only way to quit a business is to shut it all down, with all assets liquidated, all liabilities settled, and all contracts terminated.
The main downside is that it's harder for to make money. Otherwise... I only see positives. And no, it wouldn't kill innovation. The investors would just have to invest the old fashioned way - by founding companies or expanding their existing businesses. As for job security, we already don't have it in the current system.
That's such an incredibly shortsighted view of the downsides.
In your model, the only possible business owners would be those with major capital resources to begin with, encouraging the spread of existing businesses into a sprawl: Walmart is now your doctor, pharmacist, and pharma manufacturer. Nobody would start a small business because they'd have to carry all liability, any new ideas are limited to spread at a glacially slow pace, because companies can't be aquired or acqui-hired, but can instead only scale on their own revenues.
It's worse than that. When the owner retires, all staff lose their jobs. That's a fairly big bummer.
I'm currently part of a "small" business/factory (around 50 employees). The owner is nearing retirement. Are all 50 of us gonna hit the streets tomorrow? Should our customers, many longstanding over 20 years get their contracts terminated? Do they get any warning? Can they easily switch to other suppliers? Is our offering somewhat unique?
Frankly, I think the thought-experiment is very incomplete if you can't see major downsides.
Recently, the owner of the factory my grandfather worked for the last 30 years has retired and sold their business, as a single package, fully operational, with employees and pending orders. It was still shut down and all employees were let go without any severance. From what I know, this is the norm for retirement sales, not the exception.
In this thought experiment, the result would be very similar to what happened, except with less wealth concentration, and with fewer Boeing-McDonnell Douglas mergers that ruin good companies in pursuit of short term profits (because short term profits are harder to realize by design).
Lost jobs are also a lot less of a problem in countries with functioning safety net.
> In your model, the only possible business owners would be those with major capital resources to begin with
Or you get a loan. Or you get an investor on board. How is that different from the current situation?
> encouraging the spread of existing businesses into a sprawl: Walmart is now your doctor, pharmacist, and pharma manufacturer.
It's happening anyway. My last vaccination was done 100% at Walmart.
> Nobody would start a small business because they'd have to carry all liability
How is that different from the current situation?
> any new ideas are limited to spread at a glacially slow pace, because companies can't be aquired or acqui-hired
Acquisitions are a relatively recent inventions, acqui-hires even more so. People have been doing massive inventions at rapid pace for like 200 years before being bought out by FAANG was a viable business strategy.
> but can instead only scale on their own revenues.
And loans. Don't forget loans.
Private property is theft!
Disallow eyeglasses. Abolish money.
Any other good ideas?
You can sell all your offices, desks, printers, laptops, machinery, land, inventory, intellectual property, and anything else you want to your heart's content, to anyone you want, for any price you want. The only thing you can't sell is the legal entity itself.
OK. Your job is from now is dung transport. Because you inherited it, whether you like it or not.
Sure, you are allowed to start a new business. But where would you get money? You can't sell your dung transport business, and you don't have enough money of your own to just start a new business from scratch.
It's crazy what some people will come up with just to have something to criticize instead of the actual contents of the thing they're replying to. Nobody said continuing an inherited business is mandatory, least of all me.
I am all for serious discussion about shortcomings of my idea. But this isn't it.
No, I'm just describing the dystopia that will be the result of your idea.
You basically want to reinvent the feudalism with its nobility and peasants.
The dystopia you're describing has nothing in common whatsoever with my idea. Now please stop misrepresenting my words.
Yes. It absolutely does, because your system heavily favors inherited capital that HAS to stay within the family. It also heavily discourages capital mobility, risk-taking, and entrepreneurship.
Say "hello" to dynastic marriages, noble lineages, etc. The _best_ case is the system of medieval guilds.
They can't sell "Xirdus's Dung Service", but they can still sell their assets like the dung cart, shovel, dung pit, etc.
Sell it to whom? Who is going to be buying the assets? And what about employees?
(never mind that "selling assets" is just a workaround for "selling business")
It makes it impossible to share part of a business, including stocks. It also massively increases the friction of takeover by killing all employee, vendor, and client contracts, so the buyer cannot benefit from any of these without arranging for it separately. It also invalidates the strategy of leveraged buyout. But yes, it can be done in principle. Which is especially important in the "who will take over the local dentist's office" scenario - this system would heavily favor small business owners who want to do the business personally over holding corporations and PE funds.
Nope. It will result in a large company moving in and buying all the assets (still allowed), and forcing the employees to work for less money. Because why not?
It already does literally just that. You're basically saying nothing would change.
Yes. So your system not only fails to solve the issue in question, but also makes everything worse.
I live in a small midwest market, and all the landscaping companies are locally owned and awful.
PE bought two of them, combined them into one, and now they, at about the same cost, do what they say they are going to do, answer the phone, hire competent people, and do a good job.
Likewise, PE has bought up most of the local plumbing and HVAC, and that's been a bit of a bummer, and gotten more expensive, but if you need someone right now, they are there (and answer the phone, etc), as opposed to the local concern who may be on vacation and can get back to you in 2 weeks.
There are some really good local small businesses/trades people, but like the 1950s, in a lot of aspects they are overly romanticized.
My controversial opinion: chains/large businesses are more convenient, cheaper, better (and more consistent) service, and the big one: you can complain up the chain when a local branch/franchise fucks up vs dealing with a sole proprietor. There's plenty of small businesses I do value (thrift stores, bodegas, etc), but for services? The choice is obvious.
Many medical practices (and other businesses) are poorly operated and administered. I think of my dentist: terrible website (even by 1995 standards), awful at follow up, weird insurance coverage (since she doesn't have time to follow up with new plans it seems) and almost no appointment reminders. There are obvious things to do that could drive business for her.
It makes sense to me that someone could come in and say "hey, let me run the business + finance side of the house while you practice medicine" and at least on paper I can see a real world where that works out for everybody.
Of course, soon you end up with dentists pushing unnecessary procedures and more, so it doesn't always works out that way.
In human med, it's a pretty standard practice to offer a management company 10% ownership for them to handle the business shit.
I'm not arguing with you; I'm legitimately curious what happened to that model and why PE has swooped in as more attractive to doctors. Maybe it's the payout and/or the fact that they don't have to handle business owner decisions at _all_ anymore?
Those are two different things, typically. A business manager taking 10% means they're still running the practice day to day and seeing patients. PE will come in to buy the entire practice from the doctor/dentist/vet that owns the practice, buying it from them entirely.
Improving efficiency and optimizing profit are two overlapping segments on the road to crap. It’s not easy to stop the car once you put the bean counters in the driver's seat. If a company is able to do so, it’s usually because there’s a strong leader or culture to resist the slide. But otherwise it’s a thousand small decisions that all seem reasonable on their own.
written by someone who worked in private equity for 20 years:
https://www.bloomberg.com/news/articles/2025-06-06/private-e...
https://archive.is/27tJr
The upside is to the folks who sold the businesses they owned.
Should they be outlawed from selling to certain classes of investor? Which?
That's easily circumvented with management service organizations. More broadly, it's a stupid idea, especially beyond a few areas like law. If you own a golf course, you shouldn't have to sell only to a golfer.
It should be more about making certain levels of consolidation and deep erosion of local ownership illegal.
We have run this country on an assumption that we must give businesses a high amount of freedom. An argument can be made that businesses have been given too much freedom in our system. We’ve allowed Amazon and Ticketmaster and Walmart to exist and they shouldn’t exist in their present form.
Healthcare practices that provide necessary care shouldn’t even really be allowed to be for-profit entities if you ask me. The incentives become too perverse as a result.
>Healthcare practices that provide necessary care shouldn’t even really be allowed to be for-profit entities if you ask me. The incentives become too perverse as a result.
Why stop at healthcare? Why not other essentials of life, like food or toilet paper?
You’re absolutely right. For example, we’ve seen the negative impacts from excessive agricultural consolidation.
Many of them already lack profitability without subsidy.
Many agricultural products all pass through the same mega-sized processors and entities. Driscoll’s, Tyson, etc.
We’ve already made things like water and sanitation non-profit/government owned so the idea of doing more of that for food and essentials isn’t that crazy.
>You’re absolutely right. For example, we’ve seen the negative impacts from excessive agricultural consolidation.
Like what?
>Many of them already lack profitability without subsidy.
That doesn't mean anything without context. How are the non-PE farms doing?
>We’ve already made things like water and sanitation non-profit/government owned so the idea of doing more of that for food and essentials isn’t that crazy.
sanitation: please see https://en.wikipedia.org/wiki/Waste_Management,_Inc.
water, but not power, or natural gas?
Google “taylor farms cyclospora” or “tyson beef prices shortage” for an example of the problems of highly consolidated processing.
I wasn’t talking about private equity farms versus not, I’m generally talking about industry consolidation.
Sanitation includes sewers which are typically municipal.
Power and natural gas are legal monopolies with strict rules on pricing.
There are also public electric utilities such as Cleveland Public Power.
>Google “taylor farms cyclospora” or “tyson beef prices shortage” for an example of the problems of highly consolidated processing.
I already addressed cyclospora in another comment, but how is consolidation or tyson beef supposed to be blamed for the shortage? Media reports blamed the shortage on droughts and/or screw worms, hardly a tyson issue. Not to mention tyson hasn't exactly been raking it in during all this shortage:
>Yet despite record beef prices, the “Big Processors”, as Mr Trump calls them, are not thriving. Shares in Tyson, the largest, have tumbled by 40% since 2021—and by 7% since it cut its earnings forecast on September 3rd. It now expects its beef business, which brings in 40% of revenue, to lose as much as $775m this year. Trouble in the division has dragged the company’s overall operating margin down from 8.5% in 2021 to 2.6%. JBS, which is Brazilian, has said its North American business lost $427m in the first half of 2026.
https://www.economist.com/business/2026/09/10/beef-has-never...
>Like what?
https://www.npr.org/2026/07/09/nx-s1-5885008/department-of-j...
When consolidation happens collusion always follows, along with higher prices, and fines that are a tiny part of the total gain.
> Like what?
https://en.wikipedia.org/wiki/List_of_foodborne_illness_outb...
If a product isn't nationally consolidated, it can't have a national foodborne illness outbreak.
>it can't have a national foodborne illness outbreak.
Which is bad for PR and great for clicks, but it's entirely unclear whether we're better off on average. What about all the years where we didn't have a mass outbreak? Would it be better if every state/county had separate food supply chains, and they had the same rate of illness, but it's more randomly dispersed so it doesn't make it to national TV? Think the difference between airplane crash (maybe one incident per year, hundreds of deaths per incident) vs car crashes (40k/year)
Hmm yes. Two deaths, over a thousand hospitalizations, and not a single state in the US with zero cases, but those are just things that are real and happened which means they do not take into account things that didn’t happen or things you could imagine in your mind.
If we simply envision a nation without diarrhea have we not eradicated it in our hearts, where it matters mos
Absolutely hilarious that you think a small farm has any better hygiene than a large farm.
Nobody said that, nor is it relevant. The point is if the food supply is more diversified, we are less exposed to single points of failure.
It’s absolutely relevant because a diversified food supply would result in smaller farms, other things held equal.
You have fewer single points of failure, but more opportunities for failure and a tougher time addressing it via inspection, and less capital available to implement compliance.
Hippocratic oath?
> Healthcare practices that provide necessary care shouldn’t even really be allowed to be for-profit entities if you ask me. The incentives become too perverse as a result.
You don't need to disallow them for necessary care to be provided. You can just have public healthcare programs. That can look like publicly-owned hospitals or regulation that private hospitals must provide certain services under certain conditions if they want to keep operating. Private healthcare then works to provide more than that basic service that fulfills necessary care, to the benefit of the public that can afford more.
Should Doctors have a legally enforced max pay? Same with the web devs, max $150K, anything else is just profit driven bullshit right?
No, not-for-profit entities pay market rate salaries. This is already a well-established system.
Can you define profit? Would a doctor be allowed to earn more than $200 per hour? $300 per hour? $400 per hour? Is a doctor allowed to be paid per procedure or time?
How much would you want to sacrifice your 20s and early 30s? How much would you need to work in the middle of nowhere where your kids won’t have the best opportunities?
I updated my comment, I mean a for-profit entity versus non-profit, which the IRS already defines.
Not-for-profit entities can still pay market rate wages to employees and owners.
"We’ve allowed Amazon and Ticketmaster and Walmart to exist and they shouldn’t exist in their present form."
Do you realize that when Walmart moves into a community, prices charged for everyday things overall drop significantly, both at Walmart and their competition, which means that poor families are able to buy more with every dollar.
What do you have against poor people?
And the employer with the largest amount of employees using SNAP benefits is…
Walmart is subsidized by the government to the tune of $2,000 per employee due to their low wages: https://rmfu.org/taxpayer-dollars-subsidize-wal-mart/ [1]
They then get to skim the other side of those subsidies, too, since they sell so many items that qualify for SNAP and WIC, as well as being one of the largest if not the largest prescription supplier in the country.
(25% of Walmart employees qualify for Medicaid https://mafainsurance.com/how-many-walmart-employees-are-on-...)
So their employees on SNAP and Medicaid turn right around and spend that money inside Walmart.
> both at Walmart and their competition
What competition? When Walmart comes to town, the competition closes.
[1] Probably a lot higher since this article is about 20 years old
>And the employer with the largest amount of employees using SNAP benefits is…
>Walmart is subsidized by the government to the tune of $2,000 per employee due to their low wages: https://rmfu.org/taxpayer-dollars-subsidize-wal-mart/ [1]
And what happens if walmart closed up shop? Do those employees magically evaporate and not need benefits? Why are we putting the blame on the employee's best employment option?
>What competition? When Walmart comes to town, the competition closes.
Why? Because they're sending goon squads to trash all the existing businesses? If walmart replacing "the competition" because they're offering lower prices and consumers are switching, why is this bad?
As another poster stated, Walmart and other large companies are already violating federal law.
https://en.wikipedia.org/wiki/Robinson%E2%80%93Patman_Act
>And what happens if walmart closed up shop
Everything explodes and people die in the streets.... No, other businesses move in to fill the economic needs because there is a profit to be made and provide jobs in doing so.
>Because they're sending goon squads to trash
You have a horrifically simplistic world view and can't imagine where goon squads actually are.
There was an article around 2 decades ago on how Walmart manipulates prices at an unimaginable scale via their suppliers. If you supply Walmart they automatically become your biggest customer. Walmart knows this, and has you by the proverbial balls. If you don't meet their demands they drop you in a heartbeat which is a death sentence for any business who's capitalization is not in the 10s of billions. There was a saying in this article I can no longer find but to summarize.
"To compete against Walmart is to invite death. To work with Walmart is to embrace it".
Simply put they are so large they have near monopoly power over a good chunk of manufacturing.
>There was an article around 2 decades ago on how Walmart manipulates prices at an unimaginable scale via their suppliers. If you supply Walmart they automatically become your biggest customer. Walmart knows this, and has you by the proverbial balls. If you don't meet their demands they drop you in a heartbeat which is a death sentence for any business who's capitalization is not in the 10s of billions. There was a saying in this article I can no longer find but to summarize.
So what's the complaint here, that walmart negotiates aggressively, passing those better prices to buyers, and that's... bad? Given we're in a thread complaining about healthcare, should walmart do the opposite, instead using the insurance company strategy of encouraging their suppliers to pad their margins, so they can offer "modest" (in % terms, high in absolute terms) markups?
Around the turn of the century, my grandmother lamented how Wal-Mart had ruined the shopping experience in her small town. When the local hardware store and other stores closed, she ended up only with Wal-Mart where she said the employees didn't know anything and couldn't really help you. Anecdotal, I know, but this is a common refrain throughout the country, that by using their monopoly power they're able to undercut local businesses until they go bankrupt. The assumption is that we're left with is a net win due to lower prices for the consumer, but let me tell you another story.
An older relative had a very successful small conglomerate of businesses. One of them manufactured something costing close to $100 that Wal-Mart was interested in selling in its stores. After extensive negotiations, my relative told the Wal-Mart VP no because Wal-Mart was pressuring them to use cheaper parts that would make the product wear out more quickly. Wal-Mart didn't care because they'd be able to make the sales and then consumers would come back to buy again sooner, but my relative felt that was dishonorable. The VP said it was the first time a potential supplier ever walked away from him. They are notorious for their abuse of suppliers, and the ethical concerns are often very palpable. You might suggest this is simply market forces playing out, but we decided long ago that monopoly power often leads to a market we don't want to see in this country.
We the people get to decide what kind of society we want to live in. Their monopoly power means that in so many of the rural areas where they are, they might be one of the few viable employers. When people are poor, it's not so easy to just tell them to relocate to another geographical area, so it's easier for the entities benefiting from that to maintain the status quo at the expense of others. If we decide that for Wal-Mart to stay in business in the USA they need to pay employees more, with health insurance, then so be it. If they can't, then they can just go out of business and be replaced by a company that is able to navigate that balance better, offering pretty low prices while paying a bit more in wages.
Way to miss the point.
VC is bad because of the concentration of power, same reason Walmart is.
Walmart is able to offer lower prices because it does not pay its employees enough. The people being hurt is the society at large that has to allocate taxes towards SNAP and other social benefits so that Walmart can continue to underpay people. Those resources could go to other programs. That is why Walmart is bad.
Walmart is paying what people are willing to work for. The "greeter" standing at the door is not creating $25 an hour in economic value. The biggest issue is we as a society have overextended SNAP and social benefits, trying to equalize outcomes, rather than recognize that entitlements should be a last resort and a safety net against things like starvation. Someone should not weigh 275 on SNAP.
> Someone should not weigh 275 on SNAP.
Does SNAP need a better system to provide healthy food? yes.
Should employers be required to provide sufficient earnings such that employees do not require SNAP? Also, yes.
Is blaming employees who are on SNAP due to Walmart overhiring and cutting hours of at the threshold where the earnings would cross into full time with federally regulated benefits in order to pass the cost of operations to the public acceptable via absurd reductive reasoning a bald case of blaming the victims? Yes.
I'm not sure whether you are pretending that Walmart's practices are acceptable, due to a willful disregard for the complexity of the larger systemic failures that permit corporate abuse, or due to simple ignorance.
I'm not sure which looks worse, but neither makes you seem compassionate. Though the fat shaming does make you look like an ass.
>Does SNAP need a better system to provide healthy food? yes.
Yes, SNAP absolutely should not enable unhealthy consumption, especially because the majority of those diseases of affluence just hit taxpayers again via Medicaid spending.
>Should employers be required to provide sufficient earnings such that employees do not require SNAP? Also, yes.
The thrifty food plan from the USDA puts weekly food costs at about $75 for a man and about $60 for a woman. Walmart's company wide minimum pay is $14 per hour. Minus a bit for taxes, add a bit back for EITC/other tax credits, and you are covering a week of food in less than 8 hours of work. They have sufficient earnings. They choose to spend the earnings elsewhere because taxpayers are subsidizing their food.
>Is blaming employees who are on SNAP due to Walmart overhiring and cutting hours of at the threshold where the earnings would cross into full time with federally regulated benefits in order to pass the cost of operations to the public acceptable via absurd reductive reasoning a bald case of blaming the victims? Yes.
Walmart is under no obligation to hire them as full time employees. They are free to accept a different job, negotiate a contract for full time employment, etc. They aren't a "victim" because the job they accepted doesn't meet every one of your standards. They are assumably mentally competent adults who made their own decisions and are free to make different decisions at any time.
>I'm not sure whether you are pretending that Walmart's practices are acceptable, due to a willful disregard for the complexity of the larger systemic failures that permit corporate abuse, or due to simple ignorance.
Walmart's practices are acceptable. It's incredible to think that a job offering double the federal minimum wage (or more), in a reasonably safe, air conditioned environment, along with retirement matching, employee discounts, and even paid tuition/books is somehow corporate abuse.
How much do you think stocking a shelf is worth?
>I'm not sure which looks worse, but neither makes you seem compassionate. Though the fat shaming does make you look like an ass.
Oh no, will they have to eat their hurt feelings?
It’s wild to blame Walmart for government subsidies when it’s the government not Walmart who decides who gets benefits.
Is Walmart to blame they hired a single mother of 3 for $20/hr? Would this women be better off if Walmart never existed and she was unemployed?
And then turn around and blame Walmart for selling essential food items for low prices because SNAP can be used to pay for them. Would you rather SNAP beneficiaries pay more for groceries so they have less to eat?
Your argument would be a sound one if corporations weren’t granted unlimited financial power in making political donations and campaign ads.
67% of Americans support raising the federal minimum wage to $15/hour. Why hasn’t it happened yet if it’s so popular?
80%+ of Americans support voter ID laws.
https://news.gallup.com/poll/652523/americans-endorse-early-...
Why hasn’t it happened yet at the Federal level if it’s so popular?
Must be the corporations!
> Would this women be better off if Walmart never existed and she was unemployed?
If you think about this a bit, I'll bet you can spot the flaw in your own argument.
> What do you have against poor people?
They're probably thinking the same thing as those darn busybodies who outlawed child labor.
Prices may drop, but wages drop even further and the compound effect of local government subsidies and loses when competition dies means everyone loses because everything in the local area dies.
> ["poor"] families are able to buy more with every dollar.
https://en.wikipedia.org/wiki/Boots_theory
> We’ve allowed Amazon and Ticketmaster and Walmart to exist and they shouldn’t exist in their present form.
Unpopular knowledge is that these businesses are generally illegal in their current forms under existing US law. The relevant laws are still in effect, they are just rarely enforced. The scale of the lawbreaking runs to the trillions of dollars annually, and it directly harms every US consumer.
The illegal conduct is so pervasive that even explaining the existing federal law makes one sound ridiculous, because companies have been explicitly advertising illegal behavior for decades. Because there is no sanction.
One of my faves is the notion that $BIG_RETAILER can buy in bulk and get better pricing, which they pass on to the consumer. You may have seen a company advertise something like this. It sounds like smart business! There is an active federal law[1] that explicitly prohibits this arrangement.
Lack of enforcement of that law is a factor in the disappearance of the American "high street" and the demise of many small retailers.
My #1 call for reform in the US is to simply start enforcing laws, even if doing so makes rich people/companies uncomfortable.
1 - https://en.wikipedia.org/wiki/Robinson–Patman_Act
>1 - https://en.wikipedia.org/wiki/Robinson–Patman_Act
I'm not a lawyer, but a cursory search shows there's a bunch of carveouts. It's not a straightforward ban on all favorable pricing for big players. For instance, if there's an actual cost justification (eg. bigger buyer = more efficient shipping) that's allowed. Same with offering volume discounts that are available to all buyers. That's not to say everything's above board, but it's not as simple as "wow big box stores get better pricing than mom and pop shops, so there must be federal laws being violated".
I hesitated before linking that specific statute because I suspected someone would parse it as you have. Not a bad thing, just distracts from the larger point that the US government currently has tools (of which Robinson-Patman is only one) to prevent & reverse the extreme consolidation that harms every American.
In the context of this article -- we may not need a new ban specific to preventing private equity from owning medical practices. We could simply enforce existing laws around e.g. market consolidation, consumer harm, etc.
Adding a new law to also be ignored seems silly.
If the business is a hospital?
Yes.
> If the business is a hospital?
I'd expand that to any type of business that has effectively inelastic demand through the ability to hold people emotionally hostage.
So, for example, in addition to hospitals also include veterinarians, funeral services, family planning, etc.
Soulless PE vultures should be barred from all of this.
Funeral services in the US got aggressively consolidated already, decades ago. Look up SCI - owns over 1,500 funeral homes and 400 cemeteries.
That’s a good expansion of the premise, I’d support your idea wholeheartedly. Let PE raid chain restaurants and toy stores, not essential services where they add no value and only extract wealth.
Pe is good when it is taking big risks on something new. That is hard so that is not what most pe does. Most pe is just figuring out ways to insert artificial inefficiencies into the system to syphon money off. Ie tax arbitrage, patent/copyright abuse, geographic or other market power abuse, etc. Basically find a way to move money around the system with no net benefit to society while having a bunch of it fall in your pocket is 90% of what pe does and its poison. The other 10% is vitally important to continued growth and prosperity and its often hard to tell which is happening until its over.
PE staff are more intelligent and more shrewd than the people running the businesses they buy. Being a good doctor doesn't make you a good businessman.
I'm not a huge fan of PE but the point of economics to deliver cheap and quality goods to consumers not keep people in a job.
In healthcare in US in particular I think the main thing that capital should be (if regulators allow) boutique / specialists that e.g. are the best in the biz at doing MRI scans, in some states my understanding is that it's literally illegal to start a business aiming to make one small part of the process better.
What does it mean in this context to be more intelligent and shrewd than the existing owners? Delivering better profit margins?
> What does it mean in this context to be more intelligent and shrewd than the existing owners?
Streamlining everything. Sometimes this is done in a bad faith way, but it’s often not difficult to do it in a good faith way.
Some simple examples:
- right-sizing staff (can be reducing, increasing, or changing roles)
- improving marketing (e.g., simple things like customer reactivation, packaging the product/service better, or just plain, ol’ getting the word out better via stuff like before/after pics or success stories)
- improving operations (e.g., better organization, better processes, better communication, better training, better logistics, etc.)
> Delivering better profit margins?
Improved profit margins are a byproduct of the things listed above.
You're putting the cart in front of the horse. Their incentive and their job isn't about 'streamlining' anything, let alone in a good-faith way, and that just so happens to deliver some extra cash on the side in a pleasant surprise. Their sole purpose is the profit, and they will try absolutely anything to get it. Sometimes it may accidentally produce good outcomes, but in general there's no rule or incentive to ensure that happens. They can do anything, and if there's anything to go off of, every entity I see desperately chase profit over all turns utterly evil. Being evil just deepens your toolbox for getting the only thing that matters in the world - money - so of course they tend to win out over anyone who still actually cares about the underlying business or customers.
In theory this is true, but in practice I am skeptical that it's generally possible to do this with generic "business" intelligence that is not accompanied by specific understanding of and genuine care for the actual substance of what the business does. That is, no matter how good you are at "business", you're not going to have a good hamburger stand unless you care about making good hamburgers. It's true that the importance of this varies from one business to another, but I don't see any particular tendency for PE to gravitate towards industries where it matters less. (Medicine is an example of an area where it would matter most.)
There's more than one form of intelligence, and being good at fixing people doesn't necessarily correlate with managing a business. As silly as it sounds, watching Shark Tank will really demonstrate that someone can have a legitimately great idea, but if they aren't business minded, it wont matter.
I mean, losing money is not sustainable. If a doctor or physician group isn't business savvy and can't earn a profit they will eventually go under. That's not good for the patient.
OK, but making money, though it may be less than a PE company would, is. Where do most doctor's offices fall?
Most doctors make good money, but most who are good doctors could make much more.
Simple example pitch that many general practitioners might consider using (based on local laws, of course):
“Insurance covers C, Y, and Z. I can offer these additional services for A, B, and C that are not covered by insurance.”
Where I live, you get a lot of this via “concierge doctors”, but that system can go far beyond basic concierge service, and people are willing to pay for top quality care.
What shows that they are more intelligent? They might be better at extracting value from enterprise, but is that generally “more intelligent?”
Well they're considerably better paid and in a business that allows economies of scale.
It's a steelman argument to be clear I'm not entirely convinced by it.
>but is that generally “more intelligent?”
Contrary to popular belief, being intelligent in one thing does correlate with being intelligent at other things[1]. For doctors, the comparison with private equity (MBAs?) might be close, but it's not hard to imagine the targets of other PE rollups have owners that are more average in intelligence, think plumbing or roofing.
[1] https://en.wikipedia.org/wiki/G_factor_(psychometrics)
DISREGARD THIS, I CAN'T READ TODAY
> Contrary to popular belief, being intelligent in one thing does correlate with being intelligent at other things[1].
> [1] https://en.wikipedia.org/wiki/G_factor_(psychometrics)
Which section of that very long article are you claiming supports your assertion?
Here's a bit from the start of the "Concept" section:
>> In a famous research paper published in 1904,[8] English psychologist Charles Spearman observed that children's performance measures across seemingly unrelated school subjects were positively correlated. The consistent finding of universally positive correlation matrices of mental test results (or the "positive manifold"), despite large differences in tests' contents, has been described as "arguably the most replicated result in all psychology".[9]
That explicitly contradicts your assertion.
>being intelligent in one thing does correlate with being intelligent at other things
vs
>The consistent finding of universally positive correlation matrices of mental test results (or the "positive manifold"), despite large differences in tests' contents, has been described as "arguably the most replicated result in all psychology".[9]
How are they contradictory? Did the first part of my comment make you think there was a negation?
d'oh, yep
Remove “more intelligent” here and I’ll give you some benefit.
The problem with healthcare “economics” is that providing high quality care is likely not as profitable as middling care, or sub-standard care.
You say that economics is meant to deliver cheap quality goods, but in reality here economics for PE is value extraction and has nothing to do with consumer good at all - unless of course there’s more profit there. Most of the time, there isn’t.
That's really not true. Studies have shown that there's little correlation between care quality and profitability. In some cases non-profit health systems charge high prices and deliver terrible care quality. The reality is that most provider organizations are run by incompetent managers. People used to working in modern tech companies would be shocked to see the waste, inefficiency, and missed opportunities. PE acquisitions may cause some problems but the new managers do at least bring a basic level of discipline and operational competence that was often missing before.
Modern tech companies are not managed well at all in my experience! They’re rife with waste.
Management often makes terribly unprofitable decisions and often work to protect their slices of the pie rather than the org.
Tech companies are saved by their margins, their aura, and low interest rates.
Better examples might be grocery stores or other low margin businesses that require some fairly ruthless prioritization (at least that is what I’m to understand)
To your care / profitability argument: that is good news! However, I do believe that concern for profitability will always outweigh a care quality argument so there is a misalignment of incentives in that case. I would look to insurers to demonstrate this, generally, but can imagine a PE-owned hospital system might attempt similar measures.
Ideal outcome is a great manager that also cares and ends up paying doctors more and providing excellent care while driving down costs using better processes and negotiating with suppliers. But, uh… not sure how often the benevolent PE firm actually shows up historically.
Is Apple Inc run for consumer good or value extraction?
Apple is not a PE firm. They are a public consumer goods company with a ton of different business lines. Their duty is shareholder value and making good products that sell is one way to do that.
Value extraction is a short term play. It’s usable by most companies in a pinch, but normally only happens before their death or slow decay into zombie-dom. At least, that’s what my anecdata tells me.
Apple has, for most of its existence, been a distant second choice, because IBM and Microsoft captured the enterprise, which trickled down into consumer buying habits.
It survived, then thrived, by making its products so appealing that customers would buy them anyway.
So, effectively, both.
We know how to make MRI cheaper. Put it in a can. MRI suites are built with copper shielding in the walls, and the machines are really heavy, which creates huge capital costs. (Capex is a big problem for medicine.) There's an easy solution: you can just put an MRI machine in a standard tractor-trailer container and bring the patients in. Nothing has to be constructed or installed.
None of the private equity chains with the sans-serif fonts, simplified logos and trisyllabic names are doing this, though. It's bad marketing. Patients don't want to walk outside to an MRI machine in the parking lot. It feels sketchy. Never mind that they score just as well on the ACR image quality tests as the in-room machines. Who the hell knows what that is?
In reality, it's the county hospitals and big universities that use them! Places that have in-house physicists who can argue for what really makes sense in practice. A major problem with healthcare as a business is that the customer does not usually understand the product, but they still need to buy it, and there are time constraints.
> Patients don't want to walk outside to an MRI machine in the parking lot. It feels sketchy.
Seems like you could build a hallway around the trailer; if you do it right, nobody knows it's a trailer in the middle of the building. If you do it really well, you can still pull the trailer out.
Hard disagree about "more intelligent". They are playing a financial game using a combination of leverage and reptilian ruthlessness to EBITDA hack.
They buy one (or more) companies, often with only the slimmest understanding of what those companies do, slash opex by gutting the company with layoffs (yay EBITDA), maybe staple a few such companies together with leveraged buy-outs, then resell the whole bundle for more than they paid.
From experience, they don't give a single crap whether the resulting mess still functions. They care about selling the company for more than they bought it for. That prospect is only tenuously and at best accidentally related to whether the company still functions.
The private equity companies I've had to deal with were full of braindead MBA spreadsheet monkeys and used car salesmen. Their chief differentiator was that they worked 80 hours a week and were enthusiastic about laying people off without much deliberation.
Thinking private equity is "more intelligent" than business owners is like thinking house flippers are "more intelligent" than home owners. No. They know how to rip out carpet and replace it with laminate on the cheap. They know how to cut corners and hide it. They know buyers will over value a fresh veneer of paint. They don't give a shit about the long-term health or value of the house. They are not better stewards of houses. They specialize in short-term profit maximization and that is literally it.
> Can someone steelman private equity
PE attacks organizational sclerosis, can save companies that otherwise slowly deteriorate, reallocates resources faster, creates an unusually powerful form of corporate governance, Debt can impose useful discipline, can provide capabilities that smaller companies couldn't build themselves.
A society doesn't necessarily benefit from preserving every existing job. It benefits from creating increasingly productive jobs.
> increasingly productive jobs.
This needs to be defined a little bit better.
If I own a hospital that makes infinite money and every patient that comes to it dies the economy measures this is infinite productivity. This is contrived, but really matches some of what we see in real life.
This is why making a measurement a target can be horrifically destructive and contrary to the actual goal society wants.
The west doesn't seem to believe in the idea of social stability over increased profits which can lead to things like corporations being the social structure that is optimized for rather than the wellbeing of the individuals it contains. Left to run out of control the society can collapse.
> If I own a hospital that makes infinite money and every patient that comes to it dies the economy measures this is infinite productivity. This is contrived, but really matches some of what we see in real life.
You wouldn't have any business if all, or many, of your patients die.
The history of government regulations mostly only being made in response to people dieing seems to refute that. If what you claimed is true, those businesses killing people would have gone under, rather than continuing until there is enough public outcry to regulate it.
To be fair, in an emergency one does not usually get to choose the hospital they are taken to by the ambulance company.
It seems to me that oligarchies as a whole function a lot like PE's taking over a socially unstable polity.
The west has been an oligarchy for several decades at least, so it's not that people in the west don't believe in social stability, it's that they are living in the hollowed out shell of the former "company" where that doesn't exist. We need to optimize for the people's prosperity and well being.
> ... several decades at least .... We need to optimize for the people's prosperity and well being.
What statistics are you looking at that makes you draw the conclusion that people are WORSE off today than, say, 20, 30, 40, years ago?
Longevity decreases, cost of living increases on every metric, rampant inflation, ever increasing economic uncertainty, increases in mental health issues, increasingly unstable populism overturning long standing institutions.
There is also the effect where it doesn't matter if are or are not doing better by the numbers, it question is do they feel they are doing better. People act on how they feel, not on how they are.
Private Equity allows an owner to sell their income generating but slowly dieing company for its value today. The company will keep operating for 3-5 years and then rapidly shutdown.
This is valuable for business owners, because it gives them a way to get the value out of a failing business without having to ride it all the way into the ground.
It's valuable for consumers because it provides locations to shop for halloween supplies.
While not perhaps the best argument is the private equity provides liquidity for founders that want to exit. If you started business X, you’ve grown it for 20-40 years and you want to retire, selling is typically the answer. Let’s say the business makes $1m/yr after tax cash flow, PE might buy for $10m, besides PE there aren’t a bunch of likely buyers for your business (of course maybe there is a big competitor, and maybe you could sell it to an employee (but they probably don’t have the money and would need you to seller finance etc)). So for entrepreneurs with a successful small business (say $2-5m+ of ebitda) selling to private equity is the clearest path to a liquidity event for them.
The economist did a piece in defense of private equity a few months ago. Basically boils down to more efficient resource allocation across an entire economy, deep pools of capital to rapidly transform businesses into things people want to buy from.
Gift link: https://www.economist.com/podcasts/2026/02/19/a-love-letter-...
The thing is, we're now learning that efficient resource allocation in the short run is not necessarily what we want in the long run.
Small(er) businesses can be poorly run. In theory private equity takes knowledge already in practise in other locations and shares it with this new location, improving results. Downside of course is that they care a lot less about that specific location than the previous owners would have.
One specific practise I’d like to see banned is private equity buying companies with debt the company then assumes. It staggers me that it’s legal.
That's a silly suggestion. The lenders buying that debt know what they're getting into. Those are sophisticated investors. If lenders want to limit what borrowers are allowed to do then there's nothing stopping them from imposing debt covenants on the deal. No need for the government to ban anything.
> One specific practise I’d like to see banned is private equity buying companies with debt the company then assumes. It staggers me that it’s legal.
What alternative are you imagining?
That the buying company keeps the debt on their books instead of offloading it onto the company that they bought.
So form a shell buying company A and secure the debt of company A with the assets of the newly purchased company B? Congrats, you added about 5 minutes of paperwork.
How would that be an example of what I described?
If you are putting the debt on a shell company’s books, you aren’t putting debt on the buying companies books.
The buying company is the shell company.
Are you proposing that only an established company can buy another business with profits from their operations or something?
If I start a company with a loan and want to buy 3 HVAC companies in my area, is that allowed under your rule?
I’m arguing against the practice of leveraged buyouts. You aren’t describing all of the steps of a leveraged buyout. You are just describing a buyout. Buyouts are fine. Leveraged buyouts are what I think is not. I cannot be more clear or keep explaining until you go learn the difference since you aren’t understanding what I’m saying.
I’ve literally never seen that happen. what does always happen is cutting ‘non essentials’ that are essential until the company implodes.
I suspect there’s a survival bias at work here. The PE purchased companies that continued to thrive are ones you probably never even knew got bought out.
cites?
Hilton Hotels, Dell, Burger King, Dunkin Donuts? Google works if you use it.
Those are certainly some... examples. Not things I would hold up as a sign that PE is a good thing since all those businesses look like they are perpetually on the edge of collapse around my area. Dilapidated, mostly empty parking lots, poor service from understaffing. I think we would all be better off if those businesses died and left room for others to replace them.
Who’s preventing a competing coffee shop or burger restaurant from opening? If your area is such a prime business market, but these businesses aren’t capitalizing on it, one of your assumptions may be wrong.
The fact that they are still there in business, even if it is low and crappy business, will still hold onto some customers. And long established business has advantages that a new business can't buy. If there isn't enough traffic for two burger joints, it can become a standoff of both bleeding money until one of them fails, and the new business likely doesn't have the same credit line.
It does happen, but often the companies end up poisoning the local markets on their debt binge fueled way down.
I guess not everything is a Sears, K-Mart, LastPass, HCR/Carlyle, etc, etc. [https://www.congress.gov/119/meeting/house/118337/documents/...].
That is one of the core strategies in the private equity playbook.
Why would it be profitable for the company they just paid a lot of money to acquire to implode?
they usually get the company to take out the debt to actually be acquired. it’s the key first step.
then they extract as much cash as possible while the debt ballons. so called ‘extracting brand value’.
the investors usually do quite well
They sell off everything of value before it implodes and cash out. THEN they let it implode with nothing but the debt remaining.
Why would banks lend to such an enterprise if they don't expect to get paid back?
They don't. They lend to the target company BEFORE the buyout.
So over time banks will learn to avoid lending to buyout targets?
banks generally lend using a set of relatively hard coded critera. it would take systemic change for them to ‘learn’.
Many new medical treatments/approaches involve heavy capex (robots, light and ion sources, imaging systems, etc) and removing private money that doesn't belong to individual physicians personally will suck a vast amount of capital out of healthcare, creating significant forces against innovation and deployment.
The most obvious answer is that freedom needs no justification, restrictions on freedom need a justification.
PE exists because a lot of companies are poorly managed. It's better for your local hospital to be taken over by a PE firm than to go out of business. You can say that it would be even better if the government ran the hospital, and you would be right, but that would require a radical overhaul of the American healthcare system. Until that happens, PE plays a major role in keeping things working.
> PE exists because a lot of companies are poorly managed.
This is a non-sequitur. The existence of private equity has an effect on how companies are run, not the other way around. Many well-run companies are targeted by PE exactly because they're well-run and have carved out a sizable captive audience for themselves. And when PE takes over, said company usually ceases to be well-run on all metrics except one.
PE exists because of the non-linear relationship between money accumulation and power. This effect means that it is more beneficial for any company to hoard capital as much as it can rather than "waste" it on the wider economy; after accumulating enough capital, the company can pivot away from whatever market it was in before and focus solely on asset management. PE mostly results from too low taxation on inert wealth compounded by zero-interest rate monetary policies.
> It's better for your local hospital to be taken over by a PE firm than to go out of business.
It's a false choice. The healthcare system has long dealt with and deal with that situation without private equity.
Historically we've seen capitalism be a good thing.
Probably the biggest problem with medical is that it's incredibly regulated for the industry's benefit.
I don't think I agree with this, most of the regulation I see is for patient protection. Stark, AKS, HIPPA, etc... are all strong regulation aimed at protecting individuals.
From fee-splitting prohibitions to FDA regulated medical devices, almost all of the day to day regulations I've dealt with in healthcare are squarely aimed at ensuring safety, protecting privacy, preventing fraud and controlling costs.
These businesses would simply stop existing if no purchaser came forward. Many first-world economies face a demographic cliff where boomers are retiring and there is nobody in the next generation who can afford to take over the local dentist office, the HVAC company, etc.
I don’t think that’s true though in all cases. Sometimes PE just offers more money passing the debt into the company they acquire. But smaller players would still take control.
You are forgetting that if PE weren't there to buy out local dentist offices at a premium, then these offices would sell at far lower price, making them affordable to the next generation.
That's not a demographic cliff, that's a financial power cliff, and it's caused exactly by too much money being tied up in PE companies and offshore accounts. All that money taken out of the local economy is leaving each generation with an increasingly smaller size of the pie, even when the pie itself has been consistently growing. You even admit yourself that the problem is that the next generation "can't afford" to maintain the outgoing generation's standard of wealth.
It sounds like there's too much money in PE and not enough in the hands of young people. I'm told there is a secret ancient technique for rectifying such a situation.
At a general level, PE (and really much of capitalism generally) is built around the idea that financial efficiency should be the guiding principle re: capital allocation, so the steelman argument is that PE takes financially inefficient businesses, makes them more financially efficient, and that is good because that's the best way to allocate capital.
a financially inefficient business may be a business that employs more people than it absolutely needs, a business that treats customers/vendors more generously than it absolutely needs to, or even a business that exists as a going concern that would be more financially efficient if sold off for parts or went into bankruptcy.
i personally don't believe financial efficiency should be the guiding principle for everything or really anything, and I believe as a society we should account more for non-financial efficiencies (like treating human beings generously and kindly), and I think it's fine for an inefficient business to continue existing if that means more people have jobs for longer or customers/vendors are treated more generously. fundamentally, i think this line of thinking is dehumanizing, as it views the world (humans, nature, information, knowledge etc.) as resources/materials and not much else.
that all being said, i at least understand the principles and the materialist idea that everything can be viewed as material/resource and why people pursue them (esp because pursuing them effectively can make you fabulously wealthy).
i often say when talking about this stuff with friends: if you're willing/able to see everything (including/especially people) as resource/material, you're well positioned to obtain a lot of material resources/material. whether that's a good thing for you or the rest of the world is another question (and my view is that it's straight up bad).
Easy. PE 99% of the time buy businesses that were already failing and provide a lifeline. A failing business can't afford to pay for expensive medical treatments without a loan that a bank will not provide since it is failing.
People who are vehemently against PE generally do not have any idea of how the system works
That's one model of private equity, but PE has also been buying up very successful local businesses in areas like veterinary care. The PE firm keeps the name and branding of the local vet because people have traditionally wanted to take their pet to a trusted local vet, not a big chain.
So this vet practice are now a big chain except for in name only?
Yes, look up NVA vet. They own 1000+ vet practices but they all sound like small, local businesses.
That's just not true. Distressed and turnaround investing represent less than 20% of PE acquisitions [0].
[0] https://www.ey.com/en_us/insights/private-equity/pulse
They don't have to have an in-depth understanding of leveraged finance to get pissed off when their doctors start doubling prices or their own employment conditions get worse or their parents get treated badly in care homes because the staff are now overworked etc. they're mad at the outcomes they're overwhelmingly not actually trying to debate the merits of it from an exit liquidity perspective.
My main problem with PE is that it is being invested in by things that I do not consider "investors" like retirement funds, teacher's pensions, annuities, etc. Many of these things have sort of implicit guarantees from the State or Federal government. These organizations should be completely banned from investing in PE. PE investments should only be invested in by "investors", and investors understand that their investment may go to zero.
Don't pensions have to take on riskier investments because of increased life expectancy?
Remember that when private equity buys out a business, there is at least one major winner in that moment: the current owners who have been building up that business over years.
One foreseeable consequence of this bill is that it reduces the ultimate value of starting and building your own practice, leading to more consolidation among existing large operators. As this is foreseeable, I also imagine that it's an unstated goal.
I ask this honestly, do you work in private equity?
I ask because, no one else would believe that private equity is anything other than a middle man to the exact outcome you are describing, with the detour of cutting jobs and benefits from the remaining employees while simultaneously trying to buy the company for we cheaply as possible from the owner, and selling it at as a price as possible. PE steals value from both ends.
Yeah I saw this and thought, this is oddly specific, is there some publicly-traded company trying to buy up medical care for cheap?
a business can be sold to a younger generation.
I did a small research project based on medical billing challenge data (https://medgis.te0.io/). I tried to correlate the data to PE firms (best effort). As far as I could tell they were just a volume player but not the worst. After talking to people in the industry, theres some real sleezy doctors out there. Some do appointments at hospitals even if not required so they can charge more. There’s more anecdotes. All the incentives are messed up and I’m not sure how to fix without policy changes.
They'll still manage to figure out some loophole to do it anyway. PE really is cancer to most industries.
PE has bought most of hvac, electrical, plumbing, daycare, dentist. They keep the same local well established name, but is run centrally by the PE firm. They employ smooth talking salesmen to convince homeowners to pay tens of thousands of dollars for simple things. The salesmen makes 150K+ commissions. The actual plumbers/hvac people make $20/hour. The HVAC salesmen convince unsuspecting homeowners to spend 30K - 70K on upgrades and warranties. They also get a percentage from the manufacturer, usually some shitty brand. They sell warranty/services package which is questionable.
If you want to look at how similar laws have played out in practice recently at the state level, look up 2026 CPOM (Corporate Practice of Medicine) laws in Oregon, California, and Washington or Massachusetts in 2025.
Nice summary of the legal landscape here:
https://www.dlapiper.com/en/insights/publications/2026/07/co...
Key word is “recently”: seems like every law from states outside of CA were enacted in 2026. It seems too early to tell if they’re successful
I feel like medical practices should be like law firms where effectively non-lawyers can’t own equity and equity owners have to comply with ethics and code of conduct rules…
Because lawyers are notoriously affordable and transparent in their pricing & quality?
There’s a reason very few guild-like professions have survived to the present day.
Most doctors don't want to be business owners. It used to be that they were kind of forced to operate in partnerships but now most choose to become employees. This might be worse for patients but for better or worse there's no going back.
Can you cite - antidotally the only doctors I know that would rather be an employee work for big hospital chains or already sold their practice for a pile and are happy with less responsibility.
Most doctors don't want to be business owners.
Then they should work for the doctors who do.
Also, I don't think they're particularly opposed to owning their practice. I can understand them not wanting to manage a business. But for that problem, they can hire professional managers. Which is basically how hospitals work; if the doctors all want the CEO replaced, he gets fired. There's a physicians board and the trustees tend to listen to it.
So you're proposing to create a privileged class of investors with MD degrees who are protected from competition and will be able to earn above-market returns on their equity? Why would we want provider organizations to have a higher cost of capital? Makes no sense at all.
Yes they will earn above market return on a lower capital base with medical shares in medical practice trading closer to book value - and the economics are the profit share not equity value of the firm. Earning $250k/yr on a $1m capital contribution requires a whole lot less rent seeking than earning the same $250k on a $5m share purchase.
If you want to look at it that way there's already a much worse problem; a "privileged class" of service providers has a government-enforced total monopoly on the market for medical practice!
Gasp! The horrors!
How do you even define PE?
Because there’s many shades of gray here, no?
Warren was a 1980s Republican who did legal work on behalf of major corporations including Big Oil vultures.
She stayed in the race for Super Tuesday in 2020 rather than consolidating the progressive vote for Sanders.
Right before, her campaign accepted millions in funding from billionaires after promising not to. Her comment was roughly, as soon as others stop taking billionaire money, I will stop.
Make it a leverage limit. Otherwise you’ll have other players come in and replicate the playbook.
The short-term fix is banning PE. The long-term one is restricting the leverage these groups can take. Then put limits on upstream leverage. We have these across our economy. We just don’t apply them to this sector.
This is the right response.
Most state bar associations require a lawyer (or group of them) to own law firms. That _doesnt_ prevent law firms from doing crazy deals to gain liquidity for their partners, including from private equity.
Dictating who has to “own” something just incentivizes people to separate ownership from financial benefit. In most cases that’s just plain worse than letting real ownership happen.
If there is a business practice you don’t like, regulate the practice, not the corporate structure.
How does it define PE?
You know what american healthcare really needs is more regulation!
Are you saying it needs less? Why do you think that?
yes. It's completely insane that health insurance A) does all price discovery B) is tied to your employer.
Ask an American hospital how much something costs - you will get a completely fake price back, this is a sign of a totally broken market.
The 'fake' price is due to the negotiation of reimbursement between major healthcare chains and insurers. The most regulated piece - Medicare - is the only piece where there's fairly transparent pricing.
> reimbursement between major healthcare chains and insurers
And why is this so prevalent? It's subject to huge subsidy and regulatory capture
> And why is this so prevalent?
Because the law doesn't force them not to?
It's very wild to me that you're like "This organization is lying to me, so what we need less of is people telling them what to do."
How is less regulation suppose to fix any of that?
> Ask an American hospital how much something costs - you will get a completely fake price back
You think the government tells hospitals to lie to you? The hospitals lie because the government doesn't force them not to. Laissez-faire capitalism causes that. Regulation is needed to fix it.
https://en.wikipedia.org/wiki/Airline_Deregulation_Act
I need you to help me connect the dots, because a bare URL is not the same thing as communication. What does the airline deregulation act have to do with hospitals giving you fake prices because nobody forces them not to?
What do you think would force hospitals to give you real prices if not the law?
I am good with getting rid of B).
A) can probably only be fixed with regulation. Why would hospitals and insurance otherwise make prices transparent? The current state serves them really well.
Because in a fair market they would be competed away - prices of food, computers, bonds, etc are not transparent because of regulation - it's largely because of the tax incentive as far as I've read from healthcare economists.
healthcare isn’t really a market economy and neither should it be.
we should make it a public a service without a profit motive
A and B are due to regulations?
Most importantly to fight it as Private Equity is creeping like a cancer into good health systems globally, even in Europe, to slowly but surely siphon away all that is good.
It's important to fight it now before it is too late and other places also fall apart into a degraded, predatory, dystopian US system !
This has infested veterinary practices. Vet costs have increased 8-12% annually for 4-5 years now. The process approaches the vet saying their integrated back office system will save you local personnel and allow the vet to increase client service hours by wasting less on admin. Their system fractures a vet visit into service actions - each of which has a fee. They create a medication factory where a bottle of 100 tablets that cost $1 each becomes $5 a tablet, plus a dispensing fee. Over the past 6 years this has increased vet bills by 50-80%. Sadly, this brings people to abandon pets because they can not afford vet bills = death for the pet or a hard/short life as a stray. This private equity has also infested dentistry, which shows up as more dental bankruptcies as more people choose extraction over implants/root canals.
I'm surprised that medical practices can be owned by anybody other than licensed physicians.
In most states a law firm's owners must all be individuals licensed to practice law (i.e. lawyers).
Why not the same thing for medicine?
I'm not so sure limiting competition is the way to go here. One thing I hate about US healthcare is the lack of price transparency. They would rather shut an entire hospital down before giving you a price sheet. So when outfits like Walmart were looking to get into healthcare and offer basic services like blood tests, checkups, xrays, and common procedures available for flat fees and published prices, the reaction of the US healthcare community was that of a primal scream of terror, and they - specifically hospital groups -- have mobilized an army of lobbyists to try to prevent anyone else from competing.
Hospitals are massive byzantine organizations with so many management layers and so many shady billing techniques, from charging for procedures not performed, to changing what they charge you based on when they find out how much you can pay, it's crazy. What other business forces you to sign a waiver agreeing to pay whatever they decide to charge you, without them telling you what that is, or they will refuse to serve you?
PE buys up hospitals to gut them, make them less capable, and cheaper to run.
Then, they buy up air ambulance services to unnecessarily fly patients to other hospitals they own because it's more profitable at the expense of care delays and worse outcomes. Meanwhile, patients and their families are stuck with exorbitant air ambulance bills $20k-60k.
If for-profit healthcare is allowed then it could be regulated like banking, with requirements to prevent failure (including requirements for financial health), and if there is failure, to ensure customers are protected and provide for continuity.
Like banks, failure of a healthcare institution can be destructive for its customers and the community. If a bank goes under, especially a significant one for the community, regulators see that it's acquired by a surviving institution - often with only a weekend of downtime.
Another area private equity is taking advantage of is college housing. They have driven tents through the roof (the pun is an unintended bonus).
Nothing a few bills slipped to republican and "moderate" democratic senators won't fix!
Bi…cameral legislation?
...meaning both houses of Congress.
As opposed to the many famous cases of unicameral American legislation?
Yes, a lot of bills are introduced in one chamber and die in that same chamber. This case is referring to it being introduced by "Senators Elizabeth Warren (D-Mass.), Ron Wyden (D-Ore.), and Jeff Merkley (D-Ore.), along with Representatives Val Hoyle (D-Ore.), Alexandria Ocasio-Cortez (D-N.Y.), and Suhas Subramanyam (D-Va.)", presumably there's a companion bill for the house, since the links seem to only have the Senate version.
This is dumb. Just enforce the existing antitrust laws. Yeah sorry Apple Google, this is going to hurt
How about just “cannot sell for 20 years”?
The usual complaint is going full extractive mode, desperately squeezing profit and selling inside 3-7 years.
So, yeah, we can keep private investment. But they're fucking stuck with it, trying to maintain a healthy business for 20 years.
I feel it would be good to bring in (or back) compulsory partnership structures for key professional businesses like GPs, dentists, pharmacies, vets and accountants.
The PE buy-up of these core local businesses isn't great for society generally, service delivery and the existence of a middle class.
The other thing I feel gov should do is force a separation of distributors and point of sale, with rules that allow smaller business to buy at the same pricing as larger.
People seem to forget a key requirement of capitalism is for government to create a level playing field for business. I cant see a better way to do this, and I suspect it would be very beneficial to the bulk of society if gov made some changes down this line.
I wonder if ai can help doctors reclaim their practices, as the bureaucracy of dealing with insurance may become easier. Administrative overhead must be cheaper with ai. It was the main reason for consolidation and giving up management to hospitals and private equity.
AI can help doctors with the administrative side but insurance companies are also deploying AI. We're seeing an escalating arms race with provider AIs battling against payer AIs.
That's only one part of economies of scale. The technical and legal compliance costs for running a provider organization are also killing small practices. And provider organizations also consolidate in order to gain power for negotiating rates with commercial insurers.
I think it's more likely AI will cause disruption by ruthlessly optimizing on behalf of individuals.
Private Equity can afford to have people sitting around all day figuring out tricks and optimizations to save a buck here and there, and this is a power imbalance because the plebs care about things like spending time with their family, and they don't spend all their time trying to save a buck.
Maybe one day the AIs will optimize for us while we spend time with our families. And if a new vet opens that costs $15 less, the AI will route customers to the new business, driving prices down, until we reach 0 profit margin across all industries.
There's probably like a 10 trillion dollar incentive to not allow AI to truly work on behalf of individuals though, so we'll see what happens. For instance, just look at the ad industry alone; if AIs are shopping truly on behalf of individuals, and this becomes wide spread, then the ad industry is just gone.
Optimization of medical care in usa is mostly limited by regulation and fear of lawsuits. Neither of which is going away. You can always get cheaper care in other parts of the world.
Vets see animals, not humans.
> employers expect health care plan costs to rise by an average of 11 percent per worker in 2027, unless benefits are cut
I am sure most workers would prefer to get that extra 11% as a cash raise, but because healthcare costs are out of control the same care costs 11% more.
Certainly some companies will throw up their arms and hire someone overseas instead.
Look up "Medical Loss Ratio" from the ACA if you want to find out where the perverse incentives for health care pricing comes from..
The cap is generous. If an insurance company is hitting it, competition is failing to keep them in check and lifting the cap would just let them gouge deeper. Of course, that doesn't keep them from constantly yapping this talking point, as if it wasn't that way before, as if we don't have evidence that it wouldn't work. "Just lift our profit cap" is self-serving baloney.
That's not the issue, it's because an insurer's absolute profit only grows if the premium base grows. This removes any reason to compete on reduced costs and an incentive to have the costs go up.
If they aren't at the cap -- which is generous -- they can grow their profit by controlling costs. For once.
If they are at the cap, they wouldn't have passed on the benefits from controlling costs anyway because the cap is generous and reaching it proves that they have enormous pricing power.
There is simply no way that lifting the generous cap results in benefit to the consumer. It's a slimy self-serving talking point through and through.
Except you can grow the premium base by adding customers as well, as you are featured in a direct price comparison on the ACA website. Higher premiums mean less customers, unless you are offering more services that they find valuable.
Medicine is extremely capex intensive and only become more so. Sucking private capital out of healthcare is going to make it vastly worse for everyone; higher prices and less innovation. I think we can criticize the often ruthlessness of PE while realizing that limiting medicine's ability to invest would be a huge self-own and only force further centralization into the biggest non-profit centers.
Medicine is already held back enough by the lack of ability to use debt to finance its sales, unlike almost every other industry; you can repossess a car but you can't repo an implant or administered drug, forcing everything to be paid for in cash upfront. Medicine needs as much access to capital as it can get.
I have no words for how completely toxic the surge of PE in healthcare has been. It's driven the degradation of care everywhere I've been. Healthcare chains have no issues with investment (see any annual reporting document to see how much money is sitting in various investments, mostly RE); smaller clinics being eaten up by PE chains is not an answer to centralization, it's just another mechanism of it.
"Private equity" also includes venture capital here. It means all private direct investment. The thing you are imagining is one small corner of what private equity actually is.
> Sucking private capital out of healthcare is going to make it vastly worse for everyone; higher prices and less innovation.
Injecting PE into healthcare is what made it vastly worse for everyone in the first place. You can't have it both ways.
I'm sorry, compared to what? We're not talking about a routine doctor's office for healthy people. Advanced care is extremely technologically intensive and your local surgeon is not personally buying the $20M in infrastructure required for many modern advanced treatments. Venture capital has been essential for progress in medicine, and many advanced therapies are going to be increasingly delivered vertically integrated for the widest accessibility and best outcomes.
> Venture capital has been essential for progress in medicine
VC's can still fund companies that are making expensive new products.
Banks (and PE...) can still underwrite loans for these things.
We have many solutions for capex-intensive businesses and have had these for over four hundred years. LBO-type PE is not even fifty years old yet
agreed but that is not what they are talking about banning -- "PE" is expansive and includes all those other things. If they narrowed this proposal to just what people are thinking of as "PE" here rolling up clinics and gaining local pricing power that would be different and I'd agree with you
> agreed but that is not what they are talking about banning
I think you misunderstand me. I think what is proposed to be banned (employers of doctors who are PE firms) should not exist. It is strictly not necessary, and there's an excellent example of the consequences playing out across Massachusetts right now (which explains the bill's introduction by Warren)..
I'm not sure how we decided only lawyers can run law firms but that anybody can operate a hospital...
It feels to me as if the US is a useful example for the outcomes of a focus on capitalist ideals does for medical services in a country.
Apologies if an AI summary is offensive to some, but here we go:
> The US is a world leader in advanced and specialist medicine, but its overall system for providing affordable, accessible, equitable medical care to its citizens ranks poorly—last among the 10 comparable high-income countries in the strongest recent comparison.
Both sources are the same site:
https://www.commonwealthfund.org/sites/default/files/2024-09...
https://www.commonwealthfund.org/publications/fund-reports/2...
" less innovation"
"Innovation" as in marketing expenses and stock buybacks?