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The article tries to paint a naive example where private equity buys everything and jacks up the prices. But why doesn't this happen to restaurants, or super ma

by bko 2y ago

The article tries to paint a naive example where private equity buys everything and jacks up the prices. But why doesn't this happen to restaurants, or super markets or car mechanics? You have to ask yourself what makes healthcare unique to nearly every other well functioning market in the US. The bigger issue is there is third party paying for things. Try to ask your doctor how much something costs and they'll stare at you like you have two heads. Imagine getting your car fixed without knowing how much it's going to cost The other problem is the regulation and groups like AMA. Why don't new cardiologists enter the field? Because there is a cap of graduates that the AMA controls. Why doesn't a new hospital open up? Because there is often a "certificate of need" to open a new health care facility and other health care providers in the vicinity get to determine who is allowed in. What would happen to restaurants if new waiters had to go to school for 8 years and there was a cap on how many can graduate and you need to go to a board of neighboring restaurants to decide if you can open yours, and diners are forced to sign up for some company to pay for all the meals. https://www.ncsl.org/health/certificate-of-need-state-laws https://www.ncsl.org/health/certificate-of-need-state-laws

ldayley 2y ago
>But why doesn't this happen to restaurants, or super markets or car mechanics? It DOES happen with car mechanics. Leonard Green LP owns Caliber Collision, Carlyle Group owns Service King, and Icahn Enterprises owns AAMCO, Pep Boys, and Precision Tune Auto Care. While I don't have a specific example in my head about restaurants and grocery stores, I have to think that there are steps in the value chain that are absolutely owned and influenced by PE. Logistics? Real Estate? Real Estate is a great example: most commercial real estate is held inside PE portfolios via Real Estate Investment Trusts, and lease rents are an extremely non-trivial portion of business costs for EVERYBODY, espcially grocery stores and restaurants. But I agree about the many social and regulatory complexities regarding health care specifically. Often that complexity is what makes industries like health care such a lucrative investment for PE as it can be easier to hide incentive structures.
seligerasmus 2y ago
>But why doesn't this happen to restaurants, or super markets or car mechanics? This is a bafflingly underinformed rhetorical given the previous sentence. It happens all the time with the exact counter-examples you list. I'm honestly shocked you mentioned restaurants when articles were floating around HN less than a week ago about the death of Red Lobster by way of private equity: https://news.ycombinator.com/item?id=40233029 https://news.ycombinator.com/item?id=40233029 https://finance.yahoo.com/news/private-equity-keeps-failing-brands-091616738.html https://finance.yahoo.com/news/private-equity-keeps-failing-... https://www.pepboys.com/about-pep-boys/media-center/press-releases/2016/icahn-enterprises-completes-acquisition-of-pep-boys https://www.pepboys.com/about-pep-boys/media-center/press-re... https://www.reuters.com/breakingviews/private-equity-superstores-overstock-shelves-2023-11-08/ https://www.reuters.com/breakingviews/private-equity-superst... > Why don't new cardiologists enter the field? Because there is a cap of graduates that the AMA controls. The AMA doesn't have the authority to cap anything, and I encourage you to devote more research to your premises before relying so heavily on them. The cap on new doctors arises from a complex set of competing laws, policies, and blended public/private billing models for how doctors get trained and paid during residencies, which itself is downstream of how hospitals are funded and operated. There is no singular "do this -> get more doctors" solution; it is enormously complicated, often by both design and necessity, and is not easily untangled with the naive techie "just make a pull request" mentality that pervades the HN comments section. You also seem to misunderstand what the AMA does and have miscast it as some sort of central licensing authority when most of what they due is effete lobbying and begging physicians for donations/dues. They're annoying and probably a net negative for public health at this point, but they're not some boogeyman holding back the libertarian fantasy of an unregulated healthcare market. >Try to ask your doctor how much something costs and they'll stare at you like you have two heads. Imagine getting your car fixed without knowing how much it's going to cost I can't help but notice that you didn't mention the role of private health insurance when that undergirds much of the grousing. Doctors can't give you an answer on what your procedure will cost because they have to play a multi-stage game of Price is Right with a cartel of investor-driven private health insurers with the express business model of avoiding paying for those services whenever possible. The fact that everyone BUT the investors suffer from this arrangement is the actual, literal point of the article - it's even in the byline!
rwmj 2y ago
PE also loaded a UK supermarket chain with debt: https://www.theguardian.com/business/2023/mar/09/morrisons-slumps-to-15bn-pre-tax-loss-after-private-equity-takeover https://www.theguardian.com/business/2023/mar/09/morrisons-s...
- waiquoo 2y ago
  Also Congress caps the number of available residency slots, and that feeds back to med school admissions, etc. (https://www.fiercehealthcare.com/providers/senators-introduce-bipartisan-bill-increase-gme-slots-14000-2025-2031 https://www.fiercehealthcare.com/providers/senators-introduc...)
deepsun 2y ago
In Philippines their president wanted to remove the cap on doctors. Existing practicing doctors went on strike, they didn't want more competition. Funnily, population sided with doctors, instead of president.
- alephnerd 2y ago
  > they didn't want more competition It isn't because of that alone. In PH and Korea, senior doctors are expected to oversee junior or trainee doctors. These senior doctors are already overloaded with both giving care and training junior doctors. Adding more MDs won't change anything because the residency/training bottleneck still exists and there is no way to change that. This is why my SO left Vietnam for the US - getting paid $1-2k a year to train 6 juniors and work 60 hour shifts providing care is hellish. The same is happening in Korea as well, with senior doctors leaving for Japan and the US now.
  - _factor 2y ago
    So the solution is to get more doctors who can then unload the burden. If you look at the cap on medical school enrollment in the US, it’s very much an artificial supply restriction to keep wages high.
    - alephnerd 2y ago
      > So the solution is to get more doctors How? You need a residency to actually learn how to do stuff. Just getting an MD is not enough to make someone ready to be a practicing physician. Graduating more MDs doesn't automatically create more specialists tomorrow.
      - bluGill 2y ago
        There must be short term pain - in 15 years you can have a lot more doctors, but we have to get them through school and residency first, and everyone already in the industry needs to work even harder to do that.
alephnerd 2y ago
> why doesn't this happen to restaurants, or super markets or car mechanics They get bought out by PEs as well. > The other problem is the regulation and groups like AMA My SO is a Doctor, and most of her overhead is from paperwork, billing, and IT. Managing a HRM, your clinic's IT, your clinic's medical devices, your clinic's digitized patient records, the paper trail needed to get paid, etc is hard. Most older practitioners have sold their clinics to PEs for that reason - they don't want to spend an additional 20-30 hours a week dealing with the issues above. This is why they sell off their practices to consolidated groups, because they will unify these services but give the Doctor a paycheck.
- infecto 2y ago
  That has been my insight as well. I don't think PE is the problem here. We love to hear the negative stories but there are also lots of success stories. From the healthcare industry, I believe the primary care model is broken. There is a nationwide shortage of primary care doctors, usually the ones wanting to get in primary care enjoy the touch on patients. The problem is what you outlined, to run a primary care practice you need to employ a number of people that creates overhead that now requires you to be very rigid in the practice to ensure you can both cover your expenses and still make a salary yourself.
  - alephnerd 2y ago
    Yep! The American Primary Care model doesn't work, but the Canadian and British Single Payer model doesn't work either. You're damned if you do, and damned if you don't
  - WkndTriathlete 2y ago
    The shortage of PCPs is a money problem, not a symptom of a broken model. People smart enough to go to med school are (generally) also smart enough to do an ROI analysis. If I can make $500k/yr as an oncologist and pay off my student loans in 10 years vs. getting paid $150k/yr as a PCP and pay off my student loans in 30 years, which route am I going to choose? People that want to be PCPs are making the choice to go into higher-paying specialties just because it is expensive to become a doctor in the first place. Obviously it is possible to change the economic incentives to increase the supply of PCPs. One simple way would be to just create full-ride scholarships for those that want to be PCPs to dramatically increase the ROI for being a PCP.
yterdy 2y ago
>But why doesn't this happen to restaurants, or super markets or car mechanics? It does. The reasons you cited just makes it worse in medicine.
- bko 2y ago
  I don't know. I kind of like my restaurant, super market and car mechanic. System seems to be working well...
  - jklinger410 2y ago
    Typical libertarian response, falls apart at the first sign of complication.
    - tracker1 2y ago
      I'm pretty Libertarian myself... the issue, to me, comes from treating companies/corporations as "people" in terms of political speech, etc. I don't think collective groups should be able to donate to political campaigns or non-profits unless they have open books and only take contributions from individuals or orgs that likewise have open books. I also think that politicians should have to pre-declare by a day or more any financial trades. Corporations are allowed to exist in a state beyond what an individual can, and as a balance should be very limited in execution and through the past century in particular are anything but. Their power is a grant of govt, and should also be limited. In the end, that's where I stand on it. I'm all for maximizing personal liberty, and even small business allowances. Major companies should be focused on stability with growth or divestment. Foreign owned companies should be more limited even. That just isn't the case today, and it's a shame.
  - richbell 2y ago
    Something can be a widespread issue without affecting you personally.
    - glenstein 2y ago
bitwize 2y ago
Say it with me: MEDICINE IS NOT A MARKET GOOD. https://www.ncbi.nlm.nih.gov/pmc/articles/PMC2585909/ https://www.ncbi.nlm.nih.gov/pmc/articles/PMC2585909/ The solution is to socialize it.
- senorrib 2y ago
  [flagged]
  - lenerdenator 2y ago
    It's so far from being the solution that the majority of the Western world implements it as a solution to the problem, and the citizens of those nations live longer and spend less, cumulatively, on healthcare than the United States.
  - sofixa 2y ago
    > SOCIALIZING IS NEVER A GOOD OPTION I mean... do you even knowledge? Words? Logic? Think? Counterpoint number one: transit. Counterpoint number two: utilities. Counterpoint number three: healthcare. In all three of those natural monopoly, little elasticity, high upfront costs, "goods", we have plenty of examples of countries and localities with "socialised" (centrally managed by a public entity, subsidised to cover some to most of the costs) and with "private" ones. Unquestionably "socialised" ones in similarly developed countries perform much better - lower cost in total and to consumers, better coverage, better outcomes. You can have all things that make sense be managed centrally, and everything else left to a free (ish) market. It's not a binary choice all or nothing. The UK is a perfect example because they privatised transit and utilities, and the result is a steep decline in quality with increasing costs, and that's not even counting externalities like water utilities dumping sewage in rivers and the sea.
  - FrustratedMonky 2y ago
    But also, the free market is not the solution either, for inelastic goods dealing with life/death. See, price of insulin. OR, at least make a free market for real. Make insurance companies compete across state lines, make charges transparent not a surprise gatcha after the fact. Nobody would take their car to get fixed and accept something like "I know you came in for oil change, but we decided to replace the break rotors, here is a bill, you have to pay or we don't give the car back". Sadly, all the 'free market' politicians, are in the pocket of the industry and work to prevent a 'free market'.
lenerdenator 2y ago
> But why doesn't this happen to restaurants, or super markets or car mechanics? It does, all the time. These places just offer services that are less prone to "whatever price it is, I'll spend it".
- chii 2y ago
  > less prone to "whatever price it is, I'll spend it". not all medical needs are like that. Only in emergency care. For things like a regular checkup, a flu shot, or obesity etc, you have time to shop around. So not unlike the car services. Except that the provider of healthcare is paid highly, and has been limited in supply like the parent poster's comment. Why are doctors cheaper in cuber? They cure the same diseases after all, and likely learn off the same knowledge.
  - lenerdenator 2y ago
    You'd be surprised how much "emergency care" covers. A lot of people just end up going to the emergency room for colds, mild flu, persistent mild pains, etc. When Jimbob goes to the emergency room at his local hospital because he has a cough that just will not go away, he's probably going to walk out of there with a script for some cough syrup or antibiotics and not a lung cancer diagnosis. Either way, he's there, it's made him miserable enough to get up and go somewhere, and he's very unlikely to want to leave without some sort of proposed solution to his problem. So he'll pay what the provider puts on the paper without shopping around. Should he go to an urgent care center or make an appointment with a PCP? Absolutely. But he didn't. And there's millions of Jimbobs. And that's before getting into the "frequent fliers" who are on the fringes of society and see a visit to the emergency room as a guaranteed way to experience at least some human compassion.
- bko 2y ago
  I don't understand this idea that there's no demand elasticity for healthcare. If you need to go to a doctor you have choices. Most healthcare isn't emergency room visits. And the whole "health is priceless" is laughable considering obesity and smoking. You're paying money to be less healthy and now you tell me "for my health, whatever the price is I'll spend it".
gbnvc 2y ago
But private equity objectively does jack up the prices on those things. It just doesn’t own those businesses. The whole point is that it’s unsustainable to run a business that way. Look at these absurd restaurants prices, it’s private equity jacking up the prices on food and labeling it as “inflation”.
delfinom 2y ago
> But why doesn't this happen to restaurants, or super markets or car mechanics? Restaurants too have slowly been gobbled up in my area of NY suburbs into larger groups. I think the Main St here with 20 or so restaurants is owned by just 3 groups. Supermarkets are an incredibly low margin business and they would have to compete with existing players on those thin margins including titans like Walmart. There's not much more blood to extract there. Independent mechanic shops have been dwindling naturally because it's too expensive for newbies to get into the field, especially between rent and needing all their own tools. End of day, formally "car shop" areas here are being bulldozed for luxury rental apartments.
- JoeAltmaier 2y ago
  Margins is half the story. You get 1% on a loaf of bread, that's reported as 1% margin. BUT you turn that loaf around every day for a year, that's 365% margin, annualized. Shoe stores, now they have a problem. They don't turn the inventory over but monthly or worse. But McD's? They sell that hamburger a thousand times a day.
  - krisoft 2y ago
    > You get 1% on a loaf of bread, that's reported as 1% margin. BUT you turn that loaf around every day for a year, that's 365% margin, annualized. I don't think that is how margins work. Let's say you sell a unit of bread for $100, but you spent $99 the make the bread that's a 1% margin. If you sell a single bread per day for 365 days you earned $36500 and spent $36135 to make those bread. That is still a 1% margin.
    - Workaccount2 2y ago
      I think they are confusing compound interest with margin.
    - JoeAltmaier 2y ago
      You spend the same $100 every day - you got that back when you sold the bread. On that cash balance, you make $1 every day of the year. That's what annualizing does. It's on the dollars invested, not the money thrashed.
ed_elliott_asc 2y ago
Anytime the finance industry get involved and sell tailored loans then prices rise astronomically. Housing? Yep mortgages, people can rarely afford a house without a large mortgage Cars? Yep, most cars are bought on finance, people couldn’t buy new cars without the finance. Health? In the us, insurance companies provide the finance. I really wish society would have stopped this in its tracks.
- delfinom 2y ago
  >Housing? Yep mortgages, people can rarely afford a house without a large mortgage Bad example, mortgages keep jumping because property values keep increasing. Property values keep increasing because demand is exceeding supply. As more people can access mortgages due to lower rates, the demand shoots up and so does the property value which leads to a race to the top (bottom). Lol >Cars? Yep, most cars are bought on finance, people couldn’t buy new cars without the finance. Yea here we don't have a real lack of car supply. People are financing based on _wants_ rather than needs.
  - yterdy 2y ago
    >Property values keep increasing because demand is exceeding supply. Not quite. Property values keep increasing because the monetary supply keeps increasing, one effect of which is that large property owners can corner markets by buying up properties and warehousing them until they see the prices they want to sell for. This appears as a lack of supply (not enough houses) when it's really a lack of market forces forcing sales (not enough houses on the market). The remedies to these two situations are very different.
- bko 2y ago
  A mortgage and car loan is credit (borrow money). Overall it's a net good for consuners IMO because I can't afford to buy a house cash and rates are artificially low for mortgages bc most are guaranteed by Fannie Freddie. Even private mortgages are competitive. You can borrow money for 30 years, non recourse, no prepayment penalty and get 4:1 leverage and the rate you pay is a few points higher than the government pays? Insanely good value. What credit do insurance companies provide? You pay them and they pay the doctor based on some negotiated rate. They don't front you the money and you have to pay them back. What are you talking about?
fzeroracer 2y ago
> But why doesn't this happen to restaurants, or super markets or car mechanics? It does? How did you miss all of the recent news around Red Lobsters acquisition by PE. Where they bought it, saddled it with debt, sold the land under each restaurant, pocketed the money and then left?
- bluGill 2y ago
  Don't forget that Red Lobster was already a failing business. The PE that did this is also running several other restaurants that so far are successful. They know what they are doing, and they also know where nothing can save the restaurant and so made the decision to get their losses.
  - FireBeyond 2y ago
    They didn't make the decision to salvage their losses. Like you said, it was a failing business. PE didn't come in with the goal to turn Red Lobster around. EVERYTHING the parent poster described was things PE didn't do to save Red Lobster, it was "How can we suck this thing dry before it dies". The most charitable thing that you could say is that PE was putting Red Lobster out of its misery. While making bank on doing so.
  - pnutjam 2y ago
    What they did is akin to saying Grandma can stay with me, but she's dying so I'm going to sell her wheelchair. Then I send her to stay with my sister and make them rent the wheelchair back, so other care can't be afforded and her health suffers and she dies. Then you come along and say, "She was already dying".
- yterdy 2y ago
  Exactly. Its failure was a self-fulfilling prophecy imposed by PE (and other malicious financial actors). Like Toys R Us and many others, it was a stable but unremarkable business that might have been in dire straits at some point in the future if changes weren't made to update its approach. It was not, as others allege, "failing" - at least, not until PE came along and forced it into an untenable position. But that's what they do.
api 2y ago
Just like housing there's ultimately a cartel that limits supply. In medicine some of that limit is justified by preventing the whole field from degenerating into gimcrack quackery, but the limits aren't just around certifications or credentials or experience. They are, as you state, hard limits in many cases designed to jack up prices. With housing the cartels are more decentralized to the neighborhood but the effect is the same. PE gets blamed there too when they're simply taking advantage of the situation to extract some of that rent.
ThomPete 2y ago
It doesn't happen because there is competition in those areas. This is why lasik eye surgery is extremely cheap as it's not controlled and gated by legislation which keeps down the supply.
lr4444lr 2y ago
That, and the barriers to entry of the practice of medicine. I'm not implying that credentialing is bad, but we need to be honest about the constraints on the supply side of the market.
lettergram 2y ago
Was just about to comment on the AMA when I read this. Not only do they do caps on total number. They also do ridiculous race quotas, so you’ll see good students skipped for subpar students. On its face, you may think that’s going to improve equity… but in reality, subpar doctors increase malpractice insurance (~1/3 of the doctors fees go to insurance) and increase prices on everyone. So you end up with the entire population, especially the poor, feeling the brunt of the medical cost. I worked in medical billing for years and my suggestion (and all the people in billing agree that I talk to) is to make direct insurance payments illegal. It’s fine to have insurance reimburse you, the payer. But don’t have them negotiate or talk to the medical staff. Then everyone pays less because the hospital don’t know what you can pay. Great example I had recently, I had a bill of $75 for a regular medicine. Insurance covered $35 and I paid $40. I then went off instance when switching for a month. It was $40 off insurance. The same price, the pharmacy was just pocketing the extra $35. They know what you can pay already, so there’s no negotiating or downward pressure on price.
presentation 2y ago
Whatever the US does, it needs to realize that the artificially constricted supply of healthcare needs to be loosened. If we throw more money at consumers for healthcare while keeping the tight supply of doctors and hospitals constant, then you just end up paying more money for the same services. Prices go up, doctors, hospitals and insurers get richer, nobody else is better off.
s1artibartfast 2y ago
>diners are forced to sign up for some company to pay for all the meals. What would happen if diners split their bills evenly every month? What would happen if the company profit is legally capped as a percent of that bill? I think these are the biggest factors.
marricks 2y ago
> But why doesn't this happen to restaurants, or super markets or car mechanics? There's plenty of examples against your case already in the comments against other points but the reason medical care is so damn expensive is the same reason your internet bill is so expensive (for poor quality): lack of choice. You don't really have an option to haggle or shop around for the best plan when you broke a leg and are being rushed to the nearest hospital. You made the choice on plan half year ago when you were healthy and you're in no state to have a calm discussion with the ambulance about what has the best price per value with your tibia jutting out of where your calf should be.
- banannaise 2y ago
  Important to note that this is still pretty true for non-urgent care. My city has three somnologists' offices. If I have a sleep issue, I may have options, but there are very few of them. It's much more plausible for someone to buy up the three somnologists than to buy up, say, all the pizza restaurants in the city, and it's harder for someone else to start up a new somnologist than to start up a new pizza restaurant.
derbOac 2y ago
I agree with you but it's maybe worth pointing out it's even worse than your example. It's as if not only was there a cap on the number of waiters, there were strict regulations about how you got your food, and that there couldn't be restaurants where you serve yourself, have buffets, or even that you could feed yourself cooked meals at home without going to a restaurant. All the menus have to be approved by a national food association etc etc etc. There's so many factors involved in healthcare problems in the US it's impossible to pin it on just one thing or even a couple of things. I also feel like the public discourse seems to be largely out of sync with just how much change is needed to how things are done. I kind of thought the pandemic might have created an emergency situation that would have leveled the status quo and allowed for a restructuring of things along the lines that's needed, but its seemed like it just barely held on and then went back to things as usual.
- tracker1 2y ago
  To me, it was the biggest example of why we need at least partial (say 50%) domestic production and to require at least dual sourcing (which would require licensing). Which would have the side effect of at least some competition. I'm also less than convinced the term for Patents is appropriate for a lot of industries today in general. Not to mention restrictions on negotiated rates by medicare and other agencies. I'd personally like to see all Govt employees, Veterans and Medicare replaced by a non-profit insurance corp, that is able to negotiate and establish baseline care, without eliminating private coverage, but anyone can buy the public plan (employers etc) as a way of leveling (some) competition. As it is, the recent South Park special does a relatively good job of demonstrating how messed up the system is.
manishsharan 2y ago
>> But why doesn't this happen to restaurants, or super markets or car mechanics? It also happens to restaurants with much more sever outcomes Private Equity bought Sears, sold the land under Seas to thmeselves, charged Sears exorbitant rent and eventually bankrupted the company. https://www.cbc.ca/news/business/sears-lawsuit-lampert-1.5104151 https://www.cbc.ca/news/business/sears-lawsuit-lampert-1.510... Red Lobster also filed for bankruptcy for similar real estate deal related reasons . https://finance.yahoo.com/news/bad-real-estate-deal-not-173015627.html https://finance.yahoo.com/news/bad-real-estate-deal-not-1730...
- Aunche 2y ago
  Sears is an odd example because Eddie Lambert didn't want to treat it as private equity investment and he wanted to take operations in his own hands. He thought he was the next Warren Buffett, but he wasn't, so Sears hemorrhaged money and had to sell off their own parts. Nobody besides Lambert's own hedge fund thought it was a good idea to buy mall real estate, which is how it all ended up there. This didn't work out for the hedge fund either, and together with the Sears bankruptcy is why his net worth nearly dropped in half while all his billionaire buddies were enjoying the longest bull market in history.
jmclnx 2y ago
> But why doesn't this happen to restaurants, or super markets or car mechanics? Because you do not have to go to those places. Years ago, when I was a kid, I heard my parents, uncles and aunts have a big discussion while I was in bed. They were talking about the trend of For Profit Health Care, the outcome they came up with was prices will eventually raise up to extortion levels, why, because that is what everyone needs. So here we are, being extorted by insurance and equity firms. And many Doctors are in the same boat with us, they are being squeezed with insurance costs and bureaucracy. My Dr has to have 3 people working in the office just to deal with health Insurance. As a kid, it use to be 1 nurse and the nurse would deal wit paper work and help the Dr when needed. Plus their insurance costs were low compared to now.
- dartos 2y ago
  My parents are dentists and most of the memories from when I was a kid (pre 2013) of my dad working was him dialing up and arguing with insurance providers. They’d send checks 6months late and often miss them. They also forced certain prices for him to stay “in-network” Insurances don’t seem to help anyone.
  - bluGill 2y ago
    Insurance helps those who pay them. Just note that for most Americans they are not the one paying.
    - dartos 2y ago
      For dental insurance, those insurance companies force healthcare providers to keep artificially high prices, even for out of network patients. For example, with my parent’s independent office, people would come in without insurance and unable to pay the high fees for say a filling or a crown. My parents were technically able to charge much lower prices (more than half off in the case of normal cleanings,) but were unable to because of the contract they had with their insurance network. Moreover, the listed price mandated by the insurance was not the same as the payout my parents received after filling the claim. (The payout was always less. Sometimes much less than the mandated price) I don’t see who benefits in this situation besides the insurance company. Even if my employer pays for my insurance, I still need to meet some premium most of the time. And what I pay is inflated because of the in-network contracts Consider also that, in the states at least, dental insurance is separate from medical.
eganist 2y ago
> But why doesn't this happen to restaurants, or super markets or car mechanics? Not sure, but the counterpoint is the housing crisis. So painting it as something exclusive to healthcare suggests that there's no possibility of it being a systemic problem with Private Equity. https://www.propublica.org/article/when-private-equity-becomes-your-landlord https://www.propublica.org/article/when-private-equity-becom... One of the other comments raised said "because you don't have to go to those places," and it intuitively feels correct that basic needs are ripe for price gouging when supply is limited. But I'm out of my depth. Happy to hear other comments.
FrustratedMonky 2y ago
"naive example where private equity buys everything and jacks up the prices" Naïve, but not wrong. There are a lot of factors, but jacking up prices on an inelastic goods is pretty common. And if you are suffering a heart attack, getting help is inelastic. Nobody needing health care is like "Wait, don't save me, let me shop around a little, do you take coupons".
giancarlostoro 2y ago
It's a two-fold problem. Think of health insurance like "the mob" it gives you leverage if your employer has a lot of employees vs if you work for a small company. They can say "oh we're taking you out of our network since your pricing is insane" and actually holds a lot more weight than a small fish company trying the same. Then you have the fact that not everyone pays, so they subsidize the cost. Think of all the homeless people who got treated. Never take a loan unless you're literally battling something life threatening and that's your only option available. Otherwise, always haggle the billing department down. It's all a messy cost because its all subsidized. I got this information from a former hospital billing manager who I used to report to at a former software job. I don't know what can fix all of this, but it feels like the college issue of throwing more money at it just gives them free reign to raise prices at ridiculous rates.
srackey 2y ago
Correct. The industries with shortages (housing, healthcare, education) are ALSO the ones with Soviet-tier central planning. Honestly, we shouldn’t be surprised!
thayne 2y ago
There are other factors as well. For example,if a single restaurant or supermarket increases its prices, you can just go somewhere else. But switching doctors is much harder to do. And is made more difficult by insurance networks. And if you don't like your insurance, you can't really switch, without changing jobs or paying a lot more to get individual insurance instead of using discounted insurance from your employer and effectively giving up compensation.
piva00 2y ago
> But why doesn't this happen to restaurants, or super markets or car mechanics? It does: Red Lobster, Fairway in the USA, Morrissons in the UK, some others [0]. [0] https://foodinstitute.com/focus/private-equity-bankruptcies-2/ https://foodinstitute.com/focus/private-equity-bankruptcies-...
sofixa 2y ago
> You have to ask yourself what makes healthcare unique to nearly every other well functioning market in the US. The bigger issue is there is third party paying for things. Try to ask your doctor how much something costs and they'll stare at you like you have two heads. Imagine getting your car fixed without knowing how much it's going to cost Are other markets well functioning in the US? I'd argue Private Equity is ruining a lot of them. Also, you're missing one big fundamental issue. Healthcare is not a good candidate for a "free market", because it's an inelastic "good". You can't choose when to get sick or have health issues. You can't change the fact that prevention saves lives and money. So, healthcare cannot ever be a free market and function properly. The only way to make it function is either by centralisation or heavy regulation. Curiously the US is practically the only country that managed to screw up and have a bad mix of both options while also having a broken market.
L_Rahman 2y ago
It is also happening to restaurants and HVAC installers and plumbing businesses. They just got around to buying those up a little more recently. We should expect the price and service consequences to start showing up in the next 5-10 years.
croes 2y ago
Other countries also have third parties paying for things and regulations but don't have the same high prices. So it's not that simple.
ivpmto 2y ago
> What would happen to restaurants if new waiters had to go to school for 8 years I am not sure if there are many people out there who would want to see a cardiologist that was trained for the same duration as a waiter.
- FireBeyond 2y ago
  Wait til you learn about colleges offering "accelerated RN" to "accelerated RN-BSN" to ARNP pipelines that can have you functioning as a fully independent provider 6-7 years out of high school...
willcipriano 2y ago
Fast food prices have doubled since the start of the pandemic.
toomuchtodo 2y ago
It does happen to restaurants: red lobster is the most recent example. PE raised the rent on the ground leases to where it was no longer sustainable for the operators of the eatery. https://www.nbcnews.com/business/consumer/private-equity-rolled-red-lobster-rcna153397 https://www.nbcnews.com/business/consumer/private-equity-rol... > How private equity rolled Red Lobster > When a private-equity firm bought the iconic seafood chain in 2014, it sold the real estate under the restaurants for $1.5 billion. Then the restaurants struggled to pay the rents. > In recent years, private-equity firms have invested heavily in all areas of industry, including retailers, restaurants, media and health care. Some 12 million workers are employed by private equity-backed firms, or 7% of the workforce. Companies bought out and indebted by private equity go bankrupt 10 times more often than companies not purchased by these firms, academic research shows. In a report this month, Moody’s Ratings said leveraged buyouts like those pursued by many private-equity firms drive corporate defaults higher and reduce the amounts investors recover when the companies are restructured. TLDR Corporate strip mining and dumping the enterprise carcass on bag holders.
tacticalturtle 2y ago
> Why don't new cardiologists enter the field? Because there is a cap of graduates that the AMA controls. From my understanding - the choke point here is Medicare funding for residency slots- which funds most of the residencies in the US. Now the AMA did absolutely lobby for limiting the supply in the 90s: https://www.nytimes.com/1997/03/01/us/doctors-assert-there-are-too-many-of-them.html https://www.nytimes.com/1997/03/01/us/doctors-assert-there-a... But they’ve done a complete 180 since then - but it’s ultimately up to the federal government.
- resource_waste 2y ago
  There is no reason for the richest profession in the nation to require taxpayer funding for their graduate education. Most people pay for college. Why are we using taxes to pay for rich people's college? EDIT: Rate limited and replying to 'FAANG Workers make the same as doctors': "You didn't include any numbers. You also decided to choose the most elite workers living in a high cost of living area to compare to. Not fair! Not fair! There is a bit of malice to do such an unequal and unfair comparison. If we look at reality, you are never going to have the moral high ground. The wages are not-market rates, its due to lobbying/artificial scarcity that benefit the members only. The majority lose and the richest profession gets richer. I hope people can see past the pretty paint you were able to place over reality. "
  - onlyrealcuzzo 2y ago
    Most doctors are not particularly wealthy. Probably close to half of doctors make less money than the average person working at FAANG. Medical school is outrageously expensive. If you think people are going to put up with the misery of being a doctor, delay any wages until 34, basically live a lower middle class life until 50 while paying of medical school debts, and then barely be in the top 10% after that - you're gonna have a really bad pool of people signing up to be a doctor. We absolutely do not need to be making medical school EVEN MORE expensive.
    - FireBeyond 2y ago
l1nktlst 2y ago
You presume all this is required by others but it’s not. That would be too specific an obligation to validate your expectations.
TheOtherHobbes 2y ago
It does happen to restaurants. Ask Red Lobster. And to supermarkets - like Morrisons in the UK. And department stores - like Debenhams in the UK. They join a long list of viable businesses that were/are vampirised by PE for quick returns. Medicine in the US is just the most perfect platonic example of a PE chokehold on a critical market sector which has drastically negative effects on the rest of the economy, and on individuals who have to deal with it.
banannaise 2y ago
> But why doesn't this happen to restaurants, or super markets or car mechanics? I think the word you're missing is yet. Private equity hasn't bought everything and jacked up the prices yet because they have plenty of targets generating reliable profits for them, and they don't have the funds to buy out the entire restaurant industry while also doing everything they're already doing. They would also still have to compete with major national players (McDonald's et al.) who are impossible to buy out, which is something the healthcare industry didn't really have when private equity came knocking. And notably, it is starting to happen to car mechanics - particularly those who are contracted by insurance companies. It's not hard to imagine a future where they move on to smaller independent car mechanics who are gradually bought out by megacorps and/or private equity, the industry consolidates heavily, and everything gets worse.
nextworddev 2y ago
Except it does happen to restaurants and super markets.
deleted 2y ago
[deleted]
mikepurvis 2y ago
"third party paying for things" I think it depends heavily on what the motivations are for that third party. I live in Ontario, Canada, and OHIP pays for any hospital visits I need— but they're not a for-profit entity, they set the prices based on what's fair in collaboration with providers. Notably, OHIP does not cover optical, dental, physio, massage, psychotherapy, or prescription drugs, so those are all paid for by conventional insurance, typically tied to your employer, with predictable results— it's all more expensive than it should be, pricing is often vague and hard to predict (especially with dental), and people defer care, making what should be simple problems into more complicated ones.
__MatrixMan__ 2y ago
Food and cars are things you can touch. Health isn't. Markets work well for things you can touch, and poorly for things you can't. It's just the natural limits to our concept of property at play. Maybe everybody knows what you mean if you say that you're going to go down the street and buy yourself a surgery, but nobody thinks it's a natural way to talk about that sort of thing.
thrance 2y ago
Healthcare is an inelastic market. People will pay wathever the cost of a product is, because it is literally a matter of life or death. Ask yourself why your country provides the least cost-efficient system of healthcare in the West, when it is arguably the most liberal of them all.
- bluGill 2y ago
  Most healthcare is not that life and death. A few years ago I needed surgery - it was scheduled for 2 months later (originally 1 month but then the surgeon got COVID so rescheduled), if I had any incentive to I could have found plenty of other surgeons in different hospitals who could have done the same surgery - but I have no incentive to. My in-laws lived near the Mexico border (until they died) and their church around the country regularly sent members to them when someone poor needed surgery to arrange with a much cheaper hospital in Mexico to take care of them. Mexico doesn't have the same standards as the US (or didn't 30 years ago), but it isn't hard to figure out which doctors are just as good as anyone else in the US if you research.
jrs235 2y ago
Wife just went into surgery literally 5 minutes ago. While waiting we had several doctors and nurses check in and ask basically the same questions. While this was happening I was thinking about how we're at the mercy of the hospital and doctors to use providers that our insurance will actually cover. We have NO (very little if any) control over those. What if between scheduling the surgery several months ago and now our insurance and the providers no longer have contracts with each other? What if the surgeon only uses anesthesiologist and nurse anesthetists that don't belong to our insurance providers network?
- jrs235 2y ago
  And I won't know how much I'll have to pay out of pocket for this for a least 6 months... I won't be able to recall or have the knowledge if they billed for things not provided too.
- FireBeyond 2y ago
  Thankfully reversed, but took a lot more effort than it should... I had a kidney stone, and had to be transferred from Hospital A to Hospital B for a procedure, as A didn't have a urologist available. I was transported by ambulance. At the destination hospital, a transporter (person with a gurney) was waiting at the ambulance bay and I was moved from ambulance gurney to hospital gurney and wheeled into surgery. I did not go through registration or admission in the ER. I did not speak to a provider in the ER. I was not put in a room, nor was a room allocated for me. But because the physical transfer happened (in the -hallway-, mind you) of the ER, they tried to bill my insurance for a $3,800 ER incident, on top of the OR and procedure costs.
jacknews 2y ago
"The article tries to paint a naive example where private equity buys everything and jacks up the prices. But why doesn't this happen to restaurants, or super markets or car mechanics?" Seriously? Look around. It does. Eg, ticketmaster? OK not PE, but the same deal, they buy/merge with competition and you get a monopoly, and then abuse. Try Matt Stoller's BIG newsletter for all the gore.
cameldrv 2y ago
Private equity is also going on a tear buying up plumbers, electricians, HVAC contractors, etc. Their strategy is monopolization, but also "optimization" of the business. For example, sending out commissioned salesmen instead of technicians on service calls so that the homeowner gets a new furnace instead of a $20 repair part. Some similar dynamics apply in that market in that if it's winter and your heater is broken, you want it fixed fast, that you have less knowledge/information than the tech/salesman. Also, you rarely hire these contractors, so they're much slower to get a bad reputation in a homeowner's mind. A lot of PE enshitification really just amounts to monetizing dishonesty. It used to be that an independent plumbing company would have an owner in the community who had to see his neighbors every Sunday in church, whose kids were on the little league team, etc, and he cared about his reputation in the community. The PE guys swoop in from out of town, and all of this stuff is just a number in a spreadsheet that they want to go up. They then just rewire the incentives in the company so that the workers have to be dishonest in order to make a living, and the number goes up.

by bko 2y ago

ldayley 2y ago

>But why doesn't this happen to restaurants, or super markets or car mechanics? It DOES happen with car mechanics. Leonard Green LP owns Caliber Collision, Carlyle Group owns Service King, and Icahn Enterprises owns AAMCO, Pep Boys, and Precision Tune Auto Care. While I don't have a specific example in my head about restaurants and grocery stores, I have to think that there are steps in the value chain that are absolutely owned and influenced by PE. Logistics? Real Estate? Real Estate is a great example: most commercial real estate is held inside PE portfolios via Real Estate Investment Trusts, and lease rents are an extremely non-trivial portion of business costs for EVERYBODY, espcially grocery stores and restaurants. But I agree about the many social and regulatory complexities regarding health care specifically. Often that complexity is what makes industries like health care such a lucrative investment for PE as it can be easier to hide incentive structures.

seligerasmus 2y ago

>But why doesn't this happen to restaurants, or super markets or car mechanics? This is a bafflingly underinformed rhetorical given the previous sentence. It happens all the time with the exact counter-examples you list. I'm honestly shocked you mentioned restaurants when articles were floating around HN less than a week ago about the death of Red Lobster by way of private equity: https://news.ycombinator.com/item?id=40233029 https://news.ycombinator.com/item?id=40233029 https://finance.yahoo.com/news/private-equity-keeps-failing-brands-091616738.html https://finance.yahoo.com/news/private-equity-keeps-failing-... https://www.pepboys.com/about-pep-boys/media-center/press-releases/2016/icahn-enterprises-completes-acquisition-of-pep-boys https://www.pepboys.com/about-pep-boys/media-center/press-re... https://www.reuters.com/breakingviews/private-equity-superstores-overstock-shelves-2023-11-08/ https://www.reuters.com/breakingviews/private-equity-superst... > Why don't new cardiologists enter the field? Because there is a cap of graduates that the AMA controls. The AMA doesn't have the authority to cap anything, and I encourage you to devote more research to your premises before relying so heavily on them. The cap on new doctors arises from a complex set of competing laws, policies, and blended public/private billing models for how doctors get trained and paid during residencies, which itself is downstream of how hospitals are funded and operated. There is no singular "do this -> get more doctors" solution; it is enormously complicated, often by both design and necessity, and is not easily untangled with the naive techie "just make a pull request" mentality that pervades the HN comments section. You also seem to misunderstand what the AMA does and have miscast it as some sort of central licensing authority when most of what they due is effete lobbying and begging physicians for donations/dues. They're annoying and probably a net negative for public health at this point, but they're not some boogeyman holding back the libertarian fantasy of an unregulated healthcare market. >Try to ask your doctor how much something costs and they'll stare at you like you have two heads. Imagine getting your car fixed without knowing how much it's going to cost I can't help but notice that you didn't mention the role of private health insurance when that undergirds much of the grousing. Doctors can't give you an answer on what your procedure will cost because they have to play a multi-stage game of Price is Right with a cartel of investor-driven private health insurers with the express business model of avoiding paying for those services whenever possible. The fact that everyone BUT the investors suffer from this arrangement is the actual, literal point of the article - it's even in the byline!

rwmj 2y ago

PE also loaded a UK supermarket chain with debt: https://www.theguardian.com/business/2023/mar/09/morrisons-slumps-to-15bn-pre-tax-loss-after-private-equity-takeover https://www.theguardian.com/business/2023/mar/09/morrisons-s...

waiquoo 2y ago
Also Congress caps the number of available residency slots, and that feeds back to med school admissions, etc. (https://www.fiercehealthcare.com/providers/senators-introduce-bipartisan-bill-increase-gme-slots-14000-2025-2031 https://www.fiercehealthcare.com/providers/senators-introduc...)

deepsun 2y ago

In Philippines their president wanted to remove the cap on doctors. Existing practicing doctors went on strike, they didn't want more competition. Funnily, population sided with doctors, instead of president.

alephnerd 2y ago
> they didn't want more competition It isn't because of that alone. In PH and Korea, senior doctors are expected to oversee junior or trainee doctors. These senior doctors are already overloaded with both giving care and training junior doctors. Adding more MDs won't change anything because the residency/training bottleneck still exists and there is no way to change that. This is why my SO left Vietnam for the US - getting paid $1-2k a year to train 6 juniors and work 60 hour shifts providing care is hellish. The same is happening in Korea as well, with senior doctors leaving for Japan and the US now.
- _factor 2y ago
  So the solution is to get more doctors who can then unload the burden. If you look at the cap on medical school enrollment in the US, it’s very much an artificial supply restriction to keep wages high.
  - alephnerd 2y ago
    > So the solution is to get more doctors How? You need a residency to actually learn how to do stuff. Just getting an MD is not enough to make someone ready to be a practicing physician. Graduating more MDs doesn't automatically create more specialists tomorrow.
    - bluGill 2y ago
      There must be short term pain - in 15 years you can have a lot more doctors, but we have to get them through school and residency first, and everyone already in the industry needs to work even harder to do that.

alephnerd 2y ago

> why doesn't this happen to restaurants, or super markets or car mechanics They get bought out by PEs as well. > The other problem is the regulation and groups like AMA My SO is a Doctor, and most of her overhead is from paperwork, billing, and IT. Managing a HRM, your clinic's IT, your clinic's medical devices, your clinic's digitized patient records, the paper trail needed to get paid, etc is hard. Most older practitioners have sold their clinics to PEs for that reason - they don't want to spend an additional 20-30 hours a week dealing with the issues above. This is why they sell off their practices to consolidated groups, because they will unify these services but give the Doctor a paycheck.

infecto 2y ago
That has been my insight as well. I don't think PE is the problem here. We love to hear the negative stories but there are also lots of success stories. From the healthcare industry, I believe the primary care model is broken. There is a nationwide shortage of primary care doctors, usually the ones wanting to get in primary care enjoy the touch on patients. The problem is what you outlined, to run a primary care practice you need to employ a number of people that creates overhead that now requires you to be very rigid in the practice to ensure you can both cover your expenses and still make a salary yourself.
- alephnerd 2y ago
  Yep! The American Primary Care model doesn't work, but the Canadian and British Single Payer model doesn't work either. You're damned if you do, and damned if you don't
- WkndTriathlete 2y ago
  The shortage of PCPs is a money problem, not a symptom of a broken model. People smart enough to go to med school are (generally) also smart enough to do an ROI analysis. If I can make $500k/yr as an oncologist and pay off my student loans in 10 years vs. getting paid $150k/yr as a PCP and pay off my student loans in 30 years, which route am I going to choose? People that want to be PCPs are making the choice to go into higher-paying specialties just because it is expensive to become a doctor in the first place. Obviously it is possible to change the economic incentives to increase the supply of PCPs. One simple way would be to just create full-ride scholarships for those that want to be PCPs to dramatically increase the ROI for being a PCP.

yterdy 2y ago

>But why doesn't this happen to restaurants, or super markets or car mechanics? It does. The reasons you cited just makes it worse in medicine.

bko 2y ago
I don't know. I kind of like my restaurant, super market and car mechanic. System seems to be working well...
- jklinger410 2y ago
  Typical libertarian response, falls apart at the first sign of complication.
  - tracker1 2y ago
    I'm pretty Libertarian myself... the issue, to me, comes from treating companies/corporations as "people" in terms of political speech, etc. I don't think collective groups should be able to donate to political campaigns or non-profits unless they have open books and only take contributions from individuals or orgs that likewise have open books. I also think that politicians should have to pre-declare by a day or more any financial trades. Corporations are allowed to exist in a state beyond what an individual can, and as a balance should be very limited in execution and through the past century in particular are anything but. Their power is a grant of govt, and should also be limited. In the end, that's where I stand on it. I'm all for maximizing personal liberty, and even small business allowances. Major companies should be focused on stability with growth or divestment. Foreign owned companies should be more limited even. That just isn't the case today, and it's a shame.
- richbell 2y ago
  Something can be a widespread issue without affecting you personally.
  - glenstein 2y ago

bitwize 2y ago

Say it with me: MEDICINE IS NOT A MARKET GOOD. https://www.ncbi.nlm.nih.gov/pmc/articles/PMC2585909/ https://www.ncbi.nlm.nih.gov/pmc/articles/PMC2585909/ The solution is to socialize it.

senorrib 2y ago
[flagged]
- lenerdenator 2y ago
  It's so far from being the solution that the majority of the Western world implements it as a solution to the problem, and the citizens of those nations live longer and spend less, cumulatively, on healthcare than the United States.
- sofixa 2y ago
  > SOCIALIZING IS NEVER A GOOD OPTION I mean... do you even knowledge? Words? Logic? Think? Counterpoint number one: transit. Counterpoint number two: utilities. Counterpoint number three: healthcare. In all three of those natural monopoly, little elasticity, high upfront costs, "goods", we have plenty of examples of countries and localities with "socialised" (centrally managed by a public entity, subsidised to cover some to most of the costs) and with "private" ones. Unquestionably "socialised" ones in similarly developed countries perform much better - lower cost in total and to consumers, better coverage, better outcomes. You can have all things that make sense be managed centrally, and everything else left to a free (ish) market. It's not a binary choice all or nothing. The UK is a perfect example because they privatised transit and utilities, and the result is a steep decline in quality with increasing costs, and that's not even counting externalities like water utilities dumping sewage in rivers and the sea.
- FrustratedMonky 2y ago
  But also, the free market is not the solution either, for inelastic goods dealing with life/death. See, price of insulin. OR, at least make a free market for real. Make insurance companies compete across state lines, make charges transparent not a surprise gatcha after the fact. Nobody would take their car to get fixed and accept something like "I know you came in for oil change, but we decided to replace the break rotors, here is a bill, you have to pay or we don't give the car back". Sadly, all the 'free market' politicians, are in the pocket of the industry and work to prevent a 'free market'.

lenerdenator 2y ago

> But why doesn't this happen to restaurants, or super markets or car mechanics? It does, all the time. These places just offer services that are less prone to "whatever price it is, I'll spend it".

chii 2y ago
> less prone to "whatever price it is, I'll spend it". not all medical needs are like that. Only in emergency care. For things like a regular checkup, a flu shot, or obesity etc, you have time to shop around. So not unlike the car services. Except that the provider of healthcare is paid highly, and has been limited in supply like the parent poster's comment. Why are doctors cheaper in cuber? They cure the same diseases after all, and likely learn off the same knowledge.
- lenerdenator 2y ago
  You'd be surprised how much "emergency care" covers. A lot of people just end up going to the emergency room for colds, mild flu, persistent mild pains, etc. When Jimbob goes to the emergency room at his local hospital because he has a cough that just will not go away, he's probably going to walk out of there with a script for some cough syrup or antibiotics and not a lung cancer diagnosis. Either way, he's there, it's made him miserable enough to get up and go somewhere, and he's very unlikely to want to leave without some sort of proposed solution to his problem. So he'll pay what the provider puts on the paper without shopping around. Should he go to an urgent care center or make an appointment with a PCP? Absolutely. But he didn't. And there's millions of Jimbobs. And that's before getting into the "frequent fliers" who are on the fringes of society and see a visit to the emergency room as a guaranteed way to experience at least some human compassion.
bko 2y ago
I don't understand this idea that there's no demand elasticity for healthcare. If you need to go to a doctor you have choices. Most healthcare isn't emergency room visits. And the whole "health is priceless" is laughable considering obesity and smoking. You're paying money to be less healthy and now you tell me "for my health, whatever the price is I'll spend it".

gbnvc 2y ago

But private equity objectively does jack up the prices on those things. It just doesn’t own those businesses. The whole point is that it’s unsustainable to run a business that way. Look at these absurd restaurants prices, it’s private equity jacking up the prices on food and labeling it as “inflation”.

delfinom 2y ago

> But why doesn't this happen to restaurants, or super markets or car mechanics? Restaurants too have slowly been gobbled up in my area of NY suburbs into larger groups. I think the Main St here with 20 or so restaurants is owned by just 3 groups. Supermarkets are an incredibly low margin business and they would have to compete with existing players on those thin margins including titans like Walmart. There's not much more blood to extract there. Independent mechanic shops have been dwindling naturally because it's too expensive for newbies to get into the field, especially between rent and needing all their own tools. End of day, formally "car shop" areas here are being bulldozed for luxury rental apartments.

JoeAltmaier 2y ago
Margins is half the story. You get 1% on a loaf of bread, that's reported as 1% margin. BUT you turn that loaf around every day for a year, that's 365% margin, annualized. Shoe stores, now they have a problem. They don't turn the inventory over but monthly or worse. But McD's? They sell that hamburger a thousand times a day.
- krisoft 2y ago
  > You get 1% on a loaf of bread, that's reported as 1% margin. BUT you turn that loaf around every day for a year, that's 365% margin, annualized. I don't think that is how margins work. Let's say you sell a unit of bread for $100, but you spent $99 the make the bread that's a 1% margin. If you sell a single bread per day for 365 days you earned $36500 and spent $36135 to make those bread. That is still a 1% margin.
  - Workaccount2 2y ago
    I think they are confusing compound interest with margin.
  - JoeAltmaier 2y ago
    You spend the same $100 every day - you got that back when you sold the bread. On that cash balance, you make $1 every day of the year. That's what annualizing does. It's on the dollars invested, not the money thrashed.

ed_elliott_asc 2y ago

Anytime the finance industry get involved and sell tailored loans then prices rise astronomically. Housing? Yep mortgages, people can rarely afford a house without a large mortgage Cars? Yep, most cars are bought on finance, people couldn’t buy new cars without the finance. Health? In the us, insurance companies provide the finance. I really wish society would have stopped this in its tracks.

delfinom 2y ago
>Housing? Yep mortgages, people can rarely afford a house without a large mortgage Bad example, mortgages keep jumping because property values keep increasing. Property values keep increasing because demand is exceeding supply. As more people can access mortgages due to lower rates, the demand shoots up and so does the property value which leads to a race to the top (bottom). Lol >Cars? Yep, most cars are bought on finance, people couldn’t buy new cars without the finance. Yea here we don't have a real lack of car supply. People are financing based on _wants_ rather than needs.
- yterdy 2y ago
  >Property values keep increasing because demand is exceeding supply. Not quite. Property values keep increasing because the monetary supply keeps increasing, one effect of which is that large property owners can corner markets by buying up properties and warehousing them until they see the prices they want to sell for. This appears as a lack of supply (not enough houses) when it's really a lack of market forces forcing sales (not enough houses on the market). The remedies to these two situations are very different.
bko 2y ago
A mortgage and car loan is credit (borrow money). Overall it's a net good for consuners IMO because I can't afford to buy a house cash and rates are artificially low for mortgages bc most are guaranteed by Fannie Freddie. Even private mortgages are competitive. You can borrow money for 30 years, non recourse, no prepayment penalty and get 4:1 leverage and the rate you pay is a few points higher than the government pays? Insanely good value. What credit do insurance companies provide? You pay them and they pay the doctor based on some negotiated rate. They don't front you the money and you have to pay them back. What are you talking about?

fzeroracer 2y ago

> But why doesn't this happen to restaurants, or super markets or car mechanics? It does? How did you miss all of the recent news around Red Lobsters acquisition by PE. Where they bought it, saddled it with debt, sold the land under each restaurant, pocketed the money and then left?

bluGill 2y ago
Don't forget that Red Lobster was already a failing business. The PE that did this is also running several other restaurants that so far are successful. They know what they are doing, and they also know where nothing can save the restaurant and so made the decision to get their losses.
- FireBeyond 2y ago
  They didn't make the decision to salvage their losses. Like you said, it was a failing business. PE didn't come in with the goal to turn Red Lobster around. EVERYTHING the parent poster described was things PE didn't do to save Red Lobster, it was "How can we suck this thing dry before it dies". The most charitable thing that you could say is that PE was putting Red Lobster out of its misery. While making bank on doing so.
- pnutjam 2y ago
  What they did is akin to saying Grandma can stay with me, but she's dying so I'm going to sell her wheelchair. Then I send her to stay with my sister and make them rent the wheelchair back, so other care can't be afforded and her health suffers and she dies. Then you come along and say, "She was already dying".
yterdy 2y ago
Exactly. Its failure was a self-fulfilling prophecy imposed by PE (and other malicious financial actors). Like Toys R Us and many others, it was a stable but unremarkable business that might have been in dire straits at some point in the future if changes weren't made to update its approach. It was not, as others allege, "failing" - at least, not until PE came along and forced it into an untenable position. But that's what they do.

api 2y ago

Just like housing there's ultimately a cartel that limits supply. In medicine some of that limit is justified by preventing the whole field from degenerating into gimcrack quackery, but the limits aren't just around certifications or credentials or experience. They are, as you state, hard limits in many cases designed to jack up prices. With housing the cartels are more decentralized to the neighborhood but the effect is the same. PE gets blamed there too when they're simply taking advantage of the situation to extract some of that rent.

ThomPete 2y ago

It doesn't happen because there is competition in those areas. This is why lasik eye surgery is extremely cheap as it's not controlled and gated by legislation which keeps down the supply.

lr4444lr 2y ago

That, and the barriers to entry of the practice of medicine. I'm not implying that credentialing is bad, but we need to be honest about the constraints on the supply side of the market.

lettergram 2y ago

Was just about to comment on the AMA when I read this. Not only do they do caps on total number. They also do ridiculous race quotas, so you’ll see good students skipped for subpar students. On its face, you may think that’s going to improve equity… but in reality, subpar doctors increase malpractice insurance (~1/3 of the doctors fees go to insurance) and increase prices on everyone. So you end up with the entire population, especially the poor, feeling the brunt of the medical cost. I worked in medical billing for years and my suggestion (and all the people in billing agree that I talk to) is to make direct insurance payments illegal. It’s fine to have insurance reimburse you, the payer. But don’t have them negotiate or talk to the medical staff. Then everyone pays less because the hospital don’t know what you can pay. Great example I had recently, I had a bill of $75 for a regular medicine. Insurance covered $35 and I paid $40. I then went off instance when switching for a month. It was $40 off insurance. The same price, the pharmacy was just pocketing the extra $35. They know what you can pay already, so there’s no negotiating or downward pressure on price.

presentation 2y ago

Whatever the US does, it needs to realize that the artificially constricted supply of healthcare needs to be loosened. If we throw more money at consumers for healthcare while keeping the tight supply of doctors and hospitals constant, then you just end up paying more money for the same services. Prices go up, doctors, hospitals and insurers get richer, nobody else is better off.

s1artibartfast 2y ago

>diners are forced to sign up for some company to pay for all the meals. What would happen if diners split their bills evenly every month? What would happen if the company profit is legally capped as a percent of that bill? I think these are the biggest factors.

marricks 2y ago

> But why doesn't this happen to restaurants, or super markets or car mechanics? There's plenty of examples against your case already in the comments against other points but the reason medical care is so damn expensive is the same reason your internet bill is so expensive (for poor quality): lack of choice. You don't really have an option to haggle or shop around for the best plan when you broke a leg and are being rushed to the nearest hospital. You made the choice on plan half year ago when you were healthy and you're in no state to have a calm discussion with the ambulance about what has the best price per value with your tibia jutting out of where your calf should be.

banannaise 2y ago
Important to note that this is still pretty true for non-urgent care. My city has three somnologists' offices. If I have a sleep issue, I may have options, but there are very few of them. It's much more plausible for someone to buy up the three somnologists than to buy up, say, all the pizza restaurants in the city, and it's harder for someone else to start up a new somnologist than to start up a new pizza restaurant.

derbOac 2y ago

I agree with you but it's maybe worth pointing out it's even worse than your example. It's as if not only was there a cap on the number of waiters, there were strict regulations about how you got your food, and that there couldn't be restaurants where you serve yourself, have buffets, or even that you could feed yourself cooked meals at home without going to a restaurant. All the menus have to be approved by a national food association etc etc etc. There's so many factors involved in healthcare problems in the US it's impossible to pin it on just one thing or even a couple of things. I also feel like the public discourse seems to be largely out of sync with just how much change is needed to how things are done. I kind of thought the pandemic might have created an emergency situation that would have leveled the status quo and allowed for a restructuring of things along the lines that's needed, but its seemed like it just barely held on and then went back to things as usual.

tracker1 2y ago
To me, it was the biggest example of why we need at least partial (say 50%) domestic production and to require at least dual sourcing (which would require licensing). Which would have the side effect of at least some competition. I'm also less than convinced the term for Patents is appropriate for a lot of industries today in general. Not to mention restrictions on negotiated rates by medicare and other agencies. I'd personally like to see all Govt employees, Veterans and Medicare replaced by a non-profit insurance corp, that is able to negotiate and establish baseline care, without eliminating private coverage, but anyone can buy the public plan (employers etc) as a way of leveling (some) competition. As it is, the recent South Park special does a relatively good job of demonstrating how messed up the system is.

manishsharan 2y ago

>> But why doesn't this happen to restaurants, or super markets or car mechanics? It also happens to restaurants with much more sever outcomes Private Equity bought Sears, sold the land under Seas to thmeselves, charged Sears exorbitant rent and eventually bankrupted the company. https://www.cbc.ca/news/business/sears-lawsuit-lampert-1.5104151 https://www.cbc.ca/news/business/sears-lawsuit-lampert-1.510... Red Lobster also filed for bankruptcy for similar real estate deal related reasons . https://finance.yahoo.com/news/bad-real-estate-deal-not-173015627.html https://finance.yahoo.com/news/bad-real-estate-deal-not-1730...

Aunche 2y ago
Sears is an odd example because Eddie Lambert didn't want to treat it as private equity investment and he wanted to take operations in his own hands. He thought he was the next Warren Buffett, but he wasn't, so Sears hemorrhaged money and had to sell off their own parts. Nobody besides Lambert's own hedge fund thought it was a good idea to buy mall real estate, which is how it all ended up there. This didn't work out for the hedge fund either, and together with the Sears bankruptcy is why his net worth nearly dropped in half while all his billionaire buddies were enjoying the longest bull market in history.

jmclnx 2y ago

> But why doesn't this happen to restaurants, or super markets or car mechanics? Because you do not have to go to those places. Years ago, when I was a kid, I heard my parents, uncles and aunts have a big discussion while I was in bed. They were talking about the trend of For Profit Health Care, the outcome they came up with was prices will eventually raise up to extortion levels, why, because that is what everyone needs. So here we are, being extorted by insurance and equity firms. And many Doctors are in the same boat with us, they are being squeezed with insurance costs and bureaucracy. My Dr has to have 3 people working in the office just to deal with health Insurance. As a kid, it use to be 1 nurse and the nurse would deal wit paper work and help the Dr when needed. Plus their insurance costs were low compared to now.

dartos 2y ago
My parents are dentists and most of the memories from when I was a kid (pre 2013) of my dad working was him dialing up and arguing with insurance providers. They’d send checks 6months late and often miss them. They also forced certain prices for him to stay “in-network” Insurances don’t seem to help anyone.
- bluGill 2y ago
  Insurance helps those who pay them. Just note that for most Americans they are not the one paying.
  - dartos 2y ago
    For dental insurance, those insurance companies force healthcare providers to keep artificially high prices, even for out of network patients. For example, with my parent’s independent office, people would come in without insurance and unable to pay the high fees for say a filling or a crown. My parents were technically able to charge much lower prices (more than half off in the case of normal cleanings,) but were unable to because of the contract they had with their insurance network. Moreover, the listed price mandated by the insurance was not the same as the payout my parents received after filling the claim. (The payout was always less. Sometimes much less than the mandated price) I don’t see who benefits in this situation besides the insurance company. Even if my employer pays for my insurance, I still need to meet some premium most of the time. And what I pay is inflated because of the in-network contracts Consider also that, in the states at least, dental insurance is separate from medical.

eganist 2y ago

> But why doesn't this happen to restaurants, or super markets or car mechanics? Not sure, but the counterpoint is the housing crisis. So painting it as something exclusive to healthcare suggests that there's no possibility of it being a systemic problem with Private Equity. https://www.propublica.org/article/when-private-equity-becomes-your-landlord https://www.propublica.org/article/when-private-equity-becom... One of the other comments raised said "because you don't have to go to those places," and it intuitively feels correct that basic needs are ripe for price gouging when supply is limited. But I'm out of my depth. Happy to hear other comments.

FrustratedMonky 2y ago

"naive example where private equity buys everything and jacks up the prices" Naïve, but not wrong. There are a lot of factors, but jacking up prices on an inelastic goods is pretty common. And if you are suffering a heart attack, getting help is inelastic. Nobody needing health care is like "Wait, don't save me, let me shop around a little, do you take coupons".

giancarlostoro 2y ago

It's a two-fold problem. Think of health insurance like "the mob" it gives you leverage if your employer has a lot of employees vs if you work for a small company. They can say "oh we're taking you out of our network since your pricing is insane" and actually holds a lot more weight than a small fish company trying the same. Then you have the fact that not everyone pays, so they subsidize the cost. Think of all the homeless people who got treated. Never take a loan unless you're literally battling something life threatening and that's your only option available. Otherwise, always haggle the billing department down. It's all a messy cost because its all subsidized. I got this information from a former hospital billing manager who I used to report to at a former software job. I don't know what can fix all of this, but it feels like the college issue of throwing more money at it just gives them free reign to raise prices at ridiculous rates.

srackey 2y ago

Correct. The industries with shortages (housing, healthcare, education) are ALSO the ones with Soviet-tier central planning. Honestly, we shouldn’t be surprised!

thayne 2y ago

There are other factors as well. For example,if a single restaurant or supermarket increases its prices, you can just go somewhere else. But switching doctors is much harder to do. And is made more difficult by insurance networks. And if you don't like your insurance, you can't really switch, without changing jobs or paying a lot more to get individual insurance instead of using discounted insurance from your employer and effectively giving up compensation.

piva00 2y ago

> But why doesn't this happen to restaurants, or super markets or car mechanics? It does: Red Lobster, Fairway in the USA, Morrissons in the UK, some others [0]. [0] https://foodinstitute.com/focus/private-equity-bankruptcies-2/ https://foodinstitute.com/focus/private-equity-bankruptcies-...

sofixa 2y ago

> You have to ask yourself what makes healthcare unique to nearly every other well functioning market in the US. The bigger issue is there is third party paying for things. Try to ask your doctor how much something costs and they'll stare at you like you have two heads. Imagine getting your car fixed without knowing how much it's going to cost Are other markets well functioning in the US? I'd argue Private Equity is ruining a lot of them. Also, you're missing one big fundamental issue. Healthcare is not a good candidate for a "free market", because it's an inelastic "good". You can't choose when to get sick or have health issues. You can't change the fact that prevention saves lives and money. So, healthcare cannot ever be a free market and function properly. The only way to make it function is either by centralisation or heavy regulation. Curiously the US is practically the only country that managed to screw up and have a bad mix of both options while also having a broken market.

L_Rahman 2y ago

It is also happening to restaurants and HVAC installers and plumbing businesses. They just got around to buying those up a little more recently. We should expect the price and service consequences to start showing up in the next 5-10 years.

croes 2y ago

Other countries also have third parties paying for things and regulations but don't have the same high prices. So it's not that simple.

ivpmto 2y ago

> What would happen to restaurants if new waiters had to go to school for 8 years I am not sure if there are many people out there who would want to see a cardiologist that was trained for the same duration as a waiter.

FireBeyond 2y ago
Wait til you learn about colleges offering "accelerated RN" to "accelerated RN-BSN" to ARNP pipelines that can have you functioning as a fully independent provider 6-7 years out of high school...

willcipriano 2y ago

Fast food prices have doubled since the start of the pandemic.

toomuchtodo 2y ago

It does happen to restaurants: red lobster is the most recent example. PE raised the rent on the ground leases to where it was no longer sustainable for the operators of the eatery. https://www.nbcnews.com/business/consumer/private-equity-rolled-red-lobster-rcna153397 https://www.nbcnews.com/business/consumer/private-equity-rol... > How private equity rolled Red Lobster > When a private-equity firm bought the iconic seafood chain in 2014, it sold the real estate under the restaurants for $1.5 billion. Then the restaurants struggled to pay the rents. > In recent years, private-equity firms have invested heavily in all areas of industry, including retailers, restaurants, media and health care. Some 12 million workers are employed by private equity-backed firms, or 7% of the workforce. Companies bought out and indebted by private equity go bankrupt 10 times more often than companies not purchased by these firms, academic research shows. In a report this month, Moody’s Ratings said leveraged buyouts like those pursued by many private-equity firms drive corporate defaults higher and reduce the amounts investors recover when the companies are restructured. TLDR Corporate strip mining and dumping the enterprise carcass on bag holders.

tacticalturtle 2y ago

> Why don't new cardiologists enter the field? Because there is a cap of graduates that the AMA controls. From my understanding - the choke point here is Medicare funding for residency slots- which funds most of the residencies in the US. Now the AMA did absolutely lobby for limiting the supply in the 90s: https://www.nytimes.com/1997/03/01/us/doctors-assert-there-are-too-many-of-them.html https://www.nytimes.com/1997/03/01/us/doctors-assert-there-a... But they’ve done a complete 180 since then - but it’s ultimately up to the federal government.

resource_waste 2y ago
There is no reason for the richest profession in the nation to require taxpayer funding for their graduate education. Most people pay for college. Why are we using taxes to pay for rich people's college? EDIT: Rate limited and replying to 'FAANG Workers make the same as doctors': "You didn't include any numbers. You also decided to choose the most elite workers living in a high cost of living area to compare to. Not fair! Not fair! There is a bit of malice to do such an unequal and unfair comparison. If we look at reality, you are never going to have the moral high ground. The wages are not-market rates, its due to lobbying/artificial scarcity that benefit the members only. The majority lose and the richest profession gets richer. I hope people can see past the pretty paint you were able to place over reality. "
- onlyrealcuzzo 2y ago
  Most doctors are not particularly wealthy. Probably close to half of doctors make less money than the average person working at FAANG. Medical school is outrageously expensive. If you think people are going to put up with the misery of being a doctor, delay any wages until 34, basically live a lower middle class life until 50 while paying of medical school debts, and then barely be in the top 10% after that - you're gonna have a really bad pool of people signing up to be a doctor. We absolutely do not need to be making medical school EVEN MORE expensive.
  - FireBeyond 2y ago

l1nktlst 2y ago

You presume all this is required by others but it’s not. That would be too specific an obligation to validate your expectations.

TheOtherHobbes 2y ago

It does happen to restaurants. Ask Red Lobster. And to supermarkets - like Morrisons in the UK. And department stores - like Debenhams in the UK. They join a long list of viable businesses that were/are vampirised by PE for quick returns. Medicine in the US is just the most perfect platonic example of a PE chokehold on a critical market sector which has drastically negative effects on the rest of the economy, and on individuals who have to deal with it.

banannaise 2y ago

> But why doesn't this happen to restaurants, or super markets or car mechanics? I think the word you're missing is yet. Private equity hasn't bought everything and jacked up the prices yet because they have plenty of targets generating reliable profits for them, and they don't have the funds to buy out the entire restaurant industry while also doing everything they're already doing. They would also still have to compete with major national players (McDonald's et al.) who are impossible to buy out, which is something the healthcare industry didn't really have when private equity came knocking. And notably, it is starting to happen to car mechanics - particularly those who are contracted by insurance companies. It's not hard to imagine a future where they move on to smaller independent car mechanics who are gradually bought out by megacorps and/or private equity, the industry consolidates heavily, and everything gets worse.

nextworddev 2y ago

Except it does happen to restaurants and super markets.

deleted 2y ago

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mikepurvis 2y ago

"third party paying for things" I think it depends heavily on what the motivations are for that third party. I live in Ontario, Canada, and OHIP pays for any hospital visits I need— but they're not a for-profit entity, they set the prices based on what's fair in collaboration with providers. Notably, OHIP does not cover optical, dental, physio, massage, psychotherapy, or prescription drugs, so those are all paid for by conventional insurance, typically tied to your employer, with predictable results— it's all more expensive than it should be, pricing is often vague and hard to predict (especially with dental), and people defer care, making what should be simple problems into more complicated ones.

__MatrixMan__ 2y ago

Food and cars are things you can touch. Health isn't. Markets work well for things you can touch, and poorly for things you can't. It's just the natural limits to our concept of property at play. Maybe everybody knows what you mean if you say that you're going to go down the street and buy yourself a surgery, but nobody thinks it's a natural way to talk about that sort of thing.

thrance 2y ago

Healthcare is an inelastic market. People will pay wathever the cost of a product is, because it is literally a matter of life or death. Ask yourself why your country provides the least cost-efficient system of healthcare in the West, when it is arguably the most liberal of them all.

bluGill 2y ago
Most healthcare is not that life and death. A few years ago I needed surgery - it was scheduled for 2 months later (originally 1 month but then the surgeon got COVID so rescheduled), if I had any incentive to I could have found plenty of other surgeons in different hospitals who could have done the same surgery - but I have no incentive to. My in-laws lived near the Mexico border (until they died) and their church around the country regularly sent members to them when someone poor needed surgery to arrange with a much cheaper hospital in Mexico to take care of them. Mexico doesn't have the same standards as the US (or didn't 30 years ago), but it isn't hard to figure out which doctors are just as good as anyone else in the US if you research.

jrs235 2y ago

Wife just went into surgery literally 5 minutes ago. While waiting we had several doctors and nurses check in and ask basically the same questions. While this was happening I was thinking about how we're at the mercy of the hospital and doctors to use providers that our insurance will actually cover. We have NO (very little if any) control over those. What if between scheduling the surgery several months ago and now our insurance and the providers no longer have contracts with each other? What if the surgeon only uses anesthesiologist and nurse anesthetists that don't belong to our insurance providers network?

jrs235 2y ago
And I won't know how much I'll have to pay out of pocket for this for a least 6 months... I won't be able to recall or have the knowledge if they billed for things not provided too.
FireBeyond 2y ago
Thankfully reversed, but took a lot more effort than it should... I had a kidney stone, and had to be transferred from Hospital A to Hospital B for a procedure, as A didn't have a urologist available. I was transported by ambulance. At the destination hospital, a transporter (person with a gurney) was waiting at the ambulance bay and I was moved from ambulance gurney to hospital gurney and wheeled into surgery. I did not go through registration or admission in the ER. I did not speak to a provider in the ER. I was not put in a room, nor was a room allocated for me. But because the physical transfer happened (in the -hallway-, mind you) of the ER, they tried to bill my insurance for a $3,800 ER incident, on top of the OR and procedure costs.

jacknews 2y ago

"The article tries to paint a naive example where private equity buys everything and jacks up the prices. But why doesn't this happen to restaurants, or super markets or car mechanics?" Seriously? Look around. It does. Eg, ticketmaster? OK not PE, but the same deal, they buy/merge with competition and you get a monopoly, and then abuse. Try Matt Stoller's BIG newsletter for all the gore.

cameldrv 2y ago

Private equity is also going on a tear buying up plumbers, electricians, HVAC contractors, etc. Their strategy is monopolization, but also "optimization" of the business. For example, sending out commissioned salesmen instead of technicians on service calls so that the homeowner gets a new furnace instead of a $20 repair part. Some similar dynamics apply in that market in that if it's winter and your heater is broken, you want it fixed fast, that you have less knowledge/information than the tech/salesman. Also, you rarely hire these contractors, so they're much slower to get a bad reputation in a homeowner's mind. A lot of PE enshitification really just amounts to monetizing dishonesty. It used to be that an independent plumbing company would have an owner in the community who had to see his neighbors every Sunday in church, whose kids were on the little league team, etc, and he cared about his reputation in the community. The PE guys swoop in from out of town, and all of this stuff is just a number in a spreadsheet that they want to go up. They then just rewire the incentives in the company so that the workers have to be dishonest in order to make a living, and the number goes up.