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Private equity snaps up disability services, challenging regulators
- stuaxo 1y agoPrivate equity is in need of some severe regulation, how many of the ills of society go back to this sort of thing ?
- Veliladon 1y agoJust about all of them.
- LMKIIW 1y agoFeels like it would be easier to count the ills that _don't_ go back to this sort of thing.
- JumpCrisscross 1y agoThe fact that it’s private equity is mostly a red herring. The problem is the rules can be broken with minimal consequence. Swap out PE for another profit-seeking structure and you’ll tend towards the same outcome, as the bad outcompetes the good.
- phkahler 1y ago>> Swap out PE for another profit-seeking structure and you’ll tend towards the same outcome, as the bad outcompetes the good. The optimum might be an employee-owned facility, but even there you'd have incentives to increase profit - everyone would like to get paid more for whatever it is they do. PE has the strongest conflict of interest though, as they are simply investors seeking profit and have nothing else in the game.
- JumpCrisscross 1y ago> PE has the strongest conflict of interest though, as they are simply investors seeking profit This is the red herring. PE is one of many categories of financial investors. (Worse, it has become incredibly nebulously defined.) I'd also argue that employee-owned coöperatives might be the single structure worse for healthcare than a rapacious, distant capitalist. The latter can fuck around with the books. The former can fuck with the charts.
- gruez 1y ago>PE has the strongest conflict of interest though, as they are simply investors seeking profit and have nothing else in the game. How is that a "stronger" conflict of interest than the previous case?
- tracker1 1y agoI'm inclined to agree... I think the issue is that there are some areas where liabilities and a severe lack of consequences should not be the same as others. In a similar vein, even as a libertarian minded person, I don't like the idea of private prisons at all, I don't feel a company should be incentivized towards keeping people locked up and suspended of their rights. Not that I don't believe in prisons, only that they shouldn't be businesses. I think with medical facilities, that there should be far less protections from liability, and more severe repercussions from any coverup, non-reporting or mis-reporting of harm/accident/injury. Not to mention more, regular inspections and audits, along with camera/recording requirements.
- deleted 1y ago[deleted]
- strbean 1y agoI think the big issue with private equity is the lack of transparency. Seems like a big part of their bread and butter is anti-competitive or otherwise legally questionable self dealing between their holdings. Things that would quickly face public scrutiny if those companies were publicly held and had the associated reporting requirements.
- JumpCrisscross 1y ago> the big issue with private equity is the lack of transparency This is all private ownership, including non-profit.
- N_Lens 1y agoPrivate equity is a massive juicer that’ll try and squeeze money out of anything, destroying all the inherent value in the process.
- ziofill 1y agoand pumping up costs
- pixl97 1y agoIncreasing costs solely for the sake of increasing profits that is.
- staplers 1y agoAn increasing monetary base ensures this. It's simple economics and baked into most monetary policy around the globe. If you take issue with increasing prices, monetary inflation (printing money) is the root cause.
- convolvatron 1y agoI think we're talking about cashing out a company by prioritizing short term returns over long term survival (including insulting your customers, degrading the brand, committing borderline fraud, etc) . that's pretty orthogonal to broad structural inflation.
- staplers 1y agoAsk anyone in leadership and you'll find the goal is always "outpace" inflation with shareholder value. It's very simple and so many fight tooth and nail to see what's right in front of them.
- grues-dinner 1y ago> destroying all the inherent value Not all is destroyed. Some of the value is diverted to PE wallets. Setting 900k of someone else's value on fire in order to set up a updraft to push 100k into your pocket is a sweet, profitable deal for you.
- suzzer99 1y agoVampires
- caminanteblanco 1y agoI used to work for an adult daycare, for people with mental disabilities, and the amount of times people would play fast and loose with state regulations was concerning. This is an area where the government needs to be hyper vigilant, since some of these clients can't easily stand up for themselves.
- deleted 1y ago[deleted]
- OhMeadhbh 1y agoMy hat's off to you. That's often difficult, underpaid and important work.
- caminanteblanco 1y agoThe clients were usually a pleasure to work with, but management was atrocious, and encourage/allowed things that should not have happened. And this was a sole proprietorship, definitely not private equity. I'm not sure which ownership structure fosters more moral hazard, but regardless, there are a lot of issues in the industry that need addressing
- AznHisoka 1y agoCan you give us some examples on how they would play fast and loose with some regulations?
- caminanteblanco 1y agoThings like handing out punishments, restricting access to certain rooms, or just generally not acting like the client is the one paying for the service, but instead like the daycare is their guardian
- bombcar 1y agoIf they can’t just walk out and leave, the daycare is their guardian, at least while they’re in their care.
- greesil 1y agoThis, and little league. My goodness what will they think of next?
- sonicggg 1y ago[flagged]
- JumpCrisscross 1y agoHealthcare, especially the patient-facing part, isn’t like other services. If we want private ownership of this infrastructure it has to look more like either a utility, where the state has a direct say in service changes and pricing, or a partnership, where unlimited liability flows through to the owners. I’m a fan of the latter. Limited liability was an amazing invention. But it’s not appropriate for healthcare. Turn these services into partnerships and you’ll see the give-a-shit factor quintuple overnight. (You’ll also probably see a reduction in leverage.)
- lokar 1y agoI agree, there should be no limited liability for for-profit healthcare organizations. And non-profit health care orgs should have strict regulation, and the state should appoint some of the members of the board.
- JumpCrisscross 1y ago> there should be no limited liability for for-profit healthcare organizations Any. If you ringfence it to for-profit companies you'll just wind up with non-profits either siphoning profits away or exorbitantly compensating their leadership.
- lokar 1y agoThat’s why all high revenue non-profits should have some board seats appointed by the state, and state audits, etc.
- JumpCrisscross 1y ago> all high revenue non-profits should have some board seats appointed by the state, and state audits, etc. Why would you want to politicise every non-profit like this?
- lokar 1y ago
- OhMeadhbh 1y agoI'm not going to defend private equity, but the article mentions only bad outcomes for services owned by private equity. To get a more complete picture, they should probably also see if there are problems with companies that aren't owned by private equity funds. And then look to see what the positive outcomes associated with both private equity owned and non-private equity owned. Which is to say... these are anecdotes that warrant further investigation, but then ensure effort is required only for equity fund owned services by looking at the whole picture. If there are industry-wide problems and you focus your effort on private equity fund owned services and companies, you might miss an opportunity to improve the entire industry. That being said... PE funds have a bad reputation for a reason. I would be surprised to find they're not the worst offenders.
- majormajor 1y agoThe consolidation is a big story and problem regardless of the type of parent company.
- gainda 1y agoWere you invoking Deus Ex when you said consolidation ? Because that's what I immediately thought of.
- nextworddev 1y agoDamn
- margalabargala 1y agoI am personally aware of at least one company which was bought up by private equity in the last 5 years, which has remained very much the same since. It hasn't taken on debt, it hasn't been parted out, it hasn't started optimizing for profit and reducing worker benefits. The new owners seem content to simply sit back and collect the profits of the company that were previously going to the family that owned the company before. That is to say, in greater than zero instances, PE has the capacity to be benign. I think the median PE firm is far worse than the median non-PE firm, but there exist outliers in both groups.
- codegeek 1y agoIt is a shame that Private Equity destroys businesses when they can do a lot of good if done correctly. I actually like the idea of buying a business to help it grow further but PE just doesn't get it and they are too short sighted and focus on short term profits to squeeze. Even the legendary Buffet has bad things to say about PE.
- simianwords 1y agoIs it correct to understand private equity as transferring service quality to the initial set of customers (who were subsidised) from the new customers who have to give up quality to make the whole venture feasible?
- JumpCrisscross 1y agoNo. Private equity means investors who buy equity in non-public companies. That's it. (It used to imply leverage, but that distinction has blurred away.) In popular discourse it's close to a meaningless term.
- simianwords 1y agoYou are technically right but I wanted to understand the bigger reason of why this happens: A company runs well. But then they sell to a private equity. The quality goes down. This is the common critique against private equity.
- Matticus_Rex 1y agoThere are a bunch of different patterns (not all of which reduce quality), but usually when a company is sold to PE and quality goes down it's because the company was in trouble, either because they weren't profitable (or were, but only on paper), or were in a liquidity crunch, or were facing down imminent changes that would make them unprofitable. People are often comparing to a situation where the company continued doing things that weren't sustainable long-term.
- simianwords 1y agoYes this is what I was referring to. So it’s like the past customers were borrowing quality from future customers. The blame is usually put on the private equity for reducing quality but I wanted to understand the bigger reason behind it.
- JumpCrisscross 1y ago
- chasing 1y agoWhy should something like "patient harm" get in the way of profits? What is this, communist Canada?
- KaiserPro 1y agoThis has happened with special needs schooling in the UK. Its basically caused costs to balloon to £10 billion. However this is not entirely down to private equity as, these support packages are now the only way to get specialist support that used to be provided by other state/charity providers.
- throwaway48476 1y agoPrivate equity is just following trends in scamming. https://kstp.com/kstp-news/top-news/minnesota-autism-expert-said-he-started-suspecting-fraud-a-year-ago/ https://kstp.com/kstp-news/top-news/minnesota-autism-expert-...
- slantedview 1y agoProfiting off of care provided to vulnerable or disabled people is, I'm going to say it, immoral. We should not be allowing this - for the simple fact that chasing profit inevitably means cutting the quality of care.
- washadjeffmad 1y agoI've often wondered at what point toying with healthcare at a large enough scale becomes eugenics with extra steps.
- skinpop 1y agowhen there's no need for the working class anymore?
- nickff 1y agoPE is profiting off regulatory barriers to entry in situations like this; it has little to do with who the clients are. The way to solve this is to lower regulatory barriers to entry, which will make these industries more competitive and less appealing to PE.
- lawlessone 1y ago>he way to solve this is to lower regulatory barriers to entry, Lower healthcare standards is what you mean.
- nickff 1y agoI think the level of care is only one factor, and often not the one that prevents new entrants. I work at a small electronics manufacturer, and can tell you that in my industry, the biggest regulatory obstacles have nothing to do with our quality levels or production processes. In any case, according to a number of the commenters on this article, the PE providers have already lowered their level of care.
- JCM9 1y agoGenerally speaking when Private Equity shows up you should run for the hills. Fast.
- Snakes3727 1y agoMy father is currently in a long term care facility. He was in that same one for almost 5 years and never had a problem. Last year it was acquired indirectly via a larger group owned by a private equity firm. This was not a low end place back in 2023. By the end of the last year not only had the cost increased by 30%. Internally there was a number of layoffs and quality shot down. Originally it was supposed to be 1 registered nurse per 4 people. By the end it was 1 "medical professional" per 20 who constantly rotated. Who would not answer if they had formal medical training. Before at night people could go for walks on the premises, or if they were hungry they could go get hot food prepared by staff. New management locked everyone in at 8pm. If you missed any meal time you were told cope. Food was not allowed in the "suites" anymore. My dad and his friends there would go get together and spend time at night or socialize. Not allowed anymore after 8pm you were locked in your room. I pulled my father out of there when he told me the above. Now his new retirement home is now also changing ownership.
- legitster 1y agoThis story as presented every time is a bit backwards. These thinly capitalized private equity groups are in the business of scooping up "distressed assets". Being the only buyer to show up and getting something for less than it's worth. The bigger story is that all of these business are up for sale and there are no better buyers. Our population is aging, the people who founded and run these private businesses are retiring en masse and cashing out. They don't have kids who want to run these businesses, and the workers of the business don't have the cash to buy it for themselves. So part of this is a story of inequality - these businesses were accruing lots of capital value faster than even top earners could save to buy them. But also, there is a clear and obvious policy fix - provide incentives for business owners to hand down their business instead of cashing out. Make it easier to provide long-term loans and financing for small-party buyers.
- siliconc0w 1y agoPE is essentially an active exploitation of the laws. I think you'd want to figure out a way to ensure there are long term incentives like requiring a 10x holding period or face very high short-term taxes for 'flipping' companies, similar to stocks. If a company fails any 'performance fees' or other such looting of the company should be forfeited and returned to creditors/customers/employees.
- RobRivera 1y ago> returned to creditors/customers/employees I appreciate the sentiment, however it should really be clarified, for the purposes of productive dialogue, that employees and customers do not own a business. Businesses are for-profit and have a balance sheet just like everyone else, and creditors and minority shareholders have a responsibility in the ecosystem. A creditor has a due-diligence obligation to determine credit worthiness, and a recent change in ownership could be part of that. Noone forces a creditor to give a loan. In any non-public share ownership of a company, the shareholder has agency to manage their holdings in the company, and if they are bearish, they should sell. Now the real grift is PE use of regulatory capture of a consumer. Consumers do not have much choice in the world of healthcare/hospice care. In that sense, the government has the power of the pen to adjust the law. I dont find any value in echoing a false entitlement to customers amd employees.
- Der_Einzige 1y agoSocialism is popular with gen Z. They will nationalize and expropriate.
- lillecarl 1y agoBut the market will adjust, right? Isn't that the core belief, that the market takes care of everything. I think the ideology of "market rules" at least semi-works until the market is manipulated, which is "always". I prefer appointing who manages things meant for public good through voting, it's not perfect but at least it's not ultimate profiteering by default.
- Nevermark 1y ago> at least it's not ultimate profiteering by default. Unfortunately, voting is a terrible hiring plan to get competency in a highly complex often opaque environment. I am currently lost as to what the right structure should be. It certainly is an interesting (and pressing) problem.