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Private equity turned vulnerable elderly people into human ATMs
- calvinmorrison 6mo agoPrivate equity didn't. People did. We really need to get rid of limited liability and corporate fictions.
- giwook 6mo agoThe intentions may be good but that's unlikely to happen in our lifetime. What might be a more feasible solution?
- daveguy 6mo agoGet private equity out of healthcare.
- lokar 6mo agoDon’t require states to uniformly respect limited liability granted in other states. Allow them to add limits, requirements, etc. let the different states explore the trade off.
- Esophagus4 6mo agoOof, talk about making compliance difficult and expensive if a company has 50 different sets of regulations to comply with to do business in the US.
- deleted 6mo ago[deleted]
- PaulDavisThe1st 6mo agoDo you believe that states are the laboratories of democracy, and have rights, or do you believe that reducing the cost of regulatory compliance is a more important goal? I take no position on this currently, but it's an important question that deserves a serious answer. Trading off the costs of "state experimentation" and "enforced regulatory conformity" is non-trivial to do.
- jareklupinski 6mo agomulti-generational households
- lotsofpulp 6mo agoI would rather have access to a suicide pod.
- jareklupinski 6mo agocareful dont let private equity hear you say that
- lotsofpulp 6mo agoI'm more worried about Catholics and other people that want to enforce their religion on others preventing access to suicide pods.
- nradov 6mo agoThe reality of most multi-generational households is that the wife is eventually coerced into becoming an unpaid caregiver for elderly parents (who often constantly criticize how the household is managed). This sort of "worked" in traditional societies when women didn't have other options but when they're educated and have their own careers it usually doesn't seem like such an attractive choice anymore. I'm not opposed to multi-generational households and I have friends who have made it work well. Let's just not assume that it can be a scalable solution.
- PearlRiver 6mo agoIt was never an attractive choice- people simply did not have options. In my country it was not until the 1950s that retirement homes were invented and the elderly finally got their social security (remember pensions did not exist).
- mmooss 6mo agoIt could happen this year; legislatures just need to pass laws. The hardest part is people posting comments like yours as a diversion from doing real work (though there are other hard parts too).
- calvinmorrison 6mo agothat's right! if only I wasnt posting snarky crap on HN we'd have a Utopia. Paging Upton Sinclair!
- mmooss 6mo agoWe each have power, influence, and responsibility. You're spending yours on cleverness, and wasting others by shifting the focus and undermining their efforts. Cleverness, in the end, doesn't matter. > Upton Sinclair Upton Sinclair didn't waste it.
- calvinmorrison 6mo agoi certainly don't want to use my cleverness for power or influence, no thank you.
- mmooss 6mo agoI'm not talking about being power hungry, but pulling our weights in the world.
- deleted 6mo ago[deleted]
- giwook 6mo agoI find it interesting that you assume ill intent as the default when I was genuinely asking for actionable steps we could take to address a very real problem. Perhaps consider giving people the benefit of the doubt instead of projecting your cynicism onto others.
- giwook 6mo ago
- bsder 6mo agoRevoke corporate charters. Prevent and break up consolidation. All corporate entities require a registration to operate in a state if they have a physical presence. In this instance, you can also pass a law along the lines of "After setup, all care homes are required to spend 90/95/99% of their income on direct care of the residents or your charter gets revoked." This would prevent the incentives to buy them in the first place.
- gotwaz 6mo agoPeople created limited liability and private equity. Fiction is not something you get rid off. Its something you live with. It is a permanent side effect of how the over rated Humam Brain works. The brain makes predictions over multiple time horizons. When there are contradictions between these predictions how is the 3 inch chimp brain supposed to handle it while not splitting? Make up a story for the sake of coherence. Everyone is doing it everyday. They are all making up fictions to handle unpredictability.
- kelseyfrog 6mo agoThere are a finite number of legislative girders underpinning the judicial capacity to support these fictions. When they're removed, it will not be legally possible to maintain them. They are not a product of nature, they are a product of real humans, and as such are subject to human change and intervention. They are among the least durable constructs we interact with.
- JumpCrisscross 6mo agoI’ll generally defend PE. But when it comes to healthcare, private ownership and leverage are just a bad mix.
- toast0 6mo agoA human ATM is just a teller.
- layer8 6mo agoA teller would be paid for doing the job.
- thrill 6mo agoIt isn’t the fault of private equity that banks make excessive loans against assets in a leveraged buyout. Banks (such as per the article, The Royal Bank of Scotland) have a duty to ensure that their loans are of properly assessed risk, and if the PE firm that wants to or has bought an asset does not look qualified to run it, then the banks should not be making the loans. Articles that keep casually dropping triggers like “[t]hey rubbed their hands together and said, 'Sooner or later, as the demand increases, the prices must go up'” are not seeking workable solutions but capitalizing on their ability to raise ire. It’s much more yet another article that does its best to paint a profit motive as an evil, completely ignoring that any endeavor that is not profitable is going to die sooner rather than later, and when it’s a government run endeavor then the taxpayers, who were completely uninvolved in the deicsions of where their money should be spent, are the ones left on the hook - HTF is that better?
- JumpCrisscross 6mo ago> It isn’t the fault of private equity that banks make excessive loans against assets in a leveraged buyout Credit lends. Equity owns. It’s absolutely the fault of the owners, first, if their business is fucking up. That’s why they lose their chips before the banks do.
- _DeadFred_ 6mo agoWe had a society that functioned. That people could live a life. We no longer have that due in part to private equity buying up retirement homes, dental offices, HVAC/plumber shops, doctor offices, funeral homes, etc, etc and restructuring them for optimal extraction. When I deal with bob renting his house, we come from a kind of equal place. When I rent from XYZ agencies, there is no fair deal, there is their deal or no deal, designed to be as exploitive of me as possible. There is no coming to terms from somewhat equal place, there is only agreeing to corporates terms. The same with dental work. Getting a roof put on. The society we had didn't work that way in every transaction in life, and the society we have now doesn't really work for large swaths of society anymore. Systems with no slack become brittle. In the case of modern society, that brittle aspect is people not able to afford to live and businesses so 'optimized' they can't afford to do their core businessing well, their workforce unable to themselves live, and their workforce pushed in a way that isn't sustainable long term, but since their owners have purchased large amounts of the competition the business is able to stumble along for a while. Until they get their exit by selling the unsustainable bundle to a retirement fund, with PE yet again destroying another aspect of what made society work in the past.
- rob_c 6mo agoFrankly given the sorry mid/long-term state of the UK economy, yes, this is the absolute essential thing to be moaning about... And frankly moaning about this used to be right wing conspiracies a few years ago so yey for another pendulum swing...
- e-dant 6mo agoThe market is perfectly efficient, value is well attributed, lobbying is a social good, being rich means you’re smart and should have special privileges, optimizing for returns on investment is equivalent to optimizing for a better society Obviously I’m kidding, and something is rotten
- danny_codes 6mo agoWe let capitalism run too far. Need to swing hard towards socialism or the whole thing will collapse
- softjobs 6mo agoAs pointed out by Rosa Luxemburg, the choices are socialism or barbarism. In the US, barbarism seems to be a far more likely outcome.
- slopinthebag 6mo agoInsane binary choice fallacy. The choices are more akin to centralised control or free-ish markets. We see from experience how centralised control has completely butchered healthcare, both in the US and also my country of Canada. It's time to drop the insane authoritarian control and let people freely chose their own destiny, so to speak.
- zombot 6mo agoMore than likely, it's daily reality.
- ikekkdcjkfke 6mo agoAmericans often confuse socialsim for handing out money freely and letting people commit crimes without going to jail, both the left and right, so its this wierd catch 22 going on or something
- TiredOfLife 6mo ago> and letting people commit crimes without going to jail So US is the most socialist country by far. Both rich and poor commit crimes without going to jail
- lisper 6mo agoMy parents ended up being forced by circumstances to move into a retirement home about five years ago. Fortunately, the place turned out to be run by people who mostly cared about their clients and so my parents' lives were basically OK, except that the food sucked (which AFAICT is par for the course at retirement homes). But a few months ago the place was acquired by a different company, which is trying to squeeze out higher profits. Staffing and services are being cut, and prices are going up. Even the food got worse, which I didn't think was even possible. The response when someone complains is, "If you don't like it you are free to leave." Yeah, right. My barely mobile 90-year-old parents, one of whom has Parkinson's, are just going to pack up and go. They know perfectly well that they have a captive audience. Thankfully, my mother died before the acquisition, and my father died last week, only a few months after the acquisition, so I don't have to deal with this any more. But caveat emptor: if you ever go into a retirement home, think about what will happen if they change ownership. Even if it looks great, or even acceptable, now, there is no guarantee that it will still be great, or even acceptable, tomorrow, unless you somehow manage to negotiate such a guarantee. I have no idea what a contract provision like that would even look like. But I am going to be facing this problem myself some day, so I'd love to hear ideas.
- rawgabbit 6mo agoWhere I live Medicare and Medicaid want people to live (and die) in their own homes. They send out nurses and nurse practitioners to you. That is what I want. After some research I realized the provider that I want which is UTSW in Dallas has a geographical radius that they serve. I am planning to eventually move to be within that radius. https://utswmed.org/medblog/geriatrics-cove-team-makes-house-calls-and-reduces-readmissions/ https://utswmed.org/medblog/geriatrics-cove-team-makes-house...
- lisper 6mo agoThat was my parents' original plan. But they were in denial about how much preparation would be needed to make that happen. They lived in a split-level house and my father had severe osteoarthritis in his knees. It's actually a miracle that he didn't fall and break his neck going up and down the stairs. But one day he fell in the shower and could not get back up, and that was the beginning of the end.
- elephanlemon 6mo agoCould someone (please not an LLM) attempt to steel man the following position for me: Private equity is overall good for society
- JumpCrisscross 6mo agoBroadly speaking, private equity is used to describe anything leveraged we don’t like. When we like it, we tend to describe it as a start-up, family business or simply “firm.”
- youarentrightjr 6mo agoHey, it's you again! I was wondering if you would pop up in the comments defending private equity as you've done in the past. Continuing our discussion from last time, can you elaborate on why you think quoting Revlon is sufficient to excuse the practical differences between public and PE companies?
- rkhleung 6mo agoI had worked with PE firms for over 6 years from the other side where we would invest in PE funds operating primarily in emerging markets, about 50 or so during my time and reviewed another 50 more that we did not invest in. Most of them are pretty benign. We invested primarily in transportation, energy and infrastructure but also hospitality and industry. There are many many poorly run private companies out there that PE funds buy out and rehabilitate. One major segment for a couple of funds is the purchase of poorly run family businesses where the founder was successful because they had drive and energy and built something at the right time (or sometimes, they knew the right people) but lacked the interest or vision to take it to the next level. Or the founder is getting old and the family has managed to turn the once successful business into a money loser. This is a long about way of saying, the majority of PE firms are benign and have invested in many successful businesses that many of us use. There are bad actors and more so in the US where corporations are allowed to eat the weak. It is not a case of PE bad but much more so that US business laws have relatively weak protections for consumers.
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- vonnik 6mo agoI worked for a while selling fractional nurses into for-profit nursing/retirement homes at the end of Covid, got to interview some industry experts, who told me that these for-profit homes are the 21st century equivalent of 19th century insane asylums. If you or your loved ones have to enter one, seek at all costs a home that is not for profit (Catholic orders run some, Jewish organizations others, the VA also offers these homes to vets). Every single one will uphold higher values than the for-profit entities sucking resources from people who are no longer in a position to advocate for themselves.
- randycupertino 6mo ago100% agree- the Jewish home for the aged is the nicest facility I ever saw in my career as a medic. I asked some of the nurses I worked with about why they were on such a different level - better than even the fanciest most expensive $30k a month places in Portola Valley or Palo Alto - and was told it's because taking care of the elderly is a fundamental tenet of Judaism.
- alecco 6mo ago> taking care of the elderly is a fundamental tenet of Judaism As it's done in most of Europe, Latin America, Asia, Africa. US/Canada were turned against family and tradition thanks to decades of brainwashing by movies, TV, and ads. To be cool you had to go to a college in another state. Then move to a big city. Pick career over family and having children. Take antidepressants. This started in the 70s and is well documented.
- saltcured 6mo agoIn my own quest in the SF East Bay, right before COVID stole the scene, I ended with choosing a board and care for my parents that is owned and administrated by a retired nurse with a Filipino background. It is a family-run affair rather than some corporate warehouse. It is a converted small motel, with about 15 rooms, not the typical converted single-family home. This means they are just large enough to have an overnight staff shift and multiple daytime staff roles, instead of one person struggling to handle everything. It's by no means one of these places that puts on a facade of being a retirement resort. A first impression might be that it is dingy. But, for the combination of dementia and other care needs we have had on our plate, they have provided just about the best care I could hope for. Along the way, I've had to disregard superficial judgements from some extended family or family friends, who seem to harbor a fantasy image of elder care as an elevated experience with the trappings of a luxury hotel stay and experiences fit for aristocrats. In a dream, I too wish my mom could have stimulation and education in her final years like immersion in an artist colony combined with a Parisian salon from a novel. I settled for a place that consistently keeps her safe, gives her communal meals, manages her hygiene, manages her medications, monitors her health, and communicates reasonably well with me on these topics. I also visit weekly and take her to all her medical appointments etc., so I think I have an accurate view of how things really go there. My biggest lesson from this, applicable to future generations, is to find your enriching experiences and setup your end of life plans while you are young. By the time you or your family realize you are in decline, you likely have lost the cognitive and/or emotional flexibility and/or agency to really adopt the most enjoyable lifestyle or life setting. Your more basic care needs will start to dominate all decision-making.
- danielparsons 6mo agoI don't understand how PE manages to get debt financing for LBOs? Seems like a big risk for the creditors? If I buy a corp at 10% net margin for 5x ebidta on 80% leverage, i’ve really paid 1x ebidta. then lets say 20% of revenue was going to R/D and stuff that would only pay off in a few years. I cut all R/D so now its at 30% net margin. So I can triple my money every year because it’s now generating profits of 3x my original downpayment every year (minus interest payments). After a few years of zero R/D the company has no good products to sell, demand falls, and it’s declared insolvent. Well, I dont care about my 20% equity downpayment because I already got like a 3-9x return. But the debt financers are screwed.
- JumpCrisscross 6mo ago> don't understand how PE manages to get debt financing for LBOs? Seems like a big risk for the creditors? Hype aside they tend to pay it back. When they don’t, recovery is streamlined.
- nighthawk454 6mo agoYeah, that’s the idea. The loans get bundled up and resold to insurance companies, pension funds, and retail bond investors. Funds are plenty willing to lend other peoples money to get guaranteed dividends and fee payments and not be left holding the risk. Retirement funds are the bag holder - but they won’t realize till later. There’s structural pressure to buy from PE because insurance/pension is designed as fixed payout requiring say 7% yield forever. In a world where investment-grade bonds pay 4% and demographics are shifting from net-inflow to net-outflow, liquidity is _tight_. Meanwhile PE was promising 10% a year or whatever (someone call Madoff…) so that was preferable to the hard conversations of the funds failing. At the cost of kicking the can down to the road and making it worse in the future. If this sounds like 2008 that’s because it is. But bigger and worse, and happening in wayyy more than just mortgages this time.
- cloudbonsai 6mo agoI'll sketch a few points to illustrate the inner workings here: - It's hard to buy a decent company at 5x EBITDA today. A typical EBITDA multiple nowadays is like 10x-15x. (e.g. EQT bought SUSE for $3B in 2023, and the adjusted EBITDA was $240M, which implies 12x EBITDA) - Debts are tranched. Banks typically get a senior slice, often secured by real assets (a.k.a. collateral), so they can recoup the money even when the company goes straight into a ditch. The real risk lies in the junior loans ("mezzanine"), which demand very high yields to compensate for that risk. - In a typical PE deal, most profits are earned at exit, not via dividends en route. So managers have incentive to make the target company (look) better for the next buyer, rather than neglecting it. A more fundamental reason why the situation you describe rarely happens is that PE fund managers treat their operation as an "on-going" business. Lenders are gonna be really pissed if they lose their money. So fund managers try to avoid that scenario to keep the credit flowing for their next deal.
- charcircuit 6mo agoEvery company turns people into ATMs, taking their money for a good or service. It is naive to think that companies do not want people unloading their money and consuming whatever it is the company is offering.
- Ms-J 6mo agoIt's every for profit company. No exception. Charities and certain non profits may not count, but most are bad too. How is it even possible that you got down voted for this?
- SpicyLemonZest 6mo agoI just don't see what it has to do with the source article, unless you and the original commenter are suggesting that care homes shouldn't exist. How would a care home work without receiving money to pay for the services provided to residents?
- vjvjvjvjghv 6mo agoI have read that the big wealth transfer from boomers won't be as inheritance to their kids but most of it will go the the health and elderly care sectors. Hearing this stuff I totally believe it. I am thinking about more and more about a plan to off myself once I need expensive care so I am not a burden to the next generation.
- enoint 6mo agoI have a lot in common with other commenters here. I’m close to people who are close to death. There are some diseases which will rob you of the choice of assisted suicide. You must legally prepare while you are still of sound mind and body.
- varispeed 6mo agoCare sector in the UK is a dumpster fire. Corporations get paid often thousands per day per service user, hire incompetent staff at below minimum wage (if you count unpaid overtime) and pocket the massive margin. It desperately need proper regulation.
- johnohara 6mo agoOperational efficiency and care for the elderly will never have mutually beneficial outcomes. Nor will the expectations of the participants on either side of the transaction be compatible. I fear the objectives of both will always be mutually exclusive.
- 0x4e 6mo ago>Private equity relies on a basic technique known as the leveraged buyout, which works like this: you, a dealmaker, buy a company using just a small portion of your own money. You borrow the rest, and transfer all this debt on to the company you just bought. In effect, the company goes into debt in order to pay for itself. If it all goes well, you sell the company for a profit and you reap the rewards. If not, it is the company, not you, that is on the hook for this debt. —— Not how I've seen this work. These often require a personal guarantee, in some cases the homes of whoever is applying for the loan. So, whoever wrote this article has no idea of the real acquisition process.
- nradov 6mo agoWhat you're describing is accurate when an individual or partnership buys a small business. Regular bank loans usually require additional security guarantees beyond just the business assets. But large PE firms have access to other sources of financing beyond traditional loans.
- watwut 6mo agoLeverage buyout is what private equities do and works exactly as described. It usually destroys the company.
- PearlRiver 6mo agoPeople who think the government is bad have never met a corporation.
- PaulDavisThe1st 6mo agoPeople who think the government is bad generally point out that there's only one government, but typically multiple corporations. I am not one of those people, but their point does need to be fully addressed.
- causal 6mo agoThere are numerous governments in any given country, if you consider the various overlapping jurisdictions. Taleb sees business and government as equally incompetent, but businesses are supposed to die and so make room for better ideas to thrive. Unless, of course, you bail them out of their mistakes.
- _DeadFred_ 6mo agoThat statement ignores that there are multiple political parties. We have had political parties fail, just like corporations. In the US we have one that recognized we are a society and need things to work. and one that wants to get rid of government at all costs, to the point they have for the last 40 years had policies such as 'starve the beast' with the sole intention of making government completely unable to function.
- danny_codes 6mo agoHey now, the Trump admin will get offended if you downplay their incompetence!
- Amorymeltzer 6mo agoThe (excellent) Megan Greenwell wrote Bad Company, all about private equity; I'd recommend it. It does a good job of telling the story through a few specific and illustrative examples of people/industries[1], while still explaining everything in detail. Greenwell has a perspective, to be sure, but she's not wrong. 1: IIRC, it's a Toys 'R Us employee, a nurse at a rural hospital, a journalist at local newspaper, and a resident in a PE-owned apartment.
- pugchat 6mo ago[dead]
- jancsika 6mo agoSomeone needs to create a kind of JSON for care homes, if you will. Something like a super simple spec of what a goddamned care home object is for, and the minimum number of actually fairly-paid full-time staff one needs to achieve that in practice. Then it doesn't matter how many baroque shell companies it takes represent the thing internally. Either the thing can output a response in Care Home Object Notation, or it's just a bunch of crafty bullshit disguised as a care home. You'd just walk in with your one-page CHOM spec and read down the sheet: "Number 1: Can I speak to a full-time nurse, please?" If they respond, "No, but here's two high-school interns in a trench coat," you can just be like, "Not a care home. Got it," and move on to the next one.
- FuckButtons 6mo agoOnce upon a time, I heard someone tell me a fairytale about this thing called a ‘law' and they said that laws could be used to enforce compliance with standards across an entire country. Pure fantasy I know, but a man can dream.
- frameworkeGPU 6mo agoin the US a sickening % of marketing for SNFs is actually describing state-mandated requirements. "...and we even have a community led residents' association!" depends on your state ofc. none of them are a single page tmk. this makes sense, regulations are famously written in blood. don't do this if you're unprepared to be in a terrible mood, ofc.
- SpicyLemonZest 6mo agoI emphasize that I'm not excusing the stories of clear mistreatment in the source article. But the central challenge is that this kind of care is incredibly expensive, which poses awkward and sometimes brutal tradeoffs that people often don't want to honestly discuss. For example, the article blazes past a claim that £550/week/bed was too little to provide good care, but a super simple spec suggests it might be. Subtract the UK average rent of £1367/4 = £342, divide the remaining £208 by a fully-loaded nurse cost of ~£20/hr * 1.3 * 168, and even with no other costs you're left with a completely inadequate 1 hour of nurse time per resident per day. But if Guy Hands had produced a worksheet like this proving that pumping more taxpayer money into his pockets would achieve adequate staffing ratios, would that make even a single person more willing to do it?
- jmyeet 6mo agoI read recently that companies are getting almost resentful that they have to go through yuo to get your money. I keep thinking about that because I think it's true. I read some of comments here and on other threads about PE and I keep seeing some variation of "this particular PE crime is an outlier, we can fix it". No, no you can't. PE isn't an aberration. It's just the natural extension to capitalism. It's inevitable. This can be understood easily in Marxist terms, as unpopular as that is. What we're talking about is the workers relationship to the means of production. You have a nusing home. The people who work there should own it. There's no reason not to. Instead there's this intermediary, some capital owner, who demands to extract profits from that. We've simply replaced the feudal lords of old with investment bankers. It's the ultimate in rent-seeking behavior. Years ago I remember hearing about PE firms buying up trailer parks. For many this is their last refuge from being homeless. When they are homeless, it's not only devastating to them but it's expensive for everyone. Health issues, going to the ER more often, violence, law enforcement making sure homeowners don't have to see homless encampments, people can't hold down drugs, self-medication with drugs and so on. We absolutely shouldn't drive up the price of mobile home pricing so rent-seekers can extract profits but we as a society choose that over housing security for people. That's not just wrong. It's state-sanctioned violence. This nursing home PE squeeze is also state-sanctioned violence. Make no mistake. Arguably, it's even social murder [1]. And once again, it's super easy to understand in terms of the workers relationship to the means of production. Yet everybody thinks they'll be Jeff Bezos one day so it's super-important now to vote in the interests of the billionaire class. Yo uwon't be. And even if you are, do you really want to become rich this way? Is that what you want your legacy to be? That you made the last years of elderly people who needed care miserable? Why do people think this is good? Or fixable by the politicians who are bought and paid for by the people profiting off of this? [1]: https://en.wikipedia.org/wiki/Social_murder https://en.wikipedia.org/wiki/Social_murder
- RaSoJo 6mo agoThe authorities need to make leveraged buyouts illegal. I see no benefit coming out of it apart from pain for society. Is there any benefit that I am missing? (Apart from the money it generates for the investors and the related politicians whose pockets get lined)
- silexia 6mo agoPrivate equity is not a free market artifact, it could not exist without the government controlling the currency and providing very cheap loans.
- rpdillon 6mo agoI got this email in mid-March: > I’m reaching out to start a dialogue regarding a possible non-executive founding directorship role for a new senior care deal. > We are doing a roll-up. Acquiring and consolidating various senior living revenue generating companies, eliminating redundant operations, improve and expand service offerings and ultimately exit via private sale or IPO. It was so bonkers I forwarded it to my wife, who works in a research center on aging, and she was like, "how many red flags can you fit into one email?" This stuff is depressingly real.
- AbstractH24 6mo agoAs far as I know, very few senior care facilities of any sort are run by non-profits. And reimbursement rates don't incentivize that. Why is that? Not saying nonprofit hospitals are a panacea, but they sure are better than for-profit ones.