Private Equity and US Healthcare

The Journal of the American Medical Association (JAMA) recently published a paper which found:

> Private equity acquisition was associated with increased hospital-acquired adverse events, including falls and central line–associated bloodstream infections, along with a larger but less statistically precise increase in surgical site infections.

This should not come as a surprise. Private equity firms in general operate as follows: They raise funds from investors to purchase enterprises using as much borrowed money as possible. That debt does not fall on the private equity firm or its investors, however. Instead, all of it is placed on the books of the purchased entity. If a private equity firm borrows money and buys up a nursing home or hospital chain, the debt goes on the books of these healthcare facilities in what is called a leveraged buyout.

To service the debt, the enterprise’s management, directed by their private equity ownership, must reduce costs, and increase its cash flow. The first and easiest way to reduce costs is by reducing the number of staff and by decreasing services. Of course, the quality of care then suffers. Meanwhile, the private equity firm charges the company fees in order to secure its own profits.

An even larger study of private equity and health was completed this summer and published in the British Medical Journal (BMJ). After reviewing 1,778 studies it concluded that after private equity firms purchased healthcare facilities, health outcomes deteriorated, costs to patients or payers increased, and overall quality declined.

One former executive at a private equity firm that owns an assisted-living facility near Boulder, Colorado, candidly described why the firm was refusing to hire and retain high-quality caregivers: “Their position was: We are trying to increase our profitability. Care is an ancillary part of the conversation."

In 2007, 19% of Medicare recipients enrolled in Medicare Advantage plans. By 2023 enrollment had risen to 51%. These heavily marketed plans are attractive because many don’t charge additional monthly premiums, and they often include dental, vision, and hearing coverage, which Medicare does not. And in some plans, other perks get thrown in, like gym memberships and preloaded over-the-counter debit cards for use in pharmacies for health items.

How is it possible for Medical Advantage to do all this and still make a profit?

According to a report by the Physicians for a National Health Program, it’s very simple—they overcharge the government, that is we, the taxpayers, “by a minimum of $88 billion per year.” The report says it could be as much as $140 billion.

*In addition to inflating their bills to the government, these HMO plans don’t pay doctors outside of their networks, deny or slow needed coverage to patients, and delay legitimate payments. As Dr. Kenneth Williams, CEO of Alliance HealthCare, said of Medicare Advantage plans, “They don’t want to reimburse for anything — deny, deny, deny. They are taking over Medicare and they are taking advantage of elderly patients.”*emphasized text

With so much taxpayer money sloshing around in the system, hedge funds also are cashing in. They have bought large quantities of stock in the healthcare companies that are milking the government through their Medicare Advantage programs. They then insist that these healthcare companies initiate stock buybacks, inflating the price of their stock and the financial return to the hedge funds. Stock buybacks are a simple way to transfer corporate money to the largest stock-sellers.

In researching my book, Wall Street’s War on Workers, we found that private equity firms and hedge funds are undermining the working class through leveraged buyouts and stock buybacks. When private equity moves in, mass layoffs (just like healthcare staff cuts and shortages) almost always follow so that the companies can service their debt and private equity can extract profits. When hedge funds insist on stock repurchases, mass layoffs are used to free up cash in order to buy back their shares. As a result, between 1996 and today, we estimate that more than 30 million workers have gone through mass layoffs.

Stock buybacks were illegal until 1982. Perhaps we should return to those days.


Yes. hoobooody hooboody

d fb


Saw this piece recently. The increased number of stock buybacks was funded by the Fed’s ZIRP. Those buybacks increased the concentration of business sectors into fewer hands and enriched JCs and wealthy as they own most of the stock market.
The author argues that:All these trillions in near-zero cost capital flowed into manipulation, speculation and the reduction of competition, not into boosting productivity, efficiency or innovation. The net result of the Fed’s ZIRP is an economy stripped of diversity, an economy dominated by bloated monopolies, cartels and platforms generating low-quality, addictive goods and services which reduce productivity on multiple fronts.


The “supply side” tax code does the same, by offering favorable rates for income from financial manipulation, while taxing productive work more heavily. So, of course, we get more financial manipulation, and less productive work.



The systemic malevolence of big capital spending money and brain power on politics to escape

paying any coherent version of a sensible share of
new and maintenance of old infrastructure, while
treating society as a whole as a flock of to be shorn, and
ignoring the poison this pours into the civil society
on which they totally depend for their existence

is staggeringly stupid for all of us.

But the nastiest of the wealthy manipulators most successful endeavour, starring the Murdoch family, with many others playing exactly the same game across all popular forms of our information society, makes a recuperative political upheaval close to impossible for now/

The amazing pivot point of the last decade was the stunning perversion of USAian evangleical Christianity as a voting bloc via the Michael Cohen arranged and brokered critically important endorsement of a sex scandal plagued, pseudo entrepreneur, stunningly unreligious and immoral person, by the then most powerful of all religious demagogues who happened to be facing a catastrophic sex scandal, Jerry Falwell Jr…
If you wrote it as a novel your editor would scream out that the plot was absurdly contrived.

Goebbels, Stalin, and Mao, haters of democracy and great masters of media manipulation all three, must be chortling with amazement and glee.

Have the roots of virtue necessary to our democratic republican civil society survived? If not, look out below for the value of investments of all but the best connected and most powerful.

david fb


Add the defunding of education, as well as defunding infrastructure, so the “JCs” can have another tax cut. I have offered before that the rest of us are nothing but a ledger entry under “source of funds”. In the early 80s, RS was in to “customer service”. By the end of the 80s, the attitude changed. As one store manager, who had been with RS since 73 said “seems the company is getting back to the attitude when I started with the company ‘get the money in the drawer, get the s4!t out the door’”.


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The (further) corruption of the healthcare industry through financialization is the subject of The Big Fail by Joe Nocera and Bethany McLean, previously reviewed here and on my blog…

America could be so much more healthy for so much less.



If you need the equally distressing but at least couched in humor version of this issue, here you go.


Of course, the effective pushback to any attempt to build a US national health plan, based on the best practices of other countries that have been refining their national health plans for decades is “THAT’S COMMUNISM!!!”

Ever see “Teahouse Of The August Moon”? Glenn Ford is an army officer charged with revitalizing the economy of a village on Okinawa, after the war. The product they finally hit on, that they could sell to the occupying US forces, in vast quantity, was a locally brewed liquor.

Then Glenn Ford’s superior officer gets wind of what is going on.


The great Paul Ford!!! Colonel Hall in Bilko.

I think I may have dated myself; but I enjoyed my company.


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Yup. What I was going for was that Glenn Ford had accomplished his mission of revitalizing the village economy. They made so much money that the village could afford to build the teahouse that the villagers wanted. But they ran against ideology, because no single “JC” was hoovering up most of the loot for himself.

More Paul Ford, trying to talk down Buddy Hackett and Mickey Rooney in a Beech 18.

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Well, I did get that and understood your point; but we have to give shout-outs to wonderful actors when we get the chance. And I loved “Mad, Mad . . .”!