Thursday, June 14, 2018

Healthcare Ground Zero for PEU Flippers

America's absurdly expensive healthcare system is the latest target for private equity underwriters (PEU).  The greed and leverage boys  have doctors offices, hospices, home health agencies and specialty hospitals in their sites.  With each buyout private equity underwriters saddle healthcare companies with greater levels of debt. 

Their management practices focus on maximizing revenues to pay higher interest costs, management fees and pass cash to the PEU sponsor. 

Take KKR with its recent $10 billion deal for Envision Healthcare, a provider of emergency medicine physicians.  This comes on top of KKR's 2017 buyout of WebMD, an online provider of medical information, and a stake in PharMerica Corporation.

TPG Capital and Welsh, Carson, Anderson & Stowe will partner with Humana to buy Kindred Healthcare's home health, hospice and community care division, formerly known as Gentiva.  The two private equity firms will buy Kindred's specialty hospital division with its long term acute care hospitals and rehabilitation assets, both inpatient and outpatient.  Kindred had $3.2 billion in debt before the buyout.  It remains to be seen how much additional debt will be added after deal close.  

Ex Medicare Chief Tom Scully is a partner with WCAS and knows the healthcare tea leaves, especially under a Republican administration.  He has insights into reimbursement for all of Kindred's post acute care portfolio and WCAS plans to make big money off Kindred's pieces/parts.  

PEU greed will not solve the ills of America's dysfunctional healthcare system.  It is the plague that will cause widespread harm to countless citizens, through suboptimization of care and pirating of resources in an attempt to fill an insatiable desire for money.