Wednesday, September 25, 2019

PPACA Report Card: An Accelerated Cost Curve

WSJ reported:

The average total cost of employer-provided health coverage passed $20,000 for a family plan this year, according to a new survey.
The $1,655 average deductible is much higher than what most people can afford.

Worker pay has not increased anywhere near the rate of out of pocket healthcare expenses.

Employers shifted costs to employees via higher deductibles and increased co-pays.   PPACA has not helped make healthcare more affordable.  It has made a lot of money for the greed and leverage boys.

WSJ quoted a private equity underwriter (PEU) in its piece:

Health-care affordability is generally the No. 1 issue for voters,” said Dan Mendelson, a founder of a health-care consulting firm and former federal official who is now an operating partner at a private-equity firm.

Mendelson works for PEU Welsh, Carson, Anderson and Stowe.  I've worked twice for PEU healthcare affiliates, the first time in the 1990's.  A private equity firm purchased my current employer last spring. 

Our health insurance deductible rose 78% in the last year, the first year of PEU ownership.   Our owners reduced the number of paid holidays by 25% and holiday pay by 33%.  They eliminated overtime and implemented a payroll system that underpays employees.  These moves impaired my ability to pay for the increased healthcare responsibility designed by my PEU employer.

PPACA's designer, Nancy Ann Deparle,. came from the PEU world and to it she returned.  The average employee suffers greatly from healthcare greed.  I see it every day from the inside.

Update 9-26-19:  Wolf Street noted the shafting of employees under health reform.

Update 10-14-19:  Congress asked Blackstone and KKR for information on how private equity ownership contributed to rapidly rising healthcare costs.

Update 12-16-19:   Healthcare inflation is twice that of the Consumer Price Index so far in 2019. 

Update 4-16-20:  A coronavirus pandemic revealed America's broken healthcare system and PPACA's many shortcomings. How many  22 million newly unemployed  can afford the premiums?  How many of these will get COVID-19 and die at home without proper care?  

Update 4-3-22:   The average health insurance premium more than tripled for a family plan since PPACA passed in 2010.  Cost curve bent but in the wrong direction.  Concave went convex.  

Saturday, September 21, 2019

Carlyle to Sell Golden Goose in Cash Raise?

Bloomberg reported:

The Carlyle Group is considering a sale of Golden Goose, the Italian luxury sneaker brand favored by celebrities from Selena Gomez to Taylor Swift, people with knowledge of the matter said.
I doubt Taylor Swift wears Golden Goose after Carlyle funded Scooter Borchetta's buyout of Swift's music library.   The Carlyle Group funded Scooter.  Swift was saddened and grossed out from Carlyle's nightmarish deal.

If Swift made the connection I would hope she donated her Golden Goose sneakers and any Supreme merchandise from their PEU taint.

Bloomberg added:
The private equity firm is working with Bank of America Corp. on the potential deal, according to the people, who asked not to be identified because the information is private. Golden Goose, known for its vintage style footwear emblazoned with the brand’s iconic star on the side, could fetch more than 1 billion euros ($1.1 billion), the people said.

Carlyle acquired Golden Goose from Ergon Capital Partners SA in 2017. The deal valued the business at about 400 million euros.
While other retailers declare bankruptcy left and right Carlyle's GGDB rose nearly 200%?  It's clearly time to cash in before valuations snap in the other direction (like WeWork).

Update 11-17-19:  Bloomberg reported "Taylor Swift’s feud with her record label reveals a little-known fact about the entertainment business: the outsized role private equity plays in funding its biggest stars.Swift asked Carlyle Group in a tweet on Thursday to help her as she battles to secure ownership of albums she recorded with her previous label.  The pop star didn’t criticize Carlyle, only appealing for its help. But her conspicuous mention of the company put a spotlight on an industry her legions of young fans normally wouldn’t have reason to pay attention to. Google searches for Carlyle Group surged after her tweet."

Tuesday, September 17, 2019

Carlyle's Acosta to Restructure $2.7 Billion in Debt?

WSJ reported:

Acosta Inc. has hired law firm Kirkland + Ellis LLP to advise on talks to restructure some $2.7 billion in debt as the struggling marketing-services company faces a looming interest payment, according to people familiar with the matter.
The Carlyle Group bought Acosta in 2014 in a $4.8 billion deal.  Carlyle has $75 billion in dry powder to invest but it never throws good money after bad. 

Reuters reported Acosta's debt as highly leveraged and a potential concern for regulators in 2015.

Moody’s Investors Service puts leverage higher at more than 8.0 times.
S + P lowered its rating on Acosta debt in February:

The downgrade reflects the increased potential for a distressed exchange after the recent amendment to Acosta's credit agreement. While the company temporarily extended the majority of the commitments on its revolver by six months to March 26, 2020, the extending lenders reduced their total commitments by 5% and increased their pricing by 100 basis points. This will likely lead to further pressure on the company's already weakening cash flow. In addition, liquidity could become more constrained after a minority group of lenders chose not to extend their commitments beyond September 2019. 
It's September and at least one distressed exchange is in the works.  Sequa Corporation is another distressed Carlyle affiliate (based on 6-20-2019 debt rating).

Carlyle lost Carlyle Capital Corporation six months before the 2008 financial crisis.  It was massively leveraged and imploded when underlying asset quality deteriorated.

Update 11-10-19:   Acosta will declare bankruptcy and will be taken over by creditors.  The prepackaged Chapter 11 bankruptcy will place Acosta in the hands of creditors.  It's not clear how much money Carlyle pulled out of Acosta since 2014 (prior to turning it over to lenders and bondholders).

Monday, September 16, 2019

Harold Hamm Said PEU Model is Broken

Continental Resources CEO Harold Hamm talked about private equity in the oil field on Bloomberg:

"There is consolidation going on.  All the money that came in from private equity.  Basically their model was to buy acreage and flip it to someone else.  So they were big competition in the plays that we did/developed.  That model is broken.  The private equities are in trouble and some of the publics."
Six weeks ago Bloomberg ran a story on private equity underwriters (PEU) buying pipelines at premium prices (15x earnings).  Two firms mentioned in the piece were Energy Transfer and SemGroup. 

Energy Transfer announced it would buy SemGroup in a $5 billion deal.  That is a month after Bloomberg reported:

Meanwhile, SemGroup Corp., which recently hired an adviser to look at joint ventures, saw its shares jump on Wednesday after a report by Reorg M&A that the company is evaluating takeover interest from at least one private equity consortium.
In 2008 SemGroup declared bankruptcy under Carlyle Group ownership after $3.2 billion in bad energy bets.  The implosion came a year after Carlyle Capital Corporation crashed.  Former FBI Director Louis Freeh investigated SemGroup's demise and his report revealed Carlyle pulled enough cash from SemGroup to cover it's initial investment.

An Energy Transfer subsidiary owned Philadelphia Energy Solutions alongside The Carlyle Group.  Their refinery exploded in June and permanently closed after a massive fire.

Philadelphia residents may not be fans of private equity as thousands of jobs will be lost at Philadelphia Energy Solutions (1,000) and Hahnemann University Hospital (2,500).  It took PEU Paladin eighteen months to run Hahnemann, a safety net hospital, into the ground.  Not included in the bankruptcy filing were significant real estate assets in downtown Philadelphia. 

The Carlyle Group's ManorCare, a giant nursing home company, declared bankruptcy after eleven years of PEU ownership.  Carlyle sold ManorCare's facilities for $6.1 billion to a healthcare REIT in 2011.  Carlyle's financial manipulations put ManorCare under.

Where else is the PEU model broken?  Possibly healthcare.  I'd say so.

Wednesday, September 11, 2019

UVA Health System Under Microscope for Greed

University of Virginia Health System CEO Pamela Sutton-Wallace announced she will leave her position for a COO slot with New York Presbyterian Hospital.   UVA received intense scrutiny over its collection practices.  WaPo reported:

Over six years ending in June 2018, the health system and its doctors sued former patients more than 36,000 times for over $106 million, seizing wages and bank accounts, putting liens on property and homes and forcing families into bankruptcy.
It's called aggressive revenue cycle management.  The University Medical Center has to justify its nonprofit status and a challenge would seem in order.

Unpaid medical bills are a leading cause of personal debt and bankruptcy, with hospitals from Memphis to Baltimore criticized for their role in pushing families over the financial edge. But UVA Health System stands out for the scope of its collection efforts and how persistently it goes after payment, pursuing poor as well as middle-class patients for almost all they’re worth, according to court records, hospital documents and interviews with hospital officials and dozens of patients.
Early in her career at Duke University Sutton-Wallace said:

"I am creating systems where I am having an impact on the communities that I serve."
For some served by UVA Health System the impact has been traumatic and horrific. It's not clear if collections were included in the measures determining her bonus, but extrinsic motivators could have contributed to the last four years of the study period under CEO Sutton-Wallace.  The CEO has a $750,000 annual salary with bonus potential to reach $1 million.

Greed has infected our healthcare system and it is causing real harm to individuals and families.

Friday, September 6, 2019

PEU Pete for President

The Late Show hosted presidential candidate Pete Buttigieg.  The candidate said:

If you start the clock in the early '80s when I was born, that's about the time that alot of things slowed down or stopped in this country from wage growth for most Americans to progress in alot of issues of equity...

Pete was born in the same decade as many private equity underwriters, which donated significant sums to the Buttigieg campaign.

The greed and leverage boys are betting on Buttigieg.  They will make numerous wagers such that their political influence remains outsized. 

Update 10-22-19:  Another media source noticed Pete's corporate bona fides. 

Update 12-15-20:  President Elect Biden indicated he would nominate Pete Buttigieg for Transportation Secretary.  PEU Infrastructure funds must be excited.

Thursday, September 5, 2019

PEU Backed Physician Companies Behind Surprise Medical Billing

KKR's Envision and Blackstone's TeamHealth, huge physician companies, are behind surprise medical bills.   The Hill reported in May:

Patients hate surprise medical bills, but they are very profitable for the private equity owners of companies like EmCare (now called Envision) and TeamHealth. Fixing this problem may be more difficult than the White House imagines.
Legislation to address this significant problem faces stiff opposition.  The Hill reported today:

The surprise billing measure has support from bipartisan committee leaders in both the House and Senate, patient advocates and insurers — and was moving forward quickly before Congress left town for August. It was seen as one of the most promising avenues for lawmakers to target health costs this year.

But those efforts are stalling amid a fierce lobbying blitz and political pressures as the 2020 elections nears.

Doctors groups are running millions of dollars in ads against the effort.
Doctor Patient Unity has spent at least $10 million opposing legislation to reign in surprise medical bills.  The group does not disclose its donors.

TeamHealth's PEU owner Blackstone spent over $12.7 million in soft money (outside spending groups) for the 2018 elections cycle.   Envision's sponsor KKR historically gave more to Republicans, but increased donations to the Blue team during Clinton and Obama's successful Presidential runs.  

Blackstone's Stephen Schwarzman and KKR's Henry Kravis can pick up the phone and reach President Trump and most Congressional representatives.  There is no way the common person is lobbying for surprise medical bills, which only add to America's greatest stressor, money.

If Congress cannot address an opaque healthcare system that allows patients to be gouged then my longtime saying remains true.  Politicians Red and Blue love PEU.

Update 9-11-19:  One meme for not eliminating surprise medical bill gouging has politicians giving empathy to PEU companies that need to pay back their bond/debt obligations.  ""What we've seen (from industry) is, 'First, protect me financially.'"  A Daily Beast story on this issue reveals how widespread the PEU virus is in today's world.

Update 12-2-19:  Blackstone's Team Health said it stopped suing poor people.  It did not say it stopped overcharging those who could pay.

Tuesday, September 3, 2019


Seeking Alpha reported:

Carlyle Group agrees to take a majority stake in HireVue, a provider of AI-driven talent assessment and video interviewing solutions.
Hirevue's website describes the company:

HireVue is transforming the way companies discover, hire and develop the best talent by combining the power of video, games and AI for better hiring decisions. The HireVue Assessments and Video Interviewing Platform uses a ground-breaking combination of industrial/organizational science and rigorously tested, predictive artificial intelligence to help customers find and engage higher quality talent, faster.
My healthcare employer used artificial intelligence to predict patient decline.  Our experienced nurses laughed at the number produced by the company's complex algorithm.  Our doctors shook their heads over the need to reduce a patient's myriad of disease processes into a single score and pretend it meant more than the eye of a good nurse or the consensus of a healthcare team.  The company never asked our physicians for any kind of input, even though they had decades of experience.

Human Resources morphed into human neglect as virtually every function was contacted out to a vendor.  HR served executives not employees.  Strategic HR existed to implement the will of our new private equity owners.  They fired critical staff to meet financial targets.  Customer service became abysmal.  Nobody cared, not even our well insulated compliance department.

Video, games and AI will do nothing to hire experienced clinicians.  But it may ensure fans of private equity get ranked higher.

I cannot think of a more evil combination, the merging of algorithms with the greed and leverage boys.  Algorithms blew up Wall Street.  I'm sure they and private equity can make any workplace a living hell.

Update 11-11-19:  Google's healthcare partnership has access to millions of health records and plans to use artificial intelligence to "identify diseases and make predictions aimed at improving outcomes and reducing cost."  How about we reduce costs by not spending a penny on healthcare AI?  I don't want an algorithm deciding what treatment I need or can't get.  The public has seen the driver-less car not recognize a jaywalker and Goldman's Apple credit card employ a sexist algorithm without even know the cardholder's gender.  The Boeing 737 Max shows MCAS system programming can be deadly on a mass scale.