Monday, September 25, 2023

BIG's Take on PEU WCAS

Matt Stoller wrote on BIG:

“Awesome! Cha-ching!” 

That’s the phrase that an executive at private equity-owned financial firm U.S. Anesthesia Partners (USAP) used after acquiring yet another Texas anesthesiology practice, with the intent of hiking prices on Texas patients. And “Cha-ching!” was the right way to put it, since the excess profits amounted to tens, or even hundreds of millions of dollars, in just one medical specialty, in just one state. 

But the new quote should be ‘uh oh.’ Because today, the Federal Trade Commission, led by Chair Lina Khan, filed suit against USAP for monopolization, as well as its owner, New York City-based private equity firm Welsh Carson, which from its offices on Park Avenue engineered the entire strategy of gouging patients in Texas. It’s an important suit, for reasons I’ll go into, and it also reflects a more aggressive antitrust enforcement regime, and skepticism of private equity in health care.

Stoller quoted a NYT piece that concluded "private equity funded consolidation led to price increases" in a number of medical specialties.  He stated Welsh Carson ripped from that playbook.  

Actually WCAS wrote the playbook.   Brian Regan, General Partner in the Healthcare Group, implemented it at USAP.   Also in the Healthcare Group, former Medicare Chief Tom Scully.

WCAS is currently employing that very strategy in orthopedics with United Musculoskeletal Partners.  The December 2021 press release stated:

Welsh, Carson, Anderson & Stowe ("WCAS"), a leading private equity firm focused exclusively on the healthcare and technology industries, and Resurgens Orthopaedics, one of the nation's largest orthopaedic practices, today announced the formation of a new venture focused on building the premier physician-owned orthopaedic platform in the country.

The press release referenced WCAS past medical practice companies that rolled up

WCAS has deep experience building industry leading companies in partnership with physicians, including: US Radiology Specialists, US Anesthesia Partners, US Acute Care Solutions, US Oncology and USPI, among others.

WCAS' man at US Oncology is now CEO of Humana.  Bruce Broussard continues to use Humana funds for joint ventures with WCAS.  Humana makes significant profits from Medicare and Medicaid.  It invested alongside WCAS in occupational medicine, urgent care, primary care and home health/hospice ventures.

WCAS cashed out of its stake in Kindred Hospice, since renamed Gentiva by another private equity underwriter (PEU), Clayton, Dubilier and Rice. I'm sure WCAS's profit on Kindred Hospice was a majorly awesome cha-ching!

Tom Scully's ability to quote statistics supporting WCAS' greed is analogous to the Saudi Crown Prince bin Salman's recent data filled slide show.  They both have nefarious ends, more money, power, and influence....

Matt Stoller does fine work.  Consolidating and overcharging, it's been going on for a long time.  Yet, the future holds more threats than simple roll-ups.

In 2021 WCAS started Valtrius.  It is essentially a healthcare venture capital company.  Valtrius sounds like a herpes medicine and its aims to grow healthcare profits in virus like fashion.

Valtrius recently launched TailorCare:

Valtruis, a WCAS company, announces the launch of TailorCare, a risk-based company that provides evidence-based, clinically-designed care navigation to patients living with joint, back, and muscle pain.
TailorCare partners with in-market providers to deliver high-quality MSK care. This includes primary care and specialty providers, such as United Musculoskeletal Partners (UMP), TailorCare's anchor strategic orthopedic partner.
Layering of PEU affiliates will be the next challenge for any Federal Trade Commission. 

A round of applause for anyone who can hold, even turn back the PEU surge overrunning our healthcare system.  

Politicians Red and Blue love PEU, and increasingly, more are one. 

Update 9-25-23:  KKR owns healthcare provider Brightspring and appears ready to take it public.  Buzzfeed found serious care problems at the company.

Update 9-28-23:  Matt Stoller writes on Twitter/X:

Private equity is furious at Lina Kahn, everyone else is furious at private equity.

Private equity doesn't care if people are furious. They feel removed from affiliate customers and have the politicians at their beckon call.

Update 10-26-23:  Big by Matt Stoller reported the Pentagon's "hand's off position" on defense company buyouts has consequences:

Higher prices, worse quality, lower output. Wall Street and private equity firms prioritize cash out first, and that means a once functioning and nimble industrial base now produces more grift than anything else.