Monday, April 8, 2024

World Awakening to PEU Damage?

The world may be waking up to the damage done by private equity underwriters, now at the height of the economic eclipse of western economies.

Marketplace reported:

There’s currently a joint Federal Trade Commission-Department of Justice-Department of Health and Human Services inquiry into how private equity’s ownership of hospitals and physician staffing companies is affecting health care. 

 Separately, a Senate committee recently sent letters to several private equity firms that own or staff hospital emergency rooms asking them to provide information on staffing decisions, patient care and safety, and more.

Investigators are seeking comments from the public regarding private equity's damage to healthcare.

Comments on the federal query can be made at wwwregulationsgov and must be submitted by May 6.
As of now there are 1,025 comments.  Full disclosure, I've worked for two PEU owned healthcare companies and plan to submit a comment.

Left Foot Forward is written by an emeritus professor of accounting and member of Britain's House of Lords.  He writes:

Private equity operates through complex corporate structures and key components are almost always located in low/no tax jurisdictions with little or no transparency. High leverage, low wages, low investment, asset-stripping, strategic bankruptcies, profits shifting, tax avoidance and financial engineering are key tools for extracting profits. 

It loads the acquired entity with secured debt because interest payments qualify for tax relief, which lowers the cost of capital and helps to increase returns. The secured creditor status enables private equity to drastically reduce or eliminate the losses which might arise from bankruptcies because it has to be paid before all other creditors.
It remains to be seen if the government investigations are anything more than show.  Politicians Red and Blue love PEU and increasingly, more are one.

Update:  Not my comment but one that resonates with PEU Report:
Many of thepworst instances of a poorlygfunctioning corporate governance/economic incentive system have been through U.S. private equityafirms mismanaging investments in U.S. healthcare and technology companies -- are just the uniquely awful examples with broad public awareness. Private equity firmslcynically deny they have operational control of their portfolio companies when abuse is revealed, despite their effectiveicontrol through an interlocking directorate of board members, investors, and economic incentives. Some limited partner investors arevincentivized into complicity through access, equity co-investments, or fee breaks. Employees and management teams at these portfolio companies, like helots, are retaliated against if they speak out of line. 

The current governancepsystem in place for private equity is not effective and the DOJ, FTC, and Department of Health and Human Serviceseshould have a greater degree of oversight to stop this from happening again. This induced trauma is happening with full awareness from the wider private equity ecosystem. Many of the most resourced private equity firms in the world are right nowucolluding to ringfence their own liability and cover up the impact this misappropriation of resources is having on our healthcare system.
Retaliation occurs at the affiliate level as well, especially for those healthcare workers raising concerns about diminishment of care and fraudulent Medicare billing.  The PEU boys led a de-evolution of management that is particularly greedy and mean.

Update 4-9-24:  People around the U.S. can see the prevalence of PEUs via a new tool from the Private Equity Stakeholder Project.  Noted author Gretchen Morgenson wrote the story.

Update 4-11-24:  Matt Stoller wrote on X:
This headline basically says it all. The Republican approach to health care policy is to let private equity take over the doctor's office and privatize Medicare.