Bi…cameral legislation?

...meaning both houses of Congress.

As opposed to the many famous cases of unicameral American legislation?

Can someone steelman private equity, please? I'm honestly looking for the upsides (for non-investors) of when PE moves into an industry like medicine and begins buying up businesses that traditionally aren't already large chains.

I already hear the downsides frequently from someone whose work is directly affected.

The upside is to the folks who sold the businesses they owned.

Should they be outlawed from selling to certain classes of investor? Which?

It should be more about making certain levels of consolidation and deep erosion of local ownership illegal.

We have run this country on an assumption that we must give businesses a high amount of freedom. An argument can be made that businesses have been given too much freedom in our system. We’ve allowed Amazon and Ticketmaster and Walmart to exist and they shouldn’t exist in their present form.

Healthcare practices that provide necessary care shouldn’t even really be allowed to be for-profit entities if you ask me. The incentives become too perverse as a result.

Can you define profit? Would a doctor be allowed to earn more than $200 per hour? $300 per hour? $400 per hour? Is a doctor allowed to be paid per procedure or time?

How much would you want to sacrifice your 20s and early 30s? How much would you need to work in the middle of nowhere where your kids won’t have the best opportunities?

Should Doctors have a legally enforced max pay? Same with the web devs, max $150K, anything else is just profit driven bullshit right?

Healthcare practices that provide necessary care shouldn’t even really be allowed to be for-profit entities if you ask me. The incentives become too perverse as a result.

Why stop at healthcare? Why not other essentials of life, like food or toilet paper?

You’re absolutely right. For example, we’ve seen the negative impacts from excessive agricultural consolidation.

Many of them already lack profitability without subsidy.

Many agricultural products all pass through the same mega-sized processors and entities. Driscoll’s, Tyson, etc.

We’ve already made things like water and sanitation non-profit/government owned so the idea of doing more of that for food and essentials isn’t that crazy.

You’re absolutely right. For example, we’ve seen the negative impacts from excessive agricultural consolidation.

Like what?

Many of them already lack profitability without subsidy.

That doesn't mean anything without context. How are the non-PE farms doing?

We’ve already made things like water and sanitation non-profit/government owned so the idea of doing more of that for food and essentials isn’t that crazy.

sanitation: please see https://en.wikipedia.org/wiki/Waste_Management,_Inc.

water, but not power, or natural gas?

Like what?

https://en.wikipedia.org/wiki/List_of_foodborne_illness_outb...

If a product isn't nationally consolidated, it can't have a national foodborne illness outbreak.

it can't have a national foodborne illness outbreak.

Which is bad for PR and great for clicks, but it's entirely unclear whether we're better off on average. What about all the years where we didn't have a mass outbreak? Would it be better if every state/county had separate food supply chains, and they had the same rate of illness, but it's more randomly dispersed so it doesn't make it to national TV? Think the difference between airplane crash (maybe one incident per year, hundreds of deaths per incident) vs car crashes (40k/year)

"We’ve allowed Amazon and Ticketmaster and Walmart to exist and they shouldn’t exist in their present form."

Do you realize that when Walmart moves into a community, prices charged for everyday things overall drop significantly, both at Walmart and their competition, which means that poor families are able to buy more with every dollar.

What do you have against poor people?

And the employer with the largest amount of employees using SNAP benefits is…

Walmart is subsidized by the government to the tune of $2,000 per employee due to their low wages: https://rmfu.org/taxpayer-dollars-subsidize-wal-mart/ [1]

They then get to skim the other side of those subsidies, too, since they sell so many items that qualify for SNAP and WIC, as well as being one of the largest if not the largest prescription supplier in the country.

(25% of Walmart employees qualify for Medicaid https://mafainsurance.com/how-many-walmart-employees-are-on-...)

So their employees on SNAP and Medicaid turn right around and spend that money inside Walmart.

both at Walmart and their competition

What competition? When Walmart comes to town, the competition closes.

[1] Probably a lot higher since this article is about 20 years old

And the employer with the largest amount of employees using SNAP benefits is…

Walmart is subsidized by the government to the tune of $2,000 per employee due to their low wages: https://rmfu.org/taxpayer-dollars-subsidize-wal-mart/ [1]

And what happens if walmart closed up shop? Do those employees magically evaporate and not need benefits? Why are we putting the blame on the employee's best employment option?

What competition? When Walmart comes to town, the competition closes.

Why? Because they're sending goon squads to trash all the existing businesses? If walmart replacing "the competition" because they're offering lower prices and consumers are switching, why is this bad?

It’s wild to blame Walmart for government subsidies when it’s the government not Walmart who decides who gets benefits.

Is Walmart to blame they hired a single mother of 3 for $20/hr? Would this women be better off if Walmart never existed and she was unemployed?

And then turn around and blame Walmart for selling essential food items for low prices because SNAP can be used to pay for them. Would you rather SNAP beneficiaries pay more for groceries so they have less to eat?

We’ve allowed Amazon and Ticketmaster and Walmart to exist and they shouldn’t exist in their present form.

Unpopular knowledge is that these businesses are generally illegal in their current forms under existing US law. The relevant laws are still in effect, they are just rarely enforced. The scale of the lawbreaking runs to the trillions of dollars annually, and it directly harms every US consumer.

The illegal conduct is so pervasive that even explaining the existing federal law makes one sound ridiculous, because companies have been explicitly advertising illegal behavior for decades. Because there is no sanction.

One of my faves is the notion that $BIG_RETAILER can buy in bulk and get better pricing, which they pass on to the consumer. You may have seen a company advertise something like this. It sounds like smart business! There is an active federal law[1] that explicitly prohibits this arrangement.

Lack of enforcement of that law is a factor in the disappearance of the American "high street" and the demise of many small retailers.

My #1 call for reform in the US is to simply start enforcing laws, even if doing so makes rich people/companies uncomfortable.

1 - https://en.wikipedia.org/wiki/Robinson–Patman_Act

If the business is a hospital?

Yes.

If the business is a hospital?

I'd expand that to any type of business that has effectively inelastic demand through the ability to hold people emotionally hostage.

So, for example, in addition to hospitals also include veterinarians, funeral services, family planning, etc.

Soulless PE vultures should be barred from all of this.

Easy. PE 99% of the time buy businesses that were already failing and provide a lifeline. A failing business can't afford to pay for expensive medical treatments without a loan that a bank will not provide since it is failing.

People who are vehemently against PE generally do not have any idea of how the system works

That's one model of private equity, but PE has also been buying up very successful local businesses in areas like veterinary care. The PE firm keeps the name and branding of the local vet because people have traditionally wanted to take their pet to a trusted local vet, not a big chain.

So this vet practice are now a big chain except for in name only?

Many medical practices (and other businesses) are poorly operated and administered. I think of my dentist: terrible website (even by 1995 standards), awful at follow up, weird insurance coverage (since she doesn't have time to follow up with new plans it seems) and almost no appointment reminders. There are obvious things to do that could drive business for her.

It makes sense to me that someone could come in and say "hey, let me run the business + finance side of the house while you practice medicine" and at least on paper I can see a real world where that works out for everybody.

Of course, soon you end up with dentists pushing unnecessary procedures and more, so it doesn't always works out that way.

PE exists because a lot of companies are poorly managed. It's better for your local hospital to be taken over by a PE firm than to go out of business. You can say that it would be even better if the government ran the hospital, and you would be right, but that would require a radical overhaul of the American healthcare system. Until that happens, PE plays a major role in keeping things working.

PE staff are more intelligent and more shrewd than the people running the businesses they buy. Being a good doctor doesn't make you a good businessman.

I'm not a huge fan of PE but the point of economics to deliver cheap and quality goods to consumers not keep people in a job.

In healthcare in US in particular I think the main thing that capital should be (if regulators allow) boutique / specialists that e.g. are the best in the biz at doing MRI scans, in some states my understanding is that it's literally illegal to start a business aiming to make one small part of the process better.

What does it mean in this context to be more intelligent and shrewd than the existing owners? Delivering better profit margins?

I mean, losing money is not sustainable. If a doctor or physician group isn't business savvy and can't earn a profit they will eventually go under. That's not good for the patient.

OK, but making money, though it may be less than a PE company would, is. Where do most doctor's offices fall?

What shows that they are more intelligent? They might be better at extracting value from enterprise, but is that generally “more intelligent?”

but is that generally “more intelligent?”

Contrary to popular belief, being intelligent in one thing does correlate with being intelligent at other things[1]. For doctors, the comparison with private equity (MBAs?) might be close, but it's not hard to imagine the targets of other PE rollups have owners that are more average in intelligence, think plumbing or roofing.

[1] https://en.wikipedia.org/wiki/G_factor_(psychometrics)

DISREGARD THIS, I CAN'T READ TODAY

Contrary to popular belief, being intelligent in one thing does correlate with being intelligent at other things[1].

[1] https://en.wikipedia.org/wiki/G_factor_(psychometrics)

Which section of that very long article are you claiming supports your assertion?

Here's a bit from the start of the "Concept" section:

> In a famous research paper published in 1904,[8] English psychologist Charles Spearman observed that children's performance measures across seemingly unrelated school subjects were positively correlated. The consistent finding of universally positive correlation matrices of mental test results (or the "positive manifold"), despite large differences in tests' contents, has been described as "arguably the most replicated result in all psychology".[9]

That explicitly contradicts your assertion.

being intelligent in one thing does correlate with being intelligent at other things

vs

The consistent finding of universally positive correlation matrices of mental test results (or the "positive manifold"), despite large differences in tests' contents, has been described as "arguably the most replicated result in all psychology".[9]

How are they contradictory? Did the first part of my comment make you think there was a negation?

Remove “more intelligent” here and I’ll give you some benefit.

The problem with healthcare “economics” is that providing high quality care is likely not as profitable as middling care, or sub-standard care.

You say that economics is meant to deliver cheap quality goods, but in reality here economics for PE is value extraction and has nothing to do with consumer good at all - unless of course there’s more profit there. Most of the time, there isn’t.

Is Apple Inc run for consumer good or value extraction?

We know how to make MRI cheaper. Put it in a can. MRI suites are built with copper shielding in the walls, and the machines are really heavy, which creates huge capital costs. (Capex is a big problem for medicine.) There's an easy solution: you can just put an MRI machine in a standard tractor-trailer container and bring the patients in. Nothing has to be constructed or installed.

None of the private equity chains with the sans-serif fonts, simplified logos and trisyllabic names are doing this, though. It's bad marketing. Patients don't want to walk outside to an MRI machine in the parking lot. It feels sketchy. Never mind that they score just as well on the ACR image quality tests as the in-room machines. Who the hell knows what that is?

In reality, it's the county hospitals and big universities that use them! Places that have in-house physicists who can argue for what really makes sense in practice. A major problem with healthcare as a business is that the customer does not usually understand the product, but they still need to buy it, and there are time constraints.

Easy to imagine practices where the primary owner is going to retire and looking for an out.

Maybe they find a buyer in a doctor, maybe they don't, but PE provides them an exit that keeps the practice operating in the community.

Many people don't really run businesses efficiently. There was an interesting video I saw recently where a sole doctor practice made a few changes to their workflow that allowed them to hire more doctors and handle 2x as many people - I would expect a PE firm would pursue similar changes that help increase the number of people they can service, increasing competitiveness and lowering prices in the long run.

I don't know how these tradeoffs interact with patient care, but I wouldn't inherently expect PE to be worse at this than any other operating model.

A structure to run business efficiently using practiced methods is always a good thing. However from what little I have understood, the goal of Private Equity is to maximize the dollar value on their investment. Somehow they have settled with the playbook that running a business even profitably isn't the best idea. Instead its much more profitable to take over the struggling business at good price, squeeze everything possible from the assets (thats where PE seem to be investing their expertise unfortunately) over duration of time. Update the books in a manner that it saves money on taxes and carry forwards the loss, making money in the process.

Why do you need to sell a private practice? There’s no brand to sell, it’s just you and that will be gone.

PE is scourge in this space. They’ve probably taken over every dental office already and now they push unnecessary procedures and whatever your insurance will bear just because.

> Maybe they find a buyer in a doctor, maybe they don't, but PE provides them an exit that keeps the practice operating in the community.

If the practice is to continue, there must still be practitioners working there. Id prefer they buy out the one retiring, but the retiree can sell to whoever they want.

These businesses would simply stop existing if no purchaser came forward. Many first-world economies face a demographic cliff where boomers are retiring and there is nobody in the next generation who can afford to take over the local dentist office, the HVAC company, etc.

Can someone steelman private equity, please?

Step back and look at what it fundamentally is.

Person A has a business they want to sell.

Person B has a pile of money and thinks that that business is (or can be) a good investment.

That's it.

So, what happens if person A is prohibited from selling their business? Are they forced to keep working because they don't have enough other savings to retire on? Do they shut the business down in order to retire? Something else?

.

Calls to ban private equity are attempts to play "shoot the messenger".

May be categorizing the different private equities can be helpful here. A PE interested and invested for growth is always the best outcome. A PE only looking to salvage and squeeze is that gives the bad branding to PE.

It basically comes down to interest rates right? If interest rates are low, the discounted-cash-flows analysis will favor maximizing long-run profitability. If interest rates are high, you can do better by squeezing the business in the short term and placing the money you obtained into some sort of high-yield, low-risk investment vehicle.

Small(er) businesses can be poorly run. In theory private equity takes knowledge already in practise in other locations and shares it with this new location, improving results. Downside of course is that they care a lot less about that specific location than the previous owners would have.

One specific practise I’d like to see banned is private equity buying companies with debt the company then assumes. It staggers me that it’s legal.

I’ve literally never seen that happen. what does always happen is cutting ‘non essentials’ that are essential until the company implodes.

That is one of the core strategies in the private equity playbook.

Why would it be profitable for the company they just paid a lot of money to acquire to implode?

I suspect there’s a survival bias at work here. The PE purchased companies that continued to thrive are ones you probably never even knew got bought out.

One specific practise I’d like to see banned is private equity buying companies with debt the company then assumes. It staggers me that it’s legal.

What alternative are you imagining?

Can someone steelman private equity

PE attacks organizational sclerosis, can save companies that otherwise slowly deteriorate, reallocates resources faster, creates an unusually powerful form of corporate governance, Debt can impose useful discipline, can provide capabilities that smaller companies couldn't build themselves.

A society doesn't necessarily benefit from preserving every existing job. It benefits from creating increasingly productive jobs.

increasingly productive jobs.

This needs to be defined a little bit better.

If I own a hospital that makes infinite money and every patient that comes to it dies the economy measures this is infinite productivity. This is contrived, but really matches some of what we see in real life.

This is why making a measurement a target can be horrifically destructive and contrary to the actual goal society wants.

The west doesn't seem to believe in the idea of social stability over increased profits which can lead to things like corporations being the social structure that is optimized for rather than the wellbeing of the individuals it contains. Left to run out of control the society can collapse.

If I own a hospital that makes infinite money and every patient that comes to it dies the economy measures this is infinite productivity. This is contrived, but really matches some of what we see in real life.

You wouldn't have any business if all, or many, of your patients die.

It seems to me that oligarchies as a whole function a lot like PE's taking over a socially unstable polity.

The west has been an oligarchy for several decades at least, so it's not that people in the west don't believe in social stability, it's that they are living in the hollowed out shell of the former "company" where that doesn't exist. We need to optimize for the people's prosperity and well being.

Private equity just means controlling a company outside of the public stock markets, it is incredibly broad, and covers everything from blackrock buying every vets office in an area, to a plumber buying out another plumber when they want to retire.

The steelman argument is that private equity is just property rights. If I build a business I get to decide what to do with it.

What most people are arguing against is a specific kind of PE where an institutional investor will either use aggressive financial engineering to force a profit, even if it kills the business, or when those same investors aggregate market share to the point where it is detrimental to consumers. Sprinkle in a little bit of heartless MBA bullshit, and that is what people specifically don’t like.

A stronger steelman is that it results in resources getting allocated in smarter/healthier ways across society.

If there's some business that's getting by but the land it's on is more valuable (e.g. for housing) than the business, some investors buy the business, sell the land, make the business account for the land value, wind the business down if it can't, and there are apartments there a few years later.

employers expect health care plan costs to rise by an average of 11 percent per worker in 2027, unless benefits are cut

I am sure most workers would prefer to get that extra 11% as a cash raise, but because healthcare costs are out of control the same care costs 11% more.

Certainly some companies will throw up their arms and hire someone overseas instead.

Look up "Medical Loss Ratio" from the ACA if you want to find out where the perverse incentives for health care pricing comes from..

The cap is generous. If an insurance company is hitting it, competition is failing to keep them in check and lifting the cap would just let them gouge deeper. Of course, that doesn't keep them from constantly yapping this talking point, as if it wasn't that way before, as if we don't have evidence that it wouldn't work. "Just lift our profit cap" is self-serving baloney.

Australia is on its way down this path after Brookfield / Healthscope was holding a private hospital hostage against the government and had performance so degraded a child died. Hopefully we (aus) continue down this path of burning off the rot.

https://www.abc.net.au/news/2025-03-27/nsw-government-joes-l...

That's for hospitals though, in one state.

Approximately 45% of GPs in Australia work in practices owned by private companies

https://www.monash.edu/business/che/impact-and-engagement/re...

You know what american healthcare really needs is more regulation!

Are you saying it needs less? Why do you think that?

yes. It's completely insane that health insurance A) does all price discovery B) is tied to your employer.

Ask an American hospital how much something costs - you will get a completely fake price back, this is a sign of a totally broken market.

I am good with getting rid of B).

A) can probably only be fixed with regulation. Why would hospitals and insurance otherwise make prices transparent? The current state serves them really well.

The 'fake' price is due to the negotiation of reimbursement between major healthcare chains and insurers. The most regulated piece - Medicare - is the only piece where there's fairly transparent pricing.

reimbursement between major healthcare chains and insurers

And why is this so prevalent? It's subject to huge subsidy and regulatory capture

Ask an American hospital how much something costs - you will get a completely fake price back

You think the government tells hospitals to lie to you? The hospitals lie because the government doesn't force them not to. Laissez-faire capitalism causes that. Regulation is needed to fix it.

https://en.wikipedia.org/wiki/Airline_Deregulation_Act

Make it a leverage limit. Otherwise you’ll have other players come in and replicate the playbook.

The short-term fix is banning PE. The long-term one is restricting the leverage these groups can take. Then put limits on upstream leverage. We have these across our economy. We just don’t apply them to this sector.

Medicine is extremely capex intensive and only become more so. Sucking private capital out of healthcare is going to make it vastly worse for everyone; higher prices and less innovation. I think we can criticize the often ruthlessness of PE while realizing that limiting medicine's ability to invest would be a huge self-own and only force further centralization into the biggest non-profit centers.

Medicine is already held back enough by the lack of ability to use debt to finance its sales, unlike almost every other industry; you can repossess a car but you can't repo an implant or administered drug, forcing everything to be paid for in cash upfront. Medicine needs as much access to capital as it can get.

Sucking private capital out of healthcare is going to make it vastly worse for everyone; higher prices and less innovation.

Injecting PE into healthcare is what made it vastly worse for everyone in the first place. You can't have it both ways.

I'm sorry, compared to what? We're not talking about a routine doctor's office for healthy people. Advanced care is extremely technologically intensive and your local surgeon is not personally buying the $20M in infrastructure required for many modern advanced treatments. Venture capital has been essential for progress in medicine, and many advanced therapies are going to be increasingly delivered vertically integrated for the widest accessibility and best outcomes.

Venture capital has been essential for progress in medicine

VC's can still fund companies that are making expensive new products.

Banks (and PE...) can still underwrite loans for these things.

We have many solutions for capex-intensive businesses and have had these for over four hundred years. LBO-type PE is not even fifty years old yet

I have no words for how completely toxic the surge of PE in healthcare has been. It's driven the degradation of care everywhere I've been. Healthcare chains have no issues with investment (see any annual reporting document to see how much money is sitting in various investments, mostly RE); smaller clinics being eaten up by PE chains is not an answer to centralization, it's just another mechanism of it.

I wonder if ai can help doctors reclaim their practices, as the bureaucracy of dealing with insurance may become easier. Administrative overhead must be cheaper with ai. It was the main reason for consolidation and giving up management to hospitals and private equity.

There's a pattern to the kinds of companies PE buys and I think it points to the real problem.

They like companies with some kind of moat that makes it hard to unseat them. Basically, companies where there is no alternative for the consumer. That way, they can inflict abuse but know there will be nowhere to run.

There are two different ways to achieve this. Monopoly and regulation. Hospitals have both government granted locational monopoly and tons of regulations that make it impossible to compete.

Private equity is the symptom, not the disease.

Until we get at the disease, new monsters will be born with different name filling the same ecological niche. It's economic natural selection played out in the environment we created.

The Americans simply will not reject their broken for-profit medical system wholesale. What I see is one more attempt at chipping away at it in hopes that maybe they can succeed piecemeal.

I'm not sure anyone has solved the problem, though.

"For profit" isn't really the problem, fee for service is.

Value based arrangements and capitated payment structures are real improvements.

When you don't have any market forces constraining utilization, you get massive access problems.

I feel like medical practices should be like law firms where effectively non-lawyers can’t own equity and equity owners have to comply with ethics and code of conduct rules…

It's actually worse with veterinary practices.

Younger veterinarians are drowning in school debt and can't buy the practices from the older folks that are retiring. So, private equity is basically snatching all of them up right now, betting that childless millennials are going to pay tons of money on veterinary care when their pandemic pups begin to reach end-of-life.

They're going to cut wages for all the staff, and hike all the prices, because unlike with human medical care, there's hardly any regulation (yet).