Bill to Ban Private Equity from Owning Medical Practices
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Bill to Ban Private Equity from Owning Medical Practices
Unofficial Hacker News client; not affiliated with Y Combinator.
throwaway13337 · · focus · HN ↗
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.
duped · · focus · HN ↗
The biggest moat is capital.
PE is buying up things like medical practices, law firms, vets, etc, where typically there would be an upwards path for one generation to hire new blood to cover their markets and then sell partnership stakes to them when they want to retire. But why should an owner of a practice sell to their junior staff when PE is there offering 2, 3, 5x as much?
Consolidation of these kinds of businesses at the hands of PE is endemic of systemic lack of capital acquisition of a generation of people, held down by debt and concerns about practical shit like healthcare.
PE is just a symptom of larger macro economic trends, namely the depletion of the next generation from free cash they could use to become business owners.
throwaway13337 · · focus · HN ↗
There is no shortage of investment looking for great returns. A market with huge demand not being met adequately is a dream to investors. Even more when you know the competition must continue to fuck their customers because they paid above market rates for the purchase and the business is saddled with debt obligations it must meet (Leveraged buyouts do that).
What could stop new competition from beating them out?
It's not capital.
duped · · focus · HN ↗
It only works by having more capital to begin with.
Otherwise you wouldn't see consolidation where it shouldn't exist.
throwaway13337 · · focus · HN ↗
The PE firm creates market demand for the goods/services that the purchased company used to provide at a better value to the customer.
So yes, the 'creation' is a demand which is sort of a destruction of the value that the customers previously had. In a fair market, this demand can be met. But a PE buys strategically such that this demand is not possible to satisfy because the company they purchased is entrenched in some way (regulation/monopoly).