Private equity snaps up disability services, challenging regulators

Private equity is in need of some severe regulation, how many of the ills of society go back to this sort of thing ?

Private equity is a massive juicer that’ll try and squeeze money out of anything, destroying all the inherent value in the process.

Vampires

Just about all of them.

and pumping up costs

Increasing costs solely for the sake of increasing profits that is.

I used to work for an adult daycare, for people with mental disabilities, and the amount of times people would play fast and loose with state regulations was concerning. This is an area where the government needs to be hyper vigilant, since some of these clients can't easily stand up for themselves.

This, and little league. My goodness what will they think of next?

An increasing monetary base ensures this. It's simple economics and baked into most monetary policy around the globe.

If you take issue with increasing prices, monetary inflation (printing money) is the root cause.

Feels like it would be easier to count the ills that _don't_ go back to this sort of thing.

Healthcare, especially the patient-facing part, isn’t like other services.

If we want private ownership of this infrastructure it has to look more like either a utility, where the state has a direct say in service changes and pricing, or a partnership, where unlimited liability flows through to the owners. I’m a fan of the latter.

Limited liability was an amazing invention. But it’s not appropriate for healthcare. Turn these services into partnerships and you’ll see the give-a-shit factor quintuple overnight. (You’ll also probably see a reduction in leverage.)

The fact that it’s private equity is mostly a red herring.

The problem is the rules can be broken with minimal consequence. Swap out PE for another profit-seeking structure and you’ll tend towards the same outcome, as the bad outcompetes the good.

I'm not going to defend private equity, but the article mentions only bad outcomes for services owned by private equity. To get a more complete picture, they should probably also see if there are problems with companies that aren't owned by private equity funds. And then look to see what the positive outcomes associated with both private equity owned and non-private equity owned.

Which is to say... these are anecdotes that warrant further investigation, but then ensure effort is required only for equity fund owned services by looking at the whole picture. If there are industry-wide problems and you focus your effort on private equity fund owned services and companies, you might miss an opportunity to improve the entire industry.

That being said... PE funds have a bad reputation for a reason. I would be surprised to find they're not the worst offenders.

It is a shame that Private Equity destroys businesses when they can do a lot of good if done correctly. I actually like the idea of buying a business to help it grow further but PE just doesn't get it and they are too short sighted and focus on short term profits to squeeze.

Even the legendary Buffet has bad things to say about PE.

> destroying all the inherent value

Not all is destroyed. Some of the value is diverted to PE wallets. Setting 900k of someone else's value on fire in order to set up a updraft to push 100k into your pocket is a sweet, profitable deal for you.

My hat's off to you. That's often difficult, underpaid and important work.

The consolidation is a big story and problem regardless of the type of parent company.

The clients were usually a pleasure to work with, but management was atrocious, and encourage/allowed things that should not have happened. And this was a sole proprietorship, definitely not private equity. I'm not sure which ownership structure fosters more moral hazard, but regardless, there are a lot of issues in the industry that need addressing

Mostly? PE's original sin is being carpetbagger capitalism, exclusively focused on short-term profit. Without even the usual "Evil Corp" veneers of domain expertise, or emotional attachment to the underlying business and community.

>> Swap out PE for another profit-seeking structure and you’ll tend towards the same outcome, as the bad outcompetes the good.

The optimum might be an employee-owned facility, but even there you'd have incentives to increase profit - everyone would like to get paid more for whatever it is they do. PE has the strongest conflict of interest though, as they are simply investors seeking profit and have nothing else in the game.

Can you give us some examples on how they would play fast and loose with some regulations?

I agree, there should be no limited liability for for-profit healthcare organizations.

And non-profit health care orgs should have strict regulation, and the state should appoint some of the members of the board.

I am personally aware of at least one company which was bought up by private equity in the last 5 years, which has remained very much the same since. It hasn't taken on debt, it hasn't been parted out, it hasn't started optimizing for profit and reducing worker benefits.

The new owners seem content to simply sit back and collect the profits of the company that were previously going to the family that owned the company before.

That is to say, in greater than zero instances, PE has the capacity to be benign.

I think the median PE firm is far worse than the median non-PE firm, but there exist outliers in both groups.

Is it correct to understand private equity as transferring service quality to the initial set of customers (who were subsidised) from the new customers who have to give up quality to make the whole venture feasible?

> PE has the strongest conflict of interest though, as they are simply investors seeking profit

This is the red herring. PE is one of many categories of financial investors. (Worse, it has become incredibly nebulously defined.)

I'd also argue that employee-owned coöperatives might be the single structure worse for healthcare than a rapacious, distant capitalist. The latter can fuck around with the books. The former can fuck with the charts.

> there should be no limited liability for for-profit healthcare organizations

Any. If you ringfence it to for-profit companies you'll just wind up with non-profits either siphoning profits away or exorbitantly compensating their leadership.

No. Private equity means investors who buy equity in non-public companies. That's it. (It used to imply leverage, but that distinction has blurred away.)

In popular discourse it's close to a meaningless term.

I think we're talking about cashing out a company by prioritizing short term returns over long term survival (including insulting your customers, degrading the brand, committing borderline fraud, etc) . that's pretty orthogonal to broad structural inflation.

That would have to come with some liability reform however. Injury lawyers are another cancer on society along with many practices of Private Equity.

When you take care of sick or disabled people, bad outcomes, even death, can come along with that. Nobody in their right mind is going to form a health care partnership with unlimited personal exposure to liability unless that is strictly limited to actual losses in cases of proven negligence.

You are technically right but I wanted to understand the bigger reason of why this happens:

A company runs well. But then they sell to a private equity. The quality goes down.

This is the common critique against private equity.

given the absolutely nutso judgements juries award in the US, nobody would open a practice if this were true

Were you invoking Deus Ex when you said consolidation ? Because that's what I immediately thought of.

Why should something like "patient harm" get in the way of profits? What is this, communist Canada?

They do it every day. Many (most?) doctors work in partnerships. And they have insurance.

There are a bunch of different patterns (not all of which reduce quality), but usually when a company is sold to PE and quality goes down it's because the company was in trouble, either because they weren't profitable (or were, but only on paper), or were in a liquidity crunch, or were facing down imminent changes that would make them unprofitable.

People are often comparing to a situation where the company continued doing things that weren't sustainable long-term.

That’s why all high revenue non-profits should have some board seats appointed by the state, and state audits, etc.

Yes this is what I was referring to. So it’s like the past customers were borrowing quality from future customers.

The blame is usually put on the private equity for reducing quality but I wanted to understand the bigger reason behind it.

I feel like this is the theme of our entire country at the moment: Many powerful people seem willing to torch stuff worth billions of dollars to the country as a whole in order to squeeze out a few million for themselves.

If we had a functioning regulatory environment... Haha. Nevermind. We vote for our leaders based on how loudly they promise to hurt trans kids.

> To get a more complete picture, they should probably also see if there are problems with companies that aren't owned by private equity funds

There's also the problem of adverse selection. A subset of private equity is focused on buying distressed assets, so just because 50% of PE owned companies go under, doesn't necessarily mean they're bad.

>PE has the strongest conflict of interest though, as they are simply investors seeking profit and have nothing else in the game.

How is that a "stronger" conflict of interest than the previous case?

This has happened with special needs schooling in the UK.

Its basically caused costs to balloon to £10 billion.

However this is not entirely down to private equity as, these support packages are now the only way to get specialist support that used to be provided by other state/charity providers.

Private equity is just following trends in scamming.

https://kstp.com/kstp-news/top-news/minnesota-autism-expert-...

I'm inclined to agree... I think the issue is that there are some areas where liabilities and a severe lack of consequences should not be the same as others.

In a similar vein, even as a libertarian minded person, I don't like the idea of private prisons at all, I don't feel a company should be incentivized towards keeping people locked up and suspended of their rights. Not that I don't believe in prisons, only that they shouldn't be businesses.

I think with medical facilities, that there should be far less protections from liability, and more severe repercussions from any coverup, non-reporting or mis-reporting of harm/accident/injury. Not to mention more, regular inspections and audits, along with camera/recording requirements.

No, only a small proportion (less than a quarter) work in partnerships and a large driver of the decrease is the American liability environment. But sure, doctors in some specialties choose to take the gamble that the liability doesn’t exceed their insurance limits. But such a gamble would be extremely risky for a system or hospital employing hundreds of caregivers.

About half the states already have caps on damages. [1]

1 - https://www.millerandzois.com/medical-malpractice/maryland-m...

Things like handing out punishments, restricting access to certain rooms, or just generally not acting like the client is the one paying for the service, but instead like the daycare is their guardian

Profiting off of care provided to vulnerable or disabled people is, I'm going to say it, immoral. We should not be allowing this - for the simple fact that chasing profit inevitably means cutting the quality of care.

Generally speaking when Private Equity shows up you should run for the hills. Fast.

> A company runs well. But then they sell to a private equity. The quality goes down

I'm sceptical this pattern is true. But because of the aforementioned ambiguity in terms of what constites private equity, it's an essentially unanswerable question.

If you want to support the hypothesis, you focus on investors who use a lot of leverage (LBOs) and those who focus on distressed assets. There is reason to criticise the former, which often amounts to limited-liability arbitrage. The latter is just sampling bias.

Similarly, if you wanted to reject the hypothesis, you'd include venture capital in private equity, as well family offices that quietly collect businesses in an area they've long operated in, but want to say they're in private equity versus the family restaurant-parts supply business or whatnot.

Going back to something like disability services, I don't see it being run phenomenally better by a VC or family or public company. The problem is fundamental to the profit incentives of the industry. Not the fact that the owners brand themselves as private equity.

My goal is to force the large systems into being non-profit

My father is currently in a long term care facility. He was in that same one for almost 5 years and never had a problem. Last year it was acquired indirectly via a larger group owned by a private equity firm.

This was not a low end place back in 2023. By the end of the last year not only had the cost increased by 30%. Internally there was a number of layoffs and quality shot down. Originally it was supposed to be 1 registered nurse per 4 people. By the end it was 1 "medical professional" per 20 who constantly rotated. Who would not answer if they had formal medical training.

Before at night people could go for walks on the premises, or if they were hungry they could go get hot food prepared by staff. New management locked everyone in at 8pm. If you missed any meal time you were told cope. Food was not allowed in the "suites" anymore. My dad and his friends there would go get together and spend time at night or socialize. Not allowed anymore after 8pm you were locked in your room.

I pulled my father out of there when he told me the above. Now his new retirement home is now also changing ownership.

> all high revenue non-profits should have some board seats appointed by the state, and state audits, etc.

Why would you want to politicise every non-profit like this?

I think the big issue with private equity is the lack of transparency.

Seems like a big part of their bread and butter is anti-competitive or otherwise legally questionable self dealing between their holdings. Things that would quickly face public scrutiny if those companies were publicly held and had the associated reporting requirements.

most large providers already are, it is no panacea. imposing further costs on the provisioning of care only means less care in the equilibrium

This story as presented every time is a bit backwards.

These thinly capitalized private equity groups are in the business of scooping up "distressed assets". Being the only buyer to show up and getting something for less than it's worth.

The bigger story is that all of these business are up for sale and there are no better buyers. Our population is aging, the people who founded and run these private businesses are retiring en masse and cashing out. They don't have kids who want to run these businesses, and the workers of the business don't have the cash to buy it for themselves.

So part of this is a story of inequality - these businesses were accruing lots of capital value faster than even top earners could save to buy them.

But also, there is a clear and obvious policy fix - provide incentives for business owners to hand down their business instead of cashing out. Make it easier to provide long-term loans and financing for small-party buyers.

Sure, but we're talking about health care here. It's not Red Lobster or some failing brick & mortar store. I know health care in general is treated like a business, but it really shouldn't be.

I don't care if Red Lobster dies, but I do care about the already stressed disability services dying. Basically, the weighting is (or at least should be) different.

> Limited liability was an amazing invention. But it’s not appropriate for healthcare.

If you want to make these services more expensive and produce shortages, this is how you would do it. Why would anyone invest or want to work in these fields?

I have an unpopular take on PE taking over these small businesses after working with a few small businesses in the home improvement space. The fact is they are incredibly inefficient. You can't even get these guys to answer a phone. They bill you by mail weeks after and you call them to give them a credit card over the phone after you received your bill. Even getting estimates could take months. The service is not consistent. Depending on who they send, they could be completely clueless. You don't know until you finally stumble across someone competent that tells you how bad the last guy was.

Pricing is all over the places. You can get two quotes that are 50% different. So there is little discovery. These are only the obvious external inefficiencies. I couldn't imagine how bad it is operationally.

The bar is so low, which is prob why it's interesting for a PE firm. There is so much money being left on the table. That's why I generally prefer large chains for things like auto. You know the pricing. They are efficient and won't rip your face off for the most part. So I welcome more professionalism and corporate ownership if this means a better, more consistent level of service for me. I get there are downsides but right now I have enough trouble getting a hold of any of these guys that I just don't care.

I've often wondered at what point toying with healthcare at a large enough scale becomes eugenics with extra steps.

limited liability has been a disaster for the entire human race.

PE is essentially an active exploitation of the laws. I think you'd want to figure out a way to ensure there are long term incentives like requiring a 10x holding period or face very high short-term taxes for 'flipping' companies, similar to stocks. If a company fails any 'performance fees' or other such looting of the company should be forfeited and returned to creditors/customers/employees.

> Why would anyone invest or want to work in these fields?

That's how individual doctor's practices already work. If someone doesn't want to take liability for patient outcomes, good riddance.

> returned to creditors/customers/employees

I appreciate the sentiment, however it should really be clarified, for the purposes of productive dialogue, that employees and customers do not own a business. Businesses are for-profit and have a balance sheet just like everyone else, and creditors and minority shareholders have a responsibility in the ecosystem.

A creditor has a due-diligence obligation to determine credit worthiness, and a recent change in ownership could be part of that. Noone forces a creditor to give a loan.

In any non-public share ownership of a company, the shareholder has agency to manage their holdings in the company, and if they are bearish, they should sell.

Now the real grift is PE use of regulatory capture of a consumer. Consumers do not have much choice in the world of healthcare/hospice care.

In that sense, the government has the power of the pen to adjust the law.

I dont find any value in echoing a false entitlement to customers amd employees.

You’re making the assumption (from what I understand) that most of the inefficiency is in the administration side. I’m sure there is, but it’s also woefully complicated with insurance, laws, parties who may or may not be financially and cognitively sound, etc.

But let’s say you can make the administration side way more efficient. How much did that save? 20%? That’s not the kinds of returns being sought. So where does the 2x, 3x, or more returns expected come from? Cutting services.

I don't understand how either of your proposed angles of reform are supposed to work.

These are services being paid by the state, so I would think the state already has direct say in pricing? Which is why the business becomes a march to the bottom in provided services, to increase margins by decreasing expenses since they can't increase prices.

I didn't see any mention of bankruptcy in the article, so I don't see what limited liability has to do here. If anything it seems like the entities are too well capitalized, in that they can fight with individual states and pay off whatever meager fines might result. Also as far as I understand the medical industry, the individual doctors/nurses signing off on the care being given are still directly liable (modulo professional insurance policies). They just have reams of paperwork saying the care was correct from their perspective, despite what the low level caregivers might be doing outside of the paperwork.

I personally think what limited liability entities have developed into has become a scourge in general, as they end up being considered to have all the rights and freedoms of personally-liable natural persons. Getting a government granted liability shield should mean submitting to significantly more regulation to preclude engaging in well known patterns of constructive negligence. The vaunted fiercely-independent "man in the arena" can always actually get into the arena if they want their business to partake of the full natural rights afforded to natural persons...

And maybe you're just coming from a similar feeling of wanting those ultimately in charge to also be directly responsible? I usually think of this in terms of corpos fighting regulation with specious justifications based on individual rights (Citizens United, corpo direction of employee speech, etc). I just don't see how adding the liability would make anything more actionable here.

This is the hard part imo. Thinking about the argument for a government run single payer system, someone is still having to make a calculation on appropriate treatment. It’s what happens at the NHS, perhaps a single payer can do it more efficiently and no I am not defending the American system but I do think there are a lot of hard to answer questions.

PE is profiting off regulatory barriers to entry in situations like this; it has little to do with who the clients are. The way to solve this is to lower regulatory barriers to entry, which will make these industries more competitive and less appealing to PE.

I can’t even name a single large for profit system other than HCA.

Many private businesses "leave money on table". Private equity then acquires these and aim to extract maximum amount of value. Leaving money on table is probably general good. Like employees are reasonably paid, customers aren't charged maximum they can bear. Quality is not lowered as low as possible...

But ofc, if you pay for a company based on not leaving money on table calculation or bet on doing that later all those will change.

Then there are also the actually struggling and dying off companies. But I do not believe that is every one that is being acquired.

I would think unlimited liability would only work to increase prices as it would mean providers would become more laden with lawyers, even more bureaucratized and slow (spend most of your time documenting everything so we don't lose lawsuits), etc.

Those already seems like drivers of cost in hospitals. I have several family members who work in healthcare who are just miserable because so much of their time is consumed by things that are not helping and healing patients (documentation, etc.)

I think you hit the nail on the head when you mention the complexities of the business being the cause for the inefficiencies. Private Equity has figured out that they can buy into businesses with high legal, regulatory, and 'friction'-related barriers to entries, and squeeze the clients (either by increasing prices or decreasing service level/quality). The solution would be to make entry into these businesses easier by reducing legal and regulatory barriers, but that seems vanishingly unlikely.

when there's no need for the working class anymore?

> the big issue with private equity is the lack of transparency

This is all private ownership, including non-profit.

The American government hasn’t had a good track record for solving difficult problems in my life time.

Damn

It can be done fairly neutrally

In CA, put a professor of medicine and one from a mgmt school from the UC system on the boards of the to 10 medical systems. Let the regents pick the person, etc

This has become a self-fulfilling prophecy. When roughly half the political power in this country believes that government can only hurt, it makes it nearly impossible for the government to actually help.

But the market will adjust, right? Isn't that the core belief, that the market takes care of everything.

I think the ideology of "market rules" at least semi-works until the market is manipulated, which is "always".

I prefer appointing who manages things meant for public good through voting, it's not perfect but at least it's not ultimate profiteering by default.

Search Kagi for 1980s leveraged buyout and/or corporate raiders to get a start understanding how PE operate. Then realize that they have since optimized (profits must go up) upon that model of extraction at all costs for almost 40 years, and rebranded as PE for optics.

In 1980s Reagan/Yuppie/money obsessed America these guys were considered scum. In 2025 'the line must go up' America they are everywhere and considered 'you just have to accept them as part of capitalism' (even though 1980s Reagan America rejected them.)

>he way to solve this is to lower regulatory barriers to entry,

Lower healthcare standards is what you mean.

Ask anyone in leadership and you'll find the goal is always "outpace" inflation with shareholder value.

It's very simple and so many fight tooth and nail to see what's right in front of them.

I think the level of care is only one factor, and often not the one that prevents new entrants. I work at a small electronics manufacturer, and can tell you that in my industry, the biggest regulatory obstacles have nothing to do with our quality levels or production processes. In any case, according to a number of the commenters on this article, the PE providers have already lowered their level of care.

> at least it's not ultimate profiteering by default.

Unfortunately, voting is a terrible hiring plan to get competency in a highly complex often opaque environment.

I am currently lost as to what the right structure should be. It certainly is an interesting (and pressing) problem.

Just hard-cap compensation.

Or, you never give them credit when they improve things. The most difficult problems aren't fully fixable. The improvements people make often go unnoticed.

Crime rates have fallen. Rather than giving anyone credit, people seem more anxious and angry than ever.

If they can’t just walk out and leave, the daycare is their guardian, at least while they’re in their care.

Leaving money on the table is not an efficient way to run a sustainable business. No wonder they are usually sold to PE.

Forget efficiency. I want someone to pick up my phone call and pay my bill online. These guys leave a ton of money on the table. They can also better compete when the other guys are clowns

If it's so much money being left on the table, have you thought about picking some of it up?

What would that look like?

Caps aren’t super interesting overall. It’s the low bar it takes to sue and how expensive it is to litigate bullshit to marginal cases vs. settlements.

To be fair the current leaders like to hurt ALL kids!

Murder may be down, but every other “minor” visible crime is up. Reporting it is useless.

Just this week about a dozen contractor vans in the neighborhood were broken into (windows smashed) by a professional crew caught on camera looking for valuables to steal. Zero of those contractors reported it since they know it’s a pointless waste of time with the local police department. Not even worth reporting to insurance since rates will more than make up for the claim in a short period of time and they expect it to happen a few times a year. The stats will report a perfect week of zero property crime.

This is a neighborhood where the cheapest property is over seven figures.

Shoplifting is effectively legalized these days. No one is enabled to stop it like we did 30 years ago when I worked a retail job. And no one wants to talk about the corrosive effect this has on society via second and third order effects. Just the liability fairy and “don’t get paid enough to deal with that”. Again, only a small percentage of such theft is ever reported these days when before it was a policy to detain and call the police for booking every single time you caught someone in the act.

So sure, violent crime is down. Misdemeanors are effectively legal where I’m at. Traffic laws more or less no longer exist on top of it all. Armed carjackings went from basically unheard of to a weekly occurrence in my neighborhood.

But all the stats state otherwise, other than perhaps the carjacking one.

It’s also a large reason folks are losing faith with institutions and experts. When the stats and “studies” match absolutely no one’s lived experience people eventually start to question things for good reason. Only so many times you can be told by wealthy suburbanites that crime is down until you tune them out.

We are rapidly moving from a high trust society to a low trust one and I think many people are being caught flat footed in the new reality.

That said, I don’t believe it’s really a government problem. It’s societal one.

This is all true, but the fact that people continue to pay 2 million, 3 million to live in these places shows that quality of life is objectively high even if trust in society is low.

Hell, I’d wager that low trust societies are more free. That’s why you see the lowest trust and the stuff you describe in the hippy liberal PNW. Highest trust society on earth, Singapore, has no real freedom of speech, of protest, of consumption, etc

I’ll take homeless, needles, and poorly reported property crime so I can have legal weed and mushrooms, and the best outdoors/weather in the world, plenty of tech jobs, and clean air and water, and almost zero fear of the cops, and low violent crime (very few homeless are armed).

Republicans used to love the word “federalism”. Don't tread on our liberal utopia, unironically.

Aside from actual reports of crimes, the government does surveys asking people what crimes they've been a victim of. Those numbers are also down: https://ncvs.bjs.ojp.gov/quick-graphics#quickgraphicstop

1. Force Americans to take GLP-1s en mass to get objective health care costs down (most are cus we are fat as fuck)

2. Destroy the APA and reform medical training in america. Doctors shortages are primarily the fault of professional organizations. Doctors in the USA are massively overpaid compared to the rest of the world. Use US power to force the free world to imitate us so that capital has nowhere else to fly to and is forced to stay here.

3. Do something to basically destroy scam wastes of medical dollars and insurance dollars like homeopathy, naturopathic, etc

It won’t fix everything, but it’ll do a lot to help.

Socialism is popular with gen Z. They will nationalize and expropriate.

My local supermarket has an armed guard (off duty cop) with a Kevlar vest, I’m pretty sure nobody is walking out of there with unpaid groceries.

"Crime rates have fallen."

Some murder rates have presumably fallen. But I would be wary of even that b/c I've seen the lengths that bureaucrats(police) and politicians(civilians) will go to alter statistics.

"Trust but verify." - Russian proverb.

My goal is to eliminate all non-profits. That is, I want them taxed!

You could try to find another source instead of simply deciding the correct answer on your own.