Private Equity and Our Dysfunctional Healthcare System (Pt. II)Posted: November 21, 2011
By The Recalcitrant Gourmet
In our last edition this article got cut, this is part II of the article. Additionally it should be noted that Fresenius has plans (pending FTC approval) to purchase Liberty. Historically Fresenius and it subsidiaries Renal Care Group and Renal Care Supply Company have paid over 82.6 million to Government for false billing to Medicare for the years between 1999-2005. Fresenius is THE largest for-profit dialysis corporation in the US. Is that good news?
Willard states. “They all restructured.” Meaning they went bankrupt. “Looks, like they couldn’t handle the management fees. But hey we (Bain Capital) sold them at a profit: that’s all that really matters!”
You then tell Willard that you are in need of some capital to expand your renal care services company. You also explain that Medicare is a steady source of revenue, as long as you follow their regulations. You go on to explain that you already have a team of corporate lawyers and doctors that sit on your board of directors. Not to mention a few managers who are working on the cheapest way to navigate through those pesky government regulations. Plus the whole industry has paid corporate lobbyist working on getting many of those regulations relaxed or abolished all together. Additionally, while expanding, you have the ability to charge the private insurance market ridiculously high fees to pad your accounts received columns. (Just like the PE firms charge high management fees!)
“I think those exorbitant fees we charge the private insurance sector can really help offset you management fees.”
Willard says. “I like this plan, here’s what we’ll do. I’ll have my buddies at Bain draw up a contract. Then maybe we can even get some guys over at Ignition Capital and KRG to jump on board with this plan.” In the case of Liberty Dialysis KRG has a controlling interest in the company and both Ignition Capitol and Bain have also invested money: all are private equity firms. “We will ‘partner’ with your managers, charge your company a nominal fee for our services and hopefully be able to someday do an IPO of stock and make a crap-load of money. Of course you will be CEO and be paid handsomely, be given perks and lots of sweet stock options when we go public.” Breathlessly you respond. “That sounds awesome! But what happens if our debt, through the management fees, is so high that we begin to tank?”
Willard replies. “Well that’s really no problem, all you have to do is declare Chapter 11 and restructure. You just lay-off a bunch of employees, close a few clinics, and wipe your debts clean. Don’t worry your lawyers can help you protect your personal assets. We do, however try to avoid all that. You see your company will be what we call a ‘platform’ company, and we’ll have Bain’s experts try and buy up, via the whole leveraged buy-out scheme, other companies (these are called ‘add-ons’) that are synergistic to yours in order to get you sweetheart deals on crap you need to keep those sick folks paying their bills and lining your pockets.”
“Great!” you respond. “I’ll have my lawyers contact your lawyers, and we can get this ball rolling. I really can’t wait to buy a big expensive home in someplace like Mercer Island Washington or a house in a gated community on a golf course.”
It’s not just Republicans that are greedy when it comes to out healthcare system, many of the Democrats are as well. When Obama caved on a public option to the special interests, the Democratically controlled Senate Finance Committee Hearings headed by Max Baucus in 2009, were less than impartial and certainly not advocates for the ordinary citizen. “Lobbying disclosure filings for the first quarter of 2009 reveal that five of Baucus’ former staffers currently work for a total of twenty-seven different organizations that are either in the health care, are in the insurance sector, or have a noted interest in the outcome. The organizations represented include some of the top lobbying organizations in the health sector: Pharmaceutical Manufacturers and Researchers of America (PhRMA), America’s Health Insurance Plans (AHIP), Amgen, and GE Health Care.”
Moreover it was these very lobbyists that significantly contributed to Baucus re-election campaign. “[H]ealth and insurance sectors haven’t just been kind to Baucus’ staffers, but they’ve also aided his campaigns handsomely over the years, especially in his…2008 reelection campaign….Baucus received $1,148,775 from the health sector and $285,850 from the insurance sector. For his career he has received $2,797,381 from the health sector and $1,170,313 from the insurance sector.”
This is the major problem within our healthcare system; it is riddled with corporate greed from every angle. The for-profit insurance companies have historically tried every trick in the proverbial book to drop sick people, (after getting as much of their money through outrageous premiums as they possibly can) from their risk pools. Private Equity companies are investing in every aspect of niche ‘industries,’ like renal care, cardiac care or diabetes care for the sole purpose of profit: caring for the sick, elderly and disabled are secondary and are only occurring where money can be made. Have you ever wondered why stem-cell research is going nowhere in this country? Where is the profit if no one needs to spend upwards of $30,000/year on anti-rejection drugs or consistently dole out money for insulin, syringes, and blood-glucose test strips or pump supplies.
Liberty is heavily backed by 3 private equity firms: Bain, Ignition and KRG. These companies’ sole reason for existence is to make profit. The fact that they are buying companies that provide lifesaving services is incidental to everything else they do. Their profits (or lack there-of) will ultimately dictate, in America’s current healthcare environment, whether or not people on dialysis are actually able to continue treatment.
Healthcare should not be a political issue, nor should access to it or utilization of it be an economic factor for families and individuals. Healthcare is a human right, period! We will all at some point in our lives need to see a doctor or be hospitalized. But in the United States of America, we are the only industrialized nation on the planet without some form of taxpayer subsidized universal healthcare for all! We have allowed the capitalization of this right. Thus, we have allowed this human right to be exploited, for profit, by Wall St. and corporations whose only concern is making sure that their private equity over-lords or share holders are padding their banking accounts handsomely. This is being done while their CEOs and hedge fund managers are sucking up OUR tax dollars and flying to Monaco in a Gulf Stream trimmed with mahogany. This is made possible by treating corporations as individuals. The Supreme Court decisions Citizens United -that equated money to speech allow these multi-million (or more than often multi-billion) dollar corporations to spend unlimited amounts of their money to influence OUR elections.
It is time we all demanded from our elected officials that necessary healthcare be a profit-free enterprise and available to all who need it regardless of income (or any other demographic). It is possible (and probable) that this may take heroic actions such as, but not limited to: large general strikes that shut the nation down for days, showing up in front of the homes of CEO’s & politicians with pitchforks, torches and other implements of destruction, being conscious of where you spend your dollars, large city wide demonstrations & protests, and many other forms of civil disobedience and legal infractions. Theses acts may result in arrests; loss of income, and possibly even temporary incarceration, but it is the very fear of these things that the corporations are betting on to keep the status quo. It’s time we all attempt to change that status quo! Individually we will have little effect on the corporate machines that are grinding us up into Soylent Green, but collectively we can effect huge changes if we are defiant and resistant to THEIR greed.