Difference between revisions of "Private equity and health care"
(expanded) |
|||
| Line 2: | Line 2: | ||
In recent years, [[private equity]] has bought up hospitals, medical practices, and other aspects of the [[health care]] sector. Multiple studies have shown that causes far more harm than good. | In recent years, [[private equity]] has bought up hospitals, medical practices, and other aspects of the [[health care]] sector. Multiple studies have shown that causes far more harm than good. | ||
| + | |||
| + | == What is private equity? == | ||
Private equity is a form of investment whereby wealthy individuals pool their assets and deduct losses in one business venture against unrelated profits in another, such that it is common for private equity managers to walk entirely away from a losing investment such as large hotels in [[San Francisco]] to take a massive deduction against profits elsewhere. Also, private equity managers typically have no personal connection with the community where each investment is located, and thus have no qualms about converting a children's hospital into more profitable luxury apartments. Finally, private equity managers typically have no experience in the fields in which they invest, such that only the bottom line financially matters to them at the expense of, for example, the complication rates in a hospital they acquired. | Private equity is a form of investment whereby wealthy individuals pool their assets and deduct losses in one business venture against unrelated profits in another, such that it is common for private equity managers to walk entirely away from a losing investment such as large hotels in [[San Francisco]] to take a massive deduction against profits elsewhere. Also, private equity managers typically have no personal connection with the community where each investment is located, and thus have no qualms about converting a children's hospital into more profitable luxury apartments. Finally, private equity managers typically have no experience in the fields in which they invest, such that only the bottom line financially matters to them at the expense of, for example, the complication rates in a hospital they acquired. | ||
| − | + | An additional tax loophole favors private equity: its managers are allowed to receive their fees under the lower capital gains tax rate, rather than the higher income tax rate that most people have to pay. This is known as the notorious "carried interest loophole," and U.S. Senators having backgrounds or expectations to work post-retirement with private equity have blocked multiple attempts to repeal this loophole. The mindset of private equity managers is to engage in "sharp" business practices that ethical businessmen would not ordinarily do. | |
| + | |||
| + | Finally, it is common for private equity managers to borrow money for each investment, and then deplete assets from the company to finance the loans. This is known as "[[value extraction]]" and can result in laying off experienced employees or cutting corners on capital equipment. | ||
| + | |||
| + | Some sectors of the economy, such as law firms and even the NFL, currently prohibit ownership by private equity firms. Bans on the corporate practice of medicine are on the books in many states, but are typically ineffective and unenforced. | ||
| + | |||
| + | == Private Equity Invasion == | ||
| + | |||
| + | |||
| + | == Harvard Medical School Analysis == | ||
At the end of 2023, the ''Harvard Medical School'' published an extensive, incriminating analysis of the impact of private equity on health care.<ref>Jake Miller, "What Happens When Private Equity Takes Over a Hospital - New analysis shows alarming increase in patient complications (December 26, 2023).</ref> | At the end of 2023, the ''Harvard Medical School'' published an extensive, incriminating analysis of the impact of private equity on health care.<ref>Jake Miller, "What Happens When Private Equity Takes Over a Hospital - New analysis shows alarming increase in patient complications (December 26, 2023).</ref> | ||
Revision as of 03:28, May 13, 2024
Private equity and health care
In recent years, private equity has bought up hospitals, medical practices, and other aspects of the health care sector. Multiple studies have shown that causes far more harm than good.
Contents
What is private equity?
Private equity is a form of investment whereby wealthy individuals pool their assets and deduct losses in one business venture against unrelated profits in another, such that it is common for private equity managers to walk entirely away from a losing investment such as large hotels in San Francisco to take a massive deduction against profits elsewhere. Also, private equity managers typically have no personal connection with the community where each investment is located, and thus have no qualms about converting a children's hospital into more profitable luxury apartments. Finally, private equity managers typically have no experience in the fields in which they invest, such that only the bottom line financially matters to them at the expense of, for example, the complication rates in a hospital they acquired.
An additional tax loophole favors private equity: its managers are allowed to receive their fees under the lower capital gains tax rate, rather than the higher income tax rate that most people have to pay. This is known as the notorious "carried interest loophole," and U.S. Senators having backgrounds or expectations to work post-retirement with private equity have blocked multiple attempts to repeal this loophole. The mindset of private equity managers is to engage in "sharp" business practices that ethical businessmen would not ordinarily do.
Finally, it is common for private equity managers to borrow money for each investment, and then deplete assets from the company to finance the loans. This is known as "value extraction" and can result in laying off experienced employees or cutting corners on capital equipment.
Some sectors of the economy, such as law firms and even the NFL, currently prohibit ownership by private equity firms. Bans on the corporate practice of medicine are on the books in many states, but are typically ineffective and unenforced.
Private Equity Invasion
Harvard Medical School Analysis
At the end of 2023, the Harvard Medical School published an extensive, incriminating analysis of the impact of private equity on health care.[1]
References
- ↑ Jake Miller, "What Happens When Private Equity Takes Over a Hospital - New analysis shows alarming increase in patient complications (December 26, 2023).
