Remember the days when your family doctor was actually ran independently or was part of a small practice? I hate to break your nostalgia, but those days are dissolving faster than a soluble pill. The healthcare market has ingested a high dose of private equity, leading to rapid consolidation of practices. Let’s talk about today’s flavor of healthcare capitalism—Private Equity’s ambitious aim to own the entire continuum of care.
Private Equity’s Healthcare Spree: An Overview
A reality check to start – over the last couple of decades, private equity firms have tucked almost every type of medical practice under their cash-rich wings. Dermatology, dental, ophthalmology, you name it. Why should these Wall Street firms have all the fun? Further, they’ve evolved from monopolizing single specialties to aiming to own the entire outpatient care pathway. It’s like a game of Monopoly, but with your healthcare.
The Cycle: Acquisition, Integration, Regret
Here’s how it typically plays out – First, an independent medical practice gets an offer too juicy to resist. Everything is rosy. Promises of more efficient administrative support, enhanced technology, and professional development opportunities abound. Then, the hardworking and dedicated doctors become cogs in a machinery focused on maximizing Recurring-Based Revenue (RBR). Patient care, notably, takes a backseat. We’re not talking just profit-motivated decision-making here, but patient care descending to an all-time low due to disjointed systems, lack of priority and under-staffing. All while the big shots at the top walk away with hefty paychecks. Audi alteram partem? Not in this house.
The Red Flags
Private equity involvement in healthcare often rings warning bells of financial manipulation. These aren’t flimsy allegations – evidence is concrete. Remember what happened to Envision Healthcare, a company that got bought, sold, and then re-bought by KKR & Co? Take an educated guess how they funded that repurchase party – by issuing a hefty $5.45 billion in new debt and paying themselves a rollicking dividend of $1.3 billion. Because why just repeat history when you can outdo it?
What’s the Diagnosis?
The lesson here is unambiguous: when private equity firms become the puppet-masters of healthcare, we should brace ourselves for a ride down a slippery slope. It’s not exactly rocket science to recognize that a system designed around generating profits may not prioritize patients’ well-being and care. Let’s be clear, private equity isn’t the villain in a globally broken healthcare system. But their profit-driven approach, lack of transparency, and ruthless consolidation sure aren’t helping. Maybe, just maybe, healthcare should regain some of its sanctity rather than being served up on a silver platter for the highest bidder.
Let me leave you with this thought – when did we start placing more importance on EBITDA and RBR than on the health of our fellow citizens? Take a moment. Go ahead. I’ll still be here, sipping on my cynicism and churning out the next bitter truth of our modern private equity reality.