The Guys Who Killed Toys R Us are Coming for Doctors

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You may be aware that here in the United States, we have a less than ideal healthcare system. For instance, compared to our neighbors to the north, we enjoy slightly shorter wait times for some procedures in exchange for worse coverage, higher cost, and poorer health outcomes. And to expand the picture, compared to Canada, Australia, France, Germany, the Netherlands, New Zealand, Norway, Sweden, Switzerland, and the UK, the United States ranks last on access to care, administrative efficiency, equity, health outcomes, and overall healthcare performance.

There are many reasons why this may be, but one obvious one is that in the United States our healthcare is run by private for profit corporations with no option for single payer, despite the fact that every major poll shows that the majority of Americans think their government should guarantee health insurance for everyone.

As an American, all of this is pretty depressing, but what if I told you that it could get way, way worse? Well, a study just published this week in the Journal of the American Medical Association illustrates the way that a secondary player is managing to make our healthcare system even more dystopian than the pharmaceutical industry managed on its own: private equity firms.

First, let’s talk about what a private equity firm is, because the name isn’t terribly descriptive if you’re not into finance chat. Which I am not, either, by the way, so I will keep this simple and only talk about one type of private equity firm that engages in “leveraged buyouts”: in the best of all possible worlds, when a company is having trouble staying afloat or growing to their potential and needs an influx of investments, a private equity firm comes in with the necessary cash to buy the company and fix it up, allowing it to continue on or grow as needed, at which point the firm resells the company or takes it public to make a tidy profit. Everybody wins.

The problem, as it usually is, is capitalism, and greed. Because from the private equity firm’s perspective, the company’s continued existence or good health is not the long term goal. The only goal is the short term profit, and those things are often at odds with one another. And in fact as Emily Stewart pointed out in an article for Vox four years ago, one of the biggest issues is that no matter what happens to the company being purchased, the private equity firm makes money – either from the fees they collect from their own investors just for handling the transaction or from the fees they collect on any profit they return. One prominent example is Toys R Us, which was bought by private equity firms like Bain Capital and KKR in 2005 and quickly loaded down with an additional $5 billion in debt, forcing the company to declare bankruptcy in 2017. Bain and KKR made off with at least $15 million each.

As someone who grew up in the 1980s, it is completely bonkers that Toys R Us was destroyed like that. That was our mecca. I would have sold my own mother’s eyeballs to get a chance to do one of those Nickelodeon toy runs through that store. This story should honestly turn most of Gen X and Millennials into socialist terrorists.

But it’s not just beloved toy stores that private equity firms destroy.

On Vox, Stewart pointed out a seemingly funny story in which California Representative Katie Porter, an outspoken critic of the tactics employed by private equity firms, received at her home a mailer telling voters to tell Porter to vote against legislation that would stop companies from sending patients hefty surprise bills after they visit the emergency room or other medical care. Why would a group called “Doctor Patient Unity” want to stop legislation that would benefit patients? Because it was a front for two private equity firms that owned doctor staffing companies. Blackstone and KKR spent nearly $60 million on the campaign while simultaneously gutting the salaries of their medical professional employees.

That’s right, KKR! The same company that skull-fucked Geoffrey the Giraffe is also now in charge of our healthcare. For a variety of reasons, for-profit hospitals figured out that they would benefit from outsourcing the employment of their doctors, and private equity firms seized on that fact to take control of a valuable market.

They’d already dipped their toes in this area by buying up dental practices, optometrists, and nursing homes. A study from February of 2023 found that private equity owned nursing homes saw an 11% increase in mortality compared to other nursing homes due to “declines in measures of patient well-being, nurse sta?ng, and compliance with care standards.”

So it’s not exactly surprising what this most recent study found: private equity firms are absolutely hazardous to the health of the patients of the hospitals they buy.

A team of researchers examined Medicare claims for 662,095 patients at 51 different hospitals owned by private equity firms and compared the outcomes to those of more than 4 million hospitalizations at 259 hospitals that were not owned by private equity firms. The results were astounding: patients at private equity firm hospitals experienced a “25.4% increase in hospital-acquired conditions,” including a 27% increase in falls, a 38% increase in central line infections despite performing 16% fewer percutaneous central lines, and a 100% increase in surgical site infections despite the fact that the private equity hospitals performed 8% fewer surgeries after acquisition, and all despite treating younger and therefore presumably healthier patients.

As I said, knowing what we know about how private equity firms have treated companies in other industries, this study did not return a surprising result. But it should be a wake up call to Americans, that not only are we (still) fighting against the pharmaceutical industry when trying to fix our healthcare system and provide universal coverage to everyone, but we are also facing an even greater threat that is further endangering lives as it continues to gobble up our medical institutions and turn them into money making machines.
The good news is that politicians like Katie Porter are fighting them tooth and nail. She did not, in fact, vote against that law that would stop hospitals from sending patients surprise bills. But as you should know by now, no politician is perfect. Even if you are lucky enough to have a progressive representative, you should still continue to bully them about this issue. There is currently legislation introduced by U.S. Senator Jeff Merkley and Washington Rep. Adam Smith that would stop private equity firms from buying up single family homes, an important issue I didn’t even have time to address here. Please let your representatives know that this is a very good step, and the next step should focus on private equity interfering with our healthcare.

Rebecca Watson

Rebecca is a writer, speaker, YouTube personality, and unrepentant science nerd. In addition to founding and continuing to run Skepchick, she hosts Quiz-o-Tron, a monthly science-themed quiz show and podcast that pits comedians against nerds. There is an asteroid named in her honor. Twitter @rebeccawatson Mastodon Instagram @actuallyrebeccawatson TikTok @actuallyrebeccawatson YouTube @rebeccawatson BlueSky

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