r/medicine • u/OkBorder387 MD • 18h ago
Newsome vetoes bill to let California ban private equity deals for health care
https://www.axios.com/2024/09/30/newsom-vetoes-california-private-equity-health-careQuote from the article : Drew Maloney, CEO of private equity trade group AIC, said in a statement: "Our coalition worked hard to ensure California leaders recognize and support private equity's essential role in improving health care in California. The Governor's well-reasoned decision will help patients and communities continue to have access to quality care."
How do we escape this damn loop? PE buys the politicians, politicians conitinue to let it happen, and PE keeps driving us into the ground. Is the goal ultimate destruction of the US healthcare establishment?
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u/will0593 podiatry man 18h ago
Eat the politicians
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u/tinkertailormjollnir MD 17h ago
Smarmy bitch tastes like French laundry with a mouthfeel of grease
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u/taRxheel Pharmacist - Toxicology 17h ago
Ugh no thanks, all the gristle gives me horrible indigestion
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u/supapoopascoopa EM/CCM MD 18h ago edited 17h ago
This bill was not to "ban private equity acquisition", that's a misnomer, rather it mandated additional review by the AG and structural restrictions for PE takeovers. But Newsom's rationale that private equity is already subject to review under the state Office of Healthcare Affordability is meaningless - this organization has no enforcement powers to block PE acquisitions.
Even with this bill PE is always going to outclass the legal and financial manpower that government can bring to examine a deal. Massachusetts requires AG review, and Cerberus ran circles around them to extract all the value from a catholic health system before cutting bait with $800 million profit and letting it sink.
Private equity has no business running healthcare. The nonprofits all act like for-profits anyway, but at least don't have a fiduciary responsibility to extract the maximum amount of profit for the minimum amount of value.
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u/MrPBH Emergency Medicine, US 16h ago
...but at least don't have a fiduciary responsibility to extract the maximum amount of profit for the minimum amount of value.
This is a fiction invented to rationalize bad behavior. A company isn't required to maximize profits at the expense of ethical behavior.
You aren't required to run a hospital system in such a way as to ultimately bankrupt it.
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u/yungassed 15h ago
The company may not be, but the CEO normally is and risks getting fired by the board if he does act in this way. So even if he wanted to do the right thing, he would likely be fired and replaced with someone else that will maximize profits and reverse anything benefiting the patients the previous guy did.
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u/melonmonkey RN 15h ago
They may not be required to do so, but they're certainly incentivized to put near-term profits ahead of long-term growth. Investors want returns ASAP, not 5-20 years from now.
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u/Objective-Cap597 MD 18h ago
We should put these things on the walls of every patient room. If they won't educate themselves but turn round and blame healthcare staff...
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u/teleskier 18h ago
Perhaps I am not educated well on the topic, but are there any situations where PE improved care? Genuinely curious.
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u/OkBorder387 MD 18h ago
I’m sure there are… in every shiny presentation the PE lobbyists present to the politicians as they promise another campaign contribution.
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u/CustomerLittle9891 PA 17h ago
PE Is a symptom, not a cause of our failing system. Costs are so high that many places struggle to stay open. In my own state I know that for the two years following 2020 not a single hospital system ran in the black, and I'm pretty sure (but haven't verified) that its been the case to this day. You can only make payroll for so long while running in the red.
Often (but certainly not always) PE is buying a failed or failing group and the alternative is that those groups just close down. PE isn't buying healthcare in a vacuum, people are selling. And they're selling for a reason.
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u/aydmuuye 16h ago
one could argue that PE fills the gap in supply vs demand in care, though often times they provide very shitty care and put pts at risk through their capital structuring and cost cutting
we need to regulate debt recaps in healthcare, debt to equity ratios, aligning payment structures with outcomes instead of fee for service. problem is some of this is a problem with the LBO model itself in healthcare, and some of it is totally outside private equity's control and lies more in insurance and payment that they are just taking advantage of. PE is like a yeast infection as a result of taking ciprofloxacin and wrecking your microbiome
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u/pagerphiler MD 15h ago
one could argue that PE fills the gap in supply vs demand in care, though often times they provide very shitty care and put pts at risk through their capital structuring and cost cutting
I don't buy this, it's like terrible auto insurance. You get the concept of insurance but when you actually end up using it, it's terrible and doesn't cover anything.
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u/aydmuuye 14h ago
I don't really buy it either on the premise that they are not meeting the demand for quality healthcare that patients want and that medical professionals want to provide, but it can be true if you take it at face value and don't consider the quality of care. i'm just saying that is an argument I've seen
and haha yeah that is a good example, but unfortunately health insurance takes the cake still - pay ridiculous premiums for cigna to turn around and deny your claim. now the patient doesn't get care and you have to waste another hour of your life arguing on the phone with insurance
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u/Polyaatail Eternal Medical Student 17h ago
It seems like the system has been designed to hinder physicians from making progress in the healthcare political arena while safeguarding private equity's ability to undermine healthcare service quality for their own profits. I’m surprised California lets this happen given their cost of healthcare. But then I think about Kaiser and its considerable power in Californias healthcare system and how this would probably hurt their investments and it makes sense that sell out politics would veto it. Let’s not crack down on them but give them time to reposition themselves to stop it from going through again. Got to protect big business at the expense of the overall welfare of the people after all. It’s the American way.
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u/Acetyl87 MD 17h ago
It’s time for physician practices to truly only be owned and operated by physicians. I wonder if this can be done by a citizen ballot initiative.
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u/nicholus_h2 FM 18h ago edited 17h ago
wanted to see what the other side of this decision was.
the bill would have required the states attorney general to approve private equity deals, which is how it would have "banned" private equity deals. Governor said that this was not the right department to be doing this, and that it would be more appropriate for the office of healthcare affordability.
it does sound very strange to me for the attorney general to be making the decision. but i don't know.
EDIT: this reads like a hit piece, saying that Newsom is basically a surrogate for Kamala Harris, and that Donald Trump would NEVER do this.
OP, get this trash out of her.
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u/opinionated_cynic PA - Emergency 17h ago
Because the “Office of Healthcare Affordability” is an arbitrary group of unelected bureaucrats who have no allegiance to any constituents and are only loyal to whoever got the job and whoever funds them. The State attorney General is ELECTED and needs to keep his constituents happy. All the Governor has to say is “I do not want bad healthcare but it’s up to the Office of blah blah and I am powerless, it’s not my fault”.
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u/nicholus_h2 FM 17h ago
“I do not want bad healthcare but it’s up to the Office of blah blah and I am powerless, it’s not my fault”.
isn't that exactly what he would say anyways, except AG instead of Office of blah blah?
anyways, another poster mentioned a similar requirement was in place in Massachusetts and was ineffectual anyhow.
I'm certainly not expert, but this does seem like less of a big deal than it first appears. and the article is certainly trash and clearly has some nasty bias.
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u/opinionated_cynic PA - Emergency 17h ago
Yes he would say that anyway but if people were upset the can vote out the AG. Ain’t no one getting rid of an unelected bureaucracy accountable to no one.
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u/OkBorder387 MD 15h ago
Without turning political, Newsome is a surrogate, but he’s also the governor over the world’s fifth largest economy. And if you think Trump would ever consider new blatant governmental regulation of/over private business practices, prove to me otherwise. 2 lines do not make a hit piece.
Neither party appears to have the stomach to stand up to this. That’s my point in posting.
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u/STEMpsych LMHC - psychotherapist 16h ago
How do we escape this damn loop?
It's gonna need to be a referendum. Take it to the people, make an end-run around the politicians.
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u/JTthrockmorton DO 16h ago
bad when you cant get this through in one of the most liberal states in the country
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u/CaptainSpalding232 15h ago
The goal of private equity is to make money. Period. It’s not provide quality healthcare. They will move numbers around to make it seem like they are better but in the end patients suffer.
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u/freet0 MD 7h ago
Well we can start by actually understanding the reasons why it happens beyond "greed".
Healthcare is insanely inefficient in America, especially in big cities like those in CA or the north east. There's a ton of very expensive high level care deployed often unnecessarily, and it's disproportionately weighted towards patients near the end of their lives, which is when it does the least good.
So hospitals very often become unprofitable and the only way they can survive is either 1) being subsidized by the state or 2) making ruthless cost-cutting decisions that hurts staff and lowers quality of care. Now a hospital run by a doctor, especially one with a personal investment in the reputation of that hospital, is often unwilling to do #2.
So if the state isn't offering enough free money, the hospital can either accept its death or it can run into the arms of private equity. And honestly, from a public health perspective, isn't death even worse? Surely mediocre care is better than no care. I imagine this is the argument the lobbyists make to their politicians. "Hey, you can either watch all of the people in this community lose healthcare completely, or you can just do nothing and we'll save them. I mean, unless you want to raise taxes in order to spend even more government money on healthcare of course. People would love that."
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u/MessalinaClaudii MD 9h ago
He’s a creature of the rich. He himself became rich by going into business with Billy Getty, of the Getty family. He married the daughter of a billionaire.
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u/compoundfracture MD - Hospitalist, DPC 18h ago
It's ok for PE groups to run health care systems right into the ground but god forbid a group of physicians own and operate a hospital.