How can this end well, as value is stripped from hospitals to pay huge debt, consulting fees, and huge bonuses to hospital administrators?
If you are interested in following Layoffs around the country, this site lists them daily:
The HOSTESS layoffs prompted a check to see what else is going on in Layoff Land.
Today, there are a host of hospitals announcing layoffs. Hospitals? Layoffs? What's with that. Here's the list for this one snapshot:
Look at the list of hospital LAYOFFS for this one report.
Carney Hospital - Layoffs Expected SoonWell, lo and behold, Private Equity Firms like Ceberus are investing in hospitals. This won't end well if the Working Model for Private Equity firm investments remains the same. Matt Taibbi does a great job explaining exactly how they work:
St. Luke's Cornwall Hospital - 40 Positions
Lawrence & Memorial Hospital - 22
Glens Falls Hospital NY - 29
Crouse Hospital Syracuse NY - 70 Jobs
Update: the Lower Bucks Hospital - 30Wake Forest Baptist Medical NC - 950 Positions by June 2013
Yakima Regional Medical Center Washington - 10+
CVPH Medical Center - 17 Pink Slips
Emanuel Medical Center - 24
Nebraska Medical Center - 38
In short, Private Equity firms put up a small amount of money, borrow a large amount of money, buy an entity, pay the entity's Executives VERY well, and look for ways to "trim the fat" to make the entity more profitable which often fails because of the huge debt the entity is forced to take on, which is used to pay huge Salaries/Bennies to the entities upper management and consulting fees to the Private Equity firm. It's an easy set up for layoffs, wage reductions, cut backs in hours, short cuts, and ultimately bankruptcy and lost pensions, all of which Matt explains perfectly.
Are hospitals, which people depend on to SAVE THEIR LIVES, an appropriate venue for Private Equity firms? The casual observer would most likely say no, however, no one on the State levels are objecting.
Imagine my surprise when I looked into the first hospital layoff to find that former VP Dan Quayle's Cerberus owns it.
Carney Hospital is part of the Steward Health Care System, which includes Quincy Medical Center, Merrimack Valley Hospital and Norwood Hospital. Steward, affiliated with Cerberus Capital Management in New York, acquired Carney in 2010 as part of its purchase of the Caritas Christi Health Care hospitals.Odd choice of a name, btw. Cerberus is a three headed dog that guards the gates of hell to keep anyone from leaving. Not a warm, fuzzy name by any means.
Heaven forbid we have an epidemic. Hospitals are contracting while the population is expanding, especially the elderly.
A little more digging and the following helps explain this disturbing trend.
Becker's Hospital Review is an information service that helps those interested in the Hospital industry, also called Ambulatory Surgery Centers (ASC)
Becker's published this
Mr. Shah said there is currently private equity activity in the ASC space, explaining that the industry has "lots of potential opportunity given how fragmented the industry is."
According to Mr. Cockrell, private equity investors are looking for "a platform [they] can really scale," noting that not every industry is accommodating to that type of growth. For the ASC industry, its fragmentation does provide a significant opportunity for scale.
In addition to scalability and growth, private equity funds also make investment decisions based on the finances of the company they may invest in. For example, very large private equity funds are not usually interested in deals below a certain EBITD* because they focus on a smaller volume of high value deals. Middle-market funds, as their name suggests, are more likely to be interested in companies with a bit lower EBITDA. The panelists noted that most middle market funds are looking for companies with somewhere around $10 million in EBITDA.
Mr. Becker noted that in addition to private equity funds, venture capital funds are also potential investors in surgery center companies. In general, private equity funds look for more mature, stable groups to invest in, while venture capital funds are willing to take on a bit riskier investment.
Mr. Shah said that private equity activity in general is currently quite strong, and he hasn't seen this level of private equity investment since 2006-07. He expects private equity to continue to be quite active in the near future due to its more recent acceptance as a core asset class for institutional investors, such as pension funds.
It is ironic that the growth in Private Equity investments comes from pension funds, imo.
Becker's also published this list of 19 Recent Hospital Mergers & Acquisitions on September 4, 2012.
There are trends revealed by reading the Daily Job Cuts and Beckers material.
1. Hospitals moving to becoming just outpatient care.
2. Merging with other hospitals
3. Affiliating with other hospitals
4. Acquisitions of hospitals
5. Private Equity firms and Venture Capital firms are interested in investing in hospitals.
I suspect the mergers, partnerships, and affiliations are a first step to creating a large enough entity to qualify for a buy out. You see, upper level management of these hospitals get paid off in the deal.
A trend of rising CEO pay in times of economic difficulty. At the manufacturing company Caterpillar, for example, they froze workers’ pay while boosting their CEO’s pay to $17 million. And at Citigroup, CEO Vikram Pandit received $6.7 million for crashing his company, walking off with $260 million after the business lost 88 percent of its value.This was written by "puzzled" in the following comment stream:
The much touted "free market" just doesn't work where hospitals are concerned. People don't choose whether or not to have an appendectomy this week, or shop around for the lowest cost trauma surgeon when they're in the back of an ambulance.
I'll leave further analysis to the experts; however, these trends raise more than one alarm for me.
Public hospitals are becoming privatized which, in my opinion, puts the public at risk as the new owners number one job is to protect investors/investments.
Like other markets, there is a very good risk that we will end up with Hospital Chains, just like laboratories have become national chains. National chains are bottom line driven, low wage paying, fat trimming by nature and design.
So I ask:
Will the medical needs of the people of this country be well-served if these trends continue?
Gordon Gekko seems to have millions of clones out there!