Could the FTC's proposed ban on noncompete clauses curb private equity incursions in healthcare?

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“Then,” I cried, half desperate, “grant me at least a new servitude!”

The corruption of U.S. healthcare by the profit motive reaches a kind of apotheosis in the incursions of private equity into industry subsectors (hospice, nursing homes) and targeted physician practice specialties — e.g., the PEAR specialties (pathology, emergency, anesthesiology, radiology), dermatology, ophthalmology gastroenterology, orthopedics, and others. It’s common PE practice to load an acquisition with debt and then laser-focus on cutting costs and maximizing revenue.

In Private Equity and the Corporatization of Health Care, a paper posted in March 2023 (with a 2024 publication date in the Stanford Law Review), Erin C. Fuse Brown and Mark A. Hall acknowledge that “it remains unclear whether private equity investment is fundamentally more threatening to health policy than other forms of acquisition and financial investment,” but at the same time assert:

Even if PE investment in health care poses risks that are not unique to PE, it appears to heighten those risks by being more adept or ruthless at identifying profit opportunities and economies of scale among previously fragmented providers, consolidating physician specialty markets and raising costs as they go.’

Chris Hayes on Romney Rules

I have for some months been compiling a set of Romney Rules for electoral competition, all of which boil down, essentially, to "rule x applies to my opponent, but not to me."

I am currently about one third through Chris Hayes', Twilight of the Elites: America After Meritocracy, which argues that the very nature of the meritocracy ethos to which almost all Americans subscribe leads inevitably to corruption: unmediated competition drives winners to game the system and cement their advantages. It's through that prism that Hayes, focusing on Romney's violation of the negotiated ground rules (e.g, by posing direct questions to Obama), viewed last night's debate -- and by extension, Romney himself. Kos diarist Iarxphd transcribes (I've fixed apparent typos):

The theme of the last 10 years of this country is that the people at the top don't think the rules apply to them.  And you send your people to sit down and negotiate a set of rules, and 20 minutes into it you throw it out the window. Everything we've seen, from the financial crisis to everything else that's happened to this country has been about the Oligarchs and the ruling class, and the people at the top, feeling like they are not a party to the social contract. So some stupid little contract that was negotiated by your people, you don't worry about it 20 minutes into it.

Quote of the day

If your main argument for how to grow the economy is "I knew how to make a lot of money for investors," then you're missing what this job is about.

- President Obama, explaining why Romney's tenure at Bain is a legitimate campaign subject.

On leveraged debt bondage

The best articles about Romney, Bain and private equity as it's developed over the last thirty years make it clear that it's very difficult to draw a fair scorecard. Private equity firms can deploy strategic smarts and managerial skill to turn around troubled companies or turbo-charge successful ones; they can also load down their purchased companies with debt, denude them with fees and dividend payouts, and sell them off before chickens come home to roost. Whether PE-owned companies thrive or fail, we never know how they would have done under prior or different ownership. The story of private equity since about 1980 is very much of a piece with the story of American capitalism: impressive growth, but with gains going disproportionately to the very top in a game that seems ever more rigged.

When PE firms (including Bain) do drive a portfolio company into bankruptcy, it's often the result of saddling it with debt.  That highlights a basic fact about private equity that I could never quite wrap my head around: when an investment firm or fund uses mainly borrowed money to buy a company, why should the purchased company own that debt?

Steven Rattner, in a defense of Bain, relays the investor's rationale for high leverage: