Private equity turned vulnerable elderly people into human ATMs
theguardian.com
theguardian.com
Yeah, right. My barely mobile 90-year-old parents, one of whom has Parkinson's, are just going to pack up and go. They know perfectly well that they have a captive audience.
Thankfully, my mother died before the acquisition, and my father died last week, only a few months after the acquisition, so I don't have to deal with this any more. But caveat emptor: if you ever go into a retirement home, think about what will happen if they change ownership. Even if it looks great, or even acceptable, now, there is no guarantee that it will still be great, or even acceptable, tomorrow, unless you somehow manage to negotiate such a guarantee. I have no idea what a contract provision like that would even look like. But I am going to be facing this problem myself some day, so I'd love to hear ideas.
Depressing to read. I'm not sure on which side.
But yeah, it kinda sucks, and not just for the residents who are still there. It sucks for the rank-and-file staff as well, most of whom still really care about their clients, but who now have to answer to people who absolutely do not care about anything other than money.
No one leaves this planet alive, and the best you can hope for is that the majority of your time is spent relatively healthy and independent.
I didn't take it that way, I just wanted to make sure there was no misunderstanding. This is an emotionally charged topic.
The concern you raise is front and center for me, because my mother is 87 and we’ve been looking for a place. All the options are terrible, without considering PE.
https://utswmed.org/medblog/geriatrics-cove-team-makes-house...
But you really, really need a support system of willing people who care about you, and are savvy enough to effectively advocate for you when you lose that ability. Independent home care works well when you need help, not constant care.
Our family worked with this for 6 years with my bad post stroke and for about a year with my mom and cancer. My siblings were all on board and my mom was uniquely positioned - she was a regulator at the state level who was adept with the rules (and had in fact wrote many!).
Even so, as things progressed it was hard. My mom was devoted to my dad, and filled every gap. We depended on hired help for mom, and despite the financial resources it was difficult to get staff.
Family and friends are key.
In NY State at least that's turned into a cashgrab too. One they are having trouble reforming.
Staffing/flooring ratios? Laughable correlation to reality. Many a time? A single LPN "supervising" a floor of CNAs. Doctor consultation? The CNA oftentimes leaves a voicemail for the physician to review and care decisions are made without the physician talking to either the patient or a nurse (I'm not sure how this isn't malpractice, and I'm not convinced it's not). Facility "policy", often hidden behind "insurance requirements" have the facility overburdening the local EMS system because "we are required to call 911 for anything larger than a bandaid", and we can find ourselves doing anything from the most basic wound care to pointing out to a sleep-deprived CNA "you know your patient appears to have had a stroke sometime recently, right?". EMS arrives and often gets woefully incomplete or inaccurate history information (often for patients who are unable to be reliable historians themselves).
There is, however, ALWAYS money for the colorful glossy brochures/books at the front desk, or the big shiny billboard or TV ad that talks about "mom being in good hands with round the clock nursing care!" (and of course, a facility fee per month that would make you feel like she has her own personal RN and on-call MD 24/7").
The worst place I ever saw was Atherton Long Care which supposedly is fancy and expensive but they had neglected an old lady so poorly I actually reported them to CDPH and the ombudsman. She had full on necrotized tissue under both her breasts and a rotted unchanged g-tube that you could smell all the way down the hallway to the nursing station it was so sad. John George Psych hospital and Cordilleras MHRC are both also very sad hellholes. Patients sleeping laying on the floor in the hallways with a blanket because the rooms are full etc. We had a lady who purposely stabbed herself in the eye so she could go to the ER to get out of Cordilleras because it was so awful.
What I found if you ever need to place your loved on in a care home is the sniff test is the best assessment of how well it's run and if the patients are cared for. If patients are cleaned regularly and not left to sit in their own diapers it really shows there is enough staff ratio and attention given to the patients. Go on a random evening or day and at different times. Food quality is also a good indicator - eat lunch with your parents there. Would you eat this yourself voluntarily? If yes, it's probably a good place not run on a shoestring budget.
Also - hn readers - if your mom is in a care home please always check under her breasts to ensure she is clean and dry there every time you visit. Far far too many old ladies get candida and bacterial infections under their breasts that are never cleaned or taken care of because it's embarrassing to check or clean and dry so then it just gets wet and rots and is painful, sad and gross and can lead to even worse things like cellulitis or an abscess.
OMG, so much this! One of the things that happened after the acquisition is that they changed the phones to play a marketing pitch whenever you were on hold. (They even did this on the resident's phones!) One of the things the pitch said was that the place featured "chef-inspired meals" which was about as disconnected as you could possibly get from what I knew first-hand to be reality. It was one of the most bald-faced lies I have ever heard in my life, and it really steamed my clams because I knew there was nothing I could do about it.
So let's give them an eye for an eye.
The last week has actually been pretty (ahem) interesting in a lot of ways. I should probably write a blog post about it.
My dad unfortunately never made it to a retirement home (cancer onset when he just turned 70), but in his one week hospice stay, he couldn’t help but complain about the food.
The fundamental problem is it is at the intersection of two out of the three areas of the economy that have had insane cost growth over the last 30 years—-housing and healthcare (the third is education.) For the first one we know roughly what we need to do but won’t. For the second we don’t even have that.
Healthcare costs increasing is of very little concern to nursing facility ownership. Almost none of that is borne by the facility itself. They'll often hire skeletal crews of CNAs and LPNs (I was a paramedic, rare was it to see a facility in our area that even had an RN, and if they were, they were the DON, Director of Nursing, and had no direct hand in patient care). The facilities would contract with a physician service who oftentimes would not even speak to the patient, let alone -see- them.
And every, every single interaction with actual care provision was fully billed to the patient/resident's insurance. Anything that is not a profit making center for facility ownership is ruthlessly subcontracted out. A solid portion of the SNFs in my county will openly call 911 for anything beyond the most absolute basic first aid, even when their employees are ostensibly better educated/trained than the EMTs who might be responding.
Healthcare costs in the US are an abomination, but that's not the issue here, or not directly.
It’s in their interest to dump the resident on the hospital and get paid for services not rendered. Also, as residents decline they need more care, are often on Medicaid (lower reimbursement), each time they go to the hospital there is a probability they they won’t come back, and will be replaced by a Medicare patient (Medicare pays for ~90 days) at a higher rate, and perhaps higher margin services like PT/OT.
It’s an evil system. Most of the people who died in NYC during early phases of COVID did because of intense lobbying to send them back to the SNF.
In other parts, memory care, you are never recognized by the patients. Prepare for combative, confused ill people; your job depends on not treating them like animals.
I see adult children visiting their parent, who doesn't recognize them, and wouldn’t understand that $115,000/year isn’t entirely paid by the state.
The fundamental problem is that we have ceased demanding that our government produce reasonable outcomes.
The reasons for that are many, but it's a core sign of how far we've fallen that there's even a discussion or argument about this obvious fact. We are in charge. We can just ban private equity companies from doing this you know.
There didn't used to be ambiguity about the point of having a society and having that society governed by the people and having those people's representatives solve problems like this.
That ambiguity was created on purpose, for money, by specific people. Not coincidentally, they're the same people making the profits in this story.
Ideologues love to identify some small group of bad guys that if we only rein in everything will be great.
It’s private equity! It’s health insurance executives! It’s trial lawyers! It’s CNN!
The actual truth is far worse. It’s 100 million homeowners, it’s 20 million healthcare workers, it’s an entire generation too online, etc.
There’s no magic bullets. Propagating the idea that there are is how we end up with garbage legislation and regulations that don’t improve anything.
What people need to start respecting and demanding from their government is competence. The ideologues of every stripe need to go sit in a corner for a decade or three while we build back up working institutions.
We have more private equity funds than McDonalds, looking to do this kind of extraction everywhere, because we have huge wealth inequality and therefor those at the top needing to park more money in more places. Then end goal is modern feudalism, with the top owning everything and extracting more and more from every single transaction/event in a person's life.
We can't fix competence when we have one political party working to make the government incompetent so that they can leverage that to tear down government. They have internal politicides such as 'starve the beast', all with the goal to make American government unable to function.
And it’s not just one party that’s working to make the government incompetent. Both are. One for the reasons you cite, the other because it is beholden to public employees that want more money and less work. Just visit nyc or Chicago to see how that goes.
From doing what exactly? Do you think small businesses are any better about cutting corners for profit? They're often worse because they have worse economies of scale and face more cost pressure.
It seems like you are remembering a history that never existed
It is not at all clear to me that there are "lots" of such markets, but that is neither here nor there. A prerequisite for an okay-ish market is that buyers need to be able to choose not to buy, and when you have literal limited mobility it becomes very difficult to walk away from your housing and care provider, either literally or figuratively.
People buying up nursing homes are using tactics like what you’d see in the movie Goodfellas. They’ll structure the buy so that they are assuming the license to operate while “renting” the facility from an affiliated entity, cut opex, fraudulently bill Medicare and Medicaid for rehab, and exit through bankruptcy of the operating entity.
It's by no means one of these places that puts on a facade of being a retirement resort. A first impression might be that it is dingy. But, for the combination of dementia and other care needs we have had on our plate, they have provided just about the best care I could hope for.
Along the way, I've had to disregard superficial judgements from some extended family or family friends, who seem to harbor a fantasy image of elder care as an elevated experience with the trappings of a luxury hotel stay and experiences fit for aristocrats. In a dream, I too wish my mom could have stimulation and education in her final years like immersion in an artist colony combined with a Parisian salon from a novel.
I settled for a place that consistently keeps her safe, gives her communal meals, manages her hygiene, manages her medications, monitors her health, and communicates reasonably well with me on these topics. I also visit weekly and take her to all her medical appointments etc., so I think I have an accurate view of how things really go there.
My biggest lesson from this, applicable to future generations, is to find your enriching experiences and setup your end of life plans while you are young. By the time you or your family realize you are in decline, you likely have lost the cognitive and/or emotional flexibility and/or agency to really adopt the most enjoyable lifestyle or life setting. Your more basic care needs will start to dominate all decision-making.
As it's done in most of Europe, Latin America, Asia, Africa. US/Canada were turned against family and tradition thanks to decades of brainwashing by movies, TV, and ads. To be cool you had to go to a college in another state. Then move to a big city. Pick career over family and having children. Take antidepressants.
This started in the 70s and is well documented.
If that sentence fragment isn't a dystopian summary of the current state of at least US society, I don't know what is.
Obviously I’m kidding, and something is rotten
Looking at the administration, the feudal internet lords and other megacorps, the US is deeply socialist then.
We prefer to let capital (and its representatives) commit the juiciest crimes...
So US is the most socialist country by far. Both rich and poor commit crimes without going to jail
Sounds pretty much like Trump and the modern GOP
The answer is to make someone else pay for it. But man, have you ever gone to dinner with your large tech salary and been advised you have a moral obligation to cover 80% of the table's bill, and then be demonized for scrutinizing what people ordered?
Socialism is great when you can get yourself to believe that the government is a bottomless money pit fed by evil people with infinite money harvested from captive forced labor.
Capitalism is great when you can get yourself to believe that the lives of people who cannot carry (or did not carry) their weight don't matter.
While those people as individuals have nowhere near "billionaire" money, they as a contingent have the most wealth.
While the "1% have more money than the bottom 50%" is true, they have less than half the money of the 70%-95%. America's cash cow is in the suburbs, not the Hamptons. Kinda forbidden knowledge to know that.
If I buy a corp at 10% net margin for 5x ebidta on 80% leverage, i’ve really paid 1x ebidta. then lets say 20% of revenue was going to R/D and stuff that would only pay off in a few years. I cut all R/D so now its at 30% net margin.
So I can triple my money every year because it’s now generating profits of 3x my original downpayment every year (minus interest payments). After a few years of zero R/D the company has no good products to sell, demand falls, and it’s declared insolvent. Well, I dont care about my 20% equity downpayment because I already got like a 3-9x return. But the debt financers are screwed.
Funds are plenty willing to lend other peoples money to get guaranteed dividends and fee payments and not be left holding the risk. Retirement funds are the bag holder - but they won’t realize till later.
There’s structural pressure to buy from PE because insurance/pension is designed as fixed payout requiring say 7% yield forever. In a world where investment-grade bonds pay 4% and demographics are shifting from net-inflow to net-outflow, liquidity is _tight_. Meanwhile PE was promising 10% a year or whatever (someone call Madoff…) so that was preferable to the hard conversations of the funds failing. At the cost of kicking the can down to the road and making it worse in the future.
If this sounds like 2008 that’s because it is. But bigger and worse, and happening in wayyy more than just mortgages this time.
Hype aside they tend to pay it back. When they don’t, recovery is streamlined.
Blue Owl sinks as investor withdrawals halted at private credit fund https://seekingalpha.com/news/4523155-blue-owl-sinks-as-inve...
BlackRock fund limits withdrawals as redemptions rattle private credit https://www.reuters.com/business/blackrock-limits-withdrawal...
- It's hard to buy a decent company at 5x EBITDA today. A typical EBITDA multiple nowadays is like 10x-15x. (e.g. EQT bought SUSE for $3B in 2023, and the adjusted EBITDA was $240M, which implies 12x EBITDA)
- Debts are tranched. Banks typically get a senior slice, often secured by real assets (a.k.a. collateral), so they can recoup the money even when the company goes straight into a ditch. The real risk lies in the junior loans ("mezzanine"), which demand very high yields to compensate for that risk.
- In a typical PE deal, most profits are earned at exit, not via dividends en route. So managers have incentive to make the target company (look) better for the next buyer, rather than neglecting it.
A more fundamental reason why the situation you describe rarely happens is that PE fund managers treat their operation as an "on-going" business. Lenders are gonna be really pissed if they lose their money. So fund managers try to avoid that scenario to keep the credit flowing for their next deal.
1: IIRC, it's a Toys 'R Us employee, a nurse at a rural hospital, a journalist at local newspaper, and a resident in a PE-owned apartment.
I am not one of those people, but their point does need to be fully addressed.
Taleb sees business and government as equally incompetent, but businesses are supposed to die and so make room for better ideas to thrive.
Unless, of course, you bail them out of their mistakes.
In the US we have one that recognized we are a society and need things to work. and one that wants to get rid of government at all costs, to the point they have for the last 40 years had policies such as 'starve the beast' with the sole intention of making government completely unable to function.
I fear the objectives of both will always be mutually exclusive.
> I’m reaching out to start a dialogue regarding a possible non-executive founding directorship role for a new senior care deal.
> We are doing a roll-up. Acquiring and consolidating various senior living revenue generating companies, eliminating redundant operations, improve and expand service offerings and ultimately exit via private sale or IPO.
It was so bonkers I forwarded it to my wife, who works in a research center on aging, and she was like, "how many red flags can you fit into one email?"
This stuff is depressingly real.
Private equity is overall good for society
PE has become shorthand for "thing I don't like", and admittedly there are a lot of horrible evil people in PE. As a concept though, it's pretty benign.
So here are some positive things that I think PE funds can contribute:
1) Private equity serves as an exit path for small business builders. Suppose that you have built a small, profitable trucking company. Now you are old and want to retire. You kids have no interest in the business, and have already built different careers elsewhere than managing a fleet of Super Greats. Oftentimes, PE funds are only realistic buyers of your business.
2) At a more subtle level, PE can supply better management. For example, a supermarket owner I know accepted capital from a PE fund specifically to acquire better talent (his remark: "very talented people are rarely excited to operate a rural food & beverage shop").
3) PE-backed companies are, arguably, structurally better than the public counterparts. The cliche is that many public firms are run like third-world fiefdoms (the board are focused on empire building; the executives are spending money lavishly on perks). Most of these concerns vanish once each director are given a shared, transparent objective set by the deal structure. (As Henry Kravis often remarks, PE is mostly about alignment of the interests)
The growing role of PE in everything and everywhere is IMO a symptom of wealth inequality. PE didn't invest in veterinary practices, retirement homes, or plumbing businesses 30 years ago. They're just running out of places to put all that cash.
Continuing our discussion from last time, can you elaborate on why you think quoting Revlon is sufficient to excuse the practical differences between public and PE companies?
I have genuinely no idea who you are or what we were talking about.
> can you elaborate on why you think quoting Revlon is sufficient to excuse the practical differences between public and PE companies?
Revlon duties concern hostile takeovers [1]. You’re confusing orthogonal concepts.
[1] https://en.wikipedia.org/wiki/Revlon,_Inc._v._MacAndrews_%26....
No sir, it was you who were confused - you brought them up here:
https://news.ycombinator.com/item?id=46186549
> > There is a legal requirement for directors of public companies to act in the financial interests of all shareholders
> No, there isn't. The whole point of Revlon duties is that they trigger "in certain limited circumstances indicating that the 'sale' or 'break-up' of the company is inevitable" [1]. Outside those conditions, "the singular responsibility of the board" is not "to maximize immediate stockholder value by securing the highest price available."
I'll leave it up to you to recontextualize with the remainder of that thread if you want to continue discussing.
Within that context, what's confusing you? And where did I argue that "quoting Revlon is sufficient to excuse the practical differences between public and PE companies?"
Revlon duties are a specialised duty that apply in certain circumstances. They don't in others. The other situation is what we were talking about; herego, those special duties don't apply to the other situation, which is part of the general situation. It's an old piece of rhetoric [1].
If you're consistently getting downvoted in a thread, and the other side getting upvoted, try re-reading it instead of presuming sanctity. Especially if you haven't worked in a field, are mixing up terminal and are e.g. citing legal argument about a private company to make arguments about a public one (Ford).
[1] https://en.wikipedia.org/wiki/Exception_that_proves_the_rule...
Lol, what a humble take. We all know in this VC owned forum that only truth is upvoted, and lies downvoted, especially on topics like private equity.
> Revlon duties are a specialised duty that apply in certain circumstances. They don't in others. The other situation is what we were talking about
Again you're operating insincerely, because as I told you last time, and this time, Revlon does not relate to what I'm referring to. I even quoted you Dodge v Ford Motor Co as a jump off point for your education, which you refused to acknowledge due to it being "from over 100 years ago".
Anyways I'm curious if you'll share your background, and why you're consistently in these discussions about private equity, rabidly playing defense?
I am thinking about more and more about a plan to off myself once I need expensive care so I am not a burden to the next generation.
There are some diseases which will rob you of the choice of assisted suicide. You must legally prepare while you are still of sound mind and body.
Then it doesn't matter how many baroque shell companies it takes represent the thing internally. Either the thing can output a response in Care Home Object Notation, or it's just a bunch of crafty bullshit disguised as a care home.
You'd just walk in with your one-page CHOM spec and read down the sheet: "Number 1: Can I speak to a full-time nurse, please?" If they respond, "No, but here's two high-school interns in a trench coat," you can just be like, "Not a care home. Got it," and move on to the next one.
For example, the article blazes past a claim that £550/week/bed was too little to provide good care, but a super simple spec suggests it might be. Subtract the UK average rent of £1367/4 = £342, divide the remaining £208 by a fully-loaded nurse cost of ~£20/hr * 1.3 * 168, and even with no other costs you're left with a completely inadequate 1 hour of nurse time per resident per day. But if Guy Hands had produced a worksheet like this proving that pumping more taxpayer money into his pockets would achieve adequate staffing ratios, would that make even a single person more willing to do it?
depends on your state ofc. none of them are a single page tmk. this makes sense, regulations are famously written in blood. don't do this if you're unprepared to be in a terrible mood, ofc.
Is there any benefit that I am missing? (Apart from the money it generates for the investors and the related politicians whose pockets get lined)
——
Not how I've seen this work. These often require a personal guarantee, in some cases the homes of whoever is applying for the loan. So, whoever wrote this article has no idea of the real acquisition process.
Not saying nonprofit hospitals are a panacea, but they sure are better than for-profit ones.
What might be a more feasible solution?
All corporate entities require a registration to operate in a state if they have a physical presence.
In this instance, you can also pass a law along the lines of "After setup, all care homes are required to spend 90/95/99% of their income on direct care of the residents or your charter gets revoked." This would prevent the incentives to buy them in the first place.
> Upton Sinclair
Upton Sinclair didn't waste it.
And yet we’re talking about an extremely well-connected and powerful industry in PE. Do you really think they won’t lobby intensely against legislation that would cripple their profits? Are the majority of our legislators really immune from considering corporate interests?
It's not a fairy tale; it is hard; and yet our predecessors moved mountains.
The political environment we live in today is not what it was even a few years ago let alone decades.
Perhaps consider giving people the benefit of the doubt instead of projecting your cynicism onto others.
I take no position on this currently, but it's an important question that deserves a serious answer. Trading off the costs of "state experimentation" and "enforced regulatory conformity" is non-trivial to do.
I'm not opposed to multi-generational households and I have friends who have made it work well. Let's just not assume that it can be a scalable solution.
I read some of comments here and on other threads about PE and I keep seeing some variation of "this particular PE crime is an outlier, we can fix it". No, no you can't. PE isn't an aberration. It's just the natural extension to capitalism. It's inevitable.
This can be understood easily in Marxist terms, as unpopular as that is. What we're talking about is the workers relationship to the means of production.
You have a nusing home. The people who work there should own it. There's no reason not to. Instead there's this intermediary, some capital owner, who demands to extract profits from that. We've simply replaced the feudal lords of old with investment bankers. It's the ultimate in rent-seeking behavior.
Years ago I remember hearing about PE firms buying up trailer parks. For many this is their last refuge from being homeless. When they are homeless, it's not only devastating to them but it's expensive for everyone. Health issues, going to the ER more often, violence, law enforcement making sure homeowners don't have to see homless encampments, people can't hold down drugs, self-medication with drugs and so on.
We absolutely shouldn't drive up the price of mobile home pricing so rent-seekers can extract profits but we as a society choose that over housing security for people. That's not just wrong. It's state-sanctioned violence.
This nursing home PE squeeze is also state-sanctioned violence. Make no mistake. Arguably, it's even social murder [1].
And once again, it's super easy to understand in terms of the workers relationship to the means of production. Yet everybody thinks they'll be Jeff Bezos one day so it's super-important now to vote in the interests of the billionaire class. Yo uwon't be. And even if you are, do you really want to become rich this way? Is that what you want your legacy to be? That you made the last years of elderly people who needed care miserable?
Why do people think this is good? Or fixable by the politicians who are bought and paid for by the people profiting off of this?
And frankly moaning about this used to be right wing conspiracies a few years ago so yey for another pendulum swing...
How is it even possible that you got down voted for this?
When I deal with bob renting his house, we come from a kind of equal place. When I rent from XYZ agencies, there is no fair deal, there is their deal or no deal, designed to be as exploitive of me as possible. There is no coming to terms from somewhat equal place, there is only agreeing to corporates terms. The same with dental work. Getting a roof put on. The society we had didn't work that way in every transaction in life, and the society we have now doesn't really work for large swaths of society anymore.
Systems with no slack become brittle. In the case of modern society, that brittle aspect is people not able to afford to live and businesses so 'optimized' they can't afford to do their core businessing well, their workforce unable to themselves live, and their workforce pushed in a way that isn't sustainable long term, but since their owners have purchased large amounts of the competition the business is able to stumble along for a while. Until they get their exit by selling the unsustainable bundle to a retirement fund, with PE yet again destroying another aspect of what made society work in the past.
Credit lends. Equity owns. It’s absolutely the fault of the owners, first, if their business is fucking up. That’s why they lose their chips before the banks do.