[Plura-list] When private equity destroys your hospital

Cory Doctorow doctorow at craphound.com
Wed Feb 28 11:11:54 EST 2024

Read today's issue online at: https://pluralistic.net/2024/02/28/5000-bats/


I'm on tour with my new novel *The Bezzle*! Catch me TOMORROW in PHOENIX (Feb 29, Changing Hands). After that, it's Tucson, San Francisco, Anaheim, and more!



Today's links

* When private equity destroys your hospital: Looters literally want to kill you.

* Hey look at this: Delights to delectate.

* This day in history: 2009, 2014, 2019, 2022

* Colophon: Recent publications, upcoming/recent appearances, current writing projects, current reading


🧏🏻 When private equity destroys your hospital

As someone who writes a lot of fiction about corporate crime, I naturally end up spending a lot of time being *angry* about corporate crime. It's pretty goddamned enraging. But the fiction writer in me is *especially* upset at how *cartoonishly evil* the perps are - routinely doing things that I couldn't ever get away with putting in a novel.

Beyond a doubt, the most cartoonishly evil characters are the private equity looters. And the most cartoonishly evil private equity looters are the ones who get involved in *health care*.

(Buckle up.)

Writing for *The American Prospect*, Maureen Tcacik details a national scandal: the collapse of PE-backed hospital chain Steward Health, a company that bought and looted hospitals up and down the country, starving them of everything from heart valves to prescription paper, ripping off suppliers, doctors and nurses, and callously exposing patients to deadly risk:


Steward occupies a very special place in the private equity looting cycle. Private equity companies arrange themselves on a continuum of indiscriminate depravity. At the start of the continuum are PE funds that buy productive and useful firms (everything from hospitals to car-washes) using "leveraged buyouts." That means that they borrow money to buy the company and use the company itself as collateral: it's like you getting a bank-loan to buy your neighbor's mortgage out from under them, and using your neighbor's house as collateral for that loan.

Once the buyout is done, the PE fund pays itself a "special dividend" (stealing money the business needs to survive) and then starts charging the business a "management fee" for the PE fund's expertise. To pay for all this, the PE bosses start to hack away at the company. Quality declines. So do wages. Prices go up. The company changes suppliers, opting for cheaper alternatives, often stiffing the old company. There are mass layoffs. The remaining employees end up doing three peoples' jobs, for lower wages, with fewer materials of lower quality.

Eventually, that top-feeding PE company finds a more desperate, more ham-fisted PE company to unload the business onto. That middle-feeding company *also* does a leveraged buyout, pays itself *another* special dividend, cuts wages, staffing and quality even further. They switch to even worse suppliers and stiff the last batch. Prices go up even higher.

Then - you guessed it - the middle-feeding PE company finds an even more awful PE bottom-feeder to unload the company onto. That bottom feeder does it all again, without even pretending to leave the business in condition to do its job. The company is a shambling zombie at this point, often producing literal garbage in place of the products that made its reputation. Employees' paychecks bounce, or don't show up at all. The company stops bothering to pay the lawyers that have been fending off its creditors. Those lawyers sue the company, too.

That's the kind of PE company Steward Health was, and, as the name suggests, Steward Health is in the business of stripping away the very last residue of value from community hospitals. As you might imagine, this gets *pretty fucking ugly*.

Steward owns 32 hospitals up and down the country, though its holdings are dwindling as the company walks away from its debt-burdened holdings, after years of neglect that have rendered them unfit for use as health facilities - or for any other purpose. Tcacik's piece offers a snapshot of one such hospital: Florida's Rockledge Regional Medical Center, just eight miles from Cape Canaveral.

Rockledge is a disaster. The fifth floor was, at one point, home to 5,000 bats.




(Rockledge stiffed the exterminators.)

The bats were just the beginning. One of the internal sewage pipes ruptured. Whole sections of the hospital were *literally* full of shit, oozing out of the walls and ceiling, slopping over medical equipment.

That's an urgent situation for any hospital, but for Rockledge, it's catastrophic, because Rockledge is a hospital without any hospital supplies. Steward has stiffed the companies that supply "heart valves, urology lasers, Impella catheters, cardiac catheterization balloons, slings for lifting heavier patients, blood and urine test reagents, and most recently, prescription paper." Key medical equipment has been repossessed. So have the Pepsi machines. The hospital cafeteria had its supply of *cold cuts* repossessed:


It's not just Steward's nonpayments that reek of impending doom. Its *payments* also bear the hallmarks of a scam artist on the brink of blowing off the con. The company recently paid off a vendor with five separate checks for $1m, each drawn on "a random hospital in Utah" (Steward recently walked away from its Utah hospitals; its partners there are suing it for stealing $18m on their way out the door).

This company - which owns 32 hospitals! - has resorted to gambits like sending photos of fake checks to doctors it hasn't paid in months as "proof" that the money was coming (the checks arrived 22 days later).

Steward owes *so much* money to its employees - $1.66m to just one doctors' group. But the medical staff keep doing their jobs, and are reluctant to speak on the record, thanks to Steward's reputation for vicious retaliation. Those health workers keep showing up to take care of patients, even as the hospital crumbles around them. One clinician told Tcacik: "I watched a bed collapse underneath a [patient] who had just undergone *hip surgery*."

Rockledge has nine elevators, but only five of them work - the other four have been broken for a year. The hospital's fourth floor has been converted to "a graveyard of broken beds." The sinks are clogged, or filled with foul gunk. There's black mold. Nurses have noted on the maintenance tags that the repair service refuses to attend the hospital until their overdue bills are paid. The fifteen-person on-site maintenance team was cut to just two workers.

Steward is just the latest looting owner of Rockledge. After the Great Financial Crisis, private equity consultants helped sell it to Health Management Associates. The hospital's CEO took home a $10m bonus for that sale and exited; Health Management Associates then quickly became embroiled in a Medicare fraud and kickback scandal. Soon after, Rockledge was passed on to Community Health Systems, who then sold it on to Rockledge.

Steward, meanwhile, was at that time owned by an even bigger private equity giant, Cerberus, which then sold Steward off. That deal was performatively complex and hid all *kinds* of mischief. Prior to Cerberus's sell-off of Steward, they sold off Steward's real-estate. The buyer was Medical Properties Trust, who gave Cerberus $1.25b for the real-estate: three hospitals in Florida and three more in Ohio. Steward then contracted to operate these hospitals on MPT's behalf, and pay MPT rent for the real-estate.

This complex arrangement was key to siphoning value out of the hospital and to keeping angry creditors at bay - if you can't figure out who owes you money, it's a lot harder to collect on the debt. The scheme was masterminded by Steward founder/CEO Ralph de la Torre. De la Torre is notorious for taking a massive dividend out of the company while it owed $1.4b to its creditors. He bought a $40m yacht with the money.

De la Torre was once feted as a business genius who would "disrupt" healthcare. But as Steward's private jet hops around "Corfu, Santorini, St. Maarten and Antigua"
as its hospitals literally crumble, he's becoming less popular. In Massachusetts, politicians have railed against Steward and de la Torre (Governor Healey wants the company to leave the state "as soon as possible").

Florida, by contrast, is much more friendly to Steward. The state Health and Human Services Committee chair Randy Fine is an ardent admirer of hospital privatization and is currently campaigning to sell off the last community hospital in Brevard County. The state inspectors are likewise remarkably tolerant of Steward's little peccadillos. The quasi-governmental agency that inspects hospitals has awarded this shit-and-bat-filled, elevator-free, understaffed rotting hulk "A" grades for quality.

These inspectors jointly represent a mismatched assortment of private and public agencies, dominated by a nonprofit called Leapfrog, the brainchild of Harvard public-health prof Lucian Leape, who founded it in 2000. Leapfrog likes to tout its "transparent" assessment criteria, and Steward are experts at hitting those criteria, spending the exact minimum to tick every box that Leapfrog inspectors use as proxies for overall quality and safety.

This is a pretty great example of Goodhart's Law: "every measurement eventually becomes a target, whereupon it ceases to be a good measurement":


But despite Steward's increasingly furious creditors and its decaying facilities, the company remains bullish on its ability to continue operations. Medical Properties Trust - the real estate investment trust that is nominally a separate company from Steward - recently hosted a conference call to reassure Wall Street investors that it would be a going concern. When a Bank of America analyst asked MPT's CFO how this could possibly be, given the facility's dire condition and Steward's degraded state, the CFO blithely assured him that the company would get bailouts: "We own hospitals no one wants to see closed."

That's the thing about PE and health-care. The looters who buy out every health-care facility in a region understand that this makes them too big to fail: no matter how dangerous the companies they drain become, local governments will continue to prop them up. Look at dialysis, a market that's been cornered by private equity rollups. Today, if you need this lifesaving therapy, there's a good chance that every accessible facility is owned by a private equity fund that has fired all its qualified staff and ceased sterilizing its needles. Otherwise healthy people who visit these clinics sometimes die due to operator error. But they chug along, because *no* dialysis clinics is worse that "dialysis clinics where unqualified sadists sometimes kill you with dirty needles":


The bad news is that private equity has thoroughly colonized the *entire* medical system. They took hospitals, fired the doctors, then took over the doctors' groups that provided outsource staff to the hospital:


It's illegal for private equity companies to fown doctors' practices (doctors have to own these), but they obfuscated the crime with a paper-thin pretext that they got away with despite its obvious bullshittery:


The financier who decides whether you live or die depends on an algorithm that literally sets a tolerable level of preventable deaths for the patients trapped in the practice:


Private equity also took over emergency rooms and boobytrapped them with "surprise billing" - junk fees that ran to thousands of dollars that you had to pay even if the hospital was in network with your insurer. They made billions from this, and spent a many millions from that booty keeping the scam alive with scare ads:


The whole health stack is colonized by private equity-backed monopolies. Even your hospital bed!


Then there's residential care. Private equity cornered many regional markets on nursing homes and turned them into slaughterhouses, places where you go to die, not live:


The palliative care sector is also captured by private equity. PE bosses hire vast teams of fast-talking salespeople who con vulnerable older people into entering an end-of-life system before they are ready to die. Thanks to loose regulation, the nation is filled with fake hospices that can rake in millions from Medicare while denying all care to their patients (hospice patients don't get life-extending medication or procedures, by definition):


If you survive this long enough, Medicare eventually tells the hospice that you're clearly not dying and you get kicked off their rolls. Now you have to go through the lengthy bureaucratic nightmare of convincing the system - which was previously informed that you were at death's door - that you are actually viable and need to start getting care again (good luck with that).

If that kills you, guess what? Private equity has rolled up funeral homes up and down the country, and they will scam your survivors just as hard as the medical system that killed you did:


The PE sector spent *more than a trillion dollars* over the past decade buying up healthcare companies, and it has trillions more in "dry powder" allocated for further medical acquisitions. Why not? As the CFO of Medical Properties Trust told that Bank of America analyst last week, when you "own hospitals no one wants to see closed." you literally can't fail, no matter how many people you murder.

The PE sector is a reminder that the crimes people commit for money far outstrip the crimes they commit for ideology. Even the most ideological killers are *horrified* by the murders their profit-motivated colleagues commit.

Last year, Tkacic wrote about the history of IG Farben, the German company that built Monowitz, a private slave-labor camp up the road from Auschwitz to make the materiel it was gouging Hitler's Wehrmacht on:


Farben bought the cheapest possible slaves from Auschwitz, preferentially sourcing women and children. These slaves were worked to death at a rate that put Auschwitz's wholesale murder in the shade. Farben's slaves died an average of just *three months* after starting work at Monowitz. The situation was so abominable, so unconscionable, that the SS officers who provided outsource guard-labor to Monowitz actually *wrote to Berlin* to complain about the cruelty.

The Nuremberg trials are famous for the Nazi officers who insisted that they were "just following order" but were nonetheless executed for their crimes. 24 Farben executives were also tried at Nuremberg, where they offered a very different defense: "We had a fiduciary duty to our shareholders to maximize our profits." 19 of the 24 were acquitted on that basis.

PE is committed to an ideology that is far worse than any form of racial animus or other bias. As a sector, it is committed to profit above all other values. As a result, its brutality knows no bounds, no decency, no compassion. Even the worst crimes we commit for hate are nothing compared to the crimes we commit for greed.


🧏🏻 Hey look at this

* Jumbo Shrimp celebrating public-domain characters in 2024 https://www.milb.com/news/the-show-before-the-show-episode-445-jacksonville-jumbo-shrimp-public-domain (h/t Joshua Bradley)

* The Rentier Economy, Vulture Capital, and Enshittification https://c4ss.org/content/59416

* FTC Chair Lina Khan takes victory lap on blocking Nvidia-Arm merger https://www.cnbc.com/2024/02/27/ftc-chair-lina-khan-takes-victory-lap-on-blocking-nvidia-arm-merger.html


🧏🏻 This day in history

#15yrsago Amusement park offers surveillance footage of you as a souvenir https://web.archive.org/web/20090401000000*/https://www.thesun.co.uk/sol/homepage/news/article1198732.ece

#10yrsago Report from Trustycon: like RSA, but without the corruption https://www.cnet.com/news/privacy/trustycons-rsa-conference-rebels-promise-more-to-come/

#10yrsago King no longer claims to own “candy,” still claims it owns “saga” https://www.techdirt.com/2014/02/26/king-backs-off-ridiculously-broad-candy-trademark-will-still-be-obnoxious-other-ways/

#5yrsago #FixItAlready: EFF’s wishlist for fixing tech’s worst privacy and security choices https://fixitalready.eff.org/#/

#5yrsago The “Reputation Management” industry continues to depend on forged legal documents https://www.techdirt.com/2019/02/28/pissed-consumer-exposes-new-york-luxury-car-dealers-use-bogus-notarized-letters-to-remove-critical-reviews-update/

#5yrsago Pentagon Inspector General reveals widespread retaliation against whistleblowers with impunity for the retaliators and the wrongdoers https://rollcall.com/2019/02/25/pentagon-harbors-culture-of-revenge-against-whistleblowers/

#5yrsago Amazon killed Seattle’s homelessness-relief tax by threatening not to move into a massive new building, then they canceled the move anyway https://www.seattletimes.com/business/amazon/huge-downtown-seattle-office-space-that-amazon-had-leased-is-reportedly-put-on-market/

#5yrsago Bad security design made it easy to spy on video from Ring doorbells and insert fake video into their feeds https://web.archive.org/web/20190411195308/https://dojo.bullguard.com/dojo-by-bullguard/blog/ring/

#5yrsago London’s awful estate agents are cratering, warning of a “prolonged downturn” in the housing market https://www.bbc.com/news/business-47389160

#5yrsago Yet another study shows that the most effective “anti-piracy” strategy is good products at a fair price https://www.vice.com/en/article/3kg7pv/studies-keep-showing-that-the-best-way-to-stop-piracy-is-to-offer-cheaper-better-alternatives

#5yrsago EFF’s roadmap for a 21st Century antitrust doctrine https://www.eff.org/deeplinks/2019/02/antitrust-enforcement-needs-evolve-21st-century

#1yrago VW wouldn't help find kidnapped child because his mother wasn't paying for find-my-car subscription https://pluralistic.net/2023/02/28/kinderwagen/#worst-timeline


🧏🏻 Colophon

Today's top sources:

Currently writing:

* A Little Brother short story about DIY insulin PLANNING

* Picks and Shovels, a Martin Hench noir thriller about the heroic era of the PC. FORTHCOMING TOR BOOKS JAN 2025

* The Bezzle, a Martin Hench noir thriller novel about the prison-tech industry. FORTHCOMING TOR BOOKS FEB 2024

* Vigilant, Little Brother short story about remote invigilation. FORTHCOMING ON TOR.COM

* Spill, a Little Brother short story about pipeline protests. FORTHCOMING ON TOR.COM

Latest podcast: The Majority of Censorship is Self-Censorship https://craphound.com/news/2024/02/25/the-majority-of-censorship-is-self-censorship/

Upcoming appearances:

* The Bezzle at Changing Hands (Phoenix), Feb 29:

* Tucson Festival of Books, Mar 9/10

* Enshittification: How the Internet Went Bad and How to Get it Back (virtual), Mar 26

* Wondercon Anaheim, Mar 29-31

* The Bezzle at Anderson's Books (Chicago), Apr 17

* Torino Biennale Tecnologia (Apr 19-21)

* Canadian Centre for Policy Alternatives (Winnipeg), May 2

* Tartu Prima Vista Literary Festival (May 5-11)

* Media Ecology Association keynote, Jun 6-9 (Amherst, NY)

* American Association of Law Libraries keynote, (Chicago), Jul 21

Recent appearances:

* Radioactive (KCRL)

* The enshittification of music (Music Ally)

* Aaron Swartz (EpistemiCast)

Latest books:

* The Bezzle: a sequel to "Red Team Blues," about prison-tech and other grifts, Tor Books (US), Head of Zeus (UK), February 2024 (the-bezzle.org). Signed, personalized copies at Dark Delicacies (https://www.darkdel.com/store/p3062/Available_Feb_20th%3A_The_Bezzle_HB.html#/).

* "The Lost Cause:" a solarpunk novel of hope in the climate emergency, Tor Books (US), Head of Zeus (UK), November 2023 (http://lost-cause.org). Signed, personalized copies at Dark Delicacies (https://www.darkdel.com/store/p3007/Pre-Order_Signed_Copies%3A_The_Lost_Cause_HB.html#/)

* "The Internet Con": A nonfiction book about interoperability and Big Tech (Verso) September 2023 (http://seizethemeansofcomputation.org). Signed copies at Book Soup (https://www.booksoup.com/book/9781804291245).

* "Red Team Blues": "A grabby, compulsive thriller that will leave you knowing more about how the world works than you did before." Tor Books http://redteamblues.com. Signed copies at Dark Delicacies (US): and Forbidden Planet (UK): https://forbiddenplanet.com/385004-red-team-blues-signed-edition-hardcover/.

* "Chokepoint Capitalism: How to Beat Big Tech, Tame Big Content, and Get Artists Paid, with Rebecca Giblin", on how to unrig the markets for creative labor, Beacon Press/Scribe 2022 https://chokepointcapitalism.com

* "Attack Surface": The third Little Brother novel, a standalone technothriller for adults. The *Washington Post* called it "a political cyberthriller, vigorous, bold and savvy about the limits of revolution and resistance." Order signed, personalized copies from Dark Delicacies https://www.darkdel.com/store/p1840/Available_Now%3A_Attack_Surface.html

* "How to Destroy Surveillance Capitalism": an anti-monopoly pamphlet analyzing the true harms of surveillance capitalism and proposing a solution. https://onezero.medium.com/how-to-destroy-surveillance-capitalism-8135e6744d59?sk=f6cd10e54e20a07d4c6d0f3ac011af6b) (signed copies: https://www.darkdel.com/store/p2024/Available_Now%3A__How_to_Destroy_Surveillance_Capitalism.html)

* "Little Brother/Homeland": A reissue omnibus edition with a new introduction by Edward Snowden: https://us.macmillan.com/books/9781250774583; personalized/signed copies here: https://www.darkdel.com/store/p1750/July%3A__Little_Brother_%26_Homeland.html

* "Poesy the Monster Slayer" a picture book about monsters, bedtime, gender, and kicking ass. Order here: https://us.macmillan.com/books/9781626723627. Get a personalized, signed copy here: https://www.darkdel.com/store/p2682/Corey_Doctorow%3A_Poesy_the_Monster_Slayer_HB.html#/.

Upcoming books:

* Picks and Shovels: a sequel to "Red Team Blues," about the heroic era of the PC, Tor Books, February 2025

* Unauthorized Bread: a graphic novel adapted from my novella about refugees, toasters and DRM, FirstSecond, 2025

This work - excluding any serialized fiction - is licensed under a Creative Commons Attribution 4.0 license. That means you can use it any way you like, including commercially, provided that you attribute it to me, Cory Doctorow, and include a link to pluralistic.net.


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