Private equity is akin to toxic poison for everyone who isn't one of the (very few) general partners who bask in obscene amounts of scrooge-mcduck money. Think of making a cool $30 million+ a quarter, per partner -- thanks real estate (and apparently, emergency medical services) "investments"! This is a direct funnel to syphon money from the workers to the ruling class. That's even more cash than the top brass at FAAGs make.
How can this phenomenon be reigned in and sorted in the medium to long-term?
It's a loss for everyone (99.9999%) except the miniscule quantity of winners (0.0001%, yes, that's 1 in 1,000,000 - there aren't that many large-scale P/E firms). Housing owned by P/E couldn't be more soul sucking. Scratch that, this applies to every case I'm aware of where P/E firms own a thing.
Anecdote: Last month my dear old dog was suddenly very ill and I spent $12k on emergency surgery to save his sweet life. No regrets, I'm grateful he was fixable. But in the waiting room I did the conservative math for what the SAGE Emergency Veterinary Hospital in Redwood City, CA makes in a year (before the comparatively small overhead, tax-deductible expenses) and they are pulling in at least $30 million in this single location. That's.. a lot, for many 20 total staff. Also they charged me $500 for each follow-up visit, which is way more than my real life surgeon charged me earlier this year! (Even including insurance, he didn't charge much for the follow-ups to make sure I survived.) Damn.
For the dog lovers out there: Doggo is alive and well, can maybe last another year or two we hope.
Ideally you'd expect the market to deal with it how it normally does, which is to have people open up competing practices to undercut them. I think the problem is that VC has correctly identified this as not only a field where people are willing to pay a lot based on emotion, but it's also regulated enough that their strategy of buying out existing practices leaves them fairly safe from a lot of competition. I wouldn't be surprised if non-competes factor heavily into their strategy either.
In that case I would hope the government could at least step in to combat anti-competitive behavior (which I think this definitely is), but that always seems to lag a decade after it's first needed.
Locally, the answer was that the folks who could open up a competing practice were under non-compete agreements if they left the PE-owned place. (We had a local legislator step in to help void them.)
> Marion said early efforts to enlist former VSES doctors or others in the community to start an ER were discouraging. Some VSES doctors had already left the area, some had signed contracts for new jobs locally, most were worried about the constraints of noncompete agreements they signed with Thrive, and "no one seemed eager to take on the tremendous responsibility of owning, managing and running an emergency hospital even with the help and support of the local veterinary community."
hahahaha. Imagine if SCOTUS decides said law banning non-competes is unconstitutional. Could they do it in such a way to kill the "non-competes are unenforceable" law in CA? that would suck.
No, it's the FTC doesn't have the authority - this is an easy thing to do federally, just convince congress to ban them... most things should not be decided by the executive.
> Under this Act, the Commission is empowered, among other things, to (a) prevent unfair methods of competition, and unfair or deceptive acts or practices in or affecting commerce; (b) seek monetary redress and other relief for conduct injurious to consumers; (c) prescribe trade regulation rules defining with specificity acts or practices that are unfair or deceptive, and establishing requirements designed to prevent such acts or practices; (d) conduct investigations relating to the organization, business, practices, and management of entities engaged in commerce; and (e) make reports and legislative recommendations to Congress.
It's hard to see non-competes as anything other than an "unfair method of competition", and it's shameful it has taken this long to act.
My only concern in this context is that this is in relationship to employee relationships. If said vets had an ownership stake in a sold practice, could they be restricted by virtue of this different context?
Will be interesting to see how the recent FTC non compete ban plays out in this space. It seems like a prime candidate to promote competition as the key licensing is held by the individual (the vet) as opposed to the company.
It doesn't guarantee anything, especially given the Republican super-majority already ensconced in SCOTUS, but there's only one small-d democratic way out of this situation...
>always seems to lag a decade after it's first needed
Not always. Back when the US enforced antitrust there was no decade wait for results. However these days all you can expect from the government are low corporate tax rates, high interest rates, and a thumbs up saying the economy is strong. There is no antitrust enforcement coming. The only thing there is an appetite for is to loot the younger generations.
The other problem is private equity can burn money in the short term to undercut new competitors at their most vulnerable times and return to profit gathering soon after.
Requiring a degree or certification (at a legal leval) is a form of regulation. That it's costly and time consuming just makes that regulation a larger barrier. If you can somehow remove much of those people that already have the means to satisfy that regulation from the market, you've successfully controlled the supply for at least the amount of time it takes the pipeline to produce more of them.
Now I'm wondering if the VC firms took steps to disrupt that pipeline as well in some way. That would be pretty overt, but I've never gotten the impression that these people feel the need to be at all subtle.
Most (all?) states in the U.S. require state licenses to practice, and you can't get much more regulatory than that, so yes, I count that.
There have been a few different reports put out about the current situation and how vets are being bought out. The article here is one of them. Is your theory that they aren't actually buying vets, or that they aren't raising prices, or that what they're doing is irrelevant to the current problems?
I know in my town and from my personal experience over the last two years dealing with five different vet practices, one of which is a local VCA branch and also one associated withe the local humane society, all the reports ring startingly true. VCA is extremely expensive compared to all other vets, but is also the only emergency location in the area. If we go in and it's not an emergency it's about 40% more than other vets. If it is an emergency it's much more, but at least there's a plausible reason in that case.
That said, there are more pets. Our local humane society is at well over double capacity for animals that are mostly aged suspiciously close to the beginning of covid. Multiple things can be happening at the same time though. Why do you think VC decided now to get into animal health care?
Yes. That must be true because every vet office I go to advertises it heavily. The way car dealers push warranties.
And also, some theorize low birth rate is causing people to treat their pets like children thus necessitating more care. Think how many people call themselves a dog mon. Also, it’s really only been a couple decades since Frontline caught on and people largely let their animals live inside.
Vet schools are largely for-profit, often in other countries. I have a good friend who does admissions for one in St Kitts, they turn down a lot of people. I bet they all do.
Demand grows faster than supply, prices go up. Prices go up enough, PE firms start buying them.
The short term effect of VCs managing budgets might mean more support for public health initiatives (which the AMA has historically opposed) because they lower costs. So maybe we'll all be a little less sick or even a little less fat. Assuming they can focus on timespans longer than 3 months.
I'm concerned about what MBAs can do to us all after that honeymoon period because there are less benevolent ways to cut expenses, too.
This is patently false. There has never been money in cow doctoring like small animals, and the growth in new vets is almost universally for fur babies.
I was going to say, if you've ever heard the devops analogy about cattle vs pets, the cattle don't get treated very well since the goal is that they're fully replaceable.
> How can this phenomenon be reigned in and sorted in the medium to long-term?
Most dentists, veterinarians and such don’t want to deal with administering their businesses. Particularly in heavily-regulated states. Simplifying paperwork and making it easier for juniors to open their own practices (e.g. nullifying non-competed and making commercial leasing smoother) would negate this effect.
Private equity, in these situations, is a symptom of an unworkable bureaucratic overhead for small business. It’s not the poison, it’s the ulcer.
In human med, bringing in an org to handle administration for your clinic is something like 15% equity.
In PE that claims to not be PE for vet med, they want 65%. And for you to front 35% of the opening costs, naturally. For which they'll give you a loan for.
Also: Shouldn't "handling administration" just be a job for some employees? Why does it require a different ownership structure? Why can't Dr. Jones just hire some business school graduates to do the boring business administration and regulatory compliance stuff while he keeps ownership of his practice?
Yeah now they just have to deal with the boundless joy of being managed by a purely profit driven management layer - sounds great.
Seems like there's a market for innovating in the business management sector. Maybe some PE company can buy up all of the back office productivity software and rent it to these suffering small business owners to spare them the bureaucracy.
> now they just have to deal with the boundless joy of being managed
I did a start-up. I’ve worked for companies big and small. There is no single equilibrium here. Being able to cash in your paycheque and not give a fuck come 5PM is a luxury in itself.
There are literally dozens of companies selling practice management software for vets/doctors/dentists/etc, including many options that can be rented through a SaaS model. Y Combinator has even funded a few. That's not the main problem (although software licenses and training can be expensive).
What is a problem are compliance costs driven by overlapping layers of local, state, and federal rules. Plus if they take insurance payments then they have to deal with myriad different coverage policies and billing requirements. Some of this can be outsourced, but only to a limited extent and at a high cost.
Insurance is a minor issue for vets, essentially none of the population has animal insurance. It's also not a super big deal for dentists, as I understand it, though I don't know as much about the back-end of dental practices (wife is pharmacist, sister-in-law is a vet tech, so I know those businesses pretty well). Insurance reimbursement from the monopoly PBM's (three of them control 80% of the drug insurance market) are what is killing independent pharmacies- you have to be one of the national chains to have the scale to effectively negotiate against the PBM's, otherwise reimbursement rates are routinely below your wholesale price.
From talking to my wife it's not really compliance and government regulation in the pharmacy space (which is far more regulated than the vet space, naturally) that has forced consolidation. For the most part the regulations haven't changed that much in decades. What's changed is heavily reduced insurance reimbursement rates from those monopoly PBM's plus one other factor: educational debt. The idea that our intrepid young vets/pharmacists/dentists/doctors graduate with a huge pile of educational debt (200k or more), then have to take out massively more debt to start up a new business(1), at the same time they are also in prime child-bearing/rearing/caring age, that's a really hard sell for most. That's why being an employee is such an attractive thing.
1: And those loans have to be much bigger than before, because drugs are more expensive so your inventory costs are higher, people want nicer places offering more amenities, etc. They also need to be able to pay off those software licenses, which may not be individually expensive but are another new cost that wasn't present 30 years ago that has to be paid on the reduced reimbursement rates from the PBMs.
Pretty much all economic "problems" are symptoms of some greater social and/or regulatory issues. The bigger problem is that the "we must do something" response tends to have coinflip odds at least of making things worse, a la the cobra effect.
It never ceases to amaze me how no matter how clearly and obviously this is just one of those issues that is directly caused by free markets, there is inevitably someone ready to find some damn regulation by the government and blame that instead.
Markets have their place. They are not and should not be treated as the default, sole option.
Seems like vet care is clearly one of those places where markets have a place. I don't think the people will accept socializing the cost of back surgery for someone's dog.
I absolutely blame regulation. When my cat was dying I couldn't even by kidney friendly cat food without an prescription from a licensed professional.
My sincere condolences about your cat. I also had a cat with kidney disease, and the veterinary system was not very helpful about treatment. I had to learn most of it on my own. The "prescription" pet food situation is an example of free market entities subverting regulatory agencies.
"Prescription" pet foods exist only through a selective lack of enforcement by the FDA. The manufacturers make claims that the food treats specific medical conditions. That's a drug claim. By law they would be required to test for efficacy and have it approved as a drug. But the FDA chooses to allow manufacturers to sell pet food that makes drug claims without testing or approval so long as they contract with veterinarians to only sell it under "prescription." It's not a prescription (it's not a drug!), it's a way to skirt regulation.
For kidney disease you want foods high in moisture, moderate in protein and low in phosphorous. You can buy foods that meet these requirements at your pet food store. There are options that are much higher quality than said "prescription" foods hawked by Hills, Royal Canin and the like. They're just not advertised as treating kidney disease because they don't make inappropriate drug claims!
Thanks for the pointer about simply looking for low phosphorous foods, that makes a lot of sense.
I don't see this as a failure of a free market, but failure of policy makers and regulators. Consumer hostile over-regulation regulation the problem to be fixed, not the market entities. Even without businesses, you still have self-interested parties like veterinarians associations pushing for bad regulations.
I also think there is significant contingent of the population and government that is extremely risk adverse, but cost insensitive or ignorant. These are the people who argue that barbers really do need 1500 hours of training to ensure public safety.
How can this phenomenon be reigned in and sorted in the medium to long-term?
I'm not trying to make a political statement. But in my experience, we need to elect the right leaders to ensure we can try to minimize corruption through lobbyists and government officials to get regulation right. And also hold corrupted officials responsible. It's not gonna solve everything, but it does help.
The P/E orgs are generally working within the confines of all federal and local laws, they never had to lobby or corrupt anything. It's more of a wide open exploit.
Sure, but I have friends who work for these delightful folks and am confident they're not spending much energy on lobbying, mostly focused on new deals.
You vote, but they pay for their politicians. It is called lobbying, and it is the legalized corruption that maintains both parties in power. Voting won't change that.
Lobbyist are not immune to breaking the law. In this specific case, shady companies backed by shady pe firms bribed lobbyists and politicians and was a mess until newly elected officials blew the whole thing up. This is just one familiar example…
There are a lot of different PE firms that do a lot of different things, but I usually think they get the blame for systems that were broken long before they got there.
They only own a small percentage of the real estate market (like sub 2%) but I see ten articles about them buying homes for every one about the real issues that are leading to the housing crisis, such as NIMBYism, other abusive local regulatory schemes, lack of tradespeople, etc. The people who are fucking up the system want you to worry about the PE firms instead.
The way to get it sorted is to fix the market dynamics that have lead to ridiculous housing price increases. They’ll move on to greener pastures when homes in good markets aren’t appreciating at high rates.
Vet care is increasing in cost pretty rapidly due to lack of supply, so the answer is more vet schools, perhaps government backed loans for people who want to open clinics, etc.
Don’t fight the symptom (you can’t) fight the disease.
FWIW I said nothing about capitalism. Everything I said was about the conduct of individuals who operate in a universe where their actions affect others. Socialism and any other “ism” (to quote Ferris Bueller) also generates amoral actors who seek to cover their acts by aligning with a prevailing ideology. For our system, private equity is a shining example, but you can see it in action down at the used car lot too.
Capitalism is good when it can be balanced with the needs of society. We do not have that. We have people saying their only requirement is to make more money. What do you call someone who pursues profit at all costs, only restrained - and sometimes not - by the regulation of government?
Evil, duh. If you approach capitalism like this you're evil.
We do have that, a lot. It’s just not perfect. Capitalism has been the best thing that’s ever happened to humanity, and you’re just regurgitating the propaganda from people not capable of nuanced thought. Capitalism is not the answer to every problem, and nobody in economics believes laissez faire is a good idea.
People pursuing profits is what has lifted is all out of poverty. “At all costs” doesn’t mean anything, it’s just a propaganda buzzword.
Believe it or not, PE firms do a lot of good things too. VC is a form of PE without which we wouldn’t be having this conversation. A lot of poorly run businesses were purchased and well run and became going concerns.
And certainly it goes the other way sometimes, but that’s not necessarily bad. Is the World materially worse off without Kmart and Sears? Hard to say.
In any case, when you hear someone call capitalism evil, that’s the propaganda trap I’m talking about. It’s a tool. It’s no more evil than a hammer.
> People pursuing profits is what has lifted is all out of poverty.
No, it's not. People were living in abject poverty during capitalism heyday. It was only when society decided that enough was enough and capitalists had to pay taxes to fund pensions, schools, sick time, vacations, etc., that people started to have a decent life.
No, in the developed countries we have a mix of socialism and capitalism. Pure capitalism has produced only fortune for the rich and misery for the population.
HN isn't really "about" anything as specific as that, but if it was about something I think many more people would say HN is about the hacker spirit, not about being a good capitalist.
And the hacker spirit was never about allowing rent-seeking corpos do whatever they want.
Could it be “old HN” was the problem and intelligent people aren’t falling into a trap, but instead see a failing system’s failure points? Intelligent people making informed observations instead of blind nostalgia.
Capitalism is broken. It is a tool. Fix the tool. If a bunch of folks connected with YC got wealthy off of a dysfunctional system, it is what it is, congrats on your lottery ticket.
90% of startups fail, 50% of YC startups are alive after five years, only a small minority achieving unicorn status; most fail, that doesn’t mean founders and commoner employees suck, it means they’re unlucky. Certain folks connected to YC have done well regardless of their startup failures. So just be interesting to people who will give you opportunities based on whatever their criteria and belief systems are.
It was never not broken. Only less broken than everything else. Nobody thinks it couldn’t be improved.
That’s not what I’m talking about. There is a lot of anti-capitalist propaganda on the far left. You can spot the buzzwords. They believe that anybody who makes any large amount of money in anyway, must have done something evil.
Which, fine, but this used to be a site about how to raise venture capital. I’ve been here since near the beginning so it seems weird.
If you can raise venture capital in a manner that allows you to create a profitable business that doesn’t cause harm (and those investors aren’t waiting to boot you or liquidate you if your trajectory sags), I believe HN is still serving its purpose, even if forum participants are aware of undesirable behavior of non venture finance. I also believe one can be pro HN/YC (I am, with some griping along the way) and anti-brutalist capitalism, because HN and YC in general is about enabling smart, scrappy people to build and grow something tangible with YC taking their cut for contributing towards enabling their success.
TLDR The goal is building value and being rewarded for that value creation. I don’t think that’s at odds with moderated capitalism.
You’re not wrong, you’ve just had a different window of time in which your perspective was formed (imho).
(Thoughts and opinions my own, just an internet rando)
Even the most aggressive proponents of capitalism concede that it is indeed, basically evil. I'm not an anti-capitalist, I like the notion of cheap electronics and having a variety of cars to buy from, and 60 kinds of peanut butter. Where capitalism and I start to butt heads is things like predatory financial practices, anti-consumer lobbying, the monetization of essential services for life, and openly stoking the worst in people for profit.
That’s an unsupportable claim, Please show me all the aggressive proponents of capitalism who concede it as evil. It also makes no sense, People are evil, ideas are right or wrong.
That’s the exact nonsense propaganda I’m talking about.
> pretty sure they're advocating better taxing the PE firms looting billions, not the vets making $150k/year
My point is this isn’t a symptom of closing the carried-interest loophole. It’s fundamental to the business. The fixed costs of administering a veterinary clinic demand scale, and scale thirsts for capital.
If this was about administering practices more efficiently at scale, we’d see acquired practices lowering their prices and competing more aggressively due to their better cost structure. If this was about rent seeking by buying up a limited supply of regulated businesses, we’d see prices surge upward. In most of the purchased practices we’re seeing the latter.
> we’d see acquired practices lowering their prices and competing more aggressively due to their better cost structure
Introducing a new fixed cost into a market should not be expected to increase competitiveness. It almost always reduces it. The trade-off with regulation is that trade-off is worth it.
Put another way: if you are a $50mm practice, and it suddenly becomes infeasible to run anything smaller than $40mm, your market power increases. You have less competition.
Genuinely progressive taxation would aim to reduce the tax burden on small independent and non-profit vet practices, and increase it dramatically on the profits the big PE firms are taking.
It increases the risk of turning a profit due to consolidation and lack of competition. Oh you made $20 million off that vet clinic? You owe $19 million in taxes. Makes it harder to gouge people because buying "all the things" becomes far more risky and natural competition has a better chance of doing it's thing.
> Oh you made $20 million off that vet clinic? You owe $19 million in taxes.
This type of myopic thinking is how you get asinine policy like the ACA “cap on profits”. Instead of incentivizing an efficient operation, we’ll have some other accounting shenanigans to pass on profits as some other form of income.
Isn't the libertarian view on progressive income tax that it reduces the marginal returns on additional labor, thus removing the incentive for people to work harder and being more productive? Why would the reverse be true for people who work in private equity?
In the 80’s you had corporate raiders disassembling companies when their hard assets were worth more at auction than the purchase price of the company. It was violent and people didn’t like it.
PE is a slower, less obvious strategy, working on a larger pool of companies.
But I strongly suspect the same kind of human worked for both company types.
Housing being owned by private equity is only feasible because most localities work really hard to ensure that private equity gets good return on investment. They call it "neighbourhood character" and stuff like that.
Private equity per se isn't a problem. Business owners have to be able to sell their equity, and PE firms provide a source of liquidity. Most deals work out well for the seller; it's not just the GPs who benefit.
In cases where PE portfolio companies fail it's usually because the business was no longer viable, or they shifted the capital structure too much away from equity and towards debt. The former is just a regular part of the business cycle. I can't imagine how you would reign in the latter. Companies are allowed to issue bonds.
Some financial companies are looking to open PE up to more people. I think the floor is still high - around $1M up front and $4M in liquid assets for additional funding (or something like that). I think there are some regulator restrictions on accredited investors. I would bet there's a legal loophole where you could group people into a mutual fund type structure but for private equity using some sort of legal entity.
The restriction is one of: $1 million net worth (excluding primary residence), or $250k/yr income. You meet that floor, you can buy private shares on secondary markets. I don't think it's a loophole to pool accredited investors into a company, it's called a private equity firm :)
The loophole is that regular people can become "accredited investors" by simply lying. In most cases no one actually checks the numbers they write down for assets and income. I am not recommending committing fraud here, but this is extremely common.
My sister is an emergency vet at a hospital like this. She’s on call, usually sleeping in one of their little sleeping rooms above the hospital floor. She makes a ridiculous amount of money doing random surgeries like pulling pine needles out of dogs stomachs at 3am because the owner didn’t realize the dog ate half the Christmas tree before going to bed.
I work for a PE-owned company in another industry. My wife is a veterinarian, and I wrote my thoughts on those who complain about veterinary costs in another comment. You can't possibly accurately estimate how much SAGE is pulling in at that location. Not even other vets can do this. There are too many variables.
As far as PE goes, thank fucking God PE is cleaning up my company and industry. This has been a good ol' boy network, full off incompetence, favoritism, and nepotism. PE are buying players and it's crashing down. Long time execs who haven't have an original thought in 20 years are being forced to retire. A female VP in my company left because a consultant called her "too emotional" recently, and the idiot CEO listened. He's close to getting canned, too. We're losing customers left and right because his old school, "feed 'em hookers and blow" playbook (dead serious) doesn't work any more.
Until a few months ago, I worked at a company that was uneventfully owned by various PE firms for the last fifteen years or so. I was shitcanned after the PE owners of my company got their arm twisted into selling my company to a strategic buyer that had previously bought another division of my company and then played dirty under my employer's name. When the buyer was served the inevitable lawsuit, they played even dirtier and effectively goaded the judge into hearing out the weak case made by my employer. After that development, the buyer just threw in a massive offer (likely 4-5x the realistic value, but I wasn't privy to any details), bought us, dropped the suit, terminated any employee that testified against them, terminated any employee that didn't keep the lights on, and have been leaving the business to languish while they sort out multiple other lawsuit-riddled acquisitions they've made in the last year. Whenever an employee of the buyer shows up to a facility that belongs to my previous company, they come with a bodyguard/security, if you need any hints regarding their moral character. Most players in the industry refuse to deal with that buyer, so they just attempt to deceive acquired customers when making an acquisition, and throw a bunch of money and crook lawyers at the (many) lawsuits that pop up.
This type of behavior is not strictly limited to private equity. The real issue is that people who pull stunts like the above will never get their teeth punched out for it, and they're a wolf in a henhouse when dealing with a legal system that's largely powerless to say "I know it when I see it". The punishment for being a piece of human dogshit in this manner is effectively nothing, and nearly infinitely less than the reward. I haven't thought of an answer that doesn't give discomforting power to those evaluating these cases, but as long as repeat offenders can paper over every bad-faith action by claiming they're following the letter of (some interpretation of) the law and never get punished for it, it will never stop.
> How can this phenomenon be reigned in and sorted in the medium to long-term?
This is a valid question, but one that has a historical and clear answer already: Guillotines. Pretending this behaviour is anything short of deserving of immediate execution is frankly doing yourself and everyone around you a huge disservice.
These are people that exploit others at scale. They know what they're doing isn't right and is extremely exploitative, but they'll keep doing it anyway because it lets them live like modern kings and queens. They're the worst of what humanity has to offer and they should summarily be fired into the sun.
Funnily enough, heavily regulated industries are where PE and large conglomerates shines because they can centralize dealing with all the regulations and paper work. No private vet or dentist is gonna have a legal or accounting department to deal with that, nor do they want to deal with it themselves. It’s easier to outsource that to the major conglomerate that’s handling that for everyone else in the state or country.
every contraction cycle the PE ghouls swoop in with a large war chest of money and buy up more homes/businesses/anything not tied down. it's a vicious cycle that eventually ends with them holding everything and everyone else is just sent out to pasture. no good way to fix it other than curbing the accumulation of wealth at the very top. it's unsustainable as a society imo.
The only 24/7 emergency vet in our area was owned by private equity, who closed it after a unionization vote. They then tried to enforce non-competes on staff to prevent a replacement. https://news.vin.com/default.aspx?pid=210&Id=11633319&f5=1
They don't have to be enforcable. Not many people have a spare $10-$20k in their savings account they are willing to spend on legal bills to get an unenforcable non-compete thrown out.
The hospital system near my hometown just announced they are filing for bankruptcy. The parent company that bought it, which itself is owned by private equity, extracted nearly a billion dollars in profit from hospitals before going bankrupt, according to local reporting. I don’t know what the solution is, but PE is a parasitic blight on society.
No, GP said that hospitals should not be run as a busniess. Non-profit status is just another way to structure a business and, in practice, those hospitals extract a similar amount of money from patients as similar for-profit hospitals.
My local 'non-profit' hospital is one of the most expensive in the state, and has a total monopoly over its area. It paid cash for a $140m new tower right as covid started, and complained loudly about losing $13m one year and having to lay off staff, and not having money to pay nurses more, while sitting on a $1B 'rainy day fund'.
Something similar is happening in the dental world in the US. Private equity companies are buying up individual practices, and with the sky-high loans required to go to dental school, it's becoming very difficult for new dentists to go into private practice. That means that when a dentist retires there's increasingly fewer individual dentists willing to buy the practice and they end up going to private equity. I truly believe this will result in poorer quality of care, and it's sad to see where we're headed, but I don't know if anything can be done.
Luxottica manufactures and wholesales 25% of all sunglasses and prescription frames in the world (Oakley, Ray Ban, Chanel, Coach, etc). They own the second largest vision insurance company. 20% of US and 10% of worldwide retail sales are in one of their 9,100 stores: LensCrafters, Pearle Vision, Target Optical, Sunglass Hut, Glasses.com, etc. If you decide to go to a local independent optometrist, they also own the two largest equipment manufactures.
> it's becoming very difficult for new dentists to go into private practice
I work with a lot of dentists and this is somewhat untrue. It’s challenging to open a practice and isn’t for everyone, but dentist offices rarely “fail” and a loan to open a dental office is up there with the easiest loans to get.
I do agree that over time dental groups (either owned by PE or dentists) will become more common.
I was thinking just last night that it feels as if we have easily eclipsed the grand rapacious greed that Wall Street made iconic of the 80's, and yet we're still accelerating in that direction, with very few signs of awareness of the situation from governments (as the only entity reasonably able to reign it in).
If members of governments are profiting, and therefore incredibly unlikely to propose anything resembling a brake, what hope is there beyond "Viva la ...", which is very much an "it'll get much worse before it gets better" kind of resolution.
Don't forget we are also cooking the planet and destroying biodiversity while we are at it. Greed is destroying many things we can never get back, it's made me not want to work for tech companies anymore as they are fairly emblematic of the problem
PE are basically black hat engineers that exploit unpatched vulnerabilities in our societal systems. You shouldn't be any up buy up all the competition in an area but nothing stops you. You shouldn't be able to buy a company, lever it, loot it, and leave it to die but again nothing stops you.
Even if legislation happens, which it won't, it's far too slow to stop them.
This is what happens when someone has total control over an organization, they use it for purely their own benefit. This is why I would prefer more diffuse power structures for organizations in general.
It’s not just vets it’s plumbing, hvac, medical practices. Small PE funds consolidate a few small ones then sell to a bigger PE fund which consolidates a bunch of those and so on
Yeah, it's wild. The guy who fixed my garage door recently told me he sold his small time, but well rated garage door repair company to a PE firm. They also bought all his rivals. I had gotten a few quotes and everyone wanted to do a full replacement for several thousand, insisting it was all junk. He fixed it in 20 minutes for $80 and was firm that everything was absolutely in great shape except for the small problem he fixed.
The back end of all these companies is the same, some call center/scheduler that manages everything very cheap. They run the purchased companies as fronts and jack the prices and push for big replacement/upgrades until reviews dip. Then they dissolve the company into a generic regional company and sell that to a national like servicepro.
Sure, but that's if it needs a replacement. OP didn't.
I had the same happen with a toilet; the float needed replacement, but the big plumbing firm claimed it'd be better to replace the whole toilet. Toilet was fine.
Hopefully this will change when most of this audience is older, but I recently started dealing with aging sick parents, and I've seen first hand what P.E. has done to skilled nursing facilities and convalescence homes. Because the same thing is happening as with vets.
It's abhorrent and there is no choice if you aren't rich. People on medicare get a whopping total of 100 days of nursing care (that's it!) and have to pick from an approved list, but after the 100 days are over they have to pay out of pocket. Once they spend all their assets (with a 5 year lookback in case you try to hide them), they qualify for title 19 and the government pays everything but your choices are even slimmer.
P.E. squeezes EVERY last dime for profit. Places that were nice 30 years ago when my grandparents were dying are now abysmal: dirty walls, broken beds, broken furniture, broken heaters & A/C, broken televisions, crazy roommates... it's heart-wrenching watching a sick parent try to buck up so you don't see how disappointed they are that they're basically stuck in a human kennel until they recover or die.
U.S. healthcare for the non-rich elderly is a nightmare.
Every aspect of elder care is a rigged game to separate people from their wealth before they die. Everything. Think long-term-care insurance will save you? Think again, it's a con too. They'll find a reason not to pay and they will drag their feet through the legal process if you try to sue them.
Another related issue with this has been the rise in the cost of getting a DVM and the associated debt load. The vets who would be at the point in their career where they’d be buying practices from their retiring DVM boss cannot afford to do so (based on anecdata from my brother who was trying to sell his practice last year but his cancer overtook him so he wasn’t able to complete a deal).
Just a spot check - but a DVM at the University of Florida (the first vet school that popped into my head) is $30k/year for tuition and books. At 4 years, that's a $120k degree - but from my understanding, starting a vet practice is over a $1MM, so it's safe to assume buying an existing vet practice is at least $1MM, and I don't think $120k in debt would be THE limiting factor for buying a $1MM+ practice. (and that's assuming a recent DVM vet buying the practice, not a 10+ year experienced vet that's probably already paid off their student loads)
It stands in stark contrast to dentistry. Two new grads I know (of middle class means) were able to get $3-5M loans with little to nothing down, and no other collateral, to acquire a practice and to start a practice.
I've heard a similar complaint from my dentist, who said practices are being sold to private equity instead of dentists coming out of school. My understanding is that her field, it's happening through Dental Support Organizations and Orthodontic Support Organizations.
There's really not an alternative to this problem. Private equity is gobbling up these practices because there is no one else who is going to take them over.
Owners are retiring at an astonishing rate. But young professionals don't have the money to buy up the practices, that is assuming any business acumen they might have had would not have been weeded out by schooling. And even if they did - there's no reason to buy an established practice off of a retiring owner when you can just grow your own (granted there is a buyer for you at the end of it).
There's also the tax aspect. Even if you wanted to gift your business to your family/employees, you would be immediately loading them with a massive tax burden for an asset they don't immediately get to benefit from. (Linus of LTT fame actually does a good job describing this problem: https://www.youtube.com/watch?v=Faa-b2uq0gA)
The same thing is happening everywhere - family medical, law firms, mechanics, and even farms.
Our local vet is now one of those, and it is a disaster. The vets they hire are bad both with the animals and the owners, service is sub standard and they jacked the price by over 50%, the rooms aren't cleaned properly and they try to push you to buy their pseudo "insurance" that would reduce the cost (and is in reality owned by the same company). My understanding is that the previous owner has been disallowed to open nearby when he sold.
Private equity is the equivalent of “pay day loans” for businesses. Instead of predatory or illegal rates, it’s a ticking time bomb in the form of increased sales pressure and profit driven culture.
Often times PE gets these companies to take out massive amounts of debt. In some of these cases the debt is owned by some subsidiary of the PE.
Why are you being downvoted? Firms regularly to saddle up the portco with debt and then completely gut and reorg the business and flip it up, that’s the model
Last fall I bought a bicycle from the Kona bicycle company. I found out a week ago that Kona hed been bought by private equity in 2022 at peak pandemic bike shortage and is now being sold off for parts. It seems everywhere I turn these days I encounter some other perfectly viable, useful business getting ruinated by private equity.
My late father (small animal vet) got approached by VCA and Banfield multiple times to sell out, but he was pretty sure he wouldn't make the same amount and he liked having his own full scope practice. He was the minority even then.
Is there a PE alternative for small business owners or sectors looking towards PE as the solution? How can doctors or vets or other similarly time bound practitioners gain access to businesses acumen for long term success?
They can take business, finance, and accounting courses at the local community college. But most young physicians and veterinarians no longer want to devote their entire lives to running a small business. The hassles of dealing with paperwork and regulatory compliance have gotten worse every year. Those professionals would rather gain some semblance of work/life balance by becoming employees instead of owners.
Doctors and vets who own their own practices have always been prime targets for scammers because they typically have both a lot of cash flow and a lack of financial sense. In many cases when they get cheated they're too ashamed to even report crimes to law enforcement. I am aware of several cases where trusted office employees were embezzling large sums and got away with it for years due to lack of basic accounting controls.
A large problem is that people are coming out with insurmountable debt burdens from professional school and are simply unable to balance that and the start up costs of a new practice.
Combine that with states having adopted certificate of need requirements since the late 1980s, it is literally illegal for some doctors to even try to open their own practice.
In my state, I legally cannot open a radiology imaging center without spending thousands of dollars on a petition to the department of community health begging “please approve my imaging center” which then is posted publicly on a tracker website where in-house counsel for every single health system / competitor can sue to block you from ever opening.
They can also sue to block you from upgrading your equipment when it’s long out of date.
It’s untenable. While I agree there are many problems with poor financial savvy amongst highly trained professionals, I also realize that the average debt burden is over 250k and practice start up costs are not getting cheaper.
A PET or MR or CT could easily cost 500k-1million alone, without including real estate costs, building/renovation costs, or bribes/legal fees battling for the right to open your doors.
True, but even in states with certificate-of-need laws those only apply to certain types of facilities. A new physician doesn't need a certificate to open a regular medical office.
For a pure cognitive specialty, sure. But watch out if they want to do any procedures outside of a hospital. The capital / regulatory heavy specialties are getting PE-roll-upped and that’s the same story as Veterinarians.
The new world is that we are becoming bound to hospitals / private equity in a way akin to sharecroppers on a plantation, mostly because of regulatory uncertainty which requires tremendous capital to overcome.
Some states are making it easier for surgeons to open surgicenters, but those are still very tightly regulated. Same with freestanding ERs, birthing centers, radiation therapy treatment centers, or freestanding imaging centers. Even if I wanted to raise the capital myself, the regulatory uncertainty makes the playing ground so unfair that it is functionally impossible without bringing in PE money to fund the legal fight for approval.
———
I trawled the approvals this year in my state.
Hospital joint venture with PE-backed imaging chain gets approval to open new freestanding imaging centers. They have the funds to fight back against the other systems’ legal challenges.
Radiologist owned 20 year old magnet who literally charges cash price of $499 (compared to above hospital planning to charge $1911 vs $6000 in hospital) was denied permission to upgrade to a newer magnet.
Physician practice request to buy a PETCT blocked by a competing hospital for 2 years of litigation, now referred to state Supreme Court…
——————-
It doesn’t make sense that I can open a medispa and offer laser dermabrasion and other cosmetic services easier than I can open an imaging center. My options are join a hospital or join PE (rad partners or USRS).
I don't think it's business acumen. The story I keep hearing from doctor's is, too expensive, too much debt.
Of the doctor's I know that own their own practice, they work much less than others (fewer/shorter days) but they spend muuuch more time with each patient. They spend time with you, not a rushed, inexperienced PA.
I don’t really think vets are fretting. It cannot cost that much to start a vet clinic, and if they’re such a great profit source that PE firms are snapping them up, surely some other banker of some sort would be happy to give loans to enterprising ones.
The real issue is lack of supply. Which is good for vets, so I’m sure they’re not fretting too much about that.
My brother was a veterinarian who bought an existing clinic in 2008. As I recall it was close to a million dollars before the cost of the building. There was another 2–300K in capital costs for modernizing the clinic.
So, yes, it can cost a lot to start a vet clinic.
Many younger vets will do housecall practices, which do have lower startup costs, but it’s necessary to have a good relationship with a practice with a hospital for any procedures which need to be done and, given that they’re nominally in competition with those practices, this may not be the easiest thing to do (before buying the hospital, my brother did housecall work, but mostly outside the service area of the hospital that he used for his procedures. He also was their on-call fill-in vet for when the in-practice vets were on vacation or out sick).
There was a kind of standard progression in veterinary careers where owning or being a partner in a practice with a hospital/clinic was the end stop of the career, but remember that a practice run by PE has different goals than a practice run by a vet. The vet-owner is looking to have junior vets who will one day buy them out and finance their retirement. Very different from a PE-owner looking to maximize cashflow and profitability with little concern about the vets working at the practice who are viewed as fungible widgets.
I do understand what you’re saying, I just think it’s a problem that’s at least self-limiting. A million dollars is not a lot to start a business of that scale. You can’t open a steakhouse in any mid-sized city for that much, and vet clinics actually make money. You don’t see PE firms buying up restaurants.
If PE firms are buying them the ROI is clearly very good. If vets are really fretting, I’m sure a bunch of highly educated, high salary people in a very lucrative field can drum up a million bucks.
c.f. the 2-5 "restaurant groups" in every midsized city with a portfolio of "concepts" who open up a new one just as the one from last year starts to get stale and lose momentum. The ones that always seem to have absolutely exorbitant interior design budgets. Where exactly do you think their funding is coming from?
I work in the food industry now. The answer believe it or not is usually private investors who really love food and think it would be really cool to own a restaurant. You can easily start a small restaurant with what is a small investment to a few wealthy people. 1 million or two just ain’t much these days.
That’s actually why it is an unprofitable business, the people who do it aren’t really doing it for money. Supply outstrips demand which pushes prices down.
Also, he bought an existing clinic which, if already successful, has business value. It generally costs more to buy a successful business than to start one, though that’s not an ironclad law.
" Roark holds investments in a number of large restaurant chains, including Arby’s, Auntie Anne’s, Buffalo Wild Wings, Carvel and Sonic, among others."
"Roark’s deal is one of the biggest acquisitions in fast food history, coming in just under Inspire Brands’ $11.3 billion purchase of Dunkin’ in October 2020. Roark owns Inspire, which also operates Subway rival Jimmy John’s."
> My brother was a veterinarian who bought an existing clinic in 2008. As I recall it was close to a million dollars before the cost of the building. There was another 2–300K in capital costs for modernizing the clinic.
While this may be true, if anyone is reading this and thinking "that sounds like so much", remember that it is very easy for vets to get very large loans that they can pay back over a long time. The actual amount of money that needs to come from the vet's own pocket could be close to $0.
This is true precisely because of the reasons PE firms want to buy them. They’re a relatively high ROI investment in a stable and fast growing market staffed largely by high paid, educated people.
If the PE firms buy up the practices and put all the vets in the area under a non-compete (not a hypothetical; see my other comments in this thread, it happened here in Rochester NY and is widespread practice), there aren't any vets to open a competitor.
Veterinarians are not a dime a dozen. You can't go to a boot camp and emerge in 6 months with a license to practice. They should all simply refuse to sign non-competes (not that they should be legal in the first place).
Personally I don't use "sweet" to refer to an opportunity to do something difficult that only partially remediates the problem, but okay.
> The wonderful thing about capitalism is that when profits get high, people start doing things that aren’t easy and they go down.
With big companies doing their best to set up barriers, things stay not-easy and prices don't go back down to where they used to be. That only prevents prices from getting infinitely high. Usually.
That I believe. They certainly won’t all do it, but it only takes one vet who is good at business and a few more who are good at animal care to make a great clinic.
The Google seems to put that at the high end estimate. A vet clinic is still, even so, orders of magnitude cheaper to start than a hospital, and veterinarians don’t make orders of magnitude less than doctors.
I expect that PE won’t be able to push it too far before vets just start their own practices much like doctors are doing.
Do you know what the phrase “order of magnitude” means? Half is not an order of magnitude so your math proves my statement correct. From wikipedia: “ Orders of magnitude are used to make approximate comparisons. If numbers differ by one order of magnitude, x is about ten times different in quantity than y. If values differ by two orders of magnitude, they differ by a factor of about 100.”
I will excuse you, despite your rudeness, but next time Google the phrase you don’t understand before accusing someone else of ignorance and then going on to show them they are correct and that you don't know what simple terms mean.
> if they’re such a great profit source that PE firms are snapping them up
This is where the Econ 101 naiveté of your comment goes completely off the rails. I am wondering if you are trolling.
- A vet certainly does not need to be a "great" profit source for PE. I genuinely can't believe you'd say that with a straight face. If it barely breaks even and the owners end up flipping the assets and real estate, that's a win.
- The obvious reason PE has stepped up their investments in pet care is that COVID led to a huge spike in US pet ownership. In about 5 years this spike in vet demand will fade. When that happens, these firms will wring their investments dry before moving on, leaving debt-saddled clinics behind. You can't just ignore the actual economic context because you found a fact-free explanation that high schoolers find convincing.
- in general it might be barely profitable to run a good vet clinic, but highly profitable to run a terrible clinic. I doubt emergency vet medicine is very profitable. You can't just assume PE runs the clinics the same as a vet-owned clinic. In fact the article makes it clear that this is not the case.
- There is just a total lack of humility from you: being smug and ignorant is a bad combination. Sure, the article is full of people complaining about specific PE-owned vets, and the comments on HN are full of people complaining about specific PE-owned vets.... but maybe if they understood the law of supply and demand, they wouldn't be so upset.
These are terrible arguments. PE firms aren’t running around flipping veterinarian firms for a couple hundred grand. They do that with fortune 500 companies for billions, not vet offices for tens of thousands. They’re buying them because they expect good ROI going forward.
They are not dumb, your argument about Covid has surely occurred to them and been rejected for reasons that seem pretty apparent. Who is being smug now? Assuming the PEs miss the most obvious idea? It’s a garbage one though and they know it, the spike wasn’t that big, demand had been growing much faster than supply for decades and will continue to, etc.
They’re buying because they can increase efficiency (I am sure by cutting patient care and other awful things at times but in some ways that are good too), because the industry will grow and consolidate, because demand will keep outstripping supply. They’re probably right. They usually are.
I don’t think humility has anything to do with finding a title of an article to be sensationalized clickbait.
I love it when you guys switch to personal insults because you don’t like a conflicting opinion, because you’re so bad at it. Another thing that used to happen on Reddit and not here, by the way.
The signal to noise ratio here is still high enough to hang around, but the group who come to discuss ideas shrinks a little every year, while the group who likes their propaganda with a side of rage grows.
> PE firms aren’t running around flipping veterinarian firms for a couple hundred grand. They do that with fortune 500 companies for billions, not vet offices for tens of thousands. They’re buying them because they expect good ROI going forward.
This is a dumb thing to say. My views are almost entirely informed by how PE operates in mental health, aka actual facts and not stupid mental models of actors optimizing utility functions. According to you, Blackstone apparently thought childhood autism services was a good ROI going forward, and having to sell off all the assets was just an unfortunate little boo-boo. Wouldn't want to hurt PE's feelings by suggesting they were only in it for short-term gain. https://bhbusiness.com/2022/11/11/large-autism-provider-card...
I don't think you are responding in good faith - it doesn't seem like you've read the article, you are just responding to the headline + your own fact-free misconceptions.
The article specifically says “A large number of these funds are seeing veterinary medicine as a good profit center” which is exactly what I said and fairly obvious. You can’t tell me the article is right one minute and wrong the next.
The article is very poorly written, it says they have spent billions on veterinary practices, dog food brands, and pet insurance companies. Two of these things are not like the others. You’d have to buy a whole lot of veterinary offices, like all of them, to get into the billions. It’s probably an insignificant sum relative to the others.
And all of it just shows they think the pet industry is going to continue to do well. If they’re trying to flip real estate, they are going about it in a really stupid way.
And you just proved my point was for the big chains rather than individual practices like what is happening in the veterinary industry.
Also the second link says they are buying up mental health because of anticipated continuing long term demand, which is exactly what I said PE is doing here. I like that you argue against yourself for me. You’re worried about if I’m arguing in bad faith, you’re just arguing badly.
Mine here in NH got sucked up into one about 2 years ago and I'm easily paying double now. It was 2200 bucks to get my dog's teeth cleaned last year, 3 months before she died. In the same vein we have stopped going to McDonalds for, the family is kind of reorienting itself around not being a dog family. We just cope and joke that we outlived peak times. We can still get sushi though. There's still a long way to fall.
Well, that gets at what’s happening here. Paying $1100 regularly, to the point that it’s subscribing to that recurring service or not owning a dog, is way too tempting. There is a new captive market of pet owners who, through breed selection, diet, and/or aesthetic priorities have a much costlier relationship with their vet. An industry that used to struggle to bring in pet owners outside of emergencies has a lot more to offer equity than a younger doctor could afford. Because those trends (capital and changing relationships with pets) are hot, a practice owner is not going to give someone time to earn their ownership of the practice.
My vet got bought by private equity and it's turned to absolute shit. Now they basically won't approve any outside prescriptions. Have to buy heart worm, tick pills, etc through them. They are around 2.5x the cost of online pet pharmacies like chewy and allivet. They say they approve all outside vendors, but always twist it into buying from them or setting up an appointment to verify a bunch of stuff to get the approval.
This is capitalism working as intended. It's no an aberration. It's not a few bad apples. This is quite literally what capitalism is: it's building an enclosure and then jacking up the price. It's rent-seeking. It's regulatory capture.
Private equity is infecting every aspect of your life and the tactics are the same:
1. Cut costs;
2. Jack up the prices;
3. Block competition by buying them up, legislation/regulation, etc; and
4. Loading the entity up with debt and cash out before it explodes.
No value is being created or added. It's pure wealth extraction. Some cases are essentially state violence (eg buying up mobile home parks). Others are just downright immoral, like exploiting the love people have for their pets here.
The only way a market can function is with a strong government because markets require regulation and courts to function. They require a stable financial system. None of this is possible without government. Sorry to all the anarcho-capitalists.
Also, I didn't say "free markets". I said "capitalism". It's interesting that so many use these terms interchangeable and they're not interchangeable. For the longest time I knew people didn't know what socialism is. Thing is, most people don't actually know what capitalism is either.
Markets aren't predicated on capitalism. Markets exist in every economic system and predate capitalism by thousands of years. Capitalism is merely who gets to extract the surplus value of labor. In feudalism it went to lords and kings. In capitalism, it goes to capital owners. They're otherwise functionally equivalent. We've simply replaced the divine right of kings to deifying the ultra-wealthy.
you think the free market EVER existed? oh you sweet summer child. it has been owned and run by the ultra wealthy since day one. there is no "fair" with the free market, because not everything is equal. education, defense, banking, healthcare are not meant to turn a profit, but here we are.
This isn't capitalism. It's corporatism. The only reason this works is because of unnecessary regulation and red tape created by governments that enables regulatory capture by well-funded operators. A true free market would see these sort of operators outcompeted in 5 minutes.
I thought Corporatism was the kind of socialised capitalism practiced in South Korea? In that mode large corporations act as the welfare state for employees while the corporation keeps redundancies to a minimum.
Private Equity is kinda the inverse of this where there is no paternalism at all from corporations.
My brother-in-law is a veterinarian who primarily practices in Virginia but is licensed to practice in Colorado, Wyoming and California, too. He spent the first 10 years or so of his career as an emergency vet, first with full-time employment at a clinic and then increasingly picking up relief shifts at a set of clinics around the region (and occasionally even out of state).
Here are a few facts:
* Relief vets can charge $250-325/hr for a 12hr shift, plus a percentage of their production (= revenue share), often 20-25%. This means a single relief shift can net an experienced vet upwards of $3000.
* Frequently, clinics will pay travel expenses for relief vets if they can't find any local.
* Just like the AMA, the VMA restricts the number of new vets in the pipeline, so there's a scarcity of skilled labor.
* It used to be that vets got paid about the same as independent family practitioners -- in the $150-200k/yr range
* The rise of veterinary insurance is what is primarily responsible for the dramatically increased charge rates in veterinary medicine. Since an insurer will pay, vets can charge. This has had the effect of turning what was a $2000 surgery into a $8000 surgery, or a $75 vaccination into a $250 vaccination.
* Private Equity and corporatization (e.g. Banfield, Petco) have been ruining things for independent vets and also pet owners. Yes, you sometimes get the convenience efficiencies of a corporate service with plug & play employees, but everything else goes downhill. The effects mirror what the human healthcare industry has been experiencing.
* Startup costs for a new clinic can be as low as about $400k once you have the office lease. Lots of the equipment is leased to clinics so the capital expense to get running is pretty low and the costs are easy to amortize over time through operational cashflow.
* Lots of vets -- my brother-in-law included -- have said "to hell with this" and started concierge services. It's pretty easy to make a good living with VERY low stress if you only have 40-50 subscribing clients, and the hassle and headache is lightyears lower than working for a clinic (especially a corporate clinic).
* Board certified vets get paid the same as people doctors, especially in specialities (ophthalmology, dermatology, neurology, etc). $300-600k/yr depending on region, and that's just the base salary.
* A well-run veterinary clinic in a mid-sized city that has 2-3 vets on duty at any given time can easily gross >$100k in a weekend. It's not unusual for my bro-in-law to drive $25k production during a single relief shift, and that's completely above board, high quality medical work using established price lists -- not any kind of gouging. The ones making bank are the clinic owners, and until very recently (convenient carve out to appease private equity -- boo!) there was a requirement (just like dental offices) that clinic had to be owned by DVMs. Now that this isn't true, you've seen massive buyouts and franchise growth driven by both corporate interests and PE. We as consumers are suffering for it.
Disclaimer: My partner works as a small animal surgeon, and I'm honestly appalled by seeing some of the comments asking for more government intervention in here.
Private equity scooping up veterinary practices makes sense - it's a good investment. It's the same way PE firms will pool together a bunch of discrete dentist offices. I see many posters in here talking about how it's "rent-seeking" behavior, but frankly, these services are in demand and consolidating them is an increase in market efficiency. It's still good business to open up new clinics, even if the end goal is getting bought out (the standard practice for 95%+ of companies for which everyone here works for or is the beneficiary of).
If people are willing to spend more, then nothing really changed. If anything, goods and services were mispriced beforehand. If they raise the prices too high, nobody can afford the vet services and they will go out of business. If they make prices too low, we end up in a UK-style NHS situation where your dog's cancer is in line to get treated 8 months after they die, and they go out of business. Prices going up is natural for a restricted supply of extremely skilled labor (yes, you still need surgeons, anesthesiologists, nurses, drugs, human-tier equipment) and growing demand for the services (people having more pets in lieu of children in western countries). People were getting "better deals" before and are now being priced appropriately.
A big trend here is the increase in desire to spend on pets, particularly in the US, the richest country in the world. Yes, consolidation is one part of it, but we have to look at demographic trends as well. More and more people are spending more and more money on pets (in lieu of children). And yet, the increase in supply of skilled veterinarians has not increased nearly as much. Obviously, investment firms need their cut, but prices go up while owned by an investment firm does not make it evil, nor does it not make sense or outrageous. What might actually be considered outrageous around here is spending $20k on surgery for a domestic pet (common occurence as far as I can tell in a metropolitan area).
Lastly - there's actually a competitive healthcare market here! I have enjoyed being able to peek behind the curtain and look at what procedures of this scale should really cost, e.g. we still need the same training, people, equipment, and time relative to human medicine (arguably with a much lower tolerance of risk), but the prices are...... reasonable. $10-20k for a crazy surgery would be highly affordable for a human, and these PE firms are actually competing with each other for clients for these expensive procedures. It makes me wish for a similar competitive pricing landscape for humans - even if they are PE owned.
The last thing anyone needs when caring for their pet is a government bureaucrat handing out human-medicine style hospital monopolies to a "partnered provider" knighted by the government which will force a 100x billing charge to bill the govt and make it illegal to not have pet insurance while driving your premiums up 100x over the next 30 years.
> The last thing anyone needs when caring for their pet is a government bureaucrat handing out human-medicine style hospital monopolies to a "partnered provider" knighted by the government which will force a 100x billing charge to bill the govt and make it illegal to not have pet insurance while driving your premiums up 100x over the next 30 years.
Do you really think this is what people want when they call for increased government regulation?
Please respond to the strongest plausible interpretation of what someone says, not a weaker one that's easier to criticize. Assume good faith.
Government regulation can take many forms, not all of them dystopian, and many of them leading to better outcomes. Sadly there are a lot of people, even here in the comment section, for whom, when you say "government regulation," their imagination jumps to the worst possible form of government regulation they can think of, and they project that imagined scenario on the person who said it. There are no doubt many ways the government can rein in the excesses and abuses of private equity without leading to hospital monopolies and forced purchases of pet insurance.
Unfortunately, I think I'm in that boat. Truly, I appreciate the discourse.
However, whether or not that's what people want, that's the reality. Next time you get a medical charge, even with insurance, ask for an itemized bill. Compare the bill you receive to the one you receive when you tell them "I'm paying with cash". When I pay cash with a third party provider, they "magically" reduce the amount I owe by orders of magnitude, even for simple bloodwork (United States, major metropolitan area).
Again, in good faith, what am I supposed to expect when I hear regulation in animal medicine? People like my partner are studying and training for years to do this work. People are leasing or buying real estate for these facilities.
They are buying equipment, they are hiring trained surgeons, nurses, and practitioners who have been committing at minimum a decade of their life for this - what am I supposed to expect with "calls for regulation" a la human medicine style (the only comparison we have), especially when prices are ACTUALLY competitive, as I believe the human medicine market should be?
I can be convinced of any position, but it has to make sense. What prices or charges, even with private equity-funded veterinary firms, do you consider egregious and need a non-opt-outable mandatory third party oversight for? Has there been a good or a service you feel was only available at a specific provider that they gouged you on? Again, not being aggressive, just genuinely curious.
For the record, I am more in favor of the government regulating Private Equity (in particular, the use of leveraged buyouts, LBOs): 1. more scrutiny of their own business practices, and 2. limitations on their ability to buy up companies from a community, plunder them, and then leave the community strip mined. I really don't think regulating the operations of veterinary hospitals is going to solve the problems brought up in this comment section.
This is the weird thing to me. When I was a kid, a pet was more or less a thing. You took care of it, but if it got really sick or badly injured you put it down and maybe got another one.
The idea of people spending 5 or 6 figures on pet health care is rather mind-boggling.
In total, for a 15-year old cat, I have spent $8,000+ USD. He plays a large emotional part in my life and I don't think I would spare any expenses given the opportunity. It is worth it.
> If people are willing to spend more, then nothing really changed. If anything, goods and services were mispriced beforehand. If they raise the prices too high, nobody can afford the vet services and they will go out of business.
I don't agree with this theory or pricing when the purchase decisions are often made under duress, and the market is opaque. The last time I called around for quotes for getting my cat's teeth cleaned, nobody would give numbers over the phone, they all wanted me to come in for an exam first, and the next exam opening wasn't that week, it was in like 2 or 3 weeks. If a person is at the vet for something relatively urgent, they don't have much of a choice.
Married to a boarded vet of over 20 years. She's been through the era of working for privately owned clinics and now the PE-dominated landscape. 100% agree with you. The comments here range from short-sighted to plain-old stupid, especially those complaining about costs.
What many fail to realize is that vet care went through a professionalization in the 80's and 90's. Boards and specializations that humans had like dermatology and cardiology cropped up and really exploded in the past 20 years or so. Along with that was quality of care, and along with that, cost.
What frequently happens is this: If you go to a clinic with an old-school vet, he'll charge $300 for a dog spay. Down the road with the younger vet, she'll charge $600, but that's because she's running a wider blood panel with a course of anti-biotics. She won't do the surgery without it because research shows that course improves survivability by 50%.
Which are you going to choose? Don't kid yourself in thinking the quality of care is the same. Business and veterinary schools have researched this to death. You can't cheap out and get the same care.
Maybe you'll find a young vet that's willing to skip the extras, but many won't. The worst thing to happen to vet care is Yelp and Dr. Google who emboldens self-righteous hacks to complain to state boards at every little thing they think the vet did wrong.
Finally tons of people flat out belittle the cost of labor. Vets go to school a minimum of 4 years post college. They can practice right out of vet school, but many go through an internship these days. If you go to a specialist, that's an extra 1-2 years of internships and another 2-3 years of a residency and a board exam, too. On top of that, many states require veterinary assistants to be licensed, which is equivalent to an AA. In practice, most have bachelor's these days and we've known a few with master's degrees.
Meanwhile, people bitch and moan here for $500 a night of emergency care, ignoring the fact you're hiring a team of highly trained and educated people to take care of your precious Fluffy.
50% survivability increase, but is that going from 2/10000 to 1/10000 deaths? My impression is that spaying is relatively safe, so how much are we willing to spend to get more 9's?
Edit: deleted distracting details that the comment below rightfully calls out.
My fault, I shouldn't have mentioned that because it's not my key point. Given animals that come in to be spayed, say in a large US city, how risky is spaying? Is it worth everyone paying $300 more to reduce it by a very small absolute percentage? Should vets actually be more up front about this than the ones I'm familiar with are?
I get you're saying it's not the key point, but in practice, it really should be.
The spay and cost numbers were just examples. In general, yes, spays are safe, but it is anesthesia. There's a risk of death and it gets much more complicated with a huge variety of factors - age of the animal, species, whether she is in heat, and of course like we mentioned - pre-existing conditions that do not obviously present itself without a clinical workup. The last one is huge. There are plenty of values that are indicative of organ failure that would not be obvious to an owner. A dog can't tell you it's been having a nagging pain on its side for the past week.
Thanks! Glad to see someone else with similar experiences. The other issue I think people are overlooking is... 20 years ago you would present to your local, low-cost veterinarian, and they wouldn't know what the issue was (or they knew and couldnt treat it), and your animal would just die.
Now we have a ton more information, a ton more training, and an issue now that would be game-ending prior is now treatable, but it comes at a cost. We see the same patterns in human medicine too. A lot of it has to do with demographics and cultural shifts in my opinion, as well as the supply/demand factor of trained practitioners.
I bet the reason is that it's hard to become a vet and labor mobility is limited. We need to make it impossible for the government to regulate many things (not "remove regulation", but make it physically impossible in the future even if they wanted to). Maybe airlines need to step in to facilitate travel from many places to intentionally created hubs for certain kinds of cervices and Canada and Mexico: if someone can take a $400 ticket to a "city of dentists" or "city of vets" offshore where there are thousands of practices and fix their teeth for 5% of US price, there won't be a market for this kind of price gouging.
Or in fact, make it actual offshore. On converted container ships outside the territorial waters. Where regulation just does not apply.
Private equity isn't a problem, regulations that enable it are. As long as there is a potential to reintroduce it, they will be empowered because no one will build a business that can become illegal or unprofitable by decree - no one except someone with the most money because these will figure the way out at best (because people still need vets let's say), or because they will drive regulation, at worst.
Only something that clearly puts the service provision outside of government's reach, will fix it.
How can this phenomenon be reigned in and sorted in the medium to long-term?
It's a loss for everyone (99.9999%) except the miniscule quantity of winners (0.0001%, yes, that's 1 in 1,000,000 - there aren't that many large-scale P/E firms). Housing owned by P/E couldn't be more soul sucking. Scratch that, this applies to every case I'm aware of where P/E firms own a thing.
Anecdote: Last month my dear old dog was suddenly very ill and I spent $12k on emergency surgery to save his sweet life. No regrets, I'm grateful he was fixable. But in the waiting room I did the conservative math for what the SAGE Emergency Veterinary Hospital in Redwood City, CA makes in a year (before the comparatively small overhead, tax-deductible expenses) and they are pulling in at least $30 million in this single location. That's.. a lot, for many 20 total staff. Also they charged me $500 for each follow-up visit, which is way more than my real life surgeon charged me earlier this year! (Even including insurance, he didn't charge much for the follow-ups to make sure I survived.) Damn.
For the dog lovers out there: Doggo is alive and well, can maybe last another year or two we hope.
Btw, who owns SAGE? NVA, a P/E firm.
https://todaysveterinarybusiness.com/sage-veterinary-centers...
https://www.crunchbase.com/organization/national-veterinary-...