There Is Nothing That the Finance Industry Cannot Ruin

Case in point, the Private Equity (PE) takeover of most air ambulance services in the United States:

1. Buy up most of the air ambulance services in the country.
2. Leave most insurance networks.
3. Raise rates through the roof.
4. Balance the poor schmucks who have to be airlifted to an ER.
5. Profit! 

 They have done this with emergency room practices as well.

This is not productive, and it has no prospect of being productive.  It's just looting, and it is evil.

Come to think of it, "It's just looting, and it is evil," is a pretty good summary of what PE does everywhere:

Kathleen Hoechlin was in the intensive-care unit, wondering if she would ever walk again, when she and her husband, Matt, started receiving the phone calls. It was January 2018, and the couple had just gone skiing in Mammoth Lakes, California. On the last run of the day, Kathleen skied over a small jump and landed on her back, shattering the L1 vertebra in her lower spine. With the nearest hospital ill equipped to handle the required surgery, she was loaded onto a small plane and flown 300 miles south over the Sierra Nevada mountain range to Loma Linda, where she underwent 12 hours of surgery to replace the vertebra with a metal implant. The phone call, which the Hoechlins received less than a day after the surgery, was from the air-ambulance provider, Guardian Flight, informing them that the plane ride had cost $97,269.

………

From then on, Matt dealt with the incessant phone calls himself and managed to negotiate the remaining balance down to $20,000 after telling Guardian Flight that he and Kathleen would have to file for bankruptcy if it were any higher. Between their savings, gifts from family members, and a GoFundMe campaign, the Hoechlins managed to pay off the remainder. “It left me with a lot of trauma and a lot of ‘aha’ moments,” Kathleen says. “Why is this happening, and why should patients have to go through this?”

………

At the start of the aughts, private-equity firms conducted about $5 billion worth of deals in the U.S. health-care sector each year. By 2019, that figure had jumped to an estimated $120 billion, a result of deep-pocketed firms looking to park their money in a sector perceived as recessionproof (people get sick even when the economy is bad) and ripe for consolidation. When major private-equity firms started buying up air-ambulance companies, it set off a flurry of acquisitions. In 2010, Bain Capital bought Air Medical Group Holdings for $1 billion, only to sell it five years later for double that amount to KKR, which, in turn, merged the company with yet another air-ambulance provider, American Medical Response, under the name Global Medical Response. (Tracking this shell game can be dizzying. In the three years between Hoechlin’s air-ambulance flight and mine, Guardian Flight merged with REACH Air Medical Services; both are owned by Global Medical Response.) In 2017, American Securities drastically accelerated private equity’s takeover of the air-ambulance industry with its $2.5 billion purchase of Air Methods, the largest domestic provider of air ambulances. (In 2016, during its final year as a publicly traded company, Air Methods posted a $97.9 million profit on $1.17 billion in revenue, and the year before had paid its CEO $2.5 million in direct compensation, including stock options.) That purchase established the industry’s current landscape, in which two private-equity firms, American Securities and KKR, control almost two-thirds of the national market for air ambulances, according to Medicare data.

As private equity tightened its stranglehold on the industry, it jacked up the already-high prices. Between 2008 and 2017, the median price charged by providers for helicopter air ambulances nearly tripled, jumping from $12,500 to $35,900 per flight, according to a study by the Health Care Cost Institute. As the Hoechlins and I experienced, air-ambulance providers are often out of network with private insurance companies. That’s not by accident: Private-equity-backed and publicly traded air-ambulance providers in particular tend to remain out of network to charge higher rates than what may be allowed under an in-network contract. Since patients don’t decide when or where they have a medical emergency that requires them to be airlifted to a hospital, they don’t have a choice in which air-ambulance provider they use. As a result, competition in the marketplace does little to keep prices down — the higher providers set the price, the more they may be able to get paid. When insurers deem the cost too high, they pass the enormous remaining balance on to the patient, a practice known as “balance billing.” Among privately insured patients, an estimated two in five air-ambulance flights result in a potential balance bill. About half the time, though, the insurance companies simply pay up, according to Loren Adler, associate director of the USC-Brookings Schaeffer Initiative for Health Policy. Private equity “saw an opportunity to say, ‘Look, the existing companies aren’t leaning into the surprise-billing threat enough from a moneymaking perspective,’” says Adler, who co-authored a white paper last year about private equity’s impact on the air-ambulance industry. “If you really lean on that a lot, sometimes you can fight with the patient to get paid. But I think a bigger part of the money thing is often you can cajole the employer to pay because they don’t want their employee getting stuck with an $80,000 bill.”

As private equity tightened its stranglehold on the industry, it jacked up the already-high prices. Between 2008 and 2017, the median price charged by providers for helicopter air ambulances nearly tripled, jumping from $12,500 to $35,900 per flight, according to a study by the Health Care Cost Institute. As the Hoechlins and I experienced, air-ambulance providers are often out of network with private insurance companies. That’s not by accident: Private-equity-backed and publicly traded air-ambulance providers in particular tend to remain out of network to charge higher rates than what may be allowed under an in-network contract. Since patients don’t decide when or where they have a medical emergency that requires them to be airlifted to a hospital, they don’t have a choice in which air-ambulance provider they use. As a result, competition in the marketplace does little to keep prices down — the higher providers set the price, the more they may be able to get paid. When insurers deem the cost too high, they pass the enormous remaining balance on to the patient, a practice known as “balance billing.” Among privately insured patients, an estimated two in five air-ambulance flights result in a potential balance bill. About half the time, though, the insurance companies simply pay up, according to Loren Adler, associate director of the USC-Brookings Schaeffer Initiative for Health Policy. Private equity “saw an opportunity to say, ‘Look, the existing companies aren’t leaning into the surprise-billing threat enough from a moneymaking perspective,’” says Adler, who co-authored a white paper last year about private equity’s impact on the air-ambulance industry. “If you really lean on that a lot, sometimes you can fight with the patient to get paid. But I think a bigger part of the money thing is often you can cajole the employer to pay because they don’t want their employee getting stuck with an $80,000 bill.”

Private-equity firms have applied their balance-billing approach to other corners of the health-care sector they have encroached upon, including emergency-physician staffing, anesthesia, and ground ambulances — all services for which patients don’t typically choose their providers. In 2017, Blackstone Group acquired the physician-staffing company TeamHealth for $6.1 billion, only to be one-upped a year later by KKR’s $9.9 billion purchase of another physician-staffing company, Envision Healthcare. In the time since, both companies have faced scrutiny for their aggressive billing practices, with TeamHealth sending thousands of surprise bills to patients in 2017 and even going so far as to sue low-income patients over unpaid medical debts. (The company now insists it has a “long-standing policy” against balance billing and ceased its practice of suing patients after a ProPublica investigation called attention to it in 2019.)

………

It may seem as if the battle to protect patients from shocking bills is over, but air-ambulance companies and other health-care providers aren’t giving up. A number of provider groups have sued the federal government, including the American Hospital Association, the American Medical Association, and the Association of Air Medical Services. While the lawsuits vary slightly, they all take issue with the arbitration process established under the No Surprises Act, arguing that it will result in insufficient payments to providers. (Research by USC’s Adler, by contrast, suggests that the only facilities that will suffer losses under the law “are those who were benefiting financially from surprise billing.”) 

The issue is not just that PE is toxic and non-productive with regard to air ambulances, or with regard to emergency services, or with regard to public health in general.  The issue is that PE is toxic, non-productive and corrupt wherever it goes.

I have never seen a single case where their machinations have delivered a positive outcome that would not have been better had they not been involved.

They are the financial equivalent of a Super Fund site, and they should be tightly regulated, and they should be held accountable, largely through changes to the bankruptcy code, for the damage that they do.

Also, as I have said way too frequently lately, their executives should be frog marched out of their offices in handcuffs.