Politics. Sometime in the last several weeks, former Pennsylvania Senator, Pat Toomey joined the board of Apollo Management, the private equity behemoth. Former Rep. Barney Frank has been on the Signature Bank board for a number of years, but people just came to realize it in the wake of the bank’s financial problems.
The anti-PE crowd that finds most of its fellow travelers in health care, was apoplectic over Toomey’s new gig. A moment of self-reflection wherein the question is asked, “why does Apollo find Pat Toomey valuable enough to sit on its board?” would be in order.
Mr. Toomey went to Harvard and worked at Chemical Bank but people like that are a dime a dozen around Apollo, one would think.
No, Mr. Toomey is likely valuable to Apollo’s board because he was a U.S. Sen..
The next and most difficult question, is why are United States Senators so valuable to PE firms? No one in the health policy universe wants to answer that question because it leads inextricably to the conclusion that politics is so far up the rump of health care and nearly every other American industry that it can inspect their molars.
Painfully, a lot of American industries are just fine with all that. Regulation has become a feature not a bug.
Policy. The Private Equity Stakeholder Project released a report last week arguing for greater Federal Trade Commission and DOJ oversight of PE health care provider acquisitions. The argument is that PE acquisitions are small enough to fly under the regulatory radar. Aggregated under common control, the PESP asserts, requires more oversight.
The PESP’s efforts to create more transparency of ownership interests have been successful at CMS which has been focusing attention on nursing homes. The workforce at nursing homes tends to be organized which suits PESP’s union tilt.
There have been a few studies that suggest lower quality standards at PE-owned facilities which would not be altogether surprising given PE’s ownership model that aims for cost controls.
Other than transparency, PESP has argued for post-sale conditions like limits on debt/equity ratio, quality standards imposed by state regulators and prohibitions REIT spinouts.
There is no clear path for CMS to impose similar conditions but that doesn’t mean they cannot try.
Power. For the foreseeable future, in a battle between Private Equity and the health policy bureaucracy, PE will almost certainly lose. No U.S. Senator is going to change that.
What follows could be exactly what the policy machinery hopes to avoid a power struggle between labor and capital.
The health care workforce has been so cheaply purchased these last couple of decades, know what optimal staffing is has become a battleground of sorts. Some worker groups insist on set ratios while industry leaders argue that they are not necessary.
Objectively, it is hard to know but if CMS’ requirements are too onerous, access amy become an issue.
Have a great rest of your weekend.
Emily Evans
Managing Director – Health Policy
Twitter
LinkedIn
