Private equity firms are those wonderful people who like to load up private firms with debt so that they can make a big cash payment to the owners. This debt of course hobbles the business and has sent more than a few of them into bankruptcy when times got tough. If you wonder why a bank would lend out this money, remember that the wall street bank’s people got paid on up front bonuses, and often would make additional bonuses on emergency loans in bankruptcy, and most of the money being lent was other peoples’ money in any case.
Well the private equity people have found a new business to be involved in: dentistry. With changes in the way that doctors are reimbursed by HMOs and the Government, and much Dental work being elective (out of pocket), dentists have actually been making more money than doctors. Of course, just like many students today, dental students come out of school owing a lot of money. It may not be quite as bad as how much the new doctors owe, but it can easily get into six-digit numbers. And recall, these are the loans that never go away – even to the extent of garnishing the debtors social security ~50 years later when they retire.
Traditionally owned by the dentist, or small group of dentists, they have worked around state laws to set up management companies that run and operate dental offices. Many of these offices do work for the government.
I wonder how that is working?
Sydney P. Freeberg, Bloomberg, 17 May 2012 (hat tip: NC)
Isaac Gagnon stepped off the school bus sobbing last October and opened his mouth to show his mother where it hurt.
She saw steel crowns on two of the 4-year-old’s back teeth. A dentist’s statement in his backpack showed he had received pulpotomies, or baby root canals, along with the crowns and 10 X-rays -- all while he was at school. Isaac, who suffers from seizures from a brain injury in infancy, didn’t need the work, according to his mother, Stacey Gagnon.“I was absolutely horrified,” said Gagnon, of Camp Verde, Arizona. “I never gave them permission to drill into my son’s mouth. They did it for profit.”
Isaac’s case and others like it are under scrutiny by federal lawmakers and state regulators trying to determine whether a popular business model fueled by Wall Street money is soaking taxpayers and having a malign influence on dentistry.
The article continues on with a whole variety of abuses that make your teeth tingle in anticipatory pain.
This is of course another example of our finance’s “value added” to our current business model. That tax payer money is being used here, is not a big surprise. When private equity uses their usual strategy to strip a company of its value through debt, they are not the ones paying for the social services, food stamps, etcetera, that the formerly gainfully employed workers will receive when they are out of work. In this case the payments are just a little more direct.Footnote: I realize that private security firms are not "Wall Street" but they are pretty much of the same crowd, and mindset.