American healthcare — and Bain Capital
Are people still saying that American healthcare is the best in the world? I doubt it. Here’s a familiar story that’s interesting because of the Bain Capital ownership. The report by Art Levine in Salon on residential drug and teen treatment facilities run by CRC Health Group, owned by Bain Capital, is lengthy and worth reading—especially since at some point you may well be in a privately-owned hospital that’s organized and operated along the lines described in the article—namely, cutting costs ruthlessly to maximize profits. Forewarned is forearmed.
Here are just a few paragraphs from the early part of the article:
. . . Court documents and ex-staffers also allege that such incidents reflect, in part, a broader corporate culture at Aspen’s owner, CRC Health Group, a leading national chain of treatment centers. Lawsuits and critics have claimed that CRC prizes profits, and the avoidance of outside scrutiny, over the health and safety of its clients. (We sent specific questions on these basic allegations to CRC and owner Bain Capital. CRC would answer only general questions; Bain did not reply.)
And CRC’s corporate culture, in turn, reflects the attitudes and financial imperatives of Bain Capital, the private equity firm founded by Mitt Romney. (The Romney campaign also did not reply to written questions.) Bain is known for its relentless obsession with maximizing shareholder value and revenues. Indeed, this has become a talking point of late on the Romney campaign trail; he bragged to Fox in late May that “80 percent of them [Bain investments] grew their revenues.” CRC, a fast-growing company then in the lucrative field of drug treatment, was perhaps a natural fit when Bain acquired it for $720 million in 2006. In conversations with staff and patients who spent time at CRC facilities since the takeover, there are suggestions that the Bain approach has had its effects. “If you look at their daily profit numbers compared to what they charge,” Dana Blum said of CRC’s Aspen division in 2009, “it’s obscene.” That point, ironically enough, was underscored by the glowing reports in the trade press about its profitability.
The purchase of CRC came seven years after Romney publicly announced his retirement as CEO of Bain Capital, where he had been in charge since its founding in 1984. But at the time of his departure, Romney worked out an arrangement to continue to share in Bain’s profits as a limited partner in the firm. Today, he is still an investor in 48 Bain accounts. Though he has refused to disclose their underlying assets, some information about them can be gleaned. For example, he has reported at least $300,000 to $1.2 million, if not more, in fluctuating annual earnings from Bain Capital VIII, the convoluted $3.5 billion array of related funds that owns both name-brand companies such as Dunkin’ Donuts and the lesser-known CRC Health Group. Most of these funds were made more attractive to privileged investors by being registered in the Cayman Islands tax haven. And Romney’s connections to CRC run even deeper: Of the three Bain managing partners who sit on CRC’s board, two, John Connaughton and Steven Barnes (with his wife), gave a total of half a million dollars to Restore Our Future, the super PAC supporting Romney. They also each donated the $2,500 maximum directly to his campaign. . .
Read the entire article, and note that the only metric that matters to the hospital owners and operators is profitability (and the bigger the better): everything else is secondary. The effects of this approach are described in the article.
Perhaps “Bain Capital” is a play on “Bane Capital”? It certainly seems to be the bane of good care.