
Some private equity firms are furious over a paper in a dermatology journal - ItsMe000001
https://www.nytimes.com/2018/10/26/health/private-equity-dermatology.html
======
aaavl2821
This isn't discussed much, but the healthcare provider industry has
traditionally been a major sector of interest for private equity. Hospital
companies like HCA, dental clinics, ambulatory surgery centers, etc.

Healthcare providers are attractive to private equity 1) because of stable,
non-cyclical cash flow, 2) benefits to scale (ie better negotiating leverage
with payers), 3) ability to easily increase revenue at small clinics by
"optimizing" billing (ie use more lucrative codes for the same procedure) and
practice management (optimizing procedure mix and scheduling) and 4)
regulatory protection -- local monopolies enjoy durable economic advantages
and often are politically entrenched as healthcare providers are major
employers

These factors aren't limited to private equity backed healthcare, though. Even
non-profits take advantage of these things (sutter health in the bay area is
an example). If you're looking for why US healthcare is so expensive, this
isn't a bad place to start

~~~
duxup
There was an NPR (I think it was NPR) story about how medical helicopter rides
have skyrocketed in cost.

The issue was a lot of private equity folks realized that you could just get
in the market and if you didn't get enough rides... you just cranked up the
price and went after individuals who where hardly in a position to shop around
when they needed the ride.

Now there is an excess of medical helicopters, solution? Crank up the price...

~~~
LaundroMat
In ancient Rome, Crassus owned the fire department. When there was a home on
fire, Crassus would negotiate the price for extinguishing the fire with the
owners or tenants.

Plus ça change...

~~~
thaumasiotes
I mean, this is close to being right, but it's wrong in every one of the
details.

Crassus didn't own the fire department. Crassus owned a bunch of slaves who he
had trained to put out fires.

Crassus didn't charge for extinguishing fires. If your house was on fire,
Crassus took his team and negotiated _to buy your house_. If you sold it to
him, he'd put out the fire. There was no flow of money from you to Crassus
under any circumstances. (But he could get a low price, because the value of
your house was constantly dropping while it burned.)

In imperial times, private firefighting groups were illegal since they were
viewed as a potential source of rebellion. (Using your own slaves to put out
fires on your own property was of course fully legal.) It's in my mind that
Crassus benefited from similar laws, but he was active during the Republic.
Maybe someone else knows more about the precise timings.

~~~
ErikVandeWater
> Crassus didn't own the fire department. Crassus owned a bunch of slaves who
> he had trained to put out fires.

That sounds like he literally owned the fire department? It was just made up
of slaves.

Otherwise I really found what you said very interesting!

~~~
thaumasiotes
A fire department is a service that will put out fires for the public.

Crassus only put out fires on his own property. Rome didn't have a fire
department. Firefighting was expected to occur on a volunteer, as-needed
basis.

------
djsumdog
People often wonder what the point of tenure is. Well this is it. Those
authors need to not back down, and call attention to this. If they're tenured
researchers or professors, they should be able to make publications like this
without fear or retaliation from the school or industry.

~~~
distant_hat
All tenure does is largely protect you from getting fired. They can still do a
fair amount of damage though you still have employment. Lab space can be
reduced, it can get harder to get approvals for research, decreased funding
etc.

~~~
afarrell
"At the University of Florida, our professors do fearless research" \-- title
to a piece by the UoF PR department, milking an easy win for all it's worth.

~~~
tinus_hn
You can’t eat PR.

~~~
simongr3dal
You can't eat dermatology products either.

I don't think it is reasonable to require research conclusions to be censored
or changed just because big money is involved.

Why don't the opposition fund some independent research or independent
replication study if they believe so strongly that this research needs to be
shown incorrect.

------
ohazi
Can someone link to the paper? The best thing we can do to combat this sort of
thuggery is to shine light on it and try to go full-on Streisand effect.

Edit - here it is:

[https://www.docdroid.net/fhDjc7P/konda-article-pe-
copy.pdf](https://www.docdroid.net/fhDjc7P/konda-article-pe-copy.pdf)

------
lordnacho
It sounds to me that what is being monetized is the authority of doctors.
There's a lot of medical conditions where you rely on the doctor to tell you
what to do. After all, you don't have a degree in that.

Now I can buy a clinic and pressure all the doctors through an incentive
scheme that they are not used to, and get them all to nudge the borderline
cases into must-act cases. And chances are each individual case is somewhat
defensible, and the doctor is still an authority. It's perfect, the doctors
are not even going to admit their bias. But as a whole, a lot of people will
be on treatments that they wouldn't have been on.

~~~
killjoywashere
Are socialized medicine systems less evil?

~~~
stirlo
Who do you expect to sell more? A salesperson on commission or a salesperson
on salary?

~~~
justtopost
A salaried person still has room for perverse incentives. The wine-ing and
dining by drug companies is famous, and not counted on any salary form. It
makes no difference.

~~~
your-nanny
if it makes no difference tgen you must think that commissioned persons are
less susceptible to wining and dining incentives

------
Gatsky
Paper isn’t even that bad really, just stating the obvious.

Academia isn’t built to cope with well funded adversaries. Journalists handle
the heat much better, at least the NYT got hold of it.

~~~
mcny
I doubt it is perfect. I agree they're probably built for it but in practice,
theory and practice are not the same.

[https://www.nytimes.com/2014/01/05/business/media/banished-f...](https://www.nytimes.com/2014/01/05/business/media/banished-
for-questioning-the-gospel-of-guns.html)

Archived at [https://archive.fo/v5b1x](https://archive.fo/v5b1x)

I'm sure even the NY Times has its limits and so do the likes of al Jazeera
and the BBC.

Another question: Could Intel or nVidia or Microsoft or Facebook do something
similar for tech journalists?

~~~
daro
Bloomberg has still not retracted its story about the Chinese spyware despite
heavy pressure from Apple and Amazon. So I guess that shows that at least some
journalist can cope with it.

------
copper_think
What is the value that private equity and/or VC are adding to dermatology? I
guess what I'm asking is, why would the physicians be interested in sharing
some portion of their income with these non-physicians?

Medicine, like other guild professions like law, dentistry, and accounting, is
an enterprise which seems to naturally fit the partnership model instead.

~~~
jedberg
There is a strange bit about being a doctor or lawyer -- you aren't allowed to
for a C corp for your own practice. However, if someone _else_ forms the corp
and you work for them, then you get all the protections of a C corp, as long
as you don't own the majority share.

So one thing they add is legal protection.

~~~
dctoedt
> _There is a strange bit about being a doctor or lawyer -- you aren 't
> allowed to for a C corp for your own practice._

1\. In at least some U.S. jurisdictions (and possibly all), lawyers' practices
can indeed be set up as corporations; my former firm was an example. The
individual lawyers in the firm are still personally liable for their own
malpractice and for that of any junior attorneys and/or staff whom they
supervise. The corporate form does protect them from personal liability for
the office lease, etc., unless they've personally guaranteed the lease, which
is not uncommon. (Don't know how it works for doctors but I assume it's
similar.)

2\. "C corp" is an income-tax classification; AFAIK it has nothing to do with
non-tax liability.

~~~
bmh100
C Corp is a legal entity classification, along the lines of S Corp, LLC,
partnership, and sole proprietorship. What might be confusing is that S corps
can use pass-through taxation or retained earnings (C Corp) depending on what
the owners choose. There are various forms of partnerships with different
levels of liabilities to the partners: general partnership, limited
partnership (LP), limited liability partnership (LLP), etc. Partnerships
generally provide much less protection than a C Corp.

------
jcutrell
I have no proof they are involved, but my wife and I both had a visit to a
dermatologist last year. Both of us were then recommended for excisions. She
was 29, I was 28.

Everything came back pretty much normal.

We were sent to this fern after a friend went there. He also had an excision.
Also under 30.

Now, we feel pretty much like we were played. Maybe this is relevant to this
issue.

~~~
yborg
This summer I made the mistake of going to a large dermatology practice with
several locations because a dermatologist I had seen a few times before was
unavailable. I had what turned out to be essentially contact dermatitis. The
large corporate practice ended up billing almost $900 for this including an
unnecessary biopsy. I assumed that this was simply a rogue practice, but this
news story makes me see this in a new light. Apparently the field of
dermatology has been identified as a lucrative profit center by P/E firms and
these sort of dermatology practices are being built up to strip mine the out
of control medical-insurance complex here in the US. The logical next step is
for these equity-backed firms to use their capital to acquire the majority of
dermatology practices in a region and be able to dictate pricing.

I'm sure that this area of medicine has been selected by equity firms because
of the prevalence of cosmetic-related procedures that are inherently high-
margin in this field. But there is so much money being sucked into this sector
of the economy that this will encompass other types of medicine. The other
area that seems to be active now is hospice care - the large insurer Anthem
just bought a large palliative care provider this year. How this is not
playing both sides of the trade kind of escapes me.

The whole health care sector is starting to resemble the payday loan market on
a vast scale and with even less regulation. And with 2 profit-seeking players
interested in shaking down the consumer in every transaction, not just one.
Or, one player pretending to be two players for maximum profit.

~~~
lotsofpulp
Vertical integration is happening everywhere, especially due to advances in
technology allowing for much greater economies of scale. Insurers have to
combine with each other to get bigger to negotiate with providers and
pharmacies, providers have to combine with each other to get bigger to
negotiate with insurers, pharmacies have to combine with each other to
negotiate with drug manufacturers and PBMs, drug manufacturers combine with
each other to negotiate with insurance, and finally, insurance combines with
pharmacy and PBM (Aetna/cvs) to negotiate with drug manufacturer and
providers.

Telecoms, computers, retailing, everything is trending towards a handful of
big players with enough vertical integration to be able to survive. Initially,
this is could be good for consumers as the cost savings of economies of scale
might be passed on to them, but we will pay for it at the end when there is
only 2 vendors to choose from and they dictate the price.

~~~
maxxxxx
That's why we should discourage company growth beyond a certain size. They
grow because they are better than the competition but at some point they can
just overpower any competition or just buy them out.

------
rio517
Barbara Streisand effect in play. I never would have thought to be careful
about this without this Push to silence criticism.

------
calgoo
So I wonder if there is an opportunity to create a service that let's you look
up the center you are visiting, and seeing who the investors/ owners are. Then
you can filter away any that has gotten bad stars/reviews based on bad
practices.

Fight vc money with vc money basically.

~~~
darkerside
You'll have a huge problem with uninformed reviewers. It usually doesn't
become apparent you've been receiving substandard care (or over care) for
quite a while, if ever. Maybe you could contact this by taking reviews only
from patient advocates?

------
divbzero
The core underlying issue is fee-for-service [1] which inherently incentivize
overutilization of services.

We have been and should continue pushing for better alternatives. ACOs [2] and
integrated managed care [3] are promising possibilities and there are
assuredly others.

[1]: [https://en.wikipedia.org/wiki/Fee-for-
service](https://en.wikipedia.org/wiki/Fee-for-service)

[2]:
[https://en.wikipedia.org/wiki/Accountable_care_organization](https://en.wikipedia.org/wiki/Accountable_care_organization)

[3]:
[https://en.wikipedia.org/wiki/Kaiser_Permanente](https://en.wikipedia.org/wiki/Kaiser_Permanente)

------
seanseanme
Young dermatologist here - its an interesting time for my and my derm friends.
We frequently discuss if the introduction of a PE profit motive will shunt
care away from the complex, comprehensive patient exam to a more 'problem-
focused' model.

The proposed changes to Medicare reimbursement - which essentially pays the
same for an office visit regardless of complexity - seems to be also pushing
that way.

Speaking only from personal perspective, helping complex patients is
incredibly rewarding and I would absolutely hate for the system to steer the
specialty away from that.

------
ItsMe000001
Discussion on reddit in /r/medicine, by actual medical professionals AFAICS:

[https://old.reddit.com/r/medicine/comments/9rpajq/dermatolog...](https://old.reddit.com/r/medicine/comments/9rpajq/dermatology_article_discusses_vc_buying_up/)

Copy of the starter comment by OP there:

> _Starter comment: NYTimes discusses an article that details Venture Capital
> buying dermatology practices that do an unusually high proportion of high
> dollar procedures. The article made it through peer review and was posted as
> an article in press. It was suddenly pulled. The AAD’s incoming president
> works for an VC Owners clinic and sits on their board. Lawyers for one firm
> called lead authors institution to demand changes. This is a huge assault on
> academic freedom. More so than any nonsense from Washington. Coming on the
> heels of AAD telling multiple people incorrectly that they failed the board
> exam over the past few years, this is another major scandal that could
> result huge changes. Or retaliation._

From another comment there that is a tl;dr of some the problem:

> _VC involvement in derm practices is a huge, huge issue. One of the bigger
> practices in town recently was bought by a VC firm, and, lo and behold, all
> their borderline melanomas now, after being read by their "new" pathologist,
> need re-resections to get more ti$$ue. I no longer refer to them. Don't even
> get me started on electronic brachytherapy._

------
hn_throwaway_99
After just finishing "Bad Blood", the book by John Carreyrou on the Theranos
fraud, this particular passage in the article had me incensed:

> This week a lawyer for Advanced Dermatology and Cosmetic Surgery, which is
> backed by private equity and is the largest dermatology practice in the
> United States, called the general counsel at the University of Florida,
> where two of the authors are employed, demanding specific changes to the
> paper.

I'm disgusted by these high-powered law firms using thuggish tactics to try to
silence critics. I have no problem with these lawyers responding to the
article, in public, after it is published, but using the threat of expensive
litigation to shut people up is just gross and morally bankrupt.

~~~
adrian_mrd
Agree. Related thought: the influence of lawyers in tech firms - witness the
draconian EULAs users are 'forced' to accept with a false binary choice of
accept or not - and the role that corporate law staff have had in software
development, by effectively limiting the rights of users.

It seems to me that many technology firms copy-and-paste the soul of EULAs to
protect themselves (against the worse cases that _may_ arise) with little
thought about the effect these long list of restrictions cause. It often seems
it cascaded from Microsoft's use of EULAs from Windows 95, Office 95 and
onwards, because it was the norm to consumers in that 'monopoly' environment.

The role of lawyers in suppressing ideas, choices and debate - be it in
healthcare (the USA dermatology sector as per the OP article) or in technology
- the Hacker News set - warrants further debate.

Especially if ethics are to play a greater role in the future of technology -
as seems to be the general consensus of forward-thinking governments and
progressive technologists.

~~~
losteric
I think this legal arms race is a consequence of America's overly-litigious
and profitable legal system.

These EULAs are the equivalent of warning labels on soda bottles that loosely
read "Warning: Contents under pressure, don't point at your eyes"... who is
that written for? We laugh and call it unnecessary, but that warning exists
because there is precedent that must now be defended against.

When those ludicrous cases are widely used as a means of attack or personal
enrichment, _of course_ corporations will respond with excessive legal
restrictions. Their shareholders don't want to lose money to frivolous
lawsuits or be exposed to risks competitors have covered.

~~~
thomasfedb
Do they actually write that on carbonated drinks in USA? That's brilliant.

~~~
mikeash
There’s a bag of almonds in my pantry that literally says “Contains almonds”
on it in the fine print.

~~~
JoeAltmaier
And cooking spray sometimes says "Fat free!" because an average 'serving'
contains < 10 calories of fat. Yet its 100% fat. A spray can of fat.

~~~
mikeash
Similarly, Tic Tacs are listed as containing 0 grams of sugar, despite being
made of 94.5% sugar.

------
justaaron
paywall source material alert...

~~~
tomhoward
[http://archive.is/VWgV3](http://archive.is/VWgV3)

------
stevehawk
I don't care why because this is hacker news and I expect better article
headlines than buzzfeed clickbait crap.

~~~
nyolfen
everybody does these headlines now besides maybe the wire services, it's
inescapable

------
DrNuke
Conflict of interests on one side, sociopaths isolating a few words out of
their context to have a rant on the other side; both are more dangerous than
bad science, to be fair, but this is the spirit of the times.

------
refurb
The issue seems to come down as to wether or not the paper had factual
inaccuracies. Many academic papers are withdrawn, just check out
retractionwatch.com.

